Boskage Trade News

Customs Announces ACE Simplified Entry Pilot Program

2011-12-13T10:34:00.002-05:00

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.

CBP Posts Answer Key to October 2011 Broker Exam

2011-10-17T16:00:00.004-04:00

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

ABI Notice regarding the Classification of Sets

2011-10-12T11:52:00.000-04:00

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=

More “Free” Trade Anyone?

2011-10-10T12:01:00.003-04:00

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

October 2011 Broker Exam - Preliminary Answers

2011-10-07T13:11:00.001-04:00

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!

Announcement: October 2011 CBP Broker Exam Answers

2011-10-04T19:16:00.002-04:00

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.

Proposed Bill Provides Customs Brokers with New Obligation

2011-09-22T14:17:00.002-04:00

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

2011-09-09T13:29:00.002-04:00

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

Reminder re Deadline for Customs Broker Exam

2011-08-30T16:18:00.004-04:00

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.

CBP Ends Paper Courtesy Liquidation Notices

2011-08-17T12:04:00.002-04:00

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 Posts Notice of Customs Broker License Examination

2011-08-08T10:16:00.002-04:00

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.

State Department Issues Guidance Statement Regarding Implementation of Dodd-Frank to Address Problems with Conflict Minerals

2011-07-26T11:44:00.002-04:00

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.

CBP Changes PEA to PSC When Using ACE

2011-07-14T17:45:00.003-04:00

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).

Are You Getting a CBP Form 28 or 29 for the Right Reason?

2011-06-28T12:26:00.002-04:00

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.

Importer Needed Assist in Court to Help with His Half Million Dollar Assist Problem

2011-06-21T11:58:00.002-04:00

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">

CBP Finalizes Harmonized Data Set for Automated Commercial Environment

2011-06-10T11:06:00.004-04:00

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/.

It’s How Much in Duty?

2011-06-02T18:30:00.002-04:00

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?”

Manufacturer of Steel Pipe Products Pays $5.4 Million in Fines for Alleged Violation of FCPA

2011-05-23T12:32:00.003-04:00

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.

The U.S. GAO Recommends Changes to FDA’s Handling of Imported Seafood

2011-05-17T13:28:00.004-04:00

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.

European Union Proposes Changes to GSP

2011-05-13T15:48:00.003-04:00

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.

Changes to CAFTA-DR in the Works

2011-05-10T10:59:00.002-04:00

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.

FDA Issues Interim Final Rule for Importers of Food

2011-05-05T14:53:00.007-04:00

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

Commerce Department Seeks Industry Help on Regulatory Cooperation between U.S. and EU

2011-05-03T16:58:00.001-04:00

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.

Are You Filing a Valid Protest with CBP?

2011-04-26T14:45:00.003-04:00

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.

Expansion of Documentation Permitted to Substantiate Duty-Free Claims under FTAs

2011-04-21T10:43:00.002-04:00

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.

Final Rule Regarding MIDs for Textile and Apparel Importers

2011-04-19T11:31:00.003-04:00

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.

The Impact of the Food Safety Modernization Act on Importers

2011-04-14T12:03:00.005-04:00

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.

April 2011 - Preliminary Answers

2011-04-06T14:18:00.002-04:00

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!

US-Korea Trade Agreement Moves Forward, Could Signal More Trade Liberalization

2010-12-16T15:35:00.002-05:00

By Edward Steiner

(Sandler, Travis & Rosenberg, P.A.)

The following article is excerpted from North American Free Trade & Investment Report (NAFTIR), also published by Thomson Reuters. Since 1992, key players in law, business, and government have relied on NAFTIR to stay on top of the legal and regulatory developments that critically impact companies involved in cross-border trade and investment in Mexico, the U.S. and Canada. For more information or to request a sample issue, go to:

http://www.wtexecutive.com/cms/content.jsp?id=com.tms.cms.section.Section_1013_sub_options

Also of interest is Mexico, Tax, Law & Business Briefing http://www.wtexec.com/mextlbtp.html

Even before the effects of the November midterm elections are being felt and the new slate of largely Republican members has been ushered in, the Obama administration is already reprioritizing its agenda and focusing on compromise. Trade policy, relegated to back burner status for much of the past two years, is re-emerging as an area in which the two parties can find a semblance of common ground.

Politics aside, trade is an important part of the American economy. In 2008, exports alone sustained over 10 million domestic jobs – jobs that often earn 13% to 18% more than the national average. The administration has launched a National Export Initiative (NEI) to double exports and add two million jobs within the next five years, and trade agreements are necessarily part of that initiative.

The recently agreed U.S.-South Korea free trade agreement (KORUS) could be the jewel in the NEI crown and a win, to some extent, for both sides of the aisle. The FTA with South Korea, America’s seventh-largest trading partner, would be the largest such agreement since NAFTA in 1994 and would eliminate tariffs on a majority (over 95%) of consumer and industrial goods within a five-year period. Now comes the hard part – the agreement has to move through the legislatures in both countries. Though there is optimism regarding passage of the agreement, there is also a not insignificant amount of opposition among lawmakers in both the U.S. and Korea, and finally implementing the long-stalled pact is far from a pro forma exercise.

U.S.-Korea Trade in Focus

The South Korean economy is the fourth-largest in Asia and the twelfth-largest in the world. It is home to multinational companies such as Samsung Electronics Co. and Hyundai Motor Co., which undoubtedly boost Korean export numbers. South Korean exports account for about half of the country’s gross domestic product. The primary products Korea ships abroad are semiconductors, automobiles and parts, computers, telecom equipment, petrochemicals and textiles. Many of these products arrive on the shores of the U.S., Korea’s second-largest export market.

Largely as a result of these high-value, high-tech products, the size and health of South Korea’s exports continue to grow, with November shipments to the U.S. alone increasing by 25.2% compared to 2009. November was the 13th month in a row Korea’s export sales increased, earning the country a $39.11 billion trade surplus since January. Exports are also benefitting from a weaker won, making South Korean goods cheaper on the international market.

U.S. exports to South Korea have been unable to maintain volume parity with U.S. imports from that country. While the U.S. enjoyed a $7.1 billion service trade surplus with Korea in 2008, in bilateral goods trade the U.S. ran an $11 billion deficit in 2009 and a $6.6 billion shortfall in the first nine months of 2010. The primary products the United States currently exports to South Korea are corn, petrochemicals, organic chemicals, industrial machines, semiconductors, and civilian aircraft and related parts. The National Association of Manufacturers (NAM) notes that manufactured goods account for over 80% of total U.S. goods exported to Korea and that these shipments sustained 230,000 U.S. jobs in 2008.

A study by the United States International Trade Commission (USITC) claims that gross U.S. goods exports to South Korea will increase by about $11 billion as a result of tariff cuts under the pending FTA alone. Imports, on the other hand, are expected to rise only by about $6.7 billion, helping to improve the U.S. trade deficit with Korea. Ironically, government analysis also predicts that an overall increase in trade as a result of KORUS may in fact cause the U.S. trade deficit with the rest of the world to rise.

Cars and Beef

The United States and South Korea concluded FTA negotiations in 2007, but concerns among U.S. lawmakers about access to the Korean market for automobiles and beef have stalled efforts to implement the agreement. Of the big three U.S. automakers, Ford was the most vehement in opposing the agreement, running advertisements noting that for every 52 Korean cars sold in the U.S. only one U.S. car is sold in Korea. Chrysler expressed similar concerns while General Motors, owner of South Korea-based Daewoo, did not comment. A study conducted by the United Auto Workers echoed Fords’ concerns. The UAW claimed that 70% of the 2009 U.S. trade deficit with South Korea - $8.9 billion – was due to the deficit in automobile sales.

An agreement reached in early December 2010, however, has some of these earlier critics rethinking their stances. Ford now supports the Korea FTA and, breaking with labor unions’ traditional opposition, so does the UAW, which claims the agreement will increase U.S. auto exports.

The December agreement includes some significant changes related to automobiles. The United States can keep its 2.5% auto tariff for five years, while Korea must immediately cut its auto tariff from 8% to 4%. U.S. 25% truck tariffs can be maintained until the eighth year after implementation of the FTA and must be phased out by year ten, while South Korea will cut its 10% U.S. truck tariff immediately. Finally, Korea must also immediately cut its tariff on electric cars from 8% to 4%, with both countries required to phase out such tariffs by year five. The new agreement also allows U.S. carmakers to sell in the Korean market up to 25,000 cars that fail to meet strict Korean safety standards as long as the autos meet U.S. standards. The obligation of U.S. car companies to abide by Korean fuel economy and greenhouse gas emission targets will also be eased, allowing U.S. autos that fall within 19% of the standard. Finally, the U.S. can levy a safeguard against any surges of autos from South Korea for up to ten years after all tariffs on a given product have been phased out.

The progress made on autos was not mirrored in the negotiations on U.S. beef products. Specifically, South Korea will maintain its import ban on U.S. beef sourced from cattle over 30 months old, which was first imposed because of a 2003 case of mad cow disease in Washington state. U.S. beef industry groups have indicated that this situation is not overly worrisome, as a 2008 U.S.-Korea protocol is already bolstering beef exports to Korea, which are expected to rise even further with the phase-out of the 40% Korean tariff under the FTA. However, Sen. Max Baucus (D-Mont.) said he is “deeply disappointed” with the lack of progress on the current ban, and he and other legislators from heavily agricultural states have indicated that they may not support the FTA until their concerns are addressed.

Outside of automobiles and beef, the KORUS agreement includes substantial long-term benefits for many other sectors of the U.S. economy. Perhaps most valuably, U.S. service companies will enjoy increased access to the $560 billion Korean services market, an industry in which the U.S. already enjoys a trade surplus with Korea. This includes accounting, health care, education, legal, finance and telecommunications services, areas in which the U.S. excels. In agriculture, U.S. food processors, ranchers and farmers will enjoy increased access to the Korean market, as high Korean tariffs will be eliminated along with other non-tariff barriers. With respect to manufactured goods, the National Association of Manufacturers expects the already large volume of U.S. manufactured goods exported to South Korea to increase by over one-third. Other notable provisions of KORUS include increased access to the Korean government procurement market, improved enforcement of intellectual property rights in Korea, and a requirement that Korea uphold and respect fundamental labor laws in such a way that ensures a level playing field for U.S. workers.

Edward Steiner is Director of Trade and Legislative Affairs for Sandler, Travis & Rosenberg, P.A., resident in the Washington, D.C., office. Mr. Steiner consults for a diverse client base of private industry, trade associations and foreign governments on a wide range of trade compliance issues including: consumer product safety, food safety, environmental protection and labor standards.

Congress, Santa Claus and Scrooge

2010-12-16T14:00:00.003-05:00

Tis the season for children of all ages to make their wish list for Santa. On the top of some lists is the passage of the Omnibus Trade Act of 2010.

The Omnibus Trade Act of 2010 (H.R. 6517) was passed by the House on Wednesday. The bill extends several trade preferences programs and temporarily modifies duty rates on specific articles. If passed, the Omnibus Trade Act of 2010 contains several important trade provisions that include:

• extension of the Andean Trade Preferences Act (ATPA) and Generalized System of Preferences (GSP) until June 30, 2012.

