U.S. Customs and Border Protection (CBP) recently announced its plan to conduct a National Customs Automation Program (NCAP) test concerning Automated Commercial Environment (ACE) entry capability. According to CBP’s General Notice, the new trial will test entry filing via a process known as Simplified Entry, which will be filed in lieu of filing a Form 3461 or its electronic equivalent.
Simplified Entry is intended to simplify the entry process by allowing participants to submit twelve (12) required and three (3) optional data elements to CBP at any time before the imported goods arrive, as follows:
Required Data Elements
1. Importer of Record
2. Buyer name and address
3. Buyer Employer Identification Number (consignee number)
4. Seller name and address
5. Manufacturer/supplier name and address
6. HTS 10-digit number
7. Country of origin
8. Bill of lading/house air waybill number
9. Bill of lading issuer code
10. Entry number
11. Entry type
12. Estimated shipment value
Optional Data Elements
1. Ship to party name and address
2. Consolidator name and address
3. Container stuffing location
The Simplified Entry may not be filed in lieu of an entry summary, which still must be made in ACE. CBP has limited this initial phase to entries that are not under the admissibility jurisdiction of Other Government Agencies (OGAs). It also will limit to air shipments.
CBP has chosen the following nine brokers to participate in the pilot program, which is expected to begin at the end of 2011/beginning of 2012:
1. A.N. Deringer Inc.
2. Expeditors
3. FedEx Trade Networks
4. FH Kaysing
5. Janel Group of New York
6. Kuehne + Nagel Inc.
7. Livingston International
8. Page & Jones Inc.
9. UPS.
Tuesday, December 13, 2011
Monday, October 17, 2011
CBP Posts Answer Key to October 2011 Broker Exam
U.S. Customs and Border Protection posted the answer key to the October 2011 customs broker exam. We will review and determine whether any questions are protestable. Exam key can be found at http://www.cbp.gov/linkhandler/cgov/trade/trade_programs/broker/broker_exam/exam_and_key_downloads/oct_11_answer_key.ctt/oct_11_answer_key.pdf
Wednesday, October 12, 2011
ABI Notice regarding the Classification of Sets
On Oct. 6, 2011, U.S. Customs and Border Protection issued a notice through the Automated Broker Interface regarding sets classified in accordance with GRI 3(b) or 3(c). Specifically, CBP reminded ABI users to report in column 30 the HTSUS number of the part of the set that provides the duty rate for the set when the set is classified pursuant to GRI 3(b) or 3(c). Users should precede this HTSUS number with a SPI of “X.”
However, the set classification does not stop there. Each article included in the set needs to be classified separately and reported on a separate line, as though it was not part of a set. Those articles of the set that do not provide the duty rate for the set as a whole should be preceded with a SPI of “V.” Brokers will also need to report the quantity and value attributed to each article with the “V” SPI.
Here is where you can find this message on the Cargo Systems Messaging Service on CBP’s website: http://apps.cbp.gov/csms/viewmssg.asp?Recid=18488&page=1&srch_argv=&srchtype=&btype=abi&sortby=&sby=
However, the set classification does not stop there. Each article included in the set needs to be classified separately and reported on a separate line, as though it was not part of a set. Those articles of the set that do not provide the duty rate for the set as a whole should be preceded with a SPI of “V.” Brokers will also need to report the quantity and value attributed to each article with the “V” SPI.
Here is where you can find this message on the Cargo Systems Messaging Service on CBP’s website: http://apps.cbp.gov/csms/viewmssg.asp?Recid=18488&page=1&srch_argv=&srchtype=&btype=abi&sortby=&sby=
Monday, October 10, 2011
More “Free” Trade Anyone?
Last week, the House Ways and Means Committee approved the bills sponsored by Representative Eric Cantor and a co-sponsor that is the first step in implementing the U.S. Free Trade Agreements with South Korea, Panama and Colombia. The entire House of Representatives and the Senate are expected to vote on the bills the week of October 10.
Congressional action on these agreements has been a long time coming. The parties entered into the U.S.- Korea Free Trade Agreement on June 30, 2007 The U.S.-Colombia Trade Promotion Agreement was entered into on November 22, 2006, as amended by both governments on June 28, 2007 (Colombia TPA). The parties entered into the U.S.- Panama Trade Promotion Act on June 28, 2007 (Panama TPA).
Both the House and the Senate are expected to pass the three bills, referred to as the United States-Korea Free Trade Agreement Implementation Act, the United States- Colombia Trade Promotion Agreement Implementation Act and the United States- Panama Trade Promotion Agreement Implementation Act. Although President Obama is expected to sign the bills into law rather quickly, each Agreement will not take effect until the United States is satisfied that each country will be in compliance with the terms of the Agreements, respectively. For example, there is some concern that labor rights issues could delay the effect date of the Colombia Agreement. It is unlikely that any terms of the agreements will change between now and the enactment date. However, it is doubtful that the Korea FTA, Colombia TPA or the Panama TPA will take effect before the beginning of 2012. It could take up to several months for the President to certify that the countries are in compliance.
Korea FTA H.R. 3080
Colombia TPA H.R. 3078
Panama TPA H.R. 3079
Congressional action on these agreements has been a long time coming. The parties entered into the U.S.- Korea Free Trade Agreement on June 30, 2007 The U.S.-Colombia Trade Promotion Agreement was entered into on November 22, 2006, as amended by both governments on June 28, 2007 (Colombia TPA). The parties entered into the U.S.- Panama Trade Promotion Act on June 28, 2007 (Panama TPA).
Both the House and the Senate are expected to pass the three bills, referred to as the United States-Korea Free Trade Agreement Implementation Act, the United States- Colombia Trade Promotion Agreement Implementation Act and the United States- Panama Trade Promotion Agreement Implementation Act. Although President Obama is expected to sign the bills into law rather quickly, each Agreement will not take effect until the United States is satisfied that each country will be in compliance with the terms of the Agreements, respectively. For example, there is some concern that labor rights issues could delay the effect date of the Colombia Agreement. It is unlikely that any terms of the agreements will change between now and the enactment date. However, it is doubtful that the Korea FTA, Colombia TPA or the Panama TPA will take effect before the beginning of 2012. It could take up to several months for the President to certify that the countries are in compliance.
Korea FTA H.R. 3080
Colombia TPA H.R. 3078
Panama TPA H.R. 3079
Friday, October 7, 2011
October 2011 Broker Exam - Preliminary Answers
Determining potential answers for the broker's exam questions after the
test is different in a few key ways from taking the test, but none is
more key than the fact that we have more than four hours. That means
that we can take the time to research as much as we need to in order to
get the most accurate (though still unofficial) document possible to all
of you.
Click here to get our preliminary unofficial exam answers as a free download from our online checkout system.
As always, remember that these answers represent only our opinion. The official answers will come from Customs and Border Protection in a few weeks and will be posted on their site. In other words, we probably answered the majority of the questions correctly, but these answers do not guarantee whether or not you've passed; it merely is presented as a helpful tool for broker students who are (quite understandably) eager to have any idea of where they stand.
If you would like to share your answers, explanations and comments, we invite you to post them as comments to this blog; however, we ask that comments be professional and to the point. We cannot respond to all of the comments, but this forum will provide you an opportunity to converse with each other.
Happy browsing!
Click here to get our preliminary unofficial exam answers as a free download from our online checkout system.
As always, remember that these answers represent only our opinion. The official answers will come from Customs and Border Protection in a few weeks and will be posted on their site. In other words, we probably answered the majority of the questions correctly, but these answers do not guarantee whether or not you've passed; it merely is presented as a helpful tool for broker students who are (quite understandably) eager to have any idea of where they stand.
If you would like to share your answers, explanations and comments, we invite you to post them as comments to this blog; however, we ask that comments be professional and to the point. We cannot respond to all of the comments, but this forum will provide you an opportunity to converse with each other.
Happy browsing!
Tuesday, October 4, 2011
Announcement: October 2011 CBP Broker Exam Answers
One common question we're receiving is "Are you/when are you going to post answers to the October Exam?"
Have no fear! We have begun researching and answering questions, and are planning on releasing a preliminary set of answers on Friday.
Have no fear! We have begun researching and answering questions, and are planning on releasing a preliminary set of answers on Friday.
Thursday, September 22, 2011
Proposed Bill Provides Customs Brokers with New Obligation
Senator Claire McCaskill of Missouri introduced a bill entitled the “Fighting for American Industry’s Right to Enforcement Against Duty Evasion Act,” otherwise known as the “FAIR Enforcement Against Duty Evasion Act of 2011,” with the intention of ending duty evasion by foreign companies. The bill addresses two issues: (1) the lack of information collected on importers making it difficult for officials to identify those companies evading antidumping duty and (2) the ability of foreign companies who have not previously shipped to the U.S. to post a bond to cover estimated duties rather than pay cash.
Broker Obligation
The bill obligates customs brokers to use a good faith effort to obtain the identity of the customer importing into the U.S. and “maintain[ ] records of the information used to substantiate a person’s identify, including name, address, and other identifying information.” SAFE Enforcement Against Duty Evasion Act of 2011, sec. 3(a)(i)(2)(C), amending section 641(i) of the Tariff Act of 1930. With this additional burden on brokers comes new significant penalty exposure. A broker who fails to obtain the required identifying information is potentially liable for a penalty of up to $10,000 for each violation and a possible revocation or suspension of the broker’s license. http://mccaskill.senate.gov/files/documents/pdf/McCaskill_FAIR_Enforcement_Against%20Duty_Evasion_Act.pdf
Senator McCaskill indicated in her press release that collection of the identifying data would assist law enforcement during an investigation by “increasing the likelihood the lawbreakers can be identified and brought to justice.” http://mccaskill.senate.gov/?p=press_release&id=1337. The bill also creates what she referred to as a “safe harbor” to prevent brokers from penalties when they made reasonable efforts to comply with the new law. To this end, within 60 days from the date the bill is enacted, CBP must publish a Federal Register notice, in which it solicits proposals for examples of conduct that should not trigger the penalty provision. After the public comment period closes, CBP will issue its final regulation specifying such practices.
In addition, the bill requires CBP and other regulators to submit a report to Congress, (1) recommending the best way to require foreign nations to provide brokers with the required identifying information and (2) establishing a system for brokers to review identifying information maintained by the government.
New Shippers
In addition to the added broker obligations, the bill also removes the “bonding-in-lieu” provision for new shippers to the U.S. Instead, the bill requires shippers to pay in cash up front, thereby eliminating the possibility of posting a bond for estimated duties. This requirement is intended to prevent foreign companies from vanishing before making a duty payment in full. Under the bill, estimated duties are paid on imported goods at the beginning of the import process, rather than after the goods are in the U.S.
Broker Obligation
The bill obligates customs brokers to use a good faith effort to obtain the identity of the customer importing into the U.S. and “maintain[ ] records of the information used to substantiate a person’s identify, including name, address, and other identifying information.” SAFE Enforcement Against Duty Evasion Act of 2011, sec. 3(a)(i)(2)(C), amending section 641(i) of the Tariff Act of 1930. With this additional burden on brokers comes new significant penalty exposure. A broker who fails to obtain the required identifying information is potentially liable for a penalty of up to $10,000 for each violation and a possible revocation or suspension of the broker’s license. http://mccaskill.senate.gov/files/documents/pdf/McCaskill_FAIR_Enforcement_Against%20Duty_Evasion_Act.pdf
Senator McCaskill indicated in her press release that collection of the identifying data would assist law enforcement during an investigation by “increasing the likelihood the lawbreakers can be identified and brought to justice.” http://mccaskill.senate.gov/?p=press_release&id=1337. The bill also creates what she referred to as a “safe harbor” to prevent brokers from penalties when they made reasonable efforts to comply with the new law. To this end, within 60 days from the date the bill is enacted, CBP must publish a Federal Register notice, in which it solicits proposals for examples of conduct that should not trigger the penalty provision. After the public comment period closes, CBP will issue its final regulation specifying such practices.
