Trade Terms Tuesday

Welcome to Trade Terms Tuesday! Each Tuesday, we will share three trade-related terms. In order to reach out to our diverse readership, we will try to provide one for exports, one for imports and one for logistics/transportation. This week, we continue with the J’s.

Jettison
Jettison is the intentional throwing of cargo overboard to lighten the weight of a vessel to save the ship and its content. Although some contents are lost, the act serves the common good for the interests of the vessel, crew and remaining cargo.


J-List
The J-List is a list of items found in 19 CFR 134.33 that are exempted from individual country or origin marking; however, the outer containers/packaging must be marked.


Jurisdiction
Export commodities are generally regulated by the Department of Commerce or Department of State.

Commodity jurisdiction requests are made to determine whether an item or service is covered by the U.S. Munitions List (USML) and therefore subject to export controls administered by the U.S. Department of State pursuant to the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR). The Directorate of Defense Controls (DDTC) is responsible for providing information on commodity jurisdiction, which determines the export licensing authority between the Department of Commerce and Department of State. The U.S. Department of Commerce has export control jurisdiction over the export of dual use items and items which have strictly civilian or commercial uses.

Classification of Decals, Stickers & Labels

Thank you for joining us for our series on classification. Last Monday, we discussed the classification of gaskets. Today, we will explore the classification of decals, stickers and labels.

Aren’t decals, stickers and labels all the same thing? These items “stick” to something else, right? Is there one tariff provision that covers these items? Obviously, the answer to these questions is “no.” The HTS makes classification of certain items more complex than we might expect. Thus, we have the need to provide a little more depth to our research and not just assume that the first provision we find will cover our product. This requirement becomes quite evident in our attempt to classify decals, stickers and labels. Due to the information needed and complexity of classifying these items, the purpose of this article is only to identify the primary differences between the articles so that our readers will be aware of the options.

First, it is important to have a basic definition of each article for classification purposes.

Decal
A decal usually consists of an image printed onto a coated sheet, usually of paper or plastic. The imprint is coated with an adhesive and is designed to be transferred from the sheet to another object to serve as a decoration, informational marking, etc. The transfer is generally made by placing the entire sheet to the receiving surface and applying pressure to the back of the sheet.

Sticker
For CBP purposes, a sticker is a gummed piece of paper or plastic that has been printed with designed, pictures, words, etc. Stickers are normally peeled off their backing and stuck onto the surface using the pressure from a finger.

Label
Labels are virtually indistinguishable from the paper stickers; however, for purposes of the tariff, the difference is related to their principal use. Stickers are primarily used for decorative purposes, while labels are used to convey information about the items to which they are attached.

Maybe our first thought was correct. To the average consumer, decals, stickers and labels are all the same thing, but to the importer, customs broker and CBP, they are very different items.

As with many products, the classification of the decals, stickers and labels will depend on what they are made of and how they are used. Therefore, before these articles can be classified, we must determine what they are made of and how they are used.

Next, we want to identify the possible classifications. Decals, stickers and labels are found in some of the following HTS Chapters.

Plastic Stickers – 3919 (flat)
Plastic Stickers – 4911 (3-dimensional)
Paper Decals - 4908
Paper Stickers – 4911
Paper Labels - 4921
Textile Labels - 6307

Consulting the Section/Chapter Notes and Explanatory notes will also provide some additional detail about the properties of these articles that are included in and/or excluded from certain tariff provisions.

Closely related to this step is the importance of the invoice description of these items. Since the average person might consider these items to be indistinguishable, the party preparing the invoice might describe all of these articles as decals. If you were presented with an invoice for “decals,” could you properly classify them from only one word? From our research, we now know that we must determine the material and use in order to properly classify these items. It would be extremely difficult and unwise, from a compliance standpoint, to attempt classification with only the word “decal.” Remember, binding rulings and Informed Compliance Publications can be great resources when classifying difficult items.

Click HERE to view a CBP Ruling on plastic decals.
Click HERE to view a CBP Ruling distinguishing a paper sticker from a paper label.
Click HERE to view CBP’s Informed Compliance Publication on Decals and Stickers.

Join us next week as we tackle another challenging classification issue. If you have any specific commodities or sections of the HTSUS that you would like to see discussed in this series, please feel free to post a comment or send your suggestions to wizard@boskage.com.

Ask the Wizard: Skills Brokers Need

Each Friday, the Wizard joins us to share an answer to one of the questions asked during the week. This week we had an excellent question about skills needed in order to become a customs broker.

Question:
Other than passing the exam, are there other skills that someone needs to be a broker?