• extension of the key Trade Adjustment Assistance (TAA) provisions until June 30, 2012

• various miscellaneous tariff bill (MTB) provisions.

The TAA, GSP and ATPA are scheduled to expire on December 31, 2010 unless they are extended. The bill must be passed by the Senate before it can be signed into law; however, there is some speculation that the Senate might not pass the legislation. With Congress ready to end the session for the holidays, some members aka Scrooges vow to keep it going through the weekend. Will Santa deliver the passage of H.R. 6517 or will it be left on the wish list for next year along with the Korea, Panama and Columbia Free Trade Agreements?

Note from the Wizard:
The Wizard is taking a leave from Oz to follow the yellow brick road, so this will be the Wizard’s last posting on Boskage Trade News blog. It’s been a pleasure to write this blog and interact with the readers for the last two years.

“Un” Happy Holidays for Internet Counterfeiters

2010-12-08T11:49:00.004-05:00

After the big sales on Black Friday following Thanksgiving Day, retailers claim to have the best deals of the season available for online shoppers on Monday, also known as Cyber Monday. Online shoppers looking for bargains didn’t find them on 82 commercial websites found to be offering illegal counterfeit goods and copyrighted works. As part of Operation In Our Sites coordinated by the National Intellectual Property Rights Coordination Center (IPR Center) seizure orders were executed against these 82 domains on Cyber Monday.

The government operation targeted online retailers of counterfeit goods, which included sports equipment, footwear, handbags and athletic apparel. Illegal copies of copyrighted DVDs, music and software were also targeted. Federal agents made undercover purchases from various online retailed suspected of selling counterfeit goods. Some of the goods were shipped directly to the U.S. from other countries using international express mail. Once the goods were confirmed to be counterfeit, seizure orders were obtained. When accessing these websites now, users will see a banner notifying them that the website/domain has been seized by federal authorities.

Protection of intellectual property encourages creativity that is essential to continued growth and success of our economy. Without protection, companies and individuals may not be as willing to invest the time and money necessary to develop innovative new products that enhance, and in many cases, save our lives. Without proper enforcement, manufacturers may produce lower cost inferior goods by violating the trademark, copyright and patent laws. Some of these inferior goods such as pharmaceuticals could be hazardous to consumer’s health because they are not manufactured under the same regulations and processes as the patented or trademarked goods.

The IPR Center and the Department of Justice Task Force on Intellectual property (IP Task Force) work to eliminate the growth of intellectual property violations. They encourage involvement from the holders of IPR to assist them in the fight against this growing problem. To learn more about these efforts, visit the IPR Center at http://www.ice.gov/iprcenter/ and the IP Task Force at www.justice.gov/dag/iptaskforce/.

President Announces Agreement on US-Korea FTA

2010-12-06T11:59:00.006-05:00

Last week, the U.S. and Korea resolved the automotive and agriculture issues that stalled the last round of discussions. Farmers will see an increase in exports of agricultural products and American automotive manufacturers will have more access to the Korean market, which will keep more Americans working. The new agreement reduces the duties on U.S. automotive imports into Korea from 8% to 4%, with complete elimination of duties by the fifth year. Because of reduced tariffs, the agreement is expected to increase annual exports of U.S. goods by up to $11 billion and support at least 70,000 American jobs. South Korea will have greater access to U.S. markets and our products. Reduced tariffs will make American goods more affordable for personal and business use in Korea. Supporters of the agreement hope that the required changes will be made quickly so it can be submitted to Congress early in 2011 and passed by Congress in the spring.

Click HERE to read more about the agreement.

Air Cargo Humor

2010-11-30T14:55:00.003-05:00

The local newspaper asked for comments and suggestions concerning the use of more instrusive pat downs at airport security checkpoints. Suggestions included sending all baggage by express courier or a new baggage only airline for more efficient and faster service, having the military take over security, boycotting the airlines and inviting the Israelis to design our systems. The one that caught my attention was a little extreme, but definitely innovative. Instead of a scanning device, the booth passengers step into would become a detonating device. If explosives were detected, they would be detonated within the confines of the booth. The next announcements broadcast over the PA system would be for cleanup in the security area and the availability of seat on Flight 123.

While a little extreme for use on human beings, perhaps it is not so farfetched for packages. What if all packages or even just those suspected of containing explosives or coming from high risk areas passed through a detonation booth. If the machine detected explosive materials in packages like the ones containing the ink cartridges, the package would be immediately detonated within the confines of the booth. If that process slowed the flow of packages, the suspect package could be removed from the flow and taken to the specially designated detonation booth. If we are going to 100% scanning of packages, would the chance of innocent packages being blown to bits outweigh the cost of the new technology and the increased success in thwarting terrorist attempts? Perhaps the new detonating booth is already on the drawing board and coming to an airport and/or cargo facility near you!

Recent News In International Trade

2010-11-22T14:54:00.006-05:00

CBP Requests Comments on CBP Form 28

On November 17, 2010, U. S. Customs and Border Protection issued a request for comments regarding CBP Form 28. The Request for Information, CBP 28, is used as an informal method for CBP to request and review import records when they need additional information not provided by the documentation submitted.

The comments should address:
(a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;
(b) the accuracy of the agency's estimates of the burden of the collection of information;
(c) ways to enhance the quality, utility, and clarity of the information to be collected;
(d) ways to minimize the burden including the use of automated collection techniques or the use of other forms of information technology; and
(e) the annual costs burden to respondents or record keepers from the collection of information (a total capital/startup costs and operations and maintenance costs).

Comments should be submitted to U.S. Customs and Border Protection, Attn: Tracey Denning, Regulations and Rulings, Office of International Trade, 799 9th Street, NW., 5th Floor, Washington, DC 20229-1177.

H.R. 6410 Introduced - Requires 100% Screening on All-Cargo Aircraft

On November 16, 2010, a new air cargo security bill was introduced into the House of Representatives. H.R. 6410, the "Air Cargo Security Act," would require systems to be established for the inspection and screening of cargo traveling on all-cargo aircraft "operated by an air carrier or foreign air carrier in air transportation or interstate air transportation." The bill would require that the screening for cargo intended for all-cargo aircraft "provide a level of security commensurate with the level of security for the screening of passenger checked baggage." The bill also provides for training for air cargo handlers and regular inspection of air cargo facilities. consequences imposed for a facility not in compliance

If the bill is approved, 50 percent of the cargo intended for all-cargo aircraft will be inspected no later than 18 months after enactment and 100 percent screening of the cargo within three years of enactment.

Failure to Comply with OFAC Subpoena Results in $225,000 Fine

OFAC issued a subpoena to Pinnacle Aircraft Parts, Inc. related to an investigation into the company’s involvement in the sale of a jet engine that may have been ultimately destined for Iran. In response to the subpoena, Pinnacle did not supply a copy of an email that indicated the engine was destined for Iran. Obviously, the email might have shown awareness by the company, which could have provided the basis for criminal prosecution.

Although the email in question was provided to Pinnacle’s attorney, it was not included in the submission of documents requested by OFAC. Pinnacle decided not to produce the email based on the advice of counsel; however, they are legally responsible for compliance with the subpoena and the actions of their agents. The end result – a $225,000 fine issued by OFAC. The penalty was slightly mitigated based on Pinnacle’s reliance on the advice of counsel and prior good record.

FTA Update

The Generalized System of Preferences (GSP) and the Andean Trade Preference Act/Andean Trade Promotion and Drug Eradication Act (ATPA/ATPDEA) are scheduled to expire on December 31, 2010. Possible extension of these acts is being discussed in the House and Senate.

The U.S and Korea have not reached a final agreement on the U.S. - Korea FTA. Terms that have been subject of much discussion include unrestricted imports of automobiles and beef into South Korea. Given the impasse, an agreement will not likely be reached this year. President Obama pledges to keep moving forward so that this agreement may be ready for Congress in early 2011.

SAVE Award Winner

In 2009, President Obama introduced the SAVE Award (Securing American’s Value and Efficiency). The program seeks ideas from federal employees on how the make government more effective and efficient. Over 18,000 entries were received. The winner was Trudy Givens who works for the bureau of Prisons in Wisconsin. Trudy suggested“opt in” features for the approximately 8,000 copies of the Federal Register being mailed every day. Statute requires the government to make hard copies available; however, most of the public views them online. If recipients are allowed to opt-in to receive hard copies, the government could save printing and postage costs.

As this year’s winner, Trudy will have an opportunity to meet the President to discuss her idea with him. All of the SAVE Award submissions have been sent to the agencies for potential action and inclusion in the 2012 Budget. Last year, a total of 20 SAVE ideas representing millions of dollars in savings made it into the President’s FY2011 budget.

"If You See Something, Say Something"

The Department of Homeland Security announced the expansion of the “"If You See Something, Say Something" campaign. The phrase was originally implemented by New York City’s Metropolitan Transportation Authority after 9/11 and has spread to other cities across the country. The newest campaign encourages travelers and employees in the hotel industry to report indicators of terrorism, crime and other threats to the proper law enforcement authorities.

Focus on Fakes

2010-11-09T11:28:00.007-05:00

Have you ever seen someone at a flea market selling Rolex watches for $70 or NFL shirts for $5? If it sounds too good to be true, then it probably is too good to be true. Intellectual property comes in many forms, from writings of an author to the new product developed by an inventor. Federal law provides rights to owners of these writings, products and processes to protect them from being misappropriated by others.

Protection of intellectual property encourages creativity that is essential to continued growth and success of our economy. Without protection, companies and individuals may not be as willing to invest the time and money necessary to develop innovative new products that enhance, and in many cases, save our lives. Unfortunately, unethical criminal behaviors have created an increase in counterfeit and pirated goods that inhibit creativity and threaten profitability of legitimate creators. Trade in counterfeit goods such as CDs, clothing and drugs cost the true owners around the world billions of dollars annually.

Today's technological advancements and the ability of foreign manufacturers to produce lower cost goods present unlimited opportunities for distribution of goods that are authorized by the IPR owner. However, this same technology and low cost production provide the same opportunities for supplying products that infringe on intellectual property rights. For example, anyone with a computer equipped with a CD and/or DVD burner and a stack of discs can illegally copy and distribute protected works, such as music and movies.

Both the domestic and international protection of intellectual property has become increasingly more difficult. While the U.S. has well-defined laws for protection of intellectual property, not all countries provide or enforce the protection of intellectual property. This lack of protection and enforcement has led to widespread unauthorized copying and use of unlicensed marks to supply the market with goods that violate intellectual property rights.

Some of the statistics provided by CBP show that footwear, clothing, purses and electronics are some of the most frequent items imported in violation of intellectual property rights. Goods such as soaps, pharmaceuticals and electronics can be safety hazards and pose dangers to consumers if not manufactured according to our standards. China was the top trading partner for IPR seizures in FY 2009 accounting for 79% of the total value of goods seized. Footwear was the top commodity seized in FY 2009, which accounted for 38% of the entire value of infringing goods.

The enforcement of intellectual property rights has become one of CBP’s top priorities. CBP is dedicated to protecting against the importation of goods, which infringe/violate Intellectual Property Rights (IPR). The aggressive enforcement program devotes substantial resources to target, intercept, detain and seize goods in that violate intellectual property laws. CBP has an online reporting system that allows the public to report potential violations, eAllegations.