In addition, the bill requires CBP and other regulators to submit a report to Congress, (1) recommending the best way to require foreign nations to provide brokers with the required identifying information and (2) establishing a system for brokers to review identifying information maintained by the government.
New Shippers
In addition to the added broker obligations, the bill also removes the “bonding-in-lieu” provision for new shippers to the U.S. Instead, the bill requires shippers to pay in cash up front, thereby eliminating the possibility of posting a bond for estimated duties. This requirement is intended to prevent foreign companies from vanishing before making a duty payment in full. Under the bill, estimated duties are paid on imported goods at the beginning of the import process, rather than after the goods are in the U.S.
Friday, September 9, 2011
Brokers Beware: FDA Issues Letter to Industry about Import Review Process
On September 6, 2011, the U.S. Food and Drug Administration (FDA) issued a letter to the importing community, in which the agency provided recommendations to facilitate the FDA import entry review process for medical and non-medical radiation emitting electronic products. Specifically, the FDA recommends the use of Affirmation of Compliance (AofC) codes at the time of entry. The FDA believes that submitting AofC codes when entering radiation emitting electronic products will expedite the admissibility process by decreasing the likelihood that the FDA will hold your shipment for further review during the FDA’s import screening process.
The letter explains that Center for Devices and Radiological Health (CDRH) regulates radiation emitting electronic products under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §360 and implementing FDA and US Customs and Border Protection (CBP) regulations. Importers of radiation emitting electronic products subject to “federal performance standards” must submit information regarding each product to the FDA and CBP at entry on Form FDA-2877 http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/Forms/UCM080778.pdf.
Imported products subject to a federal performance standard include:
• Television receivers and video display monitors with cathode ray tubes only (21 CFR §1020.10)
• Diagnostic x-ray systems and their major components (21 CFR§ 1020.30) (Includes medical x-ray, fluoroscopy)
• Cabinet x-ray systems (21 CFR §1020.30) (Includes airport security x-ray system)
• Microwave ovens (21 CFR §1030.10) (Includes consumer and commercial)
• Laser products (21 CFR §1040.10) (Includes laser pointers, laser light shows, industrial laser, medical laser, surveying, leveling and alignment lasers)
• Sunlamp products and ultraviolet lamps intended for use in sunlamp products (21 CFR §1040.20) (Includes tanning beds/booths)
• High intensity mercury vapor discharge lamps (21 CFR §1040.30) (and metal halide lamps, for illumination)
• Ultrasonic therapy products (21 CFR §1050.10) (for use in physical therapy).
Form FDA-2877 is not required for imported medical radiation emitting electronic products that are not subject to federal performance standards, which include radiation therapy devices, linear accelerators, diagnostic ultrasounds for imaging, microwave diathermy, shortwave diathermy, hearing aids, cardiac radiofrequency ablation devices, and extracorporeal shock wave lithotripters. Although these products have reporting requirements, they do not require the form.
All radiation emitting electronic products will have an AofC code, but vary depending on the product and whether it is subject to a federal performance standard. Here is a sampling of the types of Radiation Emitting Electronic Product Affirmation of Compliance Codes:
• ACC --- EPRC Accession Number: Used as the Electronic Product Radiation Control Product report Accession Number issued by FDA identified in the FDA line. Example: ACC 102XXX
• RA1 – EPRC Product Declaration A1 (FD-2877): Transmitted for products that were manufactured prior to the effective date of an applicable performance standard. The date of manufacture serves as the qualifier.
• RA2 – EPRC Product Declaration A2 (FDA-2877): Transmitted for products that are excluded from the applicability clause or definition in the standard or by FDA written guidance. You must provide the specific reason for exclusion.
• RA6 – EPRC Product Declaration A6 (FDA-2877): Transmitted when the products are prototypes intended for ongoing product development by the importer. The products must be labeled “FOR TEST/EVALUATION ONLY,” and be exported, destroyed or held for future testing, but not distributed. A qualifier is not required, but the quantity is required at the FDA line level.
• RB1 – EPRC Product Declaration B1 (FD-2877): Transmitted when the most current annual report or product report contains performance standards compliance information.
For a complete list of AofC Codes, please see appendix to the Sept.6, 2011 letter http://www.fda.gov/MedicalDevices/ResourcesforYou/Industry/ucm271180.htm and to the March 24, 2011 letter. http://www.fda.gov/MedicalDevices/ResourcesforYou/Industry/ucm248321.htm
The letter explains that Center for Devices and Radiological Health (CDRH) regulates radiation emitting electronic products under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §360 and implementing FDA and US Customs and Border Protection (CBP) regulations. Importers of radiation emitting electronic products subject to “federal performance standards” must submit information regarding each product to the FDA and CBP at entry on Form FDA-2877 http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/Forms/UCM080778.pdf.
Imported products subject to a federal performance standard include:
• Television receivers and video display monitors with cathode ray tubes only (21 CFR §1020.10)
• Diagnostic x-ray systems and their major components (21 CFR§ 1020.30) (Includes medical x-ray, fluoroscopy)
• Cabinet x-ray systems (21 CFR §1020.30) (Includes airport security x-ray system)
• Microwave ovens (21 CFR §1030.10) (Includes consumer and commercial)
• Laser products (21 CFR §1040.10) (Includes laser pointers, laser light shows, industrial laser, medical laser, surveying, leveling and alignment lasers)
• Sunlamp products and ultraviolet lamps intended for use in sunlamp products (21 CFR §1040.20) (Includes tanning beds/booths)
• High intensity mercury vapor discharge lamps (21 CFR §1040.30) (and metal halide lamps, for illumination)
• Ultrasonic therapy products (21 CFR §1050.10) (for use in physical therapy).
Form FDA-2877 is not required for imported medical radiation emitting electronic products that are not subject to federal performance standards, which include radiation therapy devices, linear accelerators, diagnostic ultrasounds for imaging, microwave diathermy, shortwave diathermy, hearing aids, cardiac radiofrequency ablation devices, and extracorporeal shock wave lithotripters. Although these products have reporting requirements, they do not require the form.
All radiation emitting electronic products will have an AofC code, but vary depending on the product and whether it is subject to a federal performance standard. Here is a sampling of the types of Radiation Emitting Electronic Product Affirmation of Compliance Codes:
• ACC --- EPRC Accession Number: Used as the Electronic Product Radiation Control Product report Accession Number issued by FDA identified in the FDA line. Example: ACC 102XXX
• RA1 – EPRC Product Declaration A1 (FD-2877): Transmitted for products that were manufactured prior to the effective date of an applicable performance standard. The date of manufacture serves as the qualifier.
• RA2 – EPRC Product Declaration A2 (FDA-2877): Transmitted for products that are excluded from the applicability clause or definition in the standard or by FDA written guidance. You must provide the specific reason for exclusion.
• RA6 – EPRC Product Declaration A6 (FDA-2877): Transmitted when the products are prototypes intended for ongoing product development by the importer. The products must be labeled “FOR TEST/EVALUATION ONLY,” and be exported, destroyed or held for future testing, but not distributed. A qualifier is not required, but the quantity is required at the FDA line level.
• RB1 – EPRC Product Declaration B1 (FD-2877): Transmitted when the most current annual report or product report contains performance standards compliance information.
For a complete list of AofC Codes, please see appendix to the Sept.6, 2011 letter http://www.fda.gov/MedicalDevices/ResourcesforYou/Industry/ucm271180.htm and to the March 24, 2011 letter. http://www.fda.gov/MedicalDevices/ResourcesforYou/Industry/ucm248321.htm
Tuesday, August 30, 2011
Reminder re Deadline for Customs Broker Exam
As indicated in the Notice of Examination that CBP published earlier this month, the deadline to file an application to sit for the Customs Broker License Examination is close of business this Friday, September 2, 2011. CBP will not accept applications received after Friday. This means that a postmark on Friday, September 2 is not sufficient-- CBP must actually receive the application. You can find a copy of the examination application by clicking on form number CBP 3124E.
Wednesday, August 17, 2011
CBP Ends Paper Courtesy Liquidation Notices
In an attempt to streamline the notification process and reduce mailing costs, U.S. Customs and Border Protection (CBP) has decided to eliminate mailing paper copies of courtesy notices of liquidation. Although not statutorily necessary, CBP had established the practice of issuing courtesy copies of liquidation notices to importers of record whose entry summaries are filed in the Automated Broker Interface (ABI). Such courtesy liquidation notices provide informal and advance notice of an entry’s liquidation date.
CBP will cease mailing paper copies, but will continue to issue electronic courtesy notices to all ABI filers, which include importers of record who file their own entries and customs brokers who file as the agent of the importer of record. Importers of record who do not file entries through ABI will continue to receive the paper liquidation notices. CBP has also indicated that importers of record with an Automated Commercial Environment (ACE) Secure Data Portal Account can monitor the liquidation of their entries by using the reporting tool in the ACE Portal.
CBP estimated that upon implementation of the new policy, the agency will avoid duplication of the courtesy notices and save approximately $3,000,000 in postage annually. Although CBP received several comments praising CBP’s effort to save money, other commentators were concerned that importers of record would become completely reliant on their brokers to provide the liquidation date information that affect myriad of deadlines and customs compliance issues.
In response, CBP indicated that brokers are obligated to provide the liquidation dates. In addition, CBP responded that the agency is currently reprogramming ACE to permit all importers of record to monitor liquidation of entries filed under their importer of record numbers through the ACE Portal. CBP explained that even for those importers who do not have ACE Portal Account, an importer may gain limited access to a broker’s ACE Portal Account to obtain reports for entries filed by the broker using the importer of record number belonging to that importer. CBP is also considering posting an electronic courtesy bulletin notice of liquidation.
In light of this change, importers should consider revising their import policies to ensure that their customs brokers(1) provide the liquidation notices to importers upon receiving the electronic courtesy copy and (2) permit the importer limited access to their ACE Portal Account so that the importer can obtain reports for its entries.
The final rule is effective September 30, 2011. See 76 Fed. Reg. 50883 (Aug. 17, 2011), http://www.gpo.gov/fdsys/pkg/FR-2011-08-17/pdf/2011-20957.pdf, CBP will implement the rule the first day on or after September 30, 2011 that CBP can provide importers with complete liquidation reports, including liquidation dates, through the ACE Portal. CBP will announce the exact date of implementation after it determines when the ACE reports will be ready.
CBP will cease mailing paper copies, but will continue to issue electronic courtesy notices to all ABI filers, which include importers of record who file their own entries and customs brokers who file as the agent of the importer of record. Importers of record who do not file entries through ABI will continue to receive the paper liquidation notices. CBP has also indicated that importers of record with an Automated Commercial Environment (ACE) Secure Data Portal Account can monitor the liquidation of their entries by using the reporting tool in the ACE Portal.
CBP estimated that upon implementation of the new policy, the agency will avoid duplication of the courtesy notices and save approximately $3,000,000 in postage annually. Although CBP received several comments praising CBP’s effort to save money, other commentators were concerned that importers of record would become completely reliant on their brokers to provide the liquidation date information that affect myriad of deadlines and customs compliance issues.
In response, CBP indicated that brokers are obligated to provide the liquidation dates. In addition, CBP responded that the agency is currently reprogramming ACE to permit all importers of record to monitor liquidation of entries filed under their importer of record numbers through the ACE Portal. CBP explained that even for those importers who do not have ACE Portal Account, an importer may gain limited access to a broker’s ACE Portal Account to obtain reports for entries filed by the broker using the importer of record number belonging to that importer. CBP is also considering posting an electronic courtesy bulletin notice of liquidation.
In light of this change, importers should consider revising their import policies to ensure that their customs brokers(1) provide the liquidation notices to importers upon receiving the electronic courtesy copy and (2) permit the importer limited access to their ACE Portal Account so that the importer can obtain reports for its entries.
The final rule is effective September 30, 2011. See 76 Fed. Reg. 50883 (Aug. 17, 2011), http://www.gpo.gov/fdsys/pkg/FR-2011-08-17/pdf/2011-20957.pdf, CBP will implement the rule the first day on or after September 30, 2011 that CBP can provide importers with complete liquidation reports, including liquidation dates, through the ACE Portal. CBP will announce the exact date of implementation after it determines when the ACE reports will be ready.
Monday, August 8, 2011
CBP Posts Notice of Customs Broker License Examination
US Customs and Border Protection has posted its Notice of Examination for the October 3, 2011 Customs Broker License Exam. To sit for the broker exam, CBP must receive and accept your exam application Form 3124E and fee of $200 by close of business on Friday, September 2, 2011. The exam application can be found on CBP’s website, under Form 3124E at http://forms.cbp.gov/pdf/CBP_Form_3124E.pdf. CBP will accept payment by cash, check or money order, but does not accept credit cards for the $200 exam fee.
The broker exam lasts four hours and consists of 80 multiple choice questions on the follow topics:
• Entry
• Classification
• Country of origin
• Trade agreements
• Antidumping and countervailing duty
• Valuation
• Broker responsibilities
• Fines, Penalties & Forfeitures (FP&F)
• Protests
• Marking
• Prohibited and restricted merchandise
• Drawback
• Intellectual property rights
• Other areas germane to a broker’s duties
CBP reports that the October 2011 exam will test the above topics based on the following reference materials:
• 2011 version of HTSUS (without supplements)
• 19 CFR parts 0-199 (revised as of April 1, 2011)
• Customs and Trade Automated Interface Requirements (ABI User requirements CATAIR)
o Appendix B- Valid Codes
o Appendix D- Metric Conversion
o Appendix E- Valid Entry Numbers
o Appendix G- Common Errors
o Glossary
• CBP Form 7501 Entry Summary Instructions
• Custom Directives
o CD 3550-055, Instructions for Deriving Manufacturer/Shipper ID Code
o CD 3550-079A, Ultimate Consignee at time of Entry or Release
o CD 3530-002A, Right to Make Entry*
o CD 5610-002, Standard Guidelines for the Input of Names and Addresses into ACS Files
Please note that CBP will not provide materials. Applicants may use any written materials, but may not use computers, phones, PDAs, or other electronics during the exam.
* BCP Learning added a lesson regarding CD 3530-002A, Right to Make Entry to Module 9 of its Customs Broker Examination Course.
The broker exam lasts four hours and consists of 80 multiple choice questions on the follow topics:
• Entry
• Classification
• Country of origin
• Trade agreements
• Antidumping and countervailing duty
• Valuation
• Broker responsibilities
• Fines, Penalties & Forfeitures (FP&F)
• Protests
• Marking
• Prohibited and restricted merchandise
• Drawback
• Intellectual property rights
• Other areas germane to a broker’s duties
CBP reports that the October 2011 exam will test the above topics based on the following reference materials:
• 2011 version of HTSUS (without supplements)
• 19 CFR parts 0-199 (revised as of April 1, 2011)
• Customs and Trade Automated Interface Requirements (ABI User requirements CATAIR)
o Appendix B- Valid Codes
o Appendix D- Metric Conversion
o Appendix E- Valid Entry Numbers
o Appendix G- Common Errors
o Glossary
• CBP Form 7501 Entry Summary Instructions
• Custom Directives
o CD 3550-055, Instructions for Deriving Manufacturer/Shipper ID Code
o CD 3550-079A, Ultimate Consignee at time of Entry or Release
o CD 3530-002A, Right to Make Entry*
o CD 5610-002, Standard Guidelines for the Input of Names and Addresses into ACS Files
Please note that CBP will not provide materials. Applicants may use any written materials, but may not use computers, phones, PDAs, or other electronics during the exam.
* BCP Learning added a lesson regarding CD 3530-002A, Right to Make Entry to Module 9 of its Customs Broker Examination Course.
Tuesday, July 26, 2011
State Department Issues Guidance Statement Regarding Implementation of Dodd-Frank to Address Problems with Conflict Minerals
Do you import jewelry, or serve as a broker for a jewelry importer? If so, then Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) will be of particular interest to you. Section 1502 of Dodd-Frank addresses the problem of the exploitation and trade of “conflict minerals” sourced from the eastern Democratic Republic of the Congo (DRC). Conflict minerals include gold, columbite-tantalite (coltan), cassiterite (tin), wolframite (tungsten) or their derivatives.
Section 1502 instructs the Securities and Exchange Commission (SEC), in consultation with the Department of State (State Department) to promulgate regulations requiring certain companies to report annually on their due diligence activities on the source and chain of custody of conflict minerals. Specifically, the State Department is instructed “to provide guidance to commercial entities seeking to exercise due diligence on and formalize the origin and chain of custody of conflict minerals used in the products and on their suppliers to ensure that conflict minerals mused in the products of such suppliers do not directly or indirectly finance armed conflict or result in labor or human rights violations.”
The SEC intends to issue regulations pursuant to Section 1502 of Dodd-Frank by the end of 2011. In the meantime, the State Department has urged that companies begin to perform their due diligence on the source and chain of custody of conflict minerals they are using in production of products and importing into the U.S. The agency instructs that such due diligence will provide useful information that will assist the State Department and the SEC in meeting Dodd-Frank’s goal of preventing further conflict in the eastern DRC. In its Guidance Statement, http://www.state.gov/e/eeb/diamonds/docs/168632.htm, the State Department has suggested that “companies should begin immediately to structure their supply chain relationships in a responsible and productive manner to encourage legitimate, conflict-free trade, including conflict-free minerals sourced from the DRC and the Great Lakes region.”
The State Department encouraged companies to follow Organization for Economic Cooperation and Development (OECD) guidance and framework when developing and implementing their own due diligence plans:
• Establish strong company management systems;
• Identify and assess risk in the supply chain;
• Design and implement a strategy to respond to identified risks;
• Conduct supply chain due diligence at specific points in the chain (preferably by independent third party); and
• Report on findings from supply chain due diligence.
The State Department will consider whether to revise its Guidance Statement after the SEC issues its regulations.
Section 1502 instructs the Securities and Exchange Commission (SEC), in consultation with the Department of State (State Department) to promulgate regulations requiring certain companies to report annually on their due diligence activities on the source and chain of custody of conflict minerals. Specifically, the State Department is instructed “to provide guidance to commercial entities seeking to exercise due diligence on and formalize the origin and chain of custody of conflict minerals used in the products and on their suppliers to ensure that conflict minerals mused in the products of such suppliers do not directly or indirectly finance armed conflict or result in labor or human rights violations.”
The SEC intends to issue regulations pursuant to Section 1502 of Dodd-Frank by the end of 2011. In the meantime, the State Department has urged that companies begin to perform their due diligence on the source and chain of custody of conflict minerals they are using in production of products and importing into the U.S. The agency instructs that such due diligence will provide useful information that will assist the State Department and the SEC in meeting Dodd-Frank’s goal of preventing further conflict in the eastern DRC. In its Guidance Statement, http://www.state.gov/e/eeb/diamonds/docs/168632.htm, the State Department has suggested that “companies should begin immediately to structure their supply chain relationships in a responsible and productive manner to encourage legitimate, conflict-free trade, including conflict-free minerals sourced from the DRC and the Great Lakes region.”
The State Department encouraged companies to follow Organization for Economic Cooperation and Development (OECD) guidance and framework when developing and implementing their own due diligence plans:
• Establish strong company management systems;
• Identify and assess risk in the supply chain;
• Design and implement a strategy to respond to identified risks;
• Conduct supply chain due diligence at specific points in the chain (preferably by independent third party); and
• Report on findings from supply chain due diligence.
The State Department will consider whether to revise its Guidance Statement after the SEC issues its regulations.
Thursday, July 14, 2011
CBP Changes PEA to PSC When Using ACE
U.S. Customs and Border Protection (CBP) recently announced a new National Customs Automation Program Test regarding ACE Entry Summary, Accounts & Revenue (ESTR IV) capabilities. Importantly, under the ESAR IV test, CBP will permit importers to file post-entry corrections of specific type of ACE entry summaries prior to liquidation. Those participating in the test will be able to submit a PSC for existing ACE formal (type 01) entries and Antidumping/Countervailing (type 03) entries.
CBP has explained that such post-summary corrections (PSCs) replaces the Post-Entry Amendment (PEA) procedures currently used by importers to amend entry summaries prior to liquidation, which had permitted an importer to file an individual amendment letter or a quarterly tracking report covering certain errors. As of Sept. 22, 2011, CBP will stop accepting PEAs to correct entry summaries filed under ACE.
CBP has explained that if an importer must make a post-summary correction, the PSC filed through ABI should contain all of the data elements in the original entry summary. It will constitute a complete replacement of that entry summary, or any prior PSCs to that original entry summary. The PSC will be processed through all existing validations including Census warnings. Thus, one who files a PSC is conducting “customs business” as defined in 19 C.F.R. § 111.1.
Those ACE Portal Account owners who have the ability to select “portal” as their mode of communication will also have the ability to customize PSC data elements on the ACE entry summary, permitting further customization of existing entry summary reports. Such additional PSC data elements include PSC indicator, PSC filer, PSC reason codes at both the header and line level and an accelerated liquidation request indicator.
CBP has provided the following list of criteria that an importer needs to meet to file a PSC on an existing ACE entry type 01 or 03:
• The entry summary to be amended must not be liquidated.
• Duty must have been fully paid on the entry or be revenue free.
• If duty is owed because of the PSC, it must be deposited at time of filing PSC.
• The entry summary must be in “accepted status,” meaning it passed all technical edits and validations by CBP and Census.
• The entry summary must be in CBP control.
• The PSC must be transmitted within 270 days of date of entry.
• The PSC cannot be filed within 20 calendar days of the scheduled liquidation date of the entry summary.
• The entry summary cannot be under CBP review.
• The entry summary that has been flagged for reconciliation may only be corrected by a PSC that does not affect the flagged issue.
• A text explanation and at least one reason code are required for each PSC.
• An unlimited number of PSCs may be filed for any one entry, provided all the above criteria are met.
There are a number of data elements that may not be changed via the filing of a PSC, including:
• A type 03 entry (AD/CVD) may not be changed into a type 01 entry
• Importer of record
• Consolidated summary indicator
• District/port of entry
• Cargo release certification request indicator
• Live entry indicator
• NAFTA indicator
• Reconciliation issue code
• Preliminary statement print date
• Periodic statement month
• Statement client branch identifier
• Location of goods code
• Any release detail, e.g., release entry filer code, release entry number)
PSC cannot be filed in place of a prior disclosure, which are still to be filed according to 19 C.F.R.§ 162.74. More information can be found at 76 Fed. Reg. 37136 (June 24, 2011).
CBP has explained that such post-summary corrections (PSCs) replaces the Post-Entry Amendment (PEA) procedures currently used by importers to amend entry summaries prior to liquidation, which had permitted an importer to file an individual amendment letter or a quarterly tracking report covering certain errors. As of Sept. 22, 2011, CBP will stop accepting PEAs to correct entry summaries filed under ACE.
CBP has explained that if an importer must make a post-summary correction, the PSC filed through ABI should contain all of the data elements in the original entry summary. It will constitute a complete replacement of that entry summary, or any prior PSCs to that original entry summary. The PSC will be processed through all existing validations including Census warnings. Thus, one who files a PSC is conducting “customs business” as defined in 19 C.F.R. § 111.1.
Those ACE Portal Account owners who have the ability to select “portal” as their mode of communication will also have the ability to customize PSC data elements on the ACE entry summary, permitting further customization of existing entry summary reports. Such additional PSC data elements include PSC indicator, PSC filer, PSC reason codes at both the header and line level and an accelerated liquidation request indicator.
CBP has provided the following list of criteria that an importer needs to meet to file a PSC on an existing ACE entry type 01 or 03:
• The entry summary to be amended must not be liquidated.
• Duty must have been fully paid on the entry or be revenue free.
• If duty is owed because of the PSC, it must be deposited at time of filing PSC.
• The entry summary must be in “accepted status,” meaning it passed all technical edits and validations by CBP and Census.
• The entry summary must be in CBP control.
• The PSC must be transmitted within 270 days of date of entry.
• The PSC cannot be filed within 20 calendar days of the scheduled liquidation date of the entry summary.
• The entry summary cannot be under CBP review.
• The entry summary that has been flagged for reconciliation may only be corrected by a PSC that does not affect the flagged issue.
• A text explanation and at least one reason code are required for each PSC.
• An unlimited number of PSCs may be filed for any one entry, provided all the above criteria are met.
There are a number of data elements that may not be changed via the filing of a PSC, including:
• A type 03 entry (AD/CVD) may not be changed into a type 01 entry
• Importer of record
• Consolidated summary indicator
• District/port of entry
• Cargo release certification request indicator
• Live entry indicator
• NAFTA indicator
• Reconciliation issue code
• Preliminary statement print date
• Periodic statement month
• Statement client branch identifier
• Location of goods code
• Any release detail, e.g., release entry filer code, release entry number)
PSC cannot be filed in place of a prior disclosure, which are still to be filed according to 19 C.F.R.§ 162.74. More information can be found at 76 Fed. Reg. 37136 (June 24, 2011).
Tuesday, June 28, 2011
Are You Getting a CBP Form 28 or 29 for the Right Reason?
Earlier this month, U.S. Customs and Border Protection (CBP) issued a memorandum to the ports to remind import specialists about the proper use of CBP Form 28 Request for Information and CBP Form 29 Notice of Action. The memorandum stemmed from the inconsistent use among the ports and misuse by import specialists who were issuing these notices for purposes for which the notices were not intended.
In the memorandum, the ports were advised that it was appropriate to issue a CBP Form 28 to an importer when there were questions about admissibility, classification or valuation of the imported goods. CBP can also request information about the imported merchandise, such as brochures, descriptive language, blueprints and samples. In addition, CBP can seek proof of payment information or affidavits about manufacturing to determine eligibility of special tariff program, for example. In other words, if the entry summary package contained insufficient information about the imported merchandise, CBP can request information by issuing a CBP Form 28 to the importer.
On the other hand, the ports were instructed not to continue to use CBP Form 28 for a variety of purposes. First, for example, the ports are not to issue a Form 28 to notify the importer that CBP commenced a formal investigation “as a matter of enforcement policy, not a matter of law.” Instead, CBP instructed the import specialists to notify an importer of such an investigation either by letter on CBP letterhead, or issuing a CBP Form 29.
Additionally, import specialists are not permitted to use Form 28 to request proof of a properly executed power of attorney. When requesting such proof of a valid power of attorney, the ports were advised to seek such proof in writing by submitting an individualized letter on CBP letterhead, or in person during a broker compliance visit.
Finally, the memorandum reminded the ports to avoid warning importers about penalties or investigations For example, CBP does not want import specialists to state that failing to provide the information requested could lead to penalties under 19 U.S.C. § 1592. Similarly, import specialists should not state that “this office is investigating the classification of…” when CBP has not really started an investigation. CBP is concerned that using this type of language will lead to fewer prior disclosures and defeat the goal of informed compliance.
In the memorandum, the ports were advised that it was appropriate to issue a CBP Form 28 to an importer when there were questions about admissibility, classification or valuation of the imported goods. CBP can also request information about the imported merchandise, such as brochures, descriptive language, blueprints and samples. In addition, CBP can seek proof of payment information or affidavits about manufacturing to determine eligibility of special tariff program, for example. In other words, if the entry summary package contained insufficient information about the imported merchandise, CBP can request information by issuing a CBP Form 28 to the importer.
On the other hand, the ports were instructed not to continue to use CBP Form 28 for a variety of purposes. First, for example, the ports are not to issue a Form 28 to notify the importer that CBP commenced a formal investigation “as a matter of enforcement policy, not a matter of law.” Instead, CBP instructed the import specialists to notify an importer of such an investigation either by letter on CBP letterhead, or issuing a CBP Form 29.
Additionally, import specialists are not permitted to use Form 28 to request proof of a properly executed power of attorney. When requesting such proof of a valid power of attorney, the ports were advised to seek such proof in writing by submitting an individualized letter on CBP letterhead, or in person during a broker compliance visit.
Finally, the memorandum reminded the ports to avoid warning importers about penalties or investigations For example, CBP does not want import specialists to state that failing to provide the information requested could lead to penalties under 19 U.S.C. § 1592. Similarly, import specialists should not state that “this office is investigating the classification of…” when CBP has not really started an investigation. CBP is concerned that using this type of language will lead to fewer prior disclosures and defeat the goal of informed compliance.
Tuesday, June 21, 2011
Importer Needed Assist in Court to Help with His Half Million Dollar Assist Problem
On June 15, 2011, the U.S. Court of International Trade (CIT) found that both importer Trek Leather, Inc. and the company’s president and sole shareholder, Harish Shadadpuri, were grossly negligent in violation of 19 U.S.C. § 1592 for the failure to report fabric assists in the dutiable value of imported men’s suits. Although it is expected that the defendants will appeal the CIT’s decision, if the decision stands, the defendants are jointly and severally liable to U.S. Customs and Border Protection in the amount of $45,245.39 plus interest in unpaid customs duty and $534,420.32 in penalties. Maybe the defendants are lucky – Customs had sought damages in the amount of over $2.3 million for fraudulently omitting the value of the assists on the entry documentation.
How did we get here? Trek is an importer of men’s suits. Mr. Shadadpuri, through the corporate entity, purchased fabric that he provided to the foreign manufacturer who incorporated the fabric into the suits that were later imported by Trek into the United States. In August 2004, the import specialist investigated Trek and discovered that Trek consistently neglected to declare the assists in the transaction value of the imported suits. The problem for the defendants is that two years earlier, Mr. Shadadpuri had also failed to declare assists for another company he owned, Mercantile Wholesale, Inc. Mercantile had paid approximately $46,000 in unpaid duty and interest for its failure to include the assist in the dutiable value, but Customs did not seek penalties. Apparently, Mr. Shadadpuri did not learn his lesson.
Customs alleged that Mr. Shadadpuri, as the owner of both Mercantile and Trek, should have known to include the value of the assists in the value of the imported suits. In failing to do so, Customs instituted an action against Trek and Shadadpuri, alleging that (1) they committed fraud by knowingly and intentionally omitting the value of the assists, (2) in the alternative, they were grossly negligent in omitting the value of the assists and (3) that Shadadpuri could be held personally liable.
This decision is significant for several reasons. First, although Trek was the importer of record and is a corporation and separate entity from Shadadpuri, the court found that Shadadpuri as the sole owner of Trek was personally liable for the back duty and the penalties. That means that if his company does not have the money to pay the penalties, he must pay it personally with his own assets—his bank account, house, car—anything he owns to pay off the debt to Customs. It is one thing if the company you own goes out of business; it is entirely another thing when you are not protected by the corporate veil. This should serve as a wakeup call to small and privately-owned importers.
Second, not having internal controls in place to ensure that assists are captured in transaction value can lead to big problems with Customs. Even if Customs did not seek penalties in the amounts of $500,000 + (grossly negligent) or $2.3+million (fraud), paying $40,000+ in unpaid duty and interest in one lump sum, as opposed to over the course of shipments, is not always easy when a company may not have the cash flow. Moreover, the goods have already been sold, making it impossible to recoup the additional duty from the customer.
Third, this case cautions an importer that once Customs discovers you have made a material error, particularly one that affects the value of goods and thereby the amount of duty collected, an importer would be wise not to make the same mistake again! The reason Customs and the court threw the book at the importer in this case was because Shadadpuri made the same mistake just two years earlier and admitted to the import specialist that he knew that Trek should have declared the assists. Shadadpuri’s credibility was questioned.
Finally, Customs is stepping up enforcement of importation activities. Customs considers assists a red flag issue for importers and will continue to pursue those that do not declare them. Customs has shown that it will even go after an importer for fraud, if the facts support it. This could lead to penalties large enough to put a company out of business and if nothing else, also leads to large legal bills that probably could have been avoided.
Moral of the story: declare assists, put internal controls in place and if Customs calls saying it is investigating you, say nothing and immediately contact customs counsel.
The case can be found at:
"http://www.cit.uscourts.gov/slip_op/Slip_op11/11-68.pdf">
How did we get here? Trek is an importer of men’s suits. Mr. Shadadpuri, through the corporate entity, purchased fabric that he provided to the foreign manufacturer who incorporated the fabric into the suits that were later imported by Trek into the United States. In August 2004, the import specialist investigated Trek and discovered that Trek consistently neglected to declare the assists in the transaction value of the imported suits. The problem for the defendants is that two years earlier, Mr. Shadadpuri had also failed to declare assists for another company he owned, Mercantile Wholesale, Inc. Mercantile had paid approximately $46,000 in unpaid duty and interest for its failure to include the assist in the dutiable value, but Customs did not seek penalties. Apparently, Mr. Shadadpuri did not learn his lesson.
Customs alleged that Mr. Shadadpuri, as the owner of both Mercantile and Trek, should have known to include the value of the assists in the value of the imported suits. In failing to do so, Customs instituted an action against Trek and Shadadpuri, alleging that (1) they committed fraud by knowingly and intentionally omitting the value of the assists, (2) in the alternative, they were grossly negligent in omitting the value of the assists and (3) that Shadadpuri could be held personally liable.
This decision is significant for several reasons. First, although Trek was the importer of record and is a corporation and separate entity from Shadadpuri, the court found that Shadadpuri as the sole owner of Trek was personally liable for the back duty and the penalties. That means that if his company does not have the money to pay the penalties, he must pay it personally with his own assets—his bank account, house, car—anything he owns to pay off the debt to Customs. It is one thing if the company you own goes out of business; it is entirely another thing when you are not protected by the corporate veil. This should serve as a wakeup call to small and privately-owned importers.
Second, not having internal controls in place to ensure that assists are captured in transaction value can lead to big problems with Customs. Even if Customs did not seek penalties in the amounts of $500,000 + (grossly negligent) or $2.3+million (fraud), paying $40,000+ in unpaid duty and interest in one lump sum, as opposed to over the course of shipments, is not always easy when a company may not have the cash flow. Moreover, the goods have already been sold, making it impossible to recoup the additional duty from the customer.
Third, this case cautions an importer that once Customs discovers you have made a material error, particularly one that affects the value of goods and thereby the amount of duty collected, an importer would be wise not to make the same mistake again! The reason Customs and the court threw the book at the importer in this case was because Shadadpuri made the same mistake just two years earlier and admitted to the import specialist that he knew that Trek should have declared the assists. Shadadpuri’s credibility was questioned.
Finally, Customs is stepping up enforcement of importation activities. Customs considers assists a red flag issue for importers and will continue to pursue those that do not declare them. Customs has shown that it will even go after an importer for fraud, if the facts support it. This could lead to penalties large enough to put a company out of business and if nothing else, also leads to large legal bills that probably could have been avoided.
Moral of the story: declare assists, put internal controls in place and if Customs calls saying it is investigating you, say nothing and immediately contact customs counsel.
The case can be found at:
"http://www.cit.uscourts.gov/slip_op/Slip_op11/11-68.pdf">
Friday, June 10, 2011
CBP Finalizes Harmonized Data Set for Automated Commercial Environment
On June 9, 2011, U.S. Customs and Border Protection (CBP) announced the final Participating Government Agencies (PGA) Message Set for the Automated Commercial Environment (ACE). ACE is the U.S. commercial trade processing system designed to (i) automate border processing, (ii) enhance border security, (iii) expedite international trade and (iv) provide a platform for information sharing between industry and government. The PGA Message Set is a harmonized set of information needed by federal agencies to allow imported cargo to enter the country.