In addition to the passing the brokers exam, there are other skills and abilities that are helpful for brokers to have. Customs brokers should possess above average communication skills, a good memory, patience and high standards of integrity. They should enjoy working with a diverse group of clients as well as computers. Brokers must be able to keep up with a fast-paced environment and constantly changing computer systems and trade regulations. They need the ability to evaluate shipments and details in a short time and work well under pressure. Since brokers work with the law, they must be honest and ethical or risk losing their licenses if they provide inaccurate or incorrect information to customers. Because of the deadlines, laws and amount of information involved, being detail-oriented and organized are also important traits for being successful.

If you have any other skills to add to this list, please leave your comment for others to see.

Do you have a question for the Wizard? Submit your question by clicking on the link in the space for “Ask the Wizard.” See you next Friday!

How to Win a Free Place to Stay with Three Meals a Day

Need a break from your office? Would you like three free meals a day and a free place to stay? Check out the following tips. Only importers are eligible for this exciting opportunity.

1. Send emails to your foreign suppliers requesting two invoices – one with a lower cost for CBP and one with the actual cost submitted directly to you.
2. Submit fraudulent invoices to CBP.
3. Instruct your foreign supplier declare only 50% of the value on items with higher duty rates.
4. Intentionally misclassify goods to receive lower duty rates.
5. Keep records of all of these communications.

If you participate in the activities above, you might be the winner of an all expense paid trip to PRISON. Your first thought might be that another exporter made the news for shipping regulated goods to the wrong party. On the other hand, maybe you are thinking about the sentencing of the professor who was found guilty of export violations. There is a lengthy list of exporters that have been fined for violating one of the export laws, but we seldom hear of importers going to jail. That’s right, this time an importer is going to jail. What could this importer have done to land him in jail? Take a look at that list again. Pay attention, importers, this could be you!

On May 15, 2009, the importer from Mississippi was sentenced to nine months of imprisonment and was ordered to pay restitution in the amount of $10,403 and a $3,000 fine for his part in a customs fraud. Upon release from jail, the importer will be required to serve three years of supervised release. Did I forget to mention the free ankle bracelet?

Michael Holt, Special Agent-in-Charge of ICE’s Office of Investigation in New Orleans states, “We will continue to pursue those individuals and companies that circumvent duty requirements on imports. Those companies that perpetrate commercial fraud pose a serious problem for our country and will continue to be the focus of our enforcement actions."

Don’t mess with CBP or ICE in Mississippi or Louisiana unless you need/want a free place to stay with three meals a day.

CBP Posts Notice of Exam for October 2009

U.S. Customs and Border Protection posted a notice to its web site announcing the October 2009 Customs Broker License Exam. The exam will be held at various locations on Monday, October 5, 2009. Contact your local port office to verify testing locations. Applications (CBP 3124E) and the exam fee of $200 must be received on or before Friday, September 4, 2009. Applicants should bring the following reference materials to the exam. Please note the appropriate editions for the HTSUS and CFR.



- Harmonized Tariff Schedule of the United States (2009 version) (Supplement 1)

It is important to use this edition since questions often require the determination of the correct HTS number, duty rate and applicability of Free Trade Agreements, all of which may change slightly from year to year.

Note: This year's Supplement 1 has not yet been released by the ITC, but we expect that it will be released later this summer.

- Title 19, Code of Federal Regulations (revised as of April 1, 2009) Parts 0 to140, 141 to 199 and 200 to End) (no supplements)
CBP added Part 200 to End for the April Exam and there were five (5) questions from Part 351 on antidumping. Part 149 covering ISF was added to Title 19 this year, so it is a target for this exam.

Note: Because the April 2009 editions of Title 19 CFR are not yet available, Boskage has an inquiry in as to whether or not this is a typo. If it is not, all purchasers from Boskage of the 19 CFR for the October 2009 exam will be given the material they need to have an up-to-date edition.

- Customs and Trade Automated Interface Requirements (CATAIR)

• Appendix B - Valid Codes


• Appendix D - Metric Conversion


• Appendix E - Valid Entry Numbers


• Appendix G - Common Errors


• Appendix H - Census Warning Messages


• Appendix L - Drawback Errors


• Glossary of Terms
  

- Instructions for Preparation of CBP Form 7501 (8-30-2005)

-C-TPAT - Minimum Security Criteria for Customs Brokers (3-20-2007)

-Submission Changes for Supplemental Information Letters and Post Entry Amendments

-Remote Location Filing Eligibility Requirements

- Directives

• 3510-004, Monetary Guidelines for Setting Bond Amounts


• Amendment to 3510-004 for Certain Merchandise Subject to Antidumping/Countervailing Duty Cases