Click HERE to check out this interesting shopping website, then cast your vote using the poll at the top right side of the page.

Would this website be something that CBP might have an interest in?

__Yes
__No
__I’m going shopping!

Will Terrorist Threats Change Cargo Security Rules?

2010-11-01T14:04:00.002-04:00

Thanks to tips from Saudi Arabian authorities, two boxes containing explosive devices were quickly found and taken into custody without any injuries or damage to property. A question many of us may be contemplating is how these recent events affect importers, exporters, carriers and individuals.

The bombs found in the toner cartridges late last week serve as a wakeup call that Al Qaeda is alive, active and has found a new target – cargo carriers. Previously, it was thought that passenger aircraft were more likely targets. These packages did travel on passenger planes; however, they were destined transport via FedEx and UPS, known for shipment by cargo-only aircraft.

While experts are not 100% certain, they believe that the intent may have been to detonate the bombs in flight. Cargo shipped on passenger aircraft has been subject to more intense screening than cargo on freighters; however, the recent events will likely increase the level of screening for all cargo on all air carriers. Yemen pledged to tighten security at all of its airports and to inspect every piece of cargo and luggage at the airports. CNN reports that cargo carriers such as, FedEx and UPS will be required to perform more thorough inspections before accepting any package. What else can be done to prevent other potentially deadly shipments?

Increased inspection slows movement of cargo and increases cost. Hopefully, our allies will support a higher level of scrutiny, as the hatred against Americans endangers their own citizens. Regardless of where the bombs were intended to detonate, they could have exploded anywhere along the journey. With increased focus on Yemen, will Al Qaeda set up shop in a country receiving less scrutiny?

Notice that this terrorist event was not an example of a breach of security related to a major importer or exporter. The packages were not shipped to or from an importer or exporter that would normally participate in C-TPAT or other security programs, but instead a shipped from an individual to a synagogue. To complicate matters more, the terrorists are using more sophisticated at techniques to disguise the bombs. There is some question as to whether the bombs would have been found even if the packages had been screened using x-rays, dogs or other techniques.

Implemented by the TSA, Congress mandates that 100 percent of shipments on passenger planes go through screening; however, the rule does not apply to packages on cargo planes, those not carrying passengers. The rules for cargo on passenger aircraft cover domestic and outbound international flights. Air cargo security processes and regulations vary by country. Congress intended for this rule to cover international inbound flights, but it is taking more time for the U.S. to convince other countries to agree to and implement a similar air cargo inspection processes. Cargo carriers such as UPS and FedEx have their own set of security rules and processes. Cargo may not be inspected, depending on the shipper, destination, origin or other information that triggers suspicion.

On a final note, another issue to consider is the use of stolen identities to ship the bombs. The two women originally arrested in the plot have been released, claiming their identities had been stolen. Along with more intense security exams, the use of stolen identities should be a big concern. Wouldn’t the terrorists like to claim victory by shipping explosives using an American’s identity? If you’ve ever been the victim of identify fraud, can you imagine what it would be like to have your name associated with a terrorist plot? The hassles you endured from collection agencies, the bank and vendors would pale in comparison.

Stay tuned! This incident is likely to generate more robust security measures for all cargo, including packages shipped cargo planes.

CBP to Launch Two Pilot Programs November 1, 2010

2010-10-26T16:19:00.000-04:00

The Center of Excellence and Expertise (CDE) and Account Executive (AE) pilots are being launched to improve and strengthen CBP’s relationships with the trade and business partners.

The CEE pilot will work with the pharmaceutical industry to better facilitate trade and risk management practices for the industry. The group will explore opportunities to work with other government agencies involved in importation of pharmaceuticals. The AE pilot will work with partners in the electronics industry to facilitate trade and compliance with import requirements. One of the goals is to fine-tune the account-based approach for the low risk trade partners so that CBP can focus on the higher risk companies.

CBP will also use the online trade community to provide input. Click HERE to view Our Border, A Border Civic Network, the online group specifically mentioned in the announcement.

BIS Requests Comments on Understanding the EAR

2010-10-20T10:46:00.004-04:00

The overhaul of U.S. export controls and the National Export Initiative “NEI” focus on expanding trade opportunities for SMEs created an opportunity for the Bureau of Industry and Security “BIS” to solicit information from various groups about their overall experience with the Export Administration Regulations “EAR”.

The BIS seeks comments from the public concerning small and medium enterprises’ “SMEs” understanding of and compliance with export controls relate to the EAR. The BIS will use this information to determine the need for changes that will improve the SMEs’ understanding of and compliance with the EAR, without inflicting undue burdens that affect their ability to be competitive.

The BIS invites comments that identify

·issues and makes recommendations regarding SMEs’ awareness and understanding of the EAR, as well as their experiences complying with the EAR;

·the principal challenges SMEs face in trying to comply with the EAR, including any challenges that SMEs uniquely face and approaches to overcoming these challenges.

·the value of current BIS outreach, education and counseling to SMEs in understanding and complying with the EAR;

·ways to improve or expand SMEs’ awareness, knowledge and understanding of the EAR and increase their capacity to comply with them; and

· data, including comparative international data, that support comments and recommendations related to items above; and that provide examples of effective methods of administering and enforcing export controls with special attention to SMEs.

Comments may be submitted by email, fax or mail by December 6, 2010.
Click HERE for information on how to submit comments.

Trade News Summary

2010-10-13T15:42:00.004-04:00

We’ve been so busy with the Customs Broker Exam for the last week; we thought it would be nice to catch up on some of the news outside of the exam.

CBP Announces ACE Webcast
As part of the ongoing ACE Outreach Events, CBP will host a free webcast about the Automated Commercial Environment on Wednesday October 27, 2010 from 1:00 – 2:30 p.m. (EDT). CBP Executives will cover a variety of topics, including how ACE will impact your business, the short term priorities, as well as future of ACE, and CBP’s commitment to making ACE a reality for everyone.

To register, please click on the URL listed below to access the registration form:https://apps.cbp.gov/te_registration/?w=37

Don’t Lie to the BIS
Section 764.2(g) of the EAR prohibits persons from making false or misleading statements or concealing materials facts to the BIS, CBP or official of any other U.S. government agency. During an investigation, the CEO of a company allegedly told agents that he didn’t know a particular company was on the Denied Persons List; however, it was discovered that the company in question actually told the CEO they were on the list. The CEO was personally fined $52,000 for violation of 15 CFR 764.2(g). Don’t let this be you!

Public Citizen: New Trade Data Center Launched
As part of its Globalization and Trade area, Public Citizen launched the new Trade Data Center, a collection of searchable databases providing information on how various trade policies affect jobs, the community and more. Take some time to check out this collection of resources.

CBP Jobs
Just in case anyone is looking for a job, a quick scan of USAJOBS shows the need for quite a few people in the following positions. I don’t know about you, but if I were an auditor, I would be looking to into what I need to do to become an I.T. Specialist.

· Lead I.T. Specialist $102,721
· I.T. Specialist $71,674
· Telecommunications Specialist $57,408
· Management and Program Analyst $47,448
· Chemists $31,315
· Auditor $27,431

October 2010 Customs Broker Exam - Preliminary Answers

2010-10-05T13:43:00.003-04:00

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. Our first attempt may have some mistakes, but they will be corrected as new updates are posted. With that said, we're not finished yet -- BUT we do have most of them completed.

Click here for the 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. Remember, we do not have the official answers. You’ll have plenty of time to argue with CBP if you disagree with their answers.

Happy browsing!

P.S. We cannot post the questions because the copy we received had a lot of markings on it.

Pack Your Bags: The Custom Broker Exam Checklist

2010-10-01T11:04:00.005-04:00

With the exam just a few days away, it’s time to start thinking about what to pack for the exam. You will use most of your resource materials up until the day before the exam, so it’s impossible to pack them in advance of the actual test. However, you can use the practical checklist we’ve created to make sure that you have everything on the list packed in your heavy-duty tote bag, large cardboard box or other container the night before the exam. If you are like most test takers, you may be a little nervous prior to the exam, so you don’t want to run the risk of forgetting something important or being late because you couldn’t find your calculator, pens or other materials. Packing everything on your checklist the night before will help you reduce unnecessary stress so you can relax.

Click HERE to view and print your Customs Brokers License Exam Materials Checklist. You can customize this list to add specific items that you plan take to the exam. No matter what you plan to take, make sure to use the checklist to ensure you have each item packed and ready to go the night before the exam. Remember, electronic devices such as laptops and cell phones are prohibited.

Wanted: October 4 Exam Copy

(We received a copy of the exam and hope to post preliminary answers Tuesday afternoon.)

In order for us to post “preliminary” answers for the exam, we need a copy of the exam as soon as possible on Monday afternoon. Do we have any volunteers to scan and email the test or fax it? Email would be best, but we’ll be happy with a fax too!

Email: andrew@boskage.com
Fax: 269-673-5901

Is Self-Filing For Everyone?

2010-09-29T14:16:00.003-04:00

With increased pressure to reduce costs and justify staff, importers often consider the option of self-filing entries. There are some advantages that immediately come to mind such as reduced entry fees and more control, but what about the disadvantages? Importers normally check the broker’s work as part of their compliance program. If the importer files the entry, who checks the importers work? We all make mistakes. We’d like to open up the forum and hear from our readers. What are the advantages and disadvantages of self-filing. Post your comments to this blog. We’ll publish the comments. In two weeks, we will create a list of advantages and disadvantages submitted by our readers.

Take our Self-Filing Poll located at the top right side of the page.

CBE Study Tip 12: CBP Directives

2010-09-29T08:00:00.000-04:00

For many years, the Customs Brokers Exam only required the use of the HTSUS and the CBP Regulations; however, in 2004, CBP expanded its scope of materials to include Customs Directives and other reference materials. These materials are important because they provide guidance on activities brokers perform that aren’t included in the regulations. Since their addition, these resources have comprised 8% to 10% of the total questions on the exam. Because of the number of resources, it’s difficult to predict specific areas for testing. The best thing to do is to study all of it. We’ve provided the key highlights for the four most frequently tested supplemental resources.

1. Instructions for Preparation of CBP Form 7501

Although most entry summaries are completed electronically, it’s important to have a good understanding of the information contained in this document. By reading these instructions, you can complete a CBP 7501 by hand without the assistance of a computer. You should keep this document handy and review all blocks because it has been one of the most frequently tested supplemental resources since the implementation of the new CBP 7501 format in September 2005. Become very familiar with each block number, so you can easily reference it. Block 2 (Entry Type Code) and Block 31 (Net Quantity) are easy targets!

2. CD 3510-004 - Monetary Guidelines for Setting Bond Amounts

The purpose of the bond is to protect the revenue and ensure compliance. The amount of a bond is calculated using information on the bond application, the criteria in Part 113 of the CBP Regulations and the guidelines in this directive. This directive provides standardized guidelines for computing the bond amounts for all types of bonds. For the exam, it’s important to know how to calculate single entry and continuous bonds.

The first type of bond is the Activity 1, Importer or Broker Continuous Bond. The minimum amount of a bond in this category is $50,000.