According to the ACE 101 Publication dated June 2011, 26 PGAs currently use ACE. The June 9th press release did not specifically name the final PGAs. We submitted an inquiry to CBP and will report the list of final PGAs once we receive confirmation from CBP. However, according to the International Trade Data Service, the following are examples of the federal agencies slated for ACE integration:
• Animal and Plant Health Inspection Service (APHIS) of the Department of Agriculture
• International Trade Administration-Import Administration (ITA) of the Department of Commerce
• Food and Drug Administration (FDA) of the Department of Health and Human Services
• U.S. Fish and Wildlife Service (FWS) of the Department of Interior
According to Cindy Allen, Executive Director of the ACE Business Office, “The PGA Message Set will expedite legitimate trade by providing a single window through which the trade community can efficiently supply required data electronically through the Automated Commercial Environment.” She also touted the progress made on ACE, since its inception, during the American Association of Exporters and Importers (AAEI) Annual Conference in New York on June 6th. For example, CBP introduced a link from the ACE Portal to the Importer Security Filing (ISF) Portal for importers, brokers, carriers and surety accounts. CPB has established approximately 20,000 ACE portal accounts since June 2003.
Currently, data is submitted manually to PGAs through paper forms, rather than electronically or automatically. The submission of paper to an agency is obviously labor intensive and less efficient in time and money than submitting information electronically. Once the technology is completed, likely at the end of 2011, information that is now provided only to CBP will also be provided electronically to PGAs. The PGA Message Set is expected to streamline data submission.
General information about ACE, can be found at http://www.cbp.gov/xp/cgov/trade/automated/modernization/ace/.
According to the ACE 101 Publication dated June 2011, 26 PGAs currently use ACE. The June 9th press release did not specifically name the final PGAs. We submitted an inquiry to CBP and will report the list of final PGAs once we receive confirmation from CBP. However, according to the International Trade Data Service, the following are examples of the federal agencies slated for ACE integration:
• Animal and Plant Health Inspection Service (APHIS) of the Department of Agriculture
• International Trade Administration-Import Administration (ITA) of the Department of Commerce
• Food and Drug Administration (FDA) of the Department of Health and Human Services
• U.S. Fish and Wildlife Service (FWS) of the Department of Interior
According to Cindy Allen, Executive Director of the ACE Business Office, “The PGA Message Set will expedite legitimate trade by providing a single window through which the trade community can efficiently supply required data electronically through the Automated Commercial Environment.” She also touted the progress made on ACE, since its inception, during the American Association of Exporters and Importers (AAEI) Annual Conference in New York on June 6th. For example, CBP introduced a link from the ACE Portal to the Importer Security Filing (ISF) Portal for importers, brokers, carriers and surety accounts. CPB has established approximately 20,000 ACE portal accounts since June 2003.
Currently, data is submitted manually to PGAs through paper forms, rather than electronically or automatically. The submission of paper to an agency is obviously labor intensive and less efficient in time and money than submitting information electronically. Once the technology is completed, likely at the end of 2011, information that is now provided only to CBP will also be provided electronically to PGAs. The PGA Message Set is expected to streamline data submission.
General information about ACE, can be found at http://www.cbp.gov/xp/cgov/trade/automated/modernization/ace/.
Thursday, June 2, 2011
It’s How Much in Duty?
Many importers believe mistakenly that the price of their goods is simple to determine: cost of goods (manufacture plus materials), general expenses, profit, duty and fees. What happens when the duty bill turns out to be higher than anticipated and the goods are already sold? This can happen in three common ways:
(1) the importer did not know that there was anti-dumping duty on the products imported;
(2) the importer brought the goods in conditionally duty-free under a duty preference program, but then the duty-free treatment was denied by Customs and
(3) the importer misclassified the products.
How do we avoid these problems? Due diligence and internal controls.
First is the situation where an importer ships goods that are subject to an anti-dumping duty order (ADD) and the importer did not realize it at the time of entry. How can this happen? Here is an example. There is an ADD order on petroleum wax candles from China. An importer contracts with a Chinese manufacturer for soy wax candles, assuming that soy wax candles are outside the scope of the ADD order. Post entry of the soy wax candles, Customs sends a CBP Form 28 Request for Information, asking for a sample and description of the candle. Customs tests the sample and determines that the candles are 99% soy wax and 1% petroleum wax. Because the candles contain petroleum wax, and are Chinese-origin, they are subject to ADD.
You may ask how this happened. The importer relied on the manufacturer’s oral guarantee that the candles were 100% soy wax. However, the importer never tested the candles prior to importation—he simply accepted the manufacturer’s statement. The importer should have tested the candles prior to importation to ensure that they were 100% soy wax. If the importer knew that they were not 100% soy wax, he could have (1) priced the candles to account for the ADD, (2) sourced the candles from a different country or (3) prepared and submitted a scope ruling request to the Department of Commerce to try to obtain a ruling stating that candles that contain only 1% petroleum wax, which is considered de minimis, should not be within the scope of the order.
Next is the situation where an importer brings the goods in duty-free under a duty preference program, but then the duty-free treatment is denied by Customs. Let’s say the importer is a jewelry company that sources jewelry in India. Some jewelry imported from India is conditionally duty-free under the Generalized System of Preferences (GSP).
Customs issues a CPB Form 28 Request for Information, asking for an explanation of the manufacturing process in India, including information about where the gold is sourced and the processing steps taken in India. The jewelry company cannot obtain this information from the Indian manufacturer. Customs denies the GSP claim. Jewelry that was duty-free under GSP is no longer entitled to the duty preference and thus, the importer must pay duty on the imported jewelry. The importer could have avoided this situation had the company obtained the proper records from the manufacturer at the time it purchased the jewelry. Recordkeeping is an important part of good internal controls.
Last is probably the most common situation—the importer misclassified the goods. A supplier of rolls of polyurethane misclassified the goods, thinking the goods were duty-free only to find out after the goods were imported and sold that they were classified under a different provision that had 6.5% duty. The potential liability is large: (1) the importer owes duty plus interest on the previous entries; (2) the importer may be subject to penalties and (3) the goods have been sold and thus, the importer cannot recoup any of the increased duty costs.
This can occur when an importer does not conduct annual internal reviews of the company’s import operations and does not conduct regular post entry reviews. Both annual review and post entry reviews are considered best practices by Customs and are a necessary part of the exercise of reasonable care.
Don’t be surprised and find yourself asking, “It’s how much in duty?”
(1) the importer did not know that there was anti-dumping duty on the products imported;
(2) the importer brought the goods in conditionally duty-free under a duty preference program, but then the duty-free treatment was denied by Customs and
(3) the importer misclassified the products.
How do we avoid these problems? Due diligence and internal controls.
First is the situation where an importer ships goods that are subject to an anti-dumping duty order (ADD) and the importer did not realize it at the time of entry. How can this happen? Here is an example. There is an ADD order on petroleum wax candles from China. An importer contracts with a Chinese manufacturer for soy wax candles, assuming that soy wax candles are outside the scope of the ADD order. Post entry of the soy wax candles, Customs sends a CBP Form 28 Request for Information, asking for a sample and description of the candle. Customs tests the sample and determines that the candles are 99% soy wax and 1% petroleum wax. Because the candles contain petroleum wax, and are Chinese-origin, they are subject to ADD.
You may ask how this happened. The importer relied on the manufacturer’s oral guarantee that the candles were 100% soy wax. However, the importer never tested the candles prior to importation—he simply accepted the manufacturer’s statement. The importer should have tested the candles prior to importation to ensure that they were 100% soy wax. If the importer knew that they were not 100% soy wax, he could have (1) priced the candles to account for the ADD, (2) sourced the candles from a different country or (3) prepared and submitted a scope ruling request to the Department of Commerce to try to obtain a ruling stating that candles that contain only 1% petroleum wax, which is considered de minimis, should not be within the scope of the order.
Next is the situation where an importer brings the goods in duty-free under a duty preference program, but then the duty-free treatment is denied by Customs. Let’s say the importer is a jewelry company that sources jewelry in India. Some jewelry imported from India is conditionally duty-free under the Generalized System of Preferences (GSP).
Customs issues a CPB Form 28 Request for Information, asking for an explanation of the manufacturing process in India, including information about where the gold is sourced and the processing steps taken in India. The jewelry company cannot obtain this information from the Indian manufacturer. Customs denies the GSP claim. Jewelry that was duty-free under GSP is no longer entitled to the duty preference and thus, the importer must pay duty on the imported jewelry. The importer could have avoided this situation had the company obtained the proper records from the manufacturer at the time it purchased the jewelry. Recordkeeping is an important part of good internal controls.
Last is probably the most common situation—the importer misclassified the goods. A supplier of rolls of polyurethane misclassified the goods, thinking the goods were duty-free only to find out after the goods were imported and sold that they were classified under a different provision that had 6.5% duty. The potential liability is large: (1) the importer owes duty plus interest on the previous entries; (2) the importer may be subject to penalties and (3) the goods have been sold and thus, the importer cannot recoup any of the increased duty costs.
This can occur when an importer does not conduct annual internal reviews of the company’s import operations and does not conduct regular post entry reviews. Both annual review and post entry reviews are considered best practices by Customs and are a necessary part of the exercise of reasonable care.
Don’t be surprised and find yourself asking, “It’s how much in duty?”
Monday, May 23, 2011
Manufacturer of Steel Pipe Products Pays $5.4 Million in Fines for Alleged Violation of FCPA
Tenaris S.A., global manufacturer of steel pipe products in the oil and gas industry, entered into a Deferred Prosecution Agreement (DPA) with the Securities and Exchange Commission (SEC), whose terms include payment of $5.4 million in disgorgement and prejudgment interest for violations of the Foreign Corrupt Practice Act (FCPA). The SEC alleges that Tenaris’ employees located in Uzbekistan bribed Uzbekistan government officials during a bidding process in 2006 and 2007 to supply pipelines for transporting oil and natural gas. According to the DPA, the SEC alleges that the company used confidential information gained from the bribed officials to revise its own bids to ensure that Tenaris made the best bid, thereby guaranteeing that the Uzbekistan government awarded the contracts to Tenaris. According to the DPA, Tenaris earned close to $5 million in profits for these contracts.
Tenaris discovered the FCPA violations by Uzbekistan personnel during an in-house worldwide review of its operations and controls. The company immediately self-reported to SEC, permitting the company to participate in the first Deferred Prosecution Agreement. Robert Khuzami, Director of the SEC’s Enforcement Division stated:
The Tenaris foreign bribery scheme was unacceptable and unlawful, but the company’s response demonstrated high levels of corporate accountability and cooperation. . . . Effective enforcement of the securities laws includes acknowledging and providing credit to those who fully and completely support our investigation and who display an exemplary commitment to compliance, cooperation, and remediation.
Under the terms of the DPA, the SEC will not prosecute the company for FCPA violations provided that Tenaris enhances its FCPA and anti-corruption policies and procedures. Specifically, the company must:
• implement due diligence requirements when retaining and paying agents;
• train employees on FCPA and anti-corruption laws
• require certification of compliance; and
• report any complaints, charges or convictions against Tenaris or its employees for any anti-bribery or SEC violations.
Tenaris is incorporated in Luxembourg and its American Depositary Receipts (TS) are listed on the New York Stock Exchange. This is another example of how a non-U.S. company must ensure that it has procedures in place to comply with the U.S.’s FCPA.
Tenaris discovered the FCPA violations by Uzbekistan personnel during an in-house worldwide review of its operations and controls. The company immediately self-reported to SEC, permitting the company to participate in the first Deferred Prosecution Agreement. Robert Khuzami, Director of the SEC’s Enforcement Division stated:
The Tenaris foreign bribery scheme was unacceptable and unlawful, but the company’s response demonstrated high levels of corporate accountability and cooperation. . . . Effective enforcement of the securities laws includes acknowledging and providing credit to those who fully and completely support our investigation and who display an exemplary commitment to compliance, cooperation, and remediation.
Under the terms of the DPA, the SEC will not prosecute the company for FCPA violations provided that Tenaris enhances its FCPA and anti-corruption policies and procedures. Specifically, the company must:
• implement due diligence requirements when retaining and paying agents;
• train employees on FCPA and anti-corruption laws
• require certification of compliance; and
• report any complaints, charges or convictions against Tenaris or its employees for any anti-bribery or SEC violations.
Tenaris is incorporated in Luxembourg and its American Depositary Receipts (TS) are listed on the New York Stock Exchange. This is another example of how a non-U.S. company must ensure that it has procedures in place to comply with the U.S.’s FCPA.
Tuesday, May 17, 2011
The U.S. GAO Recommends Changes to FDA’s Handling of Imported Seafood
The U.S. Government Accountability Office has concluded in Report GAO-11-286 that the Federal Drug Administration (FDA) must improve its oversight of imported seafood. The GAO study was conducted at the request of several members of Congress because of concerns that the FDA was not doing enough to ensure the safety of imported seafood against residues of unapproved drugs used by foreign seafood farmers.
Farmed fish (aquaculture) account for about half of the seafood imported into the U.S. Fish grown in confined aquacultured areas can have bacterial infections, which may require foreign farmers to treat the fish with antibiotics not approved by the U.S. The concern is that the residues of some drugs in the imported seafood can cause cancer and antibiotic resistance when eaten by U.S. consumers. Specifically, the GAO was tasked with assessing whether (1) the FDA’s current program could prevent imports of seafood containing residues from unapproved drugs and (2) whether the Memoranda of Understanding (MOU) between the FDA and the National Marine Fisheries Service (NMFS) intended to enhance seafood oversight and leverage inspection resources was functioning.
The GAO concluded that the FDA did not provide enough oversight of imported seafood and that the agency was unable to ensure that seafood did not contain harmful residue from antibiotics and other drugs. The GAO also concluded that the FDA and NMFS did not implement any guidance for staff or create standard operating procedures, as required under the MOU between the agencies. Finally, the GAO concluded that the agencies did not conduct enough inspections of foreign seafood suppliers.
Based on the findings of the GAO, it recommended that the Secretary of the Health and Human Services direct the FDA to:
1. Study the feasibility of adopting other practices used by other entities, such as requiring foreign countries that want to export seafood to the United States to develop a national residues monitoring plan to control the use of aquaculture drugs;
2. Develop a more comprehensive import sampling program for seafood by more effectively using its laboratory resources and taking into account the imported seafood sampling programs of other entities and countries; and
3. Develop a strategic approach with specific time frames for enhancing collaborative efforts with NMFS and better leveraging NMFS inspection resources.
Importers of seafood should monitor closely the progress of these recommendations because they could lead to new regulations for seafood imports.
The report can be found here.
Farmed fish (aquaculture) account for about half of the seafood imported into the U.S. Fish grown in confined aquacultured areas can have bacterial infections, which may require foreign farmers to treat the fish with antibiotics not approved by the U.S. The concern is that the residues of some drugs in the imported seafood can cause cancer and antibiotic resistance when eaten by U.S. consumers. Specifically, the GAO was tasked with assessing whether (1) the FDA’s current program could prevent imports of seafood containing residues from unapproved drugs and (2) whether the Memoranda of Understanding (MOU) between the FDA and the National Marine Fisheries Service (NMFS) intended to enhance seafood oversight and leverage inspection resources was functioning.
The GAO concluded that the FDA did not provide enough oversight of imported seafood and that the agency was unable to ensure that seafood did not contain harmful residue from antibiotics and other drugs. The GAO also concluded that the FDA and NMFS did not implement any guidance for staff or create standard operating procedures, as required under the MOU between the agencies. Finally, the GAO concluded that the agencies did not conduct enough inspections of foreign seafood suppliers.
Based on the findings of the GAO, it recommended that the Secretary of the Health and Human Services direct the FDA to:
1. Study the feasibility of adopting other practices used by other entities, such as requiring foreign countries that want to export seafood to the United States to develop a national residues monitoring plan to control the use of aquaculture drugs;
2. Develop a more comprehensive import sampling program for seafood by more effectively using its laboratory resources and taking into account the imported seafood sampling programs of other entities and countries; and
3. Develop a strategic approach with specific time frames for enhancing collaborative efforts with NMFS and better leveraging NMFS inspection resources.
Importers of seafood should monitor closely the progress of these recommendations because they could lead to new regulations for seafood imports.
The report can be found here.
Friday, May 13, 2011
European Union Proposes Changes to GSP
The European Commission (EC) announced its plan to modify its Generalised System of Preferences (GSP), which would limit specific tariff preferences to the poorest of developing countries. The EC’s proposal would cut GSP benefits, currently provided to 176 countries and territories, to approximately 80 countries considered the most in need. Under GSP, eligible goods manufactured in a GSP country and imported into the European Union (EU) (and other developed countries) are given a reduced or duty-free rate of duty. Under the proposal, countries considered an advanced developing country, which are now competitive, would no longer be eligible for tariff preferences under GSP.
The EC will take into account a number of factors when determining which countries will lose its GSP eligibility. Specifically, countries falling into the following categories will no longer be eligible for GSP:
1. Countries classified by the World Bank that have a high or upper middle income per capita for the past three years. The EC has indicated that countries such as Kuwait, Russia, Saudi Arabia and Qatar fall into this category.
2. Countries that are members of a Free Trade Agreement with the EU, or have autonomous arrangements that provide equal or better tariff preferences than those provided under GSP. The Market Access Regulation for countries with an Economic Partnership Agreement or the special regime for Balkan countries are examples in this category.
3. Countries that enjoy an alternative market access arrangement for developed markets. The EC has indicated that countries such as Antarctica and American Samoa fall into this category.
The EC points to changes in the marketplace over the past twenty-five years to justify its proposed changes. Such changes include the emergence of more advanced developing countries that are globally competitive; the fact that the poorer countries are lagging behind the rest and the overall downturn in the global economy. The EC also acknowledged that the most advanced emerging economies accounted for approximately 40% of GSP imports into the EU, further hurting the lesser developed countries.
The EU has not yet completed its analysis of which countries will lose or keep GSP benefits. If the EC’s proposal is adopted by the EU, such changes to GSP will take effect by 2014. See http://trade.ec.europa.eu/doclib/docs/2011/may/tradoc_147893.pdf to read the official proposal.
The EC will take into account a number of factors when determining which countries will lose its GSP eligibility. Specifically, countries falling into the following categories will no longer be eligible for GSP:
1. Countries classified by the World Bank that have a high or upper middle income per capita for the past three years. The EC has indicated that countries such as Kuwait, Russia, Saudi Arabia and Qatar fall into this category.
2. Countries that are members of a Free Trade Agreement with the EU, or have autonomous arrangements that provide equal or better tariff preferences than those provided under GSP. The Market Access Regulation for countries with an Economic Partnership Agreement or the special regime for Balkan countries are examples in this category.
3. Countries that enjoy an alternative market access arrangement for developed markets. The EC has indicated that countries such as Antarctica and American Samoa fall into this category.
The EC points to changes in the marketplace over the past twenty-five years to justify its proposed changes. Such changes include the emergence of more advanced developing countries that are globally competitive; the fact that the poorer countries are lagging behind the rest and the overall downturn in the global economy. The EC also acknowledged that the most advanced emerging economies accounted for approximately 40% of GSP imports into the EU, further hurting the lesser developed countries.
The EU has not yet completed its analysis of which countries will lose or keep GSP benefits. If the EC’s proposal is adopted by the EU, such changes to GSP will take effect by 2014. See http://trade.ec.europa.eu/doclib/docs/2011/may/tradoc_147893.pdf to read the official proposal.
Tuesday, May 10, 2011
Changes to CAFTA-DR in the Works
In an attempt to promote U.S and regional jobs in the textile and apparel industry, the U.S. Trade Representative announced several changes to the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). During the Free Trade Commission meeting earlier this year, the signatories to CAFTA-DR discussed ways to encourage regional trade and economic integration by competing with the established textile and apparel supply chains in Asia. The signatories seek to encourage a growing textile and apparel supply chain within the Western Hemisphere that will rival China and other Asian countries.
Among the significant changes proposed are the following:
1. Certain monofilament sewing thread will be required to originate or be produced in the United States or the CAFTA-DR region for goods to qualify for preferential tariff treatment. The sewing thread industry still exists in the United States, primarily in plants located in North and South Carolina. The hope is that the industry will increase with this new requirement.
2. There will be an increase to the cumulation limits to encourage greater integration of regional production through limited reciprocal duty-free access with Mexico, and potentially Canada, to be used in Central American and Dominican Republic apparel. This increase to the annual limits will account for the addition of the Dominican Republic. These limits permit importers to enter specific quantities of designated apparel products into the United States from Central America and the Dominican Republic that contain inputs from Mexico and possibly, Canada.
3. There will be changes to the “short supply” list, including how elastomeric yarns, knit waistbands and knit-to-shape components are treated on that list. Short supply, which is formally known as the Commercial Availability Provision under CAFTA-DR, provides a list of fabrics, yarns and fibers that the signatories have determined are not available in commercial quantities in a timely manner from suppliers in the United States or other member countries. In those cases, components from non-participating countries may be used in apparel, and the end product will be eligible for duty-free treatment.
According to the USTR, U.S. exports to the CAFTA-DR region comprised 16% of the total U.S. textile and apparel exports in 2010. In fact, U.S. textile and apparel exports to CAFTA-DR countries grew by 25% in 2010, exceeding the growth to the rest of the world by 6%. Conversely, U.S. imports of CAFTA-DR textile and apparel products increased by 14% in value in 2010.
Among the significant changes proposed are the following:
1. Certain monofilament sewing thread will be required to originate or be produced in the United States or the CAFTA-DR region for goods to qualify for preferential tariff treatment. The sewing thread industry still exists in the United States, primarily in plants located in North and South Carolina. The hope is that the industry will increase with this new requirement.
2. There will be an increase to the cumulation limits to encourage greater integration of regional production through limited reciprocal duty-free access with Mexico, and potentially Canada, to be used in Central American and Dominican Republic apparel. This increase to the annual limits will account for the addition of the Dominican Republic. These limits permit importers to enter specific quantities of designated apparel products into the United States from Central America and the Dominican Republic that contain inputs from Mexico and possibly, Canada.
3. There will be changes to the “short supply” list, including how elastomeric yarns, knit waistbands and knit-to-shape components are treated on that list. Short supply, which is formally known as the Commercial Availability Provision under CAFTA-DR, provides a list of fabrics, yarns and fibers that the signatories have determined are not available in commercial quantities in a timely manner from suppliers in the United States or other member countries. In those cases, components from non-participating countries may be used in apparel, and the end product will be eligible for duty-free treatment.
According to the USTR, U.S. exports to the CAFTA-DR region comprised 16% of the total U.S. textile and apparel exports in 2010. In fact, U.S. textile and apparel exports to CAFTA-DR countries grew by 25% in 2010, exceeding the growth to the rest of the world by 6%. Conversely, U.S. imports of CAFTA-DR textile and apparel products increased by 14% in value in 2010.
Thursday, May 5, 2011
FDA Issues Interim Final Rule for Importers of Food
Pursuant to the Food Safety Modernization Act (Pub. L. 111-353), the Food and Drug Administration (FDA) amended its regulations, requiring importers of food for both people and animals to report the name of any country to which the food has been refused entry. The Act directed the FDA to shift its focus to preventing contaminated and adulterated food from entering the U.S. market, rather than on reacting to food safety issues after they occur. The FDA believes that receiving information on whether another country has refused entry to the food will assist the FDA to identify imported food that may pose health and security risks to U.S. consumers.
Section 304 of the Act, which requires a report of “any country to which the article has been refused entry,” amends section 801(m) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 381(m)). Section 801(m) was originally added by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act). Under the Bioterrorism Act, food importers were required to submit certain information about the food in advance of the shipment into the United States. The FDA was permitted to refuse entry of the imported food if it did not receive adequate prior notice from the importers. Advance notice is to be submitted electronically to FDA/Customs. The Food Safety Modernization Act adds the additional requirement of providing whether another country refused admission to the food.
This interim final rule is effective July 3, 2011. Comments from the industry on the interim rule are due no later than June 6, 2011.
A copy of the Federal Register Notice can be found at: http://www.gpo.gov/fdsys/pkg/FR-2011-05-05/html/2011-10955.htm
Section 304 of the Act, which requires a report of “any country to which the article has been refused entry,” amends section 801(m) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 381(m)). Section 801(m) was originally added by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (the Bioterrorism Act). Under the Bioterrorism Act, food importers were required to submit certain information about the food in advance of the shipment into the United States. The FDA was permitted to refuse entry of the imported food if it did not receive adequate prior notice from the importers. Advance notice is to be submitted electronically to FDA/Customs. The Food Safety Modernization Act adds the additional requirement of providing whether another country refused admission to the food.
This interim final rule is effective July 3, 2011. Comments from the industry on the interim rule are due no later than June 6, 2011.
A copy of the Federal Register Notice can be found at: http://www.gpo.gov/fdsys/pkg/FR-2011-05-05/html/2011-10955.htm
Tuesday, May 3, 2011
Commerce Department Seeks Industry Help on Regulatory Cooperation between U.S. and EU
As part of the U.S.-EU High Level Regulatory Cooperation Forum (“U.S.-EU Forum”), the Commerce Department has asked the exporting industry to provide comments on ways for the United States and European Union to reduce or eliminate regulatory differences that impact international trade of goods between their borders.
The International Trade Administration (ITA) of the Commerce Department has concluded that the greatest impediment to more open foreign markets for U.S. exporters and investors is not customs duties or quota, but rather the differences in regulatory measures within the U.S. and EU. The ITA has recognized that such differences in regulations may not be warranted as they increase costs for U.S. producers and consumers without much benefit. The ITA has defined such regulatory measure differences as:
• Standards developed by a government and used in regulation;
• Standards developed by other bodies at request of government and used in regulation; and
• Proposals to provide a presumption of compliance to technical requirements developed by a government.
The Obama administration has set goal of doubling U.S. exports in the next five years. A large part of that strategy is to increase exports to the 27 EU member countries, which currently account for 19% of total U.S. exports. Although bilateral trade between the U.S. and EU was over $500 billion in 2010, U.S. exporters continue to complain that regulatory differences between the U.S. and EU hinder trade. For example, U.S. exporters commonly encounter divergent standards or technical requirements for certain products. A U.S.-origin product may meet strict U.S. standards, but not meet EU standards, making it more difficult and costly for U.S. companies to enter the EU market.
The U.S.-EU Forum and ITA recognize that cooperation between the trading partners will not only lessen the burden on U.S. exporters and thus on consumers, but it will also help governments. The ITA has suggested that when regulators in different countries are permitted to share information on specific regulatory issues, they are more likely to promulgate similar rules and “realize common public policy objectives.”
To meet these goals, the ITA is requesting that U.S. exporters submit comments describing how they believe there is an opportunity to facilitate trade without compromising health, safety or environmental concerns of the trading partners. Because of the large volume of trade between the U.S and the EU, the ITA would like to receive comments from all product sectors. Comments are due electronically to http://www.regulations.gov no later than June 2, 2011 and should be submitted under ITA-2001-0006.
See http://edocket.access.gpo.gov/2011/pdf/2011-10713.pdf for Federal Register notice and http://www.whitehouse.gov/omb/oira_irc_europe for information on the U.S.-EU regulatory cooperation initiative.
The International Trade Administration (ITA) of the Commerce Department has concluded that the greatest impediment to more open foreign markets for U.S. exporters and investors is not customs duties or quota, but rather the differences in regulatory measures within the U.S. and EU. The ITA has recognized that such differences in regulations may not be warranted as they increase costs for U.S. producers and consumers without much benefit. The ITA has defined such regulatory measure differences as:
• Standards developed by a government and used in regulation;
• Standards developed by other bodies at request of government and used in regulation; and
• Proposals to provide a presumption of compliance to technical requirements developed by a government.
The Obama administration has set goal of doubling U.S. exports in the next five years. A large part of that strategy is to increase exports to the 27 EU member countries, which currently account for 19% of total U.S. exports. Although bilateral trade between the U.S. and EU was over $500 billion in 2010, U.S. exporters continue to complain that regulatory differences between the U.S. and EU hinder trade. For example, U.S. exporters commonly encounter divergent standards or technical requirements for certain products. A U.S.-origin product may meet strict U.S. standards, but not meet EU standards, making it more difficult and costly for U.S. companies to enter the EU market.
The U.S.-EU Forum and ITA recognize that cooperation between the trading partners will not only lessen the burden on U.S. exporters and thus on consumers, but it will also help governments. The ITA has suggested that when regulators in different countries are permitted to share information on specific regulatory issues, they are more likely to promulgate similar rules and “realize common public policy objectives.”
To meet these goals, the ITA is requesting that U.S. exporters submit comments describing how they believe there is an opportunity to facilitate trade without compromising health, safety or environmental concerns of the trading partners. Because of the large volume of trade between the U.S and the EU, the ITA would like to receive comments from all product sectors. Comments are due electronically to http://www.regulations.gov no later than June 2, 2011 and should be submitted under ITA-2001-0006.
See http://edocket.access.gpo.gov/2011/pdf/2011-10713.pdf for Federal Register notice and http://www.whitehouse.gov/omb/oira_irc_europe for information on the U.S.-EU regulatory cooperation initiative.
Tuesday, April 26, 2011
Are You Filing a Valid Protest with CBP?
Last month the U.S. Court of International Trade sided with the importer in Estee Lauder v. United States, Slip Op. 11-23 (CIT March 1, 2011), in a decision that should remind a company fighting with U.S. Customs and Border Protection (CBP) how important it is to sufficiently describe products at issue in a protest.
Estee Lauder protested how CBP liquidated entries of its cosmetic kits. CBP classified the kits according to their individual components, rather than as the single component that gives the kit its essential character under GRI 3(b). In its protest, the company asserted that under GRI 3(b), the kits should be classified under HTSUS heading 3304, a duty-free provision for beauty or make-up preparations. Although the protest identified the contents of only one type of cosmetic kit, Estee Lauder also named entries containing a second type of kit. The second type of kit, which was not described in the protest, included a container for holding make-up brushes and was classified under HTSUS heading 4202, dutiable at 20%.
Pursuant to CBP’s request, Estee Lauder provided samples of both types of kits. CBP denied the protest by non-response under the accelerated disposition procedure. Upon denial, the company filed suit with the CIT, challenging the classification of the kits. CBP moved the court to dismiss the case for lack of subject matter jurisdiction, arguing that Estee Lauder failed to file a valid protest because the second type of kit was not specifically described in the protest.
By statute and regulation, a protest is valid when it “set[s] forth distinctly and specifically . . . each category of merchandise affected” and contains “a specific description of the merchandise affected.” 19 U.S.C. § 1514(c)(1) and 19 C.F.R. § 174.13(a). The U.S. Supreme Court has explained that this requirement exists to “compel the importer to disclose the grounds of the objection at the time when he makes his protest.” Davies v. Arthur, 96 U.S. 148 (1877). A protest must show the importer’s intent and adequately notify Customs of the protest’s “true nature and character.” Id. A century later, the Customs Court also explained that “[h]owever cryptic, inartistic, or poorly drawn a communication may be, it is sufficient as a protest . . . if it conveys enough information to apprise knowledgeable officials of the importer’s intent and the relief sought.” Mattel v. United States, 72 Cust. Ct. 257, 262 (1974).
The CIT denied CBP’s motion to dismiss, holding that Estee Lauder sufficiently described the kits in the protest and filed valid protests. Although the court agreed with CBP that it was unclear which items were included in the protested kits when comparing the protest description with the entry documents, the court found that this discrepancy was not “an insurmountable obstacle” to CBP deciding the protest. The CIT held that “[p]rotest sufficiency does not turn on whether Customs can decide the entire claims based solely on information contained in the papers submitted.” Slip-Op 11-23. Rather, “the protest is the tool whereby the collector seeks the precise facts.” Id. (citation omitted).
What can we take away from this case? Although Estee Lauder successfully defended the government’s attempt to kick the case out of court for lack of jurisdiction, it may have avoided a jurisdictional argument all together had there been no question about the merchandise included in the protests. Estee Lauder now must begin the fight on the substance on its argument: what is the correct classification? The company basically added an additional layer of litigation because it filed an unclear protest.
A good protest thoroughly explains why the classification it seeks is correct as a matter of law and fact, and why the classification CBP applied at entry was incorrect. One should not simply ask for reliquidation under the tariff provision you think is right without providing arguments why you are right. It is important to:
• Describe the product
• Set forth the specific issue
• Provide and analyze the law
• Apply the law to your facts
• Explain why your classification is correct
• Explain why CBP is wrong
• Conclude
Following these simple rules will lead to a better and more successful protest.
Estee Lauder protested how CBP liquidated entries of its cosmetic kits. CBP classified the kits according to their individual components, rather than as the single component that gives the kit its essential character under GRI 3(b). In its protest, the company asserted that under GRI 3(b), the kits should be classified under HTSUS heading 3304, a duty-free provision for beauty or make-up preparations. Although the protest identified the contents of only one type of cosmetic kit, Estee Lauder also named entries containing a second type of kit. The second type of kit, which was not described in the protest, included a container for holding make-up brushes and was classified under HTSUS heading 4202, dutiable at 20%.
Pursuant to CBP’s request, Estee Lauder provided samples of both types of kits. CBP denied the protest by non-response under the accelerated disposition procedure. Upon denial, the company filed suit with the CIT, challenging the classification of the kits. CBP moved the court to dismiss the case for lack of subject matter jurisdiction, arguing that Estee Lauder failed to file a valid protest because the second type of kit was not specifically described in the protest.
By statute and regulation, a protest is valid when it “set[s] forth distinctly and specifically . . . each category of merchandise affected” and contains “a specific description of the merchandise affected.” 19 U.S.C. § 1514(c)(1) and 19 C.F.R. § 174.13(a). The U.S. Supreme Court has explained that this requirement exists to “compel the importer to disclose the grounds of the objection at the time when he makes his protest.” Davies v. Arthur, 96 U.S. 148 (1877). A protest must show the importer’s intent and adequately notify Customs of the protest’s “true nature and character.” Id. A century later, the Customs Court also explained that “[h]owever cryptic, inartistic, or poorly drawn a communication may be, it is sufficient as a protest . . . if it conveys enough information to apprise knowledgeable officials of the importer’s intent and the relief sought.” Mattel v. United States, 72 Cust. Ct. 257, 262 (1974).
The CIT denied CBP’s motion to dismiss, holding that Estee Lauder sufficiently described the kits in the protest and filed valid protests. Although the court agreed with CBP that it was unclear which items were included in the protested kits when comparing the protest description with the entry documents, the court found that this discrepancy was not “an insurmountable obstacle” to CBP deciding the protest. The CIT held that “[p]rotest sufficiency does not turn on whether Customs can decide the entire claims based solely on information contained in the papers submitted.” Slip-Op 11-23. Rather, “the protest is the tool whereby the collector seeks the precise facts.” Id. (citation omitted).
What can we take away from this case? Although Estee Lauder successfully defended the government’s attempt to kick the case out of court for lack of jurisdiction, it may have avoided a jurisdictional argument all together had there been no question about the merchandise included in the protests. Estee Lauder now must begin the fight on the substance on its argument: what is the correct classification? The company basically added an additional layer of litigation because it filed an unclear protest.
A good protest thoroughly explains why the classification it seeks is correct as a matter of law and fact, and why the classification CBP applied at entry was incorrect. One should not simply ask for reliquidation under the tariff provision you think is right without providing arguments why you are right. It is important to:
• Describe the product
• Set forth the specific issue
• Provide and analyze the law
• Apply the law to your facts
• Explain why your classification is correct
• Explain why CBP is wrong
• Conclude
Following these simple rules will lead to a better and more successful protest.
Thursday, April 21, 2011
Expansion of Documentation Permitted to Substantiate Duty-Free Claims under FTAs
U.S. Customs and Border Protection (CBP) recently issued a memorandum to its field regarding documents used to verify duty-free treatment of textile and wearing apparel under free trade agreements (FTAs). In this new memo, CBP has stated that it will now accept supporting documentation beyond a manufacturer’s affidavit to substantiate a trade preference claim. There had been inconsistent treatment among the ports regarding what documents were accepted in FTA verifications. Some ports were flexible, while other ports would accept only a sworn affidavit from the foreign factory. The confusion likely stemmed from a 2007 memorandum regarding manufacturer’s affidavits. The 2011 memo addresses this problem, while expanding the types of documents permitted to substantiate a duty-free claim under a FTA.
Most important, this directive signals flexibility in what documentation Customs will accept in FTA verifications. It should also prevent Import Specialists from the continued denial of claims based predominately on the format of the manufacturer’s affidavit. Of course, regardless of whether an importer relies on an affidavit or other documentation, the following information is still required:
• Statement of person with direct knowledge of the production;
• Identification of the actual production location;
• Legible, printed name of contact person, including telephone number, mailing address or email address of that person;
• Description of the goods, including fiber content, yarn count, fabric type, and commercial invoice or purchase order, as applicable.
Flexibility should help reduce risk to an importer. There is exposure to an importer when it is unable to substantiate a duty-free claim under a trade preference program to an Import Specialist’s satisfaction. Goods imported under a FTA are conditionally duty-free, meaning that if Customs denies the FTA claim, the goods will no longer be duty-free. CBP would rate advance the goods, seeking duty owed plus interest, as though they were not imported under a FTA. However, by that time, which can be several months after the entry of the goods, the merchandise typically has already been sold—thereby eliminating the ability to pass along the additional cost in duty to the customer.
The moral of the story is whether using a manufacturer’s affidavit or other document to substantiate duty-free treatment under a FTA, an importer must ask its manufacturer’s the right questions and must maintain good records to supply to CBP.
Most important, this directive signals flexibility in what documentation Customs will accept in FTA verifications. It should also prevent Import Specialists from the continued denial of claims based predominately on the format of the manufacturer’s affidavit. Of course, regardless of whether an importer relies on an affidavit or other documentation, the following information is still required:
• Statement of person with direct knowledge of the production;
• Identification of the actual production location;
• Legible, printed name of contact person, including telephone number, mailing address or email address of that person;
• Description of the goods, including fiber content, yarn count, fabric type, and commercial invoice or purchase order, as applicable.
Flexibility should help reduce risk to an importer. There is exposure to an importer when it is unable to substantiate a duty-free claim under a trade preference program to an Import Specialist’s satisfaction. Goods imported under a FTA are conditionally duty-free, meaning that if Customs denies the FTA claim, the goods will no longer be duty-free. CBP would rate advance the goods, seeking duty owed plus interest, as though they were not imported under a FTA. However, by that time, which can be several months after the entry of the goods, the merchandise typically has already been sold—thereby eliminating the ability to pass along the additional cost in duty to the customer.
The moral of the story is whether using a manufacturer’s affidavit or other document to substantiate duty-free treatment under a FTA, an importer must ask its manufacturer’s the right questions and must maintain good records to supply to CBP.
Tuesday, April 19, 2011
Final Rule Regarding MIDs for Textile and Apparel Importers
Importers of textile and apparel products may face higher levels of reasonable care now that U.S. Customs and Border Protection (CBP) has adopted (with some changes) the interim amendments to its regulations relating to the country of origin of textile and apparel products. Specifically, CBP eliminated the Textile Declaration, which used to accompany textile and apparel imports, but now requires importers to provide a manufacturer identification code (MID), defined as the company performing the operations that confer the country of origin of the imported article under sections 102.21 or 102.22. The MIDs must appear on CBP Form 3461 (Entry/Immediate Delivery), CPB Form 7501 (Entry Summary) and all electronic data submissions requiring manufacturer information.
CBP has stated that obtaining the MID will assist CBP, who has the responsibility of preventing entry of goods with false origin information, to verify the country of origin, leading to better enforcement of trade in textile and apparel products. This may be true, but this amendment also imposes increased obligations on the textile and apparel importer to exercise reasonable care to ensure that it is providing accurate manufacturer information. Under the revised regulations, CBP has the power to reject the entry, or take other appropriate actions, which may include civil penalties under Section 1592, if CBP is not convinced that the importer exercised reasonable care in providing the MID.
There are several situations where meeting this requirement may prove difficult for importers. For example, it may be difficult to determine the MID in those situations where the textile or apparel product is made in multiple countries. In these cases, it is imperative for the importer to ask at the time of ordering for the name and address of the manufacturer, information about the origin of fabrics and information about the work performed by the manufacturer. If CBP seeks additional information about the MID, CBP will expect the importer to produce documentation to demonstrate the information it provided is accurate. Failure to do so may constitute a failure of exercise of reasonable care and lead to civil penalties.
Second, verifying MID information may also be difficult where the U.S. importer is purchasing from a seller who is not the manufacturer, but rather serves as the intermediary and may not want to disclose the MID for fear that the buyer may contact the manufacturer directly and cut the intermediary seller out of the transaction. CBP has stated that this is not a sufficient reason to provide incorrect MID information. Importers are required to know the manufacturer, regardless of whether they are purchasing directly from the manufacturer or through an intermediary. Failure to provide MID, or providing inaccurate MID for this reason could lead to civil penalties.
Finally, under section 102.21(e)(2), the country of origin of some products depends upon where “the fabric comprising the good was both dyed and printed when accompanied by two or more of the following operations….” Under this scenario, it will be difficult to determine the origin-conferring operation if more than one manufacturer performs these operations within one country. CBP has indicated that in this situation, it will consider the entity performing the final step of these origin-conferring operations as the MID. CBP has recommended that importers seek a ruling if the company is unsure about which company confers the country of origin.
CBP has stated that obtaining the MID will assist CBP, who has the responsibility of preventing entry of goods with false origin information, to verify the country of origin, leading to better enforcement of trade in textile and apparel products. This may be true, but this amendment also imposes increased obligations on the textile and apparel importer to exercise reasonable care to ensure that it is providing accurate manufacturer information. Under the revised regulations, CBP has the power to reject the entry, or take other appropriate actions, which may include civil penalties under Section 1592, if CBP is not convinced that the importer exercised reasonable care in providing the MID.
There are several situations where meeting this requirement may prove difficult for importers. For example, it may be difficult to determine the MID in those situations where the textile or apparel product is made in multiple countries. In these cases, it is imperative for the importer to ask at the time of ordering for the name and address of the manufacturer, information about the origin of fabrics and information about the work performed by the manufacturer. If CBP seeks additional information about the MID, CBP will expect the importer to produce documentation to demonstrate the information it provided is accurate. Failure to do so may constitute a failure of exercise of reasonable care and lead to civil penalties.
Second, verifying MID information may also be difficult where the U.S. importer is purchasing from a seller who is not the manufacturer, but rather serves as the intermediary and may not want to disclose the MID for fear that the buyer may contact the manufacturer directly and cut the intermediary seller out of the transaction. CBP has stated that this is not a sufficient reason to provide incorrect MID information. Importers are required to know the manufacturer, regardless of whether they are purchasing directly from the manufacturer or through an intermediary. Failure to provide MID, or providing inaccurate MID for this reason could lead to civil penalties.
Finally, under section 102.21(e)(2), the country of origin of some products depends upon where “the fabric comprising the good was both dyed and printed when accompanied by two or more of the following operations….” Under this scenario, it will be difficult to determine the origin-conferring operation if more than one manufacturer performs these operations within one country. CBP has indicated that in this situation, it will consider the entity performing the final step of these origin-conferring operations as the MID. CBP has recommended that importers seek a ruling if the company is unsure about which company confers the country of origin.
Thursday, April 14, 2011
The Impact of the Food Safety Modernization Act on Importers
To Inspect, or not to inspect… that is the question. Earlier this year, President Obama signed into law the Food Safety Modernization Act (FSMA or the Act), with the goal of shifting the focus of the Federal Drug Administration (FDA) from to responding to food contamination problems to preventing them. Yet, this week, the president’s budget proposal includes cuts to nearly all food inspection programs, including overseas inspections of foreign food manufacturers that supply U.S. importers of food. Does anyone else see the contradiction here? FSMA, which amends the Federal Food, Drug and Cosmetic Act, may have a huge impact on importers of food products. Overall, the Act contains five major elements: (1) a mandate to the FDA to establish prevention-based controls for the food industry; (2) inspections and compliance, including specifications on how the FDA should inspect food producers; (3) imported food safety, including requirement that food importers must verify that their foreign food suppliers possess sufficient preventive controls to ensure safety; (4) mandatory recall authority to the FDA for all food products and; (5) partnership among federal, state, local and foreign agencies to work together to enhance food safety. Of significance to food importers is the third element above—imported food safety—and how the requirements under that section will increase the burden, both in time and money on importers of food products. Under FSMA, food importers must have internal controls that ensure that the food they are importing into the United States is safe. One of the largest potential burdens on importers under this new requirement is the Foreign Supplier Verification Program (FSVP). Under the FSVP, importers need to verify that their foreign suppliers also have adequate public health protection controls in place that meet the U.S. standards under the new law. The FDA describes such verification as “risk-based” that should focus on validating that imported food was not contaminated or adulterated in any way and that the imported food was produced in compliance with proper FDA controls. However, left open for interpretation is what constitutes “risk.” Is it country of origin based? Is it food product based? Another open issue is what an importer needs to do if it finds that the supplier does not have adequate controls. Is it permitted to import food from that supplier while the supplier improves its controls and procedures? Or, must the importer stop production at that plant? Does it depend on what the problem was? What happens if the importer decides to continue to import while the foreign manufacturer improves its procedures and something is contaminated—is the importer liable too? Finally, the FDA has some additional duties under FSMA too. It now has the power to conduct foreign inspections and can deny an entry of a shipment of imported food if the manufacturer does not permit FDA inspection. This brings us back to the beginning. The whole purpose of the law is to protect the public, which does involve cooperation between importers and the FDA, and between importers and their foreign suppliers. However, given that the Obama administration has just proposed to cut the FDA budget for foreign supplier inspections, it is likely that the FDA is going to struggle to do its part under the Act, thus placing even more burden on the food importer.
Wednesday, April 6, 2011
April 2011 - Preliminary Answers
Determining potential answers for the broker's exam questions after the test is different in a few key ways from taking the test, but none is more key than the fact that we have more than four hours. That means that we can take the time to research as much as we need to in order to get the most accurate (though still unofficial) document possible to all of you. This first attempt is not 100% complete, but this will be corrected and more answers added as new updates are posted.
Click here for our preliminary unofficial exam answers.
As always, remember that these answers represent only our opinion. The official answers will come from Customs and Border Protection in a few weeks and will be posted on their site. In other words, we probably answered the majority of the questions correctly, but these answers do not guarantee whether or not you've passed; it merely is presented as a helpful tool for broker students who are (quite understandably) eager to have any idea of where they stand.
If you would like to share your answers, explanations and comments, we invite you to post them as comments to this blog; however, we ask that comments be professional and to the point. We cannot respond to all of the comments, but this forum will provide you an opportunity to converse with each other.
Happy browsing!
Click here for our preliminary unofficial exam answers.
As always, remember that these answers represent only our opinion. The official answers will come from Customs and Border Protection in a few weeks and will be posted on their site. In other words, we probably answered the majority of the questions correctly, but these answers do not guarantee whether or not you've passed; it merely is presented as a helpful tool for broker students who are (quite understandably) eager to have any idea of where they stand.
If you would like to share your answers, explanations and comments, we invite you to post them as comments to this blog; however, we ask that comments be professional and to the point. We cannot respond to all of the comments, but this forum will provide you an opportunity to converse with each other.
Happy browsing!
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