• 3550-055, Instructions for Deriving Manufacturer/Shipper Identification Code


• 3550-067, Entry Summary Acceptance and Rejection Policy


• 3550-079A, Ultimate Consignee at time of Entry or Release


• 3560-001A, Census Interface-Processing Procedures


• 5610-002A, Standard Guidelines for the Input of Names and Addresses Into Automated Commercial System (ACS) Files
  

It’s time to get ready for the next Customs Broker Exam! Click HERE for a complete list of the Boskage study plans and products designed to help you study and pass the exam! Guarantee that you receive the correct editions of the materials listed on the Notice of Exam by ordering the Required Testing Material Package. Don’t delay! Find the study plan that fits best with your schedule and learning preference. Remember, there is no substitute for actually reading and studying the required materials. Visit the Boskage Trade News Blog for additional for import/export news updates, articles about specific trade topics and helpful posts related the Customs Broker Exam!

Trade Terms Tuesday

Welcome to Trade Terms Tuesday! Each Tuesday, we will share three trade-related terms. In order to reach out to our diverse readership, we will try to provide one for exports, one for imports and one for logistics/transportation. This week, we continue with the I’s.

In Bond
The In-Bond System, a part of CBP’s Automated Commercial. Merchandise that is in the custody of Customs and Border Protection (CBP) is considered to be "in bond." To transport goods under CBP custody, the carrier’s surety bond is obligated for safe delivery of the merchandise and for holding the merchandise until it is released from CBP custody by either consumption entry or exportation. If the carrier fails to fulfill its obligation to transport and retain merchandise until it is properly entered into the customs territory or exported, CBP will issue a penalty for payment of damages.

International Trade Data System
The International Trade Data System (ITDS) is a government project that works with participating government agencies (PGA) and Customs and Border Protection (CBP) for the development of the Automated Commercial Environment (ACE). Prior to ITDS and ACE, the trade community was required to submit documentation required by the various government agencies to each individual agency using a variety of different automated systems, various paper forms, or a combination of both. With ITDS and ACE, the trade community will submit standard electronic data for imports or exports only once to ACE. Then, the data will be distributed to the federal agencies that have an interest in the transaction. ACE serves as a government data collection and distribution facility, a "single electronic gateway" through which information required for processing import and export transactions can flow efficiently from the trade to agencies. This single transmission to the common database eliminates the redundancy of the over 500 forms required by the various government agencies. ACE is the system and ITDS is the process that leads to the system. The implementation of ITDS will be extremely beneficial for uniting all the government agencies and streamlining the import process. ITDS will facilitate pre-arrival, arrival, revenue accounting, and collection along with the capabilities to track licenses and permits, monitor trade transactions, query and report, and provide a single storage area for centralized data management.

International Traffic in Arms Regulations
The ITAR is administered by the Department of State to control the export of articles, services and technical data that are designed, developed or modified for military use. The ITAR is covered by 22 CFR §§ 120-130.

Classification of Gaskets

Last Monday, we introduced our new series of weekly blog articles featuring various classification topics. This week, we will explore the classification of gaskets.

Classification of gaskets would be simple if the HTSUS contained one provision for gaskets. Because gaskets are made of various materials and have multiple uses, a gasket could be classified in one of more than a dozen provisions provided in the HTSUS. So where do we begin?

The first step is to determine if the article being classified is actually a gasket. Gaskets, washers and other seals can be easily confused. Gaskets form a seal by being compressed between stationary parts where liquid or gas could pass. Most gaskets are manufactured to be used only once and are made of materials such as cork, rubber, paper and various metals.

For the second step, we need to determine the composition of the gasket. Is our gasket made of paper or plastic? Gaskets may be found in some of the following HTS Chapters.

Cork – Chapter 45
Plastic – Chapter 39
Rubber – Chapter 40
Paper – Chapter 48
Textile – Chapter 59
Asbestos – Chapter 68
Metal – Chapters 84 73 74 76

As you can see from the examples in Chapter 40, there may be several provisions for the gaskets within each Chapter. This leads us to the third step, which is to determine how the gasket is used. While the composition is critical to the classification, the use may also affect the classification. For example, Chapter 40 breaks out gaskets based on the type of rubber and how the gasket is used. Profile shapes, such as gaskets used around windows and doors, are often considered profile shapes and classified under 4008. Gaskets made of cellular rubber are found in 4016.10.00. Gaskets of vulcanized rubber other than hard rubber and used in automotive goods of Chapter 87 are found in 4016.93.10. If the gaskets are vulcanized but are used in other goods, they are classified as 4016.93.50.