For importers paying zero to $1,000,000 in duties and taxes, the bond should be computed as 10% of the duties and taxes paid for the previous calendar year and issued in increments of $10,000.

For importers paying over $1,000,000 in duties and taxes, the bond should be computed as 10% of the duties and taxes paid for the previous calendar year and issued in $100,000 increments.

The next type of bond is the Activity 1, Importer or Broker Single Transaction Bond. This bond is valid for one shipment and is computed in an amount not less than the total entered value of the merchandise plus all duties, taxes and fees, unless the merchandise falls into a special category. If the merchandise is subject to other government agency requirements such as the FDA or FCC, the bond will be computed in an amount of at least three times the total entered value of the shipment. In addition, the district director may set the single transaction bond amount at 10 percent of the total entered value for unconditionally free merchandise, which is not subject to the previously mentioned categories.

Note:
Not all of the government agencies are included in the list that requires a bond in the amount of three times the value of the shipment. If your goods are not regulated by one of the government agencies on the list, then the single entry bond will be written for value plus duty.

3. CD 3550-055 - Instructions for Deriving Manufacturer/Shipper Identification

Questions involving the manufacturer’s identification code “MID” should be some of the easiest to answer. Not only does this directive provide instructions on how to construct the code, but the information is also included in the CBP Form 7501 Instructions. Just memorize the rules for deriving the MID.

This code is commonly referred to as the MID or Manufacturer Identification Code. This technique is also known as keylining. On the broker’s exam from October 2005, a question required knowledge of the term keylining.

Customs requires the formation of a code from the name and address of the manufacturer.
The MID contains five components that are added together without spaces to create the code. The code can be up to 15 characters in length. The five components consist of the following information:

· Two letter abbreviation for the country of origin
· First three letters of the first name of the manufacturer
· First three letters of the second name of the manufacturer
· First four digits of the street address, and
· First three letters of the city name.

There are some general rules to consider.

· Ignore all punctuation
· Ignore single character initials. and
· Ignore the words “a”, “an”, “and’, “of”, and “the”.

4. 3550-067 - Entry Summary Acceptance and Rejection

Customs Directive 3550-067 provides guidelines for uniform acceptance and rejection of entry summaries. Five major areas of interest in this directive include the following:

· Collections Processing – Rejections
· Acceptance Review and Summary Processing
· Processing of Rejected Entry Summaries
· Time Limit
· Rejection Effect on Entry Summary Filing Time

This information is a little more complicated to grasp, so read each of the major areas and highlight key information.

Although we didn’t cover all of the directives and supplemental materials, they are not any less important. Remember the advice from the beginning of the article - the best thing to do is to study all of it.

We welcome your comments on these suggestions and encourage you to add your own ideas to this forum so that other students studying for the exam can benefit from your experiences. Check the Boskage Trade News regularly to find more useful news for international trade professionals! As soon as the Wizard obtains a copy of the test and has time to work out some preliminary answers, we’ll post them here for your review and comments.

Importers & Exporters Say The Darndest Things!

2010-09-28T13:11:00.003-04:00

Let’s have a little fun this week. Have you ever heard one of your co-workers say something about international trade that made you want to hide under your desk, or something so funny you laughed aloud? Submit your shocking, scary and funny sayings to us! We will collect them until October 8th and publish the list the following week. We have provided a few to get you started.

1. I’m going to call Customs and demand they release our freight because I pay their salaries.
2. Can we just mark a couple of the pieces and send them to CBP? They won’t inspect all of them, will they? What happens if we don’t mark them?
3. Please destroy this email after reading it.
4. My customer won’t buy the socks if they are not made in the USA. Can I cut out the “Made in China” tag before shipping them to the customer?
5. We were told if we can’t figure out the exact classification to classify it under “other.”
6. The bearings were made either in Germany, England, Italy or France. Just tell Customs they were made in Germany.
7. Exporting is the opposite of importing.

Click on "Comments" to submit the "darndest things" you've heard about international trade.

CBE Study Tip 11: Free Trade Agreements

2010-09-27T17:09:00.001-04:00

With the increase of free trade agreements between the U.S. and other countries, the number of questions on the CBE related to these agreements has increased. In fact, “Trade Agreements” often has its very own section of questions on the exam. Free Trade Agreements (FTAs) are international agreements made between two or more nations that relate to common trade or service issues. FTA’s reduce or eliminate all tariffs and other restrictions on substantially all the trade in goods between its member countries based on country of origin.

The information needed to answer questions about FTA’s is likely to be found in one of four places, the General Notes of the HTSUS, Chapters 98 an 99 of the HTSUS, 19 CFR Part 10 and 19 CFR Part 181. Memorize the titles of these General Notes and skim the text to become familiar with the topics covered in each. In your review of the programs, concentrate on the basic requirements such as tariff shift, de minimis and RVC requirements. Each program has different requirements regarding allowance of the special duty treatment, and some of these programs are subject to change. Most of these programs have very detailed requirements that must be met in order to claim the duty-free status. Additionally, these programs are often difficult to understand, and some have limited use in daily practice. Try not to be too overwhelmed when encountering these problems. If they appear too difficult, move and come back to them later.

Don’t overlook important terminology. Be sure to know the definitions for each of the following:

· Accumulation
· Direct Cost of Processing
· De Minimis
· Imported Directly
· Transshipment
· Regional Value Content RVC
· Tariff Shift
· Substantial Transformation

To view a list of the FTAs, the references to the HTSUS General Notes, SPI and CFR references, click HERE.

We welcome your comments on these suggestions and encourage you to add your own ideas to this forum so that other students studying for the exam can benefit from your experiences. Check the Boskage Trade News regularly for more helpful hints on studying for the Customs Broker Exam and other useful news for international trade professionals!

Check Out Border Wars and Border Simulation

2010-09-24T13:42:00.004-04:00

Border Wars is a television show on The National Geographic Channel featuring CBP agents/officers as they enforce U.S. laws, fight terrorism and intercept persons trying to enter the U.S. illegally. In its second season, the show appears on Wednesday evenings at 9:00 pm Eastern Time. Check the schedule for more information on the show and upcoming episodes.

Would you like to experience a “day in the life” of a CBP officer working at a port of entry at the border? In this simulation, you will be able to select to patrol at a point of entry or in the desert. As an office at the port of entry, you will encounter people trying to enter the country and make decisions on whether to grant entry or do a more intensive investigation. Will you make the correct decision? On patrol, you will patrol on an ATV or in a helicopter and make life or death decisions. Click HERE to participate in the Border Patrol Simulation. Then click on “You Are A Border Agent” to start the simulation. Enjoy! Maybe CBP will create some additional simulations for other areas such as C-TPAT Validations, Focused Assessments and more!

CBE Study Tip 10: Valuation

2010-09-21T08:00:00.001-04:00

Customs Valuation (19 CFR 152) is one of the most complex parts of the regulations. This section is one of the most frequently tested on the exam, and the questions are often long and time consuming to answer. When reading Part 152, it would be wise to read each section slowly in order to understand the complex terms discussed. Pay close attention to any examples provided because they help explain and demonstrate the complicated concepts. Highlight important areas of text. Make notes and lists in the margins. Locate the valuation questions in old exams and work through the questions. Make sure to mark each section of the regulations that was used in determining the answers.

Click HERE to view an outline of the most important valuation information found in 19 CFR 152. Read and highlight these sections in your copy of the regulations. Take this outline to the exam with you for a quick reference tool.

Stay tuned to Boskage Trade News for more helpful hints on studying for the Customs Broker Exam!

Government Spotlight: International Trade Administration

2010-09-15T22:46:00.001-04:00

As part of the Department of Commerce, the International Trade Administration (ITA) promotes world trade and is the official U.S. government organization that coordinates all issues concerning trade development, international economic policy, and programs and trade administration. The ITA’s mission is to create prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements. ITA ensures that U.S. industry’s commercial interests are represented in trade negotiations, bilateral and multilateral discussions, and the U.S. rulemaking process.

Unfair foreign pricing and government subsidies prevent the free flow of goods and adversely affect American business in the global marketplace. When that happens, the International Trade Administration can take enforcement actions. ITA’s Import Administration (IA) is the agency’s lead unit on enforcing trade laws and agreements to prevent unfairly traded imports and to safeguard jobs and the competitive strength of American industry.

The ITA provides information and services in some of the following areas.
· Antidumping
· Foreign Trade Zones
· General Export Assistance
· Steel Licensing

Click HERE to learn more about to topics covered by the ITA.

Check out the U.S. Export Fact Sheet containing an overview of various export statistics.

View Tradeology – the official ITA blog

CBE Study Tip 9: How to Use the HTSUS - Part 2

2010-09-14T08:00:00.000-04:00

Classification is a skill that takes time to develop, but the more effort put into the process, the faster one will become more proficient. The actual process of classification is very complex, almost like reading a foreign language. It is important for both experienced and beginner to understand that the strategy for answering classification questions on the brokers exam is a little different from the process used for classifying goods for your companies on a daily basis. The basic steps discussed are similar to those used in daily transactions, but there is more to the process for those classifying goods on a regular basis. On the exam, you won’t be able to consult with experts or use the Cross Rulings Database. Remember, the average time allotted per question on the exam is three (3) minutes. In actual practice, you would likely spend more than three minutes trying to classify a product. The primary difference between classification on the exam and classification in a business situation is that the exam provides five (5) possible answers, and you know that one of those answers is correct. In real life, you aren’t provided with a set of answers in which you know for certain one is correct. Another difference is that classification questions found on the exam are intentionally complicated and sometimes tricky. Thus, there is a need for a slightly different strategy for answering the questions on the exam.

1. Read the question carefully and make note of the details.
The first step in answering any classification question involves a careful, thorough reading of the question and making note of the details provided. Some of the details may be critical to answering the question correctly. Remember, exam questions have been carefully worded and may be tricky, so some of the details may be not be necessary. You may want to highlight the details as you read the question.

2. Look up each answer and eliminate those that are clearly incorrect.
The second step for answering classification questions is to look up all the answer selections and eliminate those that are clearly incorrect. This process may be more difficult than it sounds. Classification questions are typically written in such a way that all or most of the answers appear to be correct. The best way to answer them is by a process of elimination. Consider the following example.

What is the classification of a woven nylon scarf measuring 55 cm x 50 cm?

A. 6214.30.0000
B. 6214.40.0000
C. 6213.90.1000
D. 6117.10.2030
E. 6117.10.6020

Notice that the answers are found in two different chapters, so it is likely that we will be able to eliminate one of the chapters. Indeed, we can eliminate Answers D and E easily because Chapter 61 covers knit articles and our scarf is woven.

3. Read Chapter and Section Notes
The third step is to review the Section and Chapter Notes to make sure that there is not any information there that would preclude one or more answers. Section and Chapter Notes provide valuable information about what items are specifically included and excluded as well as useful definitions. Because of the time constraints, it would be easy to skip the Notes; therefore, the writers of the Exam intentionally include questions that require the applicant’s ability to use the Notes. Remember, the Notes can be long and many of them will not be related to the classification you are checking. You must learn to scan the notes for significant headings and keywords. If you still have several potential answers at this stage, the Notes may help you make a determination between them. You should do this even if you only have one answer remaining after the elimination step. If you have eliminated all answers but one when you reach this step and find a Note that eliminates that answer, you will have to start over to find the answer you have eliminated incorrectly. Let’s go back to the scarf.

Answer B should be eliminated because the provision is for artificial fibers and our scarf is nylon, which is a synthetic fiber. If you did not know whether nylon was artificial or synthetic, Chapter 54 and 55 covering man-made fibers would help. It would appear that Answer A is the correct selection for our scarf; however, Chapter 62 Note 7 explains that scarves that measure less than 60 cm should be classified as handkerchiefs under 6213. This is a prime example of the importance of reading the Notes. If we had overlooked the Notes assuming that 6214.30.0000 specifically describing our product was correct, we would have answered the question incorrectly.

In most situations, you will be able to answer questions using these steps; however, there may be a few questions that require an additional step involving the application of the General Notes and/or GRI. For example, a question may require you to select the appropriate duty rate. Once you’ve located the appropriate HTS number, you will select a duty rate based on the country of origin. Given the origin, you may need to check the General Notes to determine if the country is included or excluded from certain free trade agreements.

Now that you are familiar with the organization of the HTSUS and have some tips on how to answer classification questions, it’s time to practice these skills. One of the best ways to practice for the exam is to take past exams. Old exams can be found on CBP’s website. For detailed instruction on classification and related topics, check out our online courses at bcpLearning.com.

Stay tuned to the Boskage Trade News for more helpful hints on studying for the Customs Broker Exam! The next article will cover “Valuation.” We also welcome any suggestions on topics you would like to see discussed.

Who Is In Charge Of Trade Compliance?

2010-09-10T12:21:00.000-04:00

An important and somewhat sensitive question related to responsibility for compliance was recently asked of the ICPA membership. As companies look for ways to reduce the number of employees and cut costs, a function that doesn’t generate revenue, such as trade compliance, might have a big bullseye painted on it. We would like to take a short poll to determine how companies manage their trade compliance responsibilities. Participate in our poll located on the top right side of the blog and check back to see how your colleagues respond.

Trade compliance functions for my company are performed:

 Externally for imports
 Externally for exports
 Internally for imports
 Internally for exports
 Compliance? What Compliance?

Feel free to post your comments for and against outsourcing trade compliance.

CBE Study Tip 8: How to Use the HTSUS - Part 1

2010-09-07T15:00:00.000-04:00

In Study Tip 7, we provided some suggestions on how to read the CBP Regulations. In this article, we provide some tips on the key components and arrangement of information contained in the Harmonized Tariff Schedules of the United States (HTSUS). The next article will provide some helpful information on how to answer exam questions.

If you want to pass the Exam, no subject is more important than classification. On each test, classification accounts for 15% - 25% of all questions asked. If you are not experienced in this process or have not dedicated sufficient study to this area, your chances of success are more uncertain. The good news is that by focusing on some basic skills, developing a strategy and answering questions from previous exams, both experienced and beginning students can achieve success! To begin your study of the HTSUS, you should familiarize yourself with the key components and arrangement of information found in the HTSUS. Then, organize your book in a way that allows you to find information quickly. The following points will assist you with these tasks.

1. Familiarize yourself with the components of the HTSUS.

The HTSUS is similar to the CFR in that it is a reference text and not the type of book that is read from page one to the end. It is important to be familiar with the major parts so you will know where to look for answers and what information is the most important to read.

· General Rules of Interpretation (GRI) – The GRI appear at the beginning of the HTSUS and provide the primary rules for classification.

· General Notes – Covering over 500 pages, the General Notes provide instructions on special duty programs, free trade agreements, duty rates and other information necessary for proper classification and calculation of duties. The first three General Notes are the most likely sources of Exam questions; however, you should be familiar with the topics covered by all of the notes.

· Section and Chapter Notes - The Sections and Chapters contain notes that appear at the beginning of each. Since these notes provide lists of goods specifically included or excluded from a particular section, chapter, heading or subheading and contain definitions of certain terms, it is important to read these notes when classifying imported products.

· Classification Tables - The Section and Chapter Notes are followed by pages of tariff numbers along with descriptions of the products, duty rates and any special rates associated with the tariff numbers. They also contain footnotes and quota code information that can be pertinent in classification questions.

2. Familiarize yourself with the arrangement of the HTSUS.

In the HTSUS, goods are logically arranged so they appear in headings beginning with the most basic substance, and ending with more advanced manufactured goods. This progression is found within the chapters and in the sections.

Section 11 is a good example of the progression. As indicated by the title, this section contains listings for textile and textile Articles. Chapter 50 contains silk threads, yards and fabrics, and Chapter 52 covers cotton threads, yarns and fabrics. Chapters 61, 62 and 63 contain articles that are manufactured from the silk, cotton and other raw materials covered in the previous chapters. Notice how the book progresses from a basic item—in this case silk and cotton—to the products obtained from the basic item.

3. Organize your HTSUS.

Similar to the hints we provided for the CFR, consider using tabs for your copy of the HTSUS. If you are looking for the chapter on cotton and you know that it's in the middle of the book, having a tab with the chapter number and cotton may enable you to locate the exact chapter more quickly. Here are a few suggestions for using tabs.

-Attach tabs to designate each of the 22 Sections, or
-Attach tabs to designate each of the 99 Chapters, or
-Use both Section and Chapter tabs
-Use tabs to mark the GRI and each General Note.
-Consider using different color tabs to designate different sections.

Note: Although you may use the online version of the HTSUS for your daily work, you will be required to use the paper version for the exam. Until the exam is over, try to use the paper version for all of your work and study related to classification. Developing this skill will make it easier for you to locate the correct answer on test day. You can go back to the online version after the exam!

Now that you are familiar with the key components and arrangement of information in the HTSUS, it’s time to learn techniques to answer exam questions. CBE Study Tip 9 will provide suggestions to help you prepare your strategy for answering classification questions on the exam. Stay tuned to Boskage Trade News for more helpful hints on studying for the Customs Broker Exam! Please feel free to add your comments, suggestions for topics you would like to see covered and other useful information to the blog!

Criminals Work Hard On Labor Day Weekend

2010-09-07T11:50:00.003-04:00

While many honest hardworking Americans were enjoying a long three-day holiday, it was the perfect time for criminals to start working. You may have stopped your mail/newspapers, set the timers on the lights in your home and had your car checked out before hitting the road for the last big weekend of summer, but there is probably one thing you forgot to check….. your bank accounts.

What is the crazy Wizard talking about? Why would we need to check our bank accounts before the holiday weekend? Got paid on Friday and have money to spend, what else do we need to know? The short answer – criminals like to work on long weekends when the banks are closed. See where this is going or do you still think the Wizard must have partied too much last weekend? If a criminal gains access to your banking information, they can spend lots of your hard-earned money over a holiday weekend while you are away and the banks are closed. The thieves probably didn’t obtain this information while you were on vacation or even the week before. They may have obtained the information a month or more before the holiday, just waiting until the next time the bank takes a long weekend holiday. Whether using your bankcard information or your checking account numbers, the thieves know that banks will be closed, and people are less likely to check their accounts during the holidays. Another plus for criminals is that many people are paid on Fridays, so it is likely that the targeted accounts contain more funds on a Friday. Then how did the thief obtain your information?

Bank card skimmers are popular for recording bankcard numbers and PINs. Have you visited the ATM or bought gas using your ATM card lately? Check out this video to learn more about skimmers. Check fraud is the other growing method of robbing hard-working Americans of their money. There are numerous ways criminals can obtain your checking account and bank routing number to create new checks.

It was check fraud and unauthorized electronic debits that consumed the first 24 hours of the Wizard’s Labor Day Weekend. The Wizard reviews bank accounts online at least once a week. Last week the Wizard checked late Thursday night to verify a deposit had been made. All was well. The Wizard checked again for another deposit a little after 9 pm on Friday night and was shocked to find a lower than expected balance. Upon close inspection, the Wizard discovered that two very large purchases had been made at WalMart. Who spends over $1400 at WalMart? Not the Wizard! Of course, it was holiday weekend and the customer service department at the bank was closed for the day. How much more money was this thief going to take before the account could be closed? After talking to a helpful bank employee working late in another department, we started the ball rolling. If theft wasn’t bad enough, now the Wizard and the bank manager had to expend time canceling old accounts and setting up new ones. Not only is money being taken, which is a felony, but these crimes utilize a lot investigatory hours by fraud investigators from banks and the local law enforcement officers.

Next on the list was filing a report with the police department. These criminals almost always leave a paper trail, so the police detectives are on the case now. Fortunately, a branch of the bank was open on Saturday morning, and we were able to shut the accounts down, but not before “he” cashed two more checks. I say “he” because we were able to view the canceled checks. The checks contained the name, address and driver’s license number of a person who is NOT the Wizard, but the account and bank routing number belonged to the Wizard’s checking account. The interesting thing was that the check was imprinted with the name of a bank, but the bank shown not where the Wizard banks. Now, we have check fraud and unauthorized ACH debit cases open for the bank’s investigators to dig into. To further complicate matters, these crimes are considered felonies. The good news is the thief might do a little time. The bad news is the person will be less likely to find a job to become a productive citizen with a felony record, even if he really wanted give up his life of crime. Would your company hire someone with a felony record involving theft of funds? If you aren’t sure, customs brokers should check 19 CFR 111.53(e) and importers should review some of their C-TPAT guidelines. So, what will the criminal do to earn a living once convicted of a felony involving theft of funds?

The Wizard hopes you’ve enjoyed the long weekend. Just remember, check your accounts before and after a three-day weekend. Even though you are not working and banks aren’t open, the criminals are working hard to separate you from your hard-earned money.

What's New in Counterfeit Imports?

2010-09-03T14:43:00.004-04:00

When people mention counterfeit goods, items such as Rolex watches, Gucci handbags, Nike apparel, CDs and other software come to mind. So, what is the latest trend in counterfeiting? Exercise Equipment. Why would someone want to counterfeit exercise equipment? How would a purchaser or user know the equipment was counterfeit? CBP states that counterfeit equipment may be manufactured overseas using inferior design and construction, and may contain substandard components, which could lead to pulled muscles and various other injuries. Counterfeited fitness products range from DVDs, to gym equipment and some of the products seen on infomercials. CBP notes that the AB Circle, Bowflex and P90X are the most frequent target for infringement.

In fiscal year 2009, CBP made 26 seizures related to counterfeit exercise equipment with a domestic value of approximately 834,000. In just the first five months of FY2010, CBP made 57 seizures with a domestic value of over $2 million. CBP indicates that counterfeit goods are commonly sold on eBay and Craigslist CBP encourages consumers to take a close look before purchasing or using exercise equipment and provided the following helpful hints.

· Consider the method of sale –check the manufacturer’s website for authorized retail outlets and/or websites. New equipment sold on eBay or Craigslist at a price significantly lower than the MSRP may raise a red flag.

· Look for a warranty – most reputable manufacturers provide warranties.

· Inspect the packaging – most genuine fitness products include nutritional guides and instructional manuals. Counterfeited goods may be missing instruction manuals or the manuals are poorly written.

You can find information about various products registered for protection by CBP by searching the Intellectual Property Rights Search (IPRS) database. For example, typing in “fitness” in the keyword block yields 71 results. For additional information about protection of intellectual property and trends in counterfeit goods, check out the following resources.

Stopfakes.gov

CBP – Intellectual Property Rights

Source:
Lynn Hollinger. (2010). Dangerous New Trend in Counterfeit Imports: Inferior, Dangerous Fitness Equipment. Frontline , pp. 13-14.

Export Reforms Update

2010-09-01T12:32:00.003-04:00

Realizing that the current export control systems were not effective or efficient, the government has taken action to create a better system. In April, Defense Secretary Gates unveiled the plans to simply the export process by consolidating export functions. These changes included combining the CCL and USML, creating a single licensing agency to have jurisdiction over defense and dual-use items, creating a single agency to enforce export controls and implementing a new information technology system.

In Washington, D.C. this week, the Bureau of Industry & Security is holding a conference – Update 2010 Export Controls in Transition. It should be no surprise to see export reform as a key topic for this conference.

President Obama presented opening remarks concerning export reform via video. Similar to the information presented in April, the President reiterated the commitment to a single control list, a single set of licensing policies and a single information technology system. Although much of the reform requires new statutory authority approval by Congress, work is underway to put these processes in place. Slightly different from the initial announcement of a single agency to enforce export controls, the President announced the creation of the Export Enforcement Coordination Center to coordinate and strengthen enforcement activities and eliminate gaps and duplication between the relevant agencies. This leaves the question, will there be one enforcement agency or multiple enforcement agencies operating under the new EECC? From the comments in April, it sounded like one agency, but the use of the "coordination" language may mean something different is in store.

Commerce Secretary Gary Locke focused on the benefits of the new system, such as placing more focus on the high-risk dual-use technologies posing the highest risk to the U.S. and less scrutiny on an expanded list of items that carry little or no risk. Locke noted that reforming the licensing system will free up resources, such as enforcement agents who can focus on the on interdicting the high-risk exports. The main goal of the new initiative is to allow U.S. companies to be more competitive by reducing some of the time consuming government processes while allowing the government to focus on enforcement to keep America safe.

Stay tuned for more information on the progress of export reform!

CBE Study Tip 7: How to Read the CBP Regulations

2010-08-31T08:30:00.001-04:00

From the time we were children, most of us were taught to read a book from the beginning to the end or cover-to-cover, starting with the first page. When reading Title 19 of the Code of Federal Regulations “CBP Regulations” for the Customs Brokers Exam, you should break that rule. Yes, we really did suggest that you should not read the regulations from the beginning to the end, but that doesn’t mean that you shouldn’t read the entire book. The material contained in the regulations is very technical and often quite boring; therefore, it is not the kind of book you can read from cover-to-cover in a short time.

If you think this idea sounds crazy, pick up the book and read 19 CFR 4, containing approximately 45 pages. Only three questions from Part 4 have appeared on the last ten exams; that’s three questions in a total of 800 questions, which is less than 1% of the questions. This means you’ve just spent valuable time reading material that won’t likely be tested. On the other hand, 19 CFR 111, “Part 111” is one of the most frequently tested sections and it contains 15 pages. There have been 52 questions from Part 111 on the last ten exams which means approximately 6.5% of the questions on each exam come from Part 111. Not only will you be reading information that is important for the test, but also Part 111 provides requirements for customs brokers. Understanding the requirements for customs brokers is important for passing the exam and for persons who want to be brokers.

The CBP Regulations book is lengthy and often difficult to read and understand; however, it is important for importers, brokers, and other parties involved in international trade to have a good understanding of this book. There are numerous reasons for reading, understanding and applying the regulations. For purposes of the exam, knowledge of the regulations reduces time spent looking for answers on exam day. CBP employees and other members of the trade community might tell you that all of the sections are equally important. This is true, but for the purposes of the exam, some sections are not as significant because they are not as heavily tested.

The key to reading the regulations is to match your reading schedule with your study plan. In most situations, this means reading the sections that are most heavily tested first and saving the sections that are rarely tested for later. For example, Week 1 of your plan may require you to read Part 111- Brokers, Part 141 – Entry of Merchandise and Part 142 - Entry Process. These three parts are included in the top five sections that have been tested on the last ten exams and make up about 13% of the total questions on each exam.

Another strategy might be to read sections that are related to each other by a common theme. For example, Parts 18, 114, 127, 132, 143, 144 and 146 contain information about types of entries and alternatives to entry. There are various strategies for reading the regulations. Use what works best for your study plan, but use your time wisely and avoid reading the book from cover-to-cover.

We would like to offer some other suggestions related to reading the regulations. First, use "tabs" to mark each part of the regulations. Colored tabs can be used to indicate more important or frequently used parts. Using tabs also makes certain parts easier to find which can be a time saver during the exam. Second, highlight important facts, which can be used later for making outlines, flash cards or other study tools. Third, make notes in the margins to help you remember certain fact or provide examples that might not be included. Fourth, memorize the titles of each part and/or associate that title with something that will remind you of the information contained in that part.

Unfortunately, the regulations haven’t been made into a movie or a song, so there is no substitute for reading them. However, CD’s and MP3s discussing the regulations are available. Pop in the CD and you can study while in the car on the way to work!

We welcome your comments on these suggestions and encourage you to add your own ideas to this forum so that other students studying for the exam can benefit from your experiences.

Check the Boskage Trade News regularly for more helpful hints on studying for the Customs Broker Exam and other useful news for international trade professionals! We will discuss “How to Use the HTSUS” in the next study tip.

Deductive Value Quiz Answer

2010-08-26T23:36:00.002-04:00

In order to complete the deductive value formula, the value of components that are not dutiable must be deducted from the sales price using the list of deductions in Part152.105. The following amounts should be deducted from the merchandise being appraised under the deductive method:

- Any commission usually paid or the addition usually made for profit and general expenses in connection with sales in the U.S. of imported merchandise that is of the same class or kind regardless of the country of exportation.

- The actual costs and associated costs of transportation and insurance incurred with respect to international shipments of the merchandise concerned from the country of exportation to the U.S.

- The usual costs and associated costs for transportation and insurance incurred with respect to shipments of the merchandise concerned from the place of importation to the place of delivery in the U.S.

- The customs duties and other federal taxes currently payable on the merchandise concerned because of its importation.

Note:
Notice the "or" in 152.105? If you have a deductive value situation that has both commissions AND profit and general expenses, which one applies?

The Customs Valuation Encyclopedia summarizes a ruling in the Deductive Value section under Deduction for Usual Profits and General Expenses. It's Ruling 543065 and states that "an importer who elects deductive value as a means of appraisement is only entitled to an adjustment of EITHER the commission OR the addition usually made for profit and general expenses. "

Therefore, the answer to Wednesday's question is D - $10.51

$15.00

- $1.50 - Commission OR $1.50 Profit & General Expenses
- $1.00 Intl Transportation
- $0.85 Domestic Transportation
- $1.14 Duties

$10.51

Deductive Value Quiz

2010-08-25T14:25:00.005-04:00

It has been a slow news week in international trade, so we're going to have a little fun with Part 152 of the CFR. Read and answer the question below. You are welcome to submit answers; however, we won't publish them until Thursday night so that everyone has a chance to work the problem without being tempted to look at the answers that have been submitted. Then on Friday, we will post the answer along with an explanation. Choose wisely; it could be a trick question.

Wilson’s Watermelons, a large fresh foods distributor in Laredo, Texas, imports 400 cartons of watermelons on consignment from a farming operation in Mexico. The watermelons are shipped to Dallas for sale at the Cowboy's Fresh Fruit & Vegetables Market. Once placed for sale at the local market, all of the cartons are sold to unrelated parties within two days. Based on an examination of the merchandise, including identical or similar watermelons, the unit price sold in the greatest aggregate quantity is $15 per carton (300 cartons). The cartons of watermelons are appraised under deductive value. Wilson submits the following cost data per carton.

Commissions $1.50
Profit and General Expenses $1.50
Transportation from Mexico to Laredo $1.00
Transportation from Laredo to Dallas $0.85
Customs Duties $1.14

What is the appraised value?

A.) $9.01
B.) $13.51
C.) $15.00
D.) $10.51
E.) $11.51

CBE Study Tip 6: Taking Previous Exams

2010-08-24T07:50:00.003-04:00

Taking past exams is an important part of any study plan. Persons studying for the Customs Broker Exam have an advantage because past exams are available for students to review. The exams provide information about the types of questions and format of the test. So, now that you have discovered this gold mine of information, what should you do with it?

1. Familiarize yourself with the test format.
It is not necessary to sit down and take a complete test of 80 questions the first time you review the exam. Take time to read a few questions and become familiar with the way the questions are constructed. Practice looking up answers in the HTSUS and Regulations. Watch out for questions containing the words “NOT”, “MAXIMUM”, “EXCEPT” and other words that appear in all capital letters and bold text. Pay close attention to the terminology. Some questions may contain answer options that appear to be the same, such as 10 working days and 10 calendar days. Don’t get in a hurry and select the first answer that contains “10” in it.

Example:
Imported merchandise must be entered within _________ days after landing from the vessel, aircraft or vehicle.

A. 10 calendar days
B. 10 working days
C. 15 calendar days
D. 15 working days

The correct answer is C. Part 142.2(a)

2. Take practice exams in a simulated test environment.
Do your best to recreate the actual test-taking environment and conditions. Find a quiet location to take the test without distraction and threat of interruption. Use only the written reference materials and notes allowed on the exam. Do not use any electronic device other than a battery-operated calculator. Allocate four hours for taking the entire test or two hours if taking half of the exam. The exam contains 80 questions and the time allotted is four hours, which averages out to three minutes per question. You may take less time on some questions and more on others, but it will be impossible to finish the test if you spend 10 minutes on each question.

3. Review your results.
In addition to preparing you for the test format and testing conditions, taking practice tests as part of your study plan builds confidence and allows you to find areas that need more concentrated study. Compare your answers with the answer sheet. Review the questions you answered incorrectly and keep track of the sections of the regulations and HTSUS the correct answer comes from. If you find most of your incorrect answers come from the HTSUS, then devote more time to studying the HTSUS lessons and answering classification questions. If you find that you missed more answers from Part 152 on valuation, then spend more time studying valuation and answering valuation questions. Devoting extra time studying the topics related to the questions missed on the practice exam is a great way to improve your score on the next practice exam and the real exam.

4. Highlight all answers in the CBP Regulations.
As you review the exam questions answered, highlight the correct answers in your copy of the regulations. This will reinforce your knowledge of the regulations, and the highlighted information tends to stand out on the page when you are looking for it. Even though the questions for each exam may be worded differently, the answers will still be found in the same texts. The last twelve exams contained 42 questions from Part 24. Fifteen of those 42 questions came from 19 CFR 24.23. Seven of the 42 questions came from 24.1 and five came from 24.5. By marking the answers in those three sections, you reinforce the information in your mind, and you will be more likely to spot the answer quickly when looking for it on the actual exam.

5. Answer test questions as a regular part of study.In addition to taking practice tests, set aside some study time once or twice a week to answer questions from other exams that you are not using for the simulated practice. Since each question is allotted an average of three minutes, you could plan to spend 30 minutes answering 10 questions from an older exam. You could do this exercise four times a week and have completed half of one exam in a week. Alternatively, you could allot one hour and answer 20 questions at a time. If you did this four times a week, you would have completed an entire exam. This exercise will give you practice managing time. Additionally you will gain familiarity with the question, answer formats and increase your knowledge of the materials.

Note:
When taking old exams, be alert for possible inconsistencies in the answer selections. Tariff numbers and duty rates have changed over the years. A tariff number that was listed as a possible answer on the October 2005 Exam may not be valid in 2010. When calculating the duty rates to determine an answer, you may find a slight variance because of the reduction in duty over the years. With the addition of new free trade agreements, duties have been reduced and eliminated for certain countries.

We welcome your comments on these suggestions and encourage you to add your own ideas to this forum so that other students studying for the exam can benefit from your experiences.

I'm Gonna Tell!

2010-08-19T20:38:00.004-04:00

Remember the old phrase you yelled at your siblings when one of them did something they weren’t supposed to do? I’m telling! Was there a benefit from telling Mom and Dad about the indiscretions of your sibling or were you stuck with the title of tattletale?

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new legislation protects whistleblowers who report violations of the securities laws to the SEC. The whistleblower could receive 10% to 30% of the total amount of monetary penalties collected in sanctions that exceed $1,000,000. Why is this important? The new legislation expands the coverage to include violations of the Foreign Corrupt Practices Act.

With increased enforcement actions, the recent trend of imposing higher fines and the poor economy, the financial incentive could draw out more whistleblowers. From this pool, we might find some who are interested in doing the right thing, some who are only in it for the money and a few disgruntled people who want to get even with former employers.

Let’s take a look at some potential awards. A recovery for the lowest penalty of $1,000,000 would result in a payment to the whistleblower of $100,000 to $300,000. On the other end of the spectrum, we find the largest FCPA penalty of $800 million imposed in 2008. If an individual had been responsible for reporting that violation, he or she might have received $80,000,000 to $240,000,000. Would a payment of $100,000 be worth becoming a whistleblower? How about $80,000,000? Your parents may not have given you anything for tattling on your siblings, but the federal government appears to be willing to provide some rewards for tattletales.

The Dodd-Frank legislation is one of many federal statutes that have been passed to protect whistleblowers for reporting various types of violations such as those related to the environment and employment laws. Click HERE for a list of whistleblower protections.

CBE Study Tip 5: Time Management

2010-08-17T13:00:00.000-04:00

Now that your study materials and workspace are organized, it is time to discuss time management. Students often feel overwhelmed by the amount of information to be learned in order to pass the exam. Some people feel like they do not have enough time to do all they want to do, so finding additional time to study for the Customs Broker Exam seems like an impossible task.

Have you ever noticed how some people seem to have a natural ability to get things done without appearing stressed out, while others are often late in completing tasks and appear to be rushed all of the time? Have you ever thought that certain people accomplish more because they don’t have to work full time, or they don’t have children or they have more money? Even if those reasons were true, it doesn’t change the fact that everyone has the same amount of time each day. The difference is in how you choose to use your time. Time cannot be bought or saved. Once time is gone, you cannot get it back. Your ability to pass the exam as well as accomplish other goals begins with how you manage your time.

What are some of the causes of time management problems? Three of the most important causes of problems related to time management are procrastination, poor planning and wasting time.

Procrastination is a tendency to avoid a harder or less pleasant task in favor of doing an easier one. Procrastination often results in added stress due to missed deadlines or last minute preparation to meet a deadline. No one needs or wants additional stress, and stress is not good for our health. Visualize what will happen if you procrastinate by putting off studying for the exam. Do you see success or failure? Procrastination is not an option when you visualize success!

Poor planning is another culprit that sabotages achieving success. You must prioritize and create schedules to accomplish the tasks necessary to accomplish your goals. Once you make up your mind to take the exam, you must create a study plan and make it a priority. Of course, most aspiring brokers have full time jobs and personal obligations; however, by creating a plan and schedule that allots specific time for study, you can ensure success by following that schedule. You can’t expect to pass the exam unless you make the effort.

Wasting time is one of the biggest problems exam students face. When too much time is spent doing things that are unproductive, you rob yourself of valuable time that could be spent studying for the exam. It may not be the activity itself that is unproductive, but the amount of time spent doing the activity that creates the problem. If you like watching television, watching one favorite show is not unproductive because it provides relaxation and a sense of well-being. However, watching several hours of television to avoid studying is unproductive. Playing a game on the computer for 15 minutes is not necessarily unproductive because it provides a break from the routine that gives your mind a rest. However, playing computer games for hours robs you of time that could have been spent studying.

What can you do to improve time management in order to pass the Customs Broker’s Exam?

The tools and methods adopted to manage time wisely will largely depend on the amount of individual’s experience with issues covered on the exam, learning styles, ability to grasp and retain new information, work schedule and other personal issues. We have provided a few suggestions below. At the end of this article, you can comment on these and provide some ideas of your own.

• Create a Calendar
Your calendar should allocate time for work, study, exercise, meals, family and personal time. Set a regular time for study. You may want to check off the items completed each day and keep track of time spent on each task.

• Identify Priorities
Prioritize tasks and create a “To Do” List. Complete the most important tasks first. If not all tasks are completed, putting off the least unimportant task isn't procrastination, it's probably good prioritization.

• Learn to Say “NO”
Explain to people that you must study to pass the test and you will be available in a few weeks. Six to eight weeks of intense study is a small commitment of time when you think about the rewards of passing the exam and the amount of free time you will have when you no longer need to study.

• Make Time for Family
Set aside special time for family each week. Remember, quality over quantity. Your family will appreciate the time you spend with them and be more understanding of your need to study when you devote special time for them.

• Set Aside Time for Exercise
Regular exercise reduces stress and promotes good health. Exercise can provide a welcome break from your studies by giving your mind a chance to relax and think of something else. Your choice of exercise can be anything from gardening or walking around the block to a game of softball or a workout at the gym.

• Make Good Use of Unproductive Time

1. Waiting
At one time or another, you will find yourself waiting for something. The wait may be anywhere, from the doctor’s office or at an airport to an unanticipated event, such as a traffic jam. Anticipate circumstances that are likely to create unavoidable delays and be sure to have your notes handy. You can make great use of that time to study. Instead of being upset because you were stuck in the airport for two hours because your plane was late, you can be excited that you were able to devote two more hours to your studies.

2. Commute
Whether it’s by train or car, most people have some type of commute to work. Use the commute time to listen to the audio lectures on CD. Turn that hour spent in a traffic jam into productive study time.

3. Lunch
Do you really need an hour to eat lunch? Consider devoting a portion of your lunch breaks each to study. Eat lunch, then read or eat and read at the same time. Treat yourself to a nice lunch out at the end of the week.

• Reward Yourself
Set daily, weekly and monthly goals. When you have achieved a goal, reward yourself. It may be as small as allowing yourself 30 minutes of television or spending 30 minutes playing a video game to something more significant such as a vacation after receiving news you passed the exam.

We welcome your comments on these suggestions and encourage you to add your own ideas to this forum so that other students studying for the exam can benefit from your experiences.

Check the Boskage Trade News regularly for more helpful hints on studying for the Customs Broker Exam and other useful news for international trade professionals! We will explore “Using Previous Exams” in the next study tip.

Missing In Action: 19 CFR 163 Appendix

2010-08-16T16:27:00.000-04:00

Last week, one of my colleagues asked where she could find a good copy of the list of required documents for recordkeeping. My first thought was to send her to the Appendix to 19 CFR 163, containing the (a)(1)(A) List. Trying to be helpful, I decided to send the link to a document that was nicely formatted for printing purposes. I clicked the CFR bookmark on my computer and was pleased to see the April 2010 version available. A PDF document containing only the list of documents would be preferable for her intended use, but I could not remember whether it was the TXT or PDF document that contained that information. Clicking on the preferred PDF file, I was surprised to see information for foreign trade zones . I must have mixed up my numbers and clicked on the wrong section of the regulations. Going back to the list, I clicked on Part 163 again and then on the TXT document for the Appendix. Again, I found information for Part 146 Subpart H of Title 19. I guess Part 163 Appendix containing the (a)(1)(A) List is missing in action or perhaps taking a vacation from the 2010 version of the regulations. Fortunately, I was go back to the 2009 version and send the link to the (a)(1) (A) List.

So, if you are looking for the (a)(1)(A) list in the 2010 version of Part 163 via GPO Access, don’t be surprised if you find foreign trade zone information. It appears to be a minor error in linking documents, so the (a)(1)(A) List should be back home where it belongs very soon!

CBP Trade Outreach Webinars

2010-08-13T13:32:00.007-04:00

In an effort to provide timely information to the trade community, CBP periodically offers free webinars on a variety of trade topics. The trade can attend the live webinar or view the recorded versions over the Internet. Space is limited for the live webinars, so register early. Participants in the live webinar will be invited to submit questions to the chat area. The following webinars are currently available for viewing via the Internet. In addition to the webinar recording, CBP also provides the presentation copies in a separate PowerPoint or pdf document.

ISF/”10+2 Webinar for Small to Medium-Sized Companies

Objective: Help importers understand the importance of ISF
Recorded: Tuesday, June 29, 2010

CBP Outbound Issues

Objective: Provide information about CBP’s role in the export process, along with outbound procedures and regulations
Recorded: Thursday, June 10, 2010

CPSC Notices of Detention
Objective: Presentation of the new CBSC Import Safety Detention Policy

Recorded: Wednesday, June 2, 2010

Check the CBP website for opportunities to attend upcoming live webinars as well as new postings of completed webinars.

U.S. Importer Hung Up On Hangars

2010-08-11T09:00:00.001-04:00

It’s unusual to read about importers getting caught doing bad things, but recently, a U.S. importer of steel wire garment hangers was arrested and charged with fraud, smuggling and other charges related to the importation of the hangers.

Arturo Huizar-Velazquez and Jesus de La Torre-Escobara allegedly imported Chinese-made hangers to the U.S. via a third country, claiming the third country as the country of origin to avoid payment of dumping duties imposed on hangers manufactured in China. If convicted, Huizar-Velazquez and de La Torre-Escobar face maximum prison terms of five to 20 years per count, various fines and the payment of any applicable dumping duties.

Senators Ron Wyden (D-Ore.) and Olympia Snowe (R-Maine) introduced S.3725 to reduce the evasion of U.S. import duties by certain importers. The Enforcing Orders & Reducing Circumvention & Evasion (ENFORCE) Act of 2010 will provide the International Trade Commission (ITC) and U.S. Customs & Border Protection (CBP) additional resources to combat schemes to avoid payment of dumping duties. The act will facilitate more cooperation and information sharing between Customs and the ITC and create a faster response timeline for investigation of alleged violations. The ENFORCE Act would give the U.S. government 60 days, after an allegation of evasion is presented, to determine whether there is a reasonable basis to believe an importer is attempting to evade an AD/CVD order. If an affirmative preliminary determination is made, the ENFORCE Act would require collection of AD/CVD duties in cash until the investigation is concluded.

CBE Study Tip 4: Organization

2010-08-10T09:00:00.002-04:00

Now that you have made the decision to take the October 2010 Customs Broker Exam, it’s
important to develop a study plan that guarantees your chances of success.

Some people are naturally good at organization; everything has a neat orderly place. Have you ever noticed your colleague’s desk or your neighbor’s garage? All of the books are stacked on bookshelves. Papers are filed away or neatly stacked. The tools are hung on a pegboard and two cars actually fit into the garage. On the other hand, you wonder how another colleague can find anything since his or her desk is covered with so many papers, books and other junk that you can’t even see a desk. The neighbor’s two-car garage won’t even hold a bicycle, let alone one car! Organization is another step on your journey to pass the CBE.

What is organization, why is it important and what can you do to become organized for the exam?

What is organization?
Organization is the systematic arrangement or assembly of objects in an orderly manner.

Why is organization important?
For the purposes of the studying for the exam, organizing your materials helps improve time management and increases your comprehension and memory. If your materials are organized, you will not waste time looking for a book or document that you need later on. Obtaining and organizing all of your materials will allow you to easily access information as you need it. This organization will save time on the day of the test.

What can you do to become organized for the exam?

1. Organize Required Materials - You will want to be able to access your materials quickly during the exam. Organizing the CBP Regulations and the HTSUS is easy, because they can be placed in binders so that you have two rather large books instead of a huge pile of loose paper. What remains are the stack of directives and the other supplementary documents required for the exam. If you haven’t purchased these materials already bound, then you may consider placing them together in a separate binder. You can include additional materials to that third binder later. It will be much easier to find information relating to the supplemental materials if they are placed together in one binder instead of having to shuffle through all of those documents stacked in a pile. In addition, placing those documents in a binder reduces the risk of one of them getting lost.

2. Label Required Materials – Consider using tabs to identify the chapters of the HTSUS. If you are looking for Chapter 61 and know that it's in the middle of the book, having a tab with the chapter number listed may help you to locate the exact chapter faster. Time is very important on the exam. We also suggest that you use tabs to mark each part of the regulations. Colored tabs can be used to indicate more important or frequently tested parts. Tabbing also makes certain parts easier to find and will save you time. Finally, you should consider using tabs on the supplemental materials you placed in the binder. As you add notes and other materials to the third binder, you will want to organize your notes so that you can easily locate them. Organizing your materials not only saves time, but it can also increase your comprehension and memory of large amounts of information.

Note: Even though you may use electronic versions of the HTSUS and CFR in your business, you must use the paper versions for the exam. It is a good idea to study using the paper versions to get used to looking up the information the same way you will on exam day.

3. Arrange Your Study Area – Remember the example of the colleague with the desk that looked like a disaster area? If that example sounds like your desk or study area, now is the time to clean it up. Don’t waste valuable study time digging through piles of paper. Get rid of the clutter in your study area and your office. If you have a desk or designated study area at home, create a special place for your study materials. If you study at the office, create a special place for your materials there also. If possible, create a study area that is comfortable and attractive. A bright cheery comfortable atmosphere will be more inviting for study than the dreaded cold gray metal desk with the uncomfortable wooden chair. Don’t get too comfortable; studying in the bed may result in sleep instead of productive study time.

4. Create a Study Schedule - Your schedule will depend on your experience and learning style. Someone who is new to importing may need to devote more time than someone who has more experience. Some students may need study that is more individual while others may prefer some group or interactive activities. Regardless of your preferences, you will be required to do a great deal of reading. Some people require more structure so reading, tests and other assignments are provided on a regular basis. Others may prefer to create schedules that suit their schedules. Just remember that it is important to allow plenty of time for reading and taking practice tests. If you work full time and wait until two weeks before the exam to start reading the regulations, you may find yourself burned out and struggling on exam day. We’ve provided a few examples that may help you when creating your schedule:

• Consider how many weeks you plan to devote to study. If you have 16 weeks to study, then you will not need to read as much each week; however, if you only have eight weeks to study, you will need to read a little more each week.

• Divide the reading into manageable sections. You may consider reading similar sections together. For example, you might want to read and study the requirements for brokers and entry in one week. This would include Parts 111, 141 and 142. You may want to devote another week to the various types of entries and alternatives to entries.

• Determine how many practice tests you want to take and designate dates and times to take them. Students should take at least one complete 4-hour test and are encouraged to take more than one.

Now that you have placed the required exam materials in binders with tabs, arranged your study space and created a schedule, you are ready to begin your studies.

We welcome your comments on each of these articles. Share what has worked for you or what hasn’t worked so that others will benefit from your experiences.

Check the Boskage Trade News regularly for more helpful hints on studying for the Customs Broker Exam and other useful news for international trade professionals! We will explore “Time Management” in the next study tip.

IPR - Product Identification Guides

2010-08-05T09:45:00.000-04:00

Trademark and copyright holders that have created product identification guidelines can submit them to CBP electronically instead of providing hard copies to each port. The new electronic capabilities allow CBP to disseminate the information to all CBP personnel in a more efficient timely manner. Note that only the property rights that have been registered with CBP may be included in the guidelines.

The training guides provide an effective tool to assist CBP personnel in identifying counterfeit and piratical goods. CBP posted instructions on what to include in the product identification guides. The primary topics include

· Company Information
· Registration and Recordation Information
· Product Information
· Product Manufacture and Distribution
· Violation Information

The guide should contain photos that demonstrate the differences between legitimate articles and counterfeit articles. Product catalogs and links to web sites that provide pictures should also be included. CBP suggests that the guides be dated and updated for significant events such as additions for new registrations, changes in contracts or products, etc. The information contained in the training guides will be kept confidential. The guides are required to contain a disclosure provided by CBP on the inside front cover. Click HERE to view the detailed information about information CBP requires for the product identification guides.

CBE Study Tip 3: Using Looseleaf and Bound HTSUS and Regulations

2010-08-03T08:00:00.000-04:00

Let’s face it; the materials necessary to study for the Customs Broker Exam are burdensome. Who wants to carry around a bunch of big heavy books? While it’s possible to use online versions while studying, we don’t recommend that you make a habit of this practice. Why? Because you cannot use the online version of the Regulations or HTSUS on the day of the exam. You will also want to make notes in your materials and highlight key words, phrases and sections. Use the online versions after you’ve passed the exam or when you need a quick answer to a client question and you have the online version readily available.

Now that we’ve determined that printed versions are best, what are the options? There are three primary options, looseleaf, paperback (perfect binding) and coil bound.

Looseleaf
The looseleaf version is bulky; however, it can be easily updated when supplements are issued quarterly for the Regulations and in summer for the HTSUS. The print is larger than other versions, making it easier to read. There is also more room for making legible notes in the margin. If you use the looseleaf version, make sure you purchase a good quality binder so the pages turn easily and do not fall out of the binder.

Looseleaf editions can also be used in a publication rack, which allows them to sit open on a desk. The pages tend to turn more easily with a publication rack, and the disadvantage of bulkiness is essentially negated. This makes publication racks a popular choice for exam day.

Paperback/Perfect Binding
The Regulations produced using perfect binding resemble smaller paperback versions of the loose-leaf version (The paperback HTSUS is the same size as the looseleaf). The cover is made from heavier paper and is glued together at the spine with strong flexible glue. These books are lighter and slightly less expensive than the loose-leaf versions; however, they cannot be updated. If you are going to use the book regularly and make notes in the book, these might not be the best options. However, if you are looking for a book that is easy to carry for quick reference, then the paperback edition would be an excellent choice.

Coil Bound
Coil binding is commonly used for publications that are frequently opened so that the pages lie flat or back-to-back. Generally, binding is accomplished by punching holes along the entire length of the spine of the page and winding a wire through the holes to provide a fully flexible hinge at the spine. Coil bound versions are smaller and lighter weight than

their looseleaf counterparts are (they are the same size as the perfect-bound). Coil binding is similar to looseleaf; however, the pages cannot be removed and they cannot be updated.

For persons taking the exam, we suggest that you consider the looseleaf book or a coil bound version. Both books are sturdy, and the primary differences relate to the ability to update the looseleaf version versus the ease of carrying the coil bound version.

Trade News Update

2010-07-29T14:36:00.008-04:00

FTA Tug-of-War

Introduced in April 2009, H.R. 1875 establishes an Emergency Commission to End the Trade Deficit. Concern about the impact of the growing trade deficit, the commission will examine establishment, administration and the impact of trade policies. The commission is charged with developing a trade policy to eliminate the U.S. merchandise trade deficit by January 1, 2019 and developing a competitive trade policy for the 21st century. The Commission must submit the plan no later than 16 months after the enactment of the Act. As part of this Act, The President is prohibited from submitting any free trade agreement or legislation implementing a free trade agreement to Congress until the Commission’s report has been delivered to Congress and the President. The House passed this bill on July 28, 2010.

On July 27, 2010, H.R. 1562 was introduced and requests the immediate implementation of the U.S. Columbia Trade Promotion Agreement, U.S. Panama FTA and the U.S. Korea FTA.

So, will the pending FTAs be implemented before HR 1875 puts them on hold?

Watch CBP on COPS - July 31st

The U.S. Customs and Border Protection will be featured on the Fox network television show COPS at 8:00 p.m. ET on Saturday, July 31.

Saturday’s episode, Protecting Borders and Stopping Crime show officers from San Ysidro Customs and Border Protection in California engaging in a sting operation to catch undocumented aliens coming into the U.S. Later, the officers halt a suspicious vehicle crossing the border, which eventually leads them to a major drug bust.

TSA: Certified Cargo Screening Program

Tick Tock! On August 1, 2010, the Transportation Security Administration (TSA) Certified Cargo Screening Program (CCSP) will require that 100% of all cargo shipped on passenger aircraft to be scanned before it can fly.

In 2007, Congress passed the Implementing Recommendations of the 9/11 Commission Act more commonly known as the 9/11 Act. The new law mandated that all cargo transported on a passenger aircraft be screened for explosives by August 1, 2010.

All cargo requires screening at the piece level. Skids and pallets must also be screened. To reduce the anticipated delays and costs at airline facilities, the TSA allows for screening at approved Certified Cargo Screening Facilities (CCSFs). You might be thinking that your cargo won’t be affected because it is shipped by an express carrier such as FedEx, UPS or DHL. While the majority of the cargo these companies handle may be shipped on cargo planes, they also use passenger aircraft. You should expect delays. Think about the lines and inspection process when you go through security at the airport and then picture the screening of every individual package. Check with your broker/freight forwarder for more information about your options for screening.

Click HERE to learn more about CCSP.

CBE Study Tip 2: Study Aids

2010-07-27T08:54:00.004-04:00

In our first study tip, we discussed the importance of obtaining all of the required resources that are necessary to take the exam. This study tip focuses on the various study aids and materials available to help you prepare for the exam.

The percentage of people who pass the Customs Broker Exam the first time is low, ranging from 3% to 25%. While it is possible to pass the Customs Broker Exam using only the required exam materials, most people find using a variety a supplemental materials and exam study courses significantly increases their potential of passