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.

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