Our fourth step shows the importance of reading the Section and Chapter Notes for any special rules concerning gaskets. For example, consider a plastic gasket for use solely with an oil pan drain plug for an automotive engine classified in Chapter 84.

Gaskets made of plastics are described in subheading 3926.90.45, HTSUS, which provides for other articles of plastics…gaskets, washers and other seals. This subheading falls under the heading for other articles of plastics in 3926. When comparing headings, a heading for “parts” is more specific than a heading for “other articles.” Therefore, gaskets of plastics are classifiable in an appropriate provision for parts, unless there is exclusionary language that prevents classification as parts.

Reading the notes to Chapter 39, we find an exclusion in Legal Note 2(p). This note excludes articles of Section XVI (which includes Chapters 84 and 85) from classification in Chapter 39. Since our plastic gasket is solely for use with the engine oil pan in Chapter 84, it is classifiable as parts of the articles in Chapter 84.

Classification of gaskets is complicated and depends on the material composition and use of the gasket. Remember, binding rulings and Informed Compliance Publications can be great resources when classifying difficult items.

Click HERE to view a CBP Ruling on gaskets.
Click HERE to view CBP’s Informed Compliance Publication on Gaskets.

Join us next week as we tackle another challenging classification issue. If you have any specific commodities or sections of the HTSUS that you would like to see discussed in this series, please feel free to post a comment or send your suggestions to wizard@boskage.com.

Ask the Wizard: Single Entry Bond Amounts

Each Friday, the Wizard joins us to share an answer to one of the questions asked during the week. This week’s question concerns single entry bond amounts.

Question:
Does the list of OGA’s found in CD 3510-004 requiring a single entry bond for 3 times the entered value encompass only the OGA’s listed or do all OGA’s require a single entry bond for three times the value? Would an imported product regulated by the DOT require a single entry bond for 3 times the value?

Reading the directive, we find that CBP requires a bond for three times the entered value for “merchandise subject to other government agency requirement where failure to redeliver the goods could pose a threat to the public health and safety”. Notice that this heading doesn’t state “subject to ALL other government agency requirements”. It also states that failure to redeliver could pose a threat to public safety. Without reading more, one might assume that anything regulated by the DOT, such as seat belts and brake hoses, might pose a safety hazard if not redelivered if the reason for redelivery was non-compliance with standards. However, scanning the list we find the following government agencies listed FDA EPA, BATF, CBSC, USDA-AMS, FCC and TSCA. Noticeably missing are the FWS and DOT. Thus, it appears that articles regulated by the DOT are not subject to single entry bonds in the amount of three times the entered value.

Still not sure? Let’s take a look at Question 51 from the April 2008 Customs Broker Exam.

CBP requires a single entry bond in the amount of three times the total entered value for _____.

A. medical instruments
B. musical instruments
C. patent leather shoes
D. metal furniture
E. works of art

Generally, a single transaction bond is executed in an amount not less than the total entered value plus all duties, taxes, and fees that apply. If the merchandise falls into one of the categories of merchandise subject to other agency requirements (FDA, EPA, BATF, CPSC, Agriculture, FCC and TSCA) where failure to redeliver could pose a threat to the public health and safety, then the bond will be executed in an amount which is not less than three times the total entered value of the merchandise. Answer B is not regulated by these agencies, and failure to redeliver a musical instrument would not pose a threat to public health or safety. Even though Answer C may be regulated by the FWS, it is not regulated by the agencies listed, and the shoes would not pose a threat to public health or safety. Answers D and E are not regulated by these agencies, and failure to redeliver furniture and works of art would not pose a threat to public health or safety. Answer A is the most correct answer because medical instruments are regulated by the FDA and could pose a threat to public health and safety.

Do you have a question for the Wizard? Submit your question by clicking on the link in the space for “Ask the Wizard.” See you next Friday!

Trade Terms Tuesday

Welcome to Trade Terms Tuesday! Each Tuesday, we will share three trade-related terms. In order to reach out to our diverse readership, we will try to provide one for exports, one for imports and one for logistics/transportation. This week, we continue with the H’s.

Hazardous Materials
Hazardous materials are substances or materials that have been determined to pose a potential risk to health, safety, and property when transported. Goods normally falling into this category include those that are flammable, corrosive or poisonous. Cargo designated as HAZMAT must carry special warning labels, be properly identified and packaged, and meet other special requirements before being shipped.

Harbor Maintenance Fee (HMF)
The HMF is a fee paid on import shipments for use of ocean ports and is based on a percentage of value of the shipment. The current HMF is 0.125 percent of the value; however, there is a bill, H.R. 2355, that proposes and increase in the HMF from 0.125 percent to 0.4375. The HMF is paid at time of entry unless the goods enter into a foreign trade zone, where fees are paid quarterly. Fees collected are earmarked for use in improvement and maintenance of U.S. harbors. There is no maximum on the HMF collected per entry.

Horizontal Export Trading Company
A Horizontal Export Trading company is an export trading company which exports a range of similar or identical products supplied by multiple manufacturers who may be competitors on the domestic market. An export trading company formed by an association of agricultural cooperatives is the prime example of a horizontally organized export trading company.

Classification Using the HTSUS

Classification is the process of assigning the Harmonized Tariff Schedule (HTSUS) number that best describes the product being imported. Classification is necessary to determine the appropriate duty rate in order to calculate the amount of duties owed to CBP for imported merchandise. Additionally, the classifications reported to CBP are used by the Bureau of Census to analyze trade data.

This series in classification may also be useful to persons assigning Schedule B numbers for exports. Every item that is imported and exported is assigned a unique 10-digit identification code. HTS numbers and Schedule B numbers will be the same up to the first six (6) digits. With some exceptions, the codes contained in the HTSUS can be used instead of Schedule B codes for reporting exports in the Automated Export System (AES). The Census Bureau has published a short list of HTSUS numbers that may not be used for reporting exports in AES. The appropriate Schedule B numbers must be used in place of the HTS numbers on the list. In addition to these exclusions, codes from Chapter 98 of the HTSUS may not be used in AES.

Brokers, exporters and importers must use reasonable care in fulfilling their responsibilities involving the classification of merchandise. One of the most important tasks of a broker is to report accurate information concerning import transactions. In order to do this, the broker must become skilled in classification of merchandise. However, the importer and exporter have the legal duty to provide the correct classification of merchandise for purposes of the import entry and completion of the AES. Therefore, it is important for all of the “trade professionals” to develop classification skills. Classification is a complex process, so it takes some training and practice for trade professionals to become proficient. We hope that this series of blog articles about various products and chapters of the HTSUS will provide our readers some additional expertise. Before we get started with the first topic next week, we wanted to provide a list of some of the resources that are helpful in the classification process.

• Harmonized Tariff Schedule of the United States (HTSUS)
• Explanatory Notes
• Customs Rulings (CROSS)
• Informed Compliance Publications
• Dictionaries and Reference Books
• Product catalogs, drawings or other literature
  

Next Monday, we will discuss the classification of a specific commodity. If you have any specific commodities or sections of the HTSUS that you would like to see discussed in this series, please feel free to post a comment or send your suggestions to wizard@boskage.com.


Note: For ease of reference, we will use the term “trade professional” to encompass brokers, exporters and importers.

Ask The Wizard: Trade Compliance On A Budget

Each Friday, the Wizard joins us to share an answer to one of the questions asked during the week. This week, the Wizard wants to ask our readers a question.

Most companies are doing more with less money and fewer employees. Budgets have been cut which means resources are not available for conferences, association dues, publications and special projects. However, CBP, BIS and other regulatory agencies still require the same high standards of compliance. We would like to provide an opportunity for our readers to share ideas on how they are meeting the challenges created. Instead of answering a question this week, the Wizard decided to ask a question, actually two questions.

1. How is your organization fulfilling compliance requirements in today’s economy?

2. Other than staff and a bigger budget, what resources or tools would make your job easier?

Share your best practices and innovative ideas to help our readers who are struggling to maintain compliant organizations on a tight budget.

Do you have a question for the Wizard? Submit your question by clicking on the link in the space for “Ask the Wizard.” See you next Friday!

Why Should Universities Worry About Export Control Laws?

When most people think of export compliance, images of large multinational corporations come to mind. Universities are in the business of education and they don’t sell products, so why would a university need export compliance procedures?

Since 9/11, the government has become increasingly concerned with preventing certain information and technology from disclosure by universities. Because of increased scrutiny, one inducement is the cost of non-compliance. Penalties range from 5 to 10 years imprisonment and fines of $250,000 to $1,000,000. Some of the recent violations include:

· Professor convicted for allowing unauthorized foreign citizens access to restricted technology in violation of the Arms Export control Act
· University fined for financial dealings with Iran and Cuba
· Universities cited for failure to obtain licenses for access by foreign nationals to military technology
· University involved in unauthorized export of biological materials.

Additional costs include loss of contracts, grants, employees and other collaborative efforts.

How can universities balance the mission of an open academic environment without regard to citizenship, nationality, or residency and academic freedom to publish and disseminate the results of research with the export regulations? Universities receive four exemptions to export regulation, fundamental research, educational exemption, employment exemption and public domain. Although most research conducted by universities is exempted under the fundamental research exemption (15 CFR 734.8), export regulations apply to research activities, including grants, contracts, and cooperative agreements. The regulations not only apply to activities, but also people, such as research assistants, students, visiting foreign researchers, etc. Because many of the export laws conflict with traditional foundations of academic freedom and openness in research and impose criminal and civil fines for noncompliance, it is important that universities implement export compliance programs. We’ve compiled the following information to get you started on the journey.


Basic Elements of a University Export Compliance Plan
Universities should consider the following items for inclusion in the export compliance plan.

• Identify and Assess Campus Risk Areas
• Implement Export Control Policies and Procedures
• Develop Best Practices Recommendations
• Provide Training
• Perform Restricted Party Screening
• Provide Travel Briefings
• Establish Export Recordkeeping Requirements – keep for at least 5 years


Activities Subject to Export Regulations
The following list identifies activities that may be subject to export controls.

• Foreign equipment & material purchase, usage & disposal
• Collaborative efforts involving foreign universities and students
• Sponsored research agreements
• International travel
• Encryption restrictions
• Defense services
• Hand-carried Items – laptops, memory devices
• Conferences
• Websites
• Visual inspections revealing technical data
• Email
• International agreements
• Material transfer agreements
• Nondisclosure agreements
• Software and other intellectual property licenses


Functional Areas Subject to Export Regulations
The following list identifies departments that may engage in activities subject to export controls.

• Legal
• Finance/Bursar
• Purchasing
• Shipping
• Grants & Contracts
• Travel & Reimbursement
• Environmental Health and Safety
• International Research, Education, and Development
• Research
• Academic Departments – Engineering, Medicine, Nursing, Sciences
• Information Technology


The information presented here only touches the surface of export compliance requirements and exceptions for universities. At a minimum, faculty, students, researchers and others as identified, need to know how to recognize that an export control issue may exist, and then whom to contact for assistance at the university.

Click on any of the following links to view the export compliance information provided by the university.

· John Hopkins University
· California Institute of Technology
· The University of Tennessee Knoxville
· Michigan State University

Trade Terms Tuesday

General Average
General average is a maritime principle that allows a vessel owner to recover from shippers that have cargo on board the vessel for expenditures incurred to repair the vessel due to extraordinary events such as fires and collisions. Under the general average provision, the owners of any cargo on board a vessel that is damaged must share pro rata in general average to repair any damage done to the vessel. General average originated in the late 1600’s when the risk of sailing long distances was higher so the risks of the voyage were shared by all who had an interest in the safe and profitable journey of the ship.


General Order
Merchandise which has not been released by CBP after a certain period is considered to be “general order” when it is taken into the custody of the port director and deposited in the public stores, or a general order warehouse. Imported merchandise subject to entry requirements must be released within 15 calendar days after the arrival of the vessel, aircraft or other conveyance (19 CFR 141.5, 19 CFR 127). In the case of merchandise moved in bond, merchandise must be released within 15 calendar days after arrival at the in bond destination. Merchandise not cleared within the allotted time may be at risk for being placed in General Order Storage by CBP. The owner of the merchandise has 6 months from date of importation to claim the merchandise, make an entry and pay any charges due. After the expiration of the 6-month period, CBP may sell the merchandise at public auction.


GBS
GBS is an exception to an export license requirement found in 15 CFR 740 of the EAR. Each License Exception is designated by a three-letter symbol used for export clearance purposes. GBS is the three-letter symbol for the exception for Shipments to Country Group B Countries. (15 CFR 740.4) License Exception GBS authorizes exports and reexports to Country Group B (see Supplement No. 1 to part 740) of those commodities where the Commerce Country Chart (Supplement No. 1 to part 738 of the EAR) indicates a license requirement to the ultimate destination for national security reasons only.

Bill Proposes HMF Increase

Is someone trying to make us feel better about the potential increase in the Harbor Maintenance Fee (HMF) by giving the bill a catchy name? H.R. 2355, Making Opportunities Via Efficient and More Effective National Transportation (MOVEMENT) Act proposes and increase in the HMF from .125 percent to .4375 percent of the value of imported cargo. In addition, the scope of the HMF would be expanded to all ports that collect taxes, this includes seaports and land ports. HMF of .3125 percent would be collected on goods that enter the customs territory of the U.S. via a foreign port, such as Quebec or Vancouver. However, the HMF would not apply to goods that originate in Canada or Mexico. If approved, over 70% of the fees would be allocated to the Department of Transportation for certain projects to improve the transportation infrastructure, including homeland security projects.

How would this increase affect a shipment valued at $100,000?
$100,000 x .125% = $125
$100,000 x .4375% = $437.50
Increase $312.50

Importers, be prepared to see an increase in your HMF if we see MOVEMENT because of this bill.

Click HERE to view the full text of H.R. 2355.

Each Friday, the Wizard joins us to share an answer to one of the questions asked during the week. Our readers must be working on exam protests because the majority of questions asked this week involved the April 2009 Customs Broker Exam.

Question:
Why wouldn’t the answer to Question 15 on the April 2009 Exam be “A” instead of “B”?


To answer this week’s question, we must review the actual question from the exam.

15. An antidumping or countervailing duty reimbursement certificate must be filed _____.

A. at the time of importation of the goods
B. prior to liquidation of the entry
C. with the CBP Form 7501 Entry Summary
D. prior to issuance of liquidation instructions by the Department of Commerce
E. prior to importation of the goods


Next, we should remember the instructions given on the first page of the exam.

“Each question is designed to have a single best answer.”


Keeping these instructions in mind, we find information about the reimbursement certificate in 19 CFR 351.402(f). Part 351.402(f)(2) specifically states that "the importer must file prior to liquidation a certificate in the following form with the appropriate District Director of Customs…."

Notice the language used in Question 15. The “…certificate “MUST” be filed ___.” Notice it doesn’t state “may be filed” but states “MUST be filed.” Now, let’s look at the potential answers to see which one is the single best answer CBP refers to.

Answer A:
It would be acceptable to file the reimbursement certificate at the time of importation, but filing it at that time is not mandatory. This answer falls into the “may be filed” category.

Answer C:
It would also be acceptable to file the certificate at the time the Entry Summary is filed, but it is not mandatory to file at that time. This answer also falls into the “may be filed” category.

Answer D:
Filing the reimbursement certificate prior to issuance of liquidation instructions by the Department of Commerce is another acceptable alternative; however, it is not mandatory.

Answer E:
It would be acceptable to file the reimbursement certificate prior to the importation of the goods. Many importers file blanket certificates that are good for up to a year. Again, this meets the “may be filed” criteria.

Answer B:
Part 351.402(f)(2) specifically states that "the importer must file prior to liquidation a certificate in the following form with the appropriate District Director of Customs…." This statement complies with the “must be filed” requirement in 351.402(f)(2) and Question 15.

While Answers A, C, D and E are all acceptable options for filing the certificate, it “MUST” be filed prior to liquidation. Using this analysis, Answer B is the single best answer.


Do you have a question for the Wizard? Submit your question by clicking on the link in the space for “Ask the Wizard.” Maybe the Wizard will have a question for the blog readers next week. See you next Friday!

Is Your International Trade Compliance Team Ready for Hurricane Season?

With the start of hurricane season, we want to do our part to make sure our readers and customers are prepared for the 2009 Hurricane Season. Hurricane preparedness normally focuses on securing the family residence, evacuation plans and gathering supplies needed. Is your business prepared if your area is hit by a hurricane? For those of you who think this article does not apply to you, do not dismiss it too soon. It could be one of your related parties affected by the storm or your business could be devastated by another disaster such as a tornado, fire, flood or earthquake.

Unlike tornados and fires, a hurricane usually provides warning so that protection of property and evacuation can be accomplished before the storm hits with full force. Even with advance notice, hurricanes cause flooding, power outages, and other major damage. Businesses should be aware of measures they can take to protect their facilities and employees. One of the primary objectives should be to ensure that the business could continue to function after a hurricane has threatened the area. Without a complete plan to protect the business, a quick recovery from a hurricane or other disaster will be difficult. The current state of our economy makes these plans even more important. For those of you who are C-TPAT members, your company may already have an adequate disaster recovery plan. To prepare for a potential disaster, organizations should:

· Create a disaster response and recovery plan that includes provisions for the disasters that could be encountered by your company.
· Identify and protect vital records and back up all key data.
· Protect electronic equipment and store back-up files in a safe place.
· Review the company's insurance policy and make sure it provides adequate coverage.
· Have cash and blank checks available in case extra money is needed after the storm.
· Establish a temporary location for business operations in case your facility is damaged.
· Train employees in the entire process, from pre-disaster preparation to post-disaster recovery procedures.


How would a disaster impact trade compliance? In the event of a disaster, it is important that international trade compliance departments have procedures in place to minimize loss and to provide for resumption of services as soon as possible. While trade compliance may not be critical to the immediate functions of the company as a whole, prolonged disruption of services could ultimately affect the end user of your products. Additionally, trade compliance is responsible for the safe storage of certain required government documentation. Destruction of this required documentation would require extensive manpower and financial resources to reconstruct. The international trade compliance department should:

· Provide a list of critical functions performed by the department.
· Create storage plans for procedure manuals, compliance records, entry files and other documentation that compliance departments must retain.
· Identify the impact of a disaster to other departments that the group works with.
· Create temporary operating procedures.
· Estimate lost revenue during shutdown.
· Determine the order/priority of restoration necessary.
· Identify staffing requirements.
· Identify equipment, office supplies and other tools needed to complete work assignments such as the CBP Regulations, HTSUS, EAR, ITAR, file folders, computers, software and miscellaneous supplies.


Do your part to protect your company, your job and yourself in the event of a disaster. For additional information concerning hurricanes, visit the following web sites.

Department of Homeland Security

National Hurricane Center – NOAA

National Hurricane Survival Initiative

Trade Terms Tuesday

Welcome to Trade Terms Tuesday! Each Tuesday we will share three trade-related terms. In order to reach out to our diverse readership, we will try to provide one for exports, one for imports and one for logistics/transportation. This week, we continue with the F’s.

Force Majeure
Force majeure clauses are found in standard transportation contracts and usually excuse a party who breaches a contract because performance is prevented by an occurrence of an event beyond the party’s control. Generally, force majeure clauses cover earthquakes, floods, hurricanes and war. It is important to remember that force majeure clauses are intended to excuse performance only if the failure to perform could not be avoided by the exercise of due care by the breaching party.


Fallback Method
When imported merchandise cannot be appraised using transaction value, it is to be appraised in accordance with the remaining methods of valuation, applied in sequential order. The alternative bases of appraisement, in order of precedence, are the transaction value of identical merchandise; the transaction value of similar merchandise; deductive value; and computed value. If the value of imported merchandise cannot be determined under these methods, it is to be determined in accordance with section 402(f) of the TAA, known as the “fallback method.” 19 U.S.C. § 1401a(a)(1).The fallback method is also known as derived value, the sixth and final true method of valuation. If all other methods are inappropriate, then derived value must be used. Derived value determines the dutiable value using a combination of the other five methods and allows the value to be "reasonably adjusted to the extent necessary."


Foreign Corrupt Practices Act (FCPA)
Administered by the Department of Justice, the FCPA makes it unlawful for any U.S. citizen or business to offer, pay, transfer, promise to pay money or anything of value to any foreign appointed or elected government official, foreign political party or candidate for foreign political office for a corrupt purpose. The FCPA does not prohibit payments made to facilitate a routine government action, one that a foreign official must perform as part of the job such as processing visas or other official documents. . A corrupt payment is one made to influence an official’s discretionary decision. In general, the FCPA prohibits corrupt payments to foreign officials for the purpose of obtaining or keeping business. Individuals and business entities can be criminally liable and punished by both fines and imprisonment. Civil penalties may also be assessed against firms and offices, directors, employees and agents.

Tips for Studying Valuation

For the last few months, we have devoted Monday’s blog to issues related to valuation of imported merchandise. Last week the blog addressed duties and taxes. The answer to last week’s question can be found at the end of this article. As we discussed in the first article in this series, both importers and brokers must have a good understanding of valuation and how to apply it to a variety of situations. Over the past few months, we have provided some information about methods of valuation and components of valuation, as well as some examples. This week, we will conclude our valuation series by providing some tips for studying valuation.

· Gather resources such as the Valuation Encyclopedia and Informed Compliance Publications.
· Read the blogs in this series; they appear on Mondays from March 9 to June 1.
· Read Part 152 of the CBP Regulations.
· Take a valuation course. (See www.bcplearning.com for a sample.)
· Learn the methods of valuation, focusing on why each one is used.
· Learn the components of valuation.
· Create fact sheets summarizing what you have learned.
· Create a process/checklist for verifying the value of imported goods. This list will likely include a review of the purchase order, commercial invoice and accounts payable.
· Create procedures for certain key valuation topics such as declaring assists, deducting non-dutiable charges and converting foreign currency.
· Create presentations and tools for use in training other departments with valuation responsibilities such as purchasing and finance.
· Compile all of your resources into a valuation guide to share with your team and other departments having responsibilities related to valuation .

This concludes our series on valuation. Join us next Monday as we start a new series. The topic has not yet been determined so submit your suggestions in the next few days.


Answer to Duties & Taxes Question – Monday May 25, 2009

Question 58 October 2005
$100,000 - $6,000 (frt) - $850 (ins.) = $93,150 6.5 + .21 +.125 = 6.835% (duty paid)
$ 93,150/1.06835= $87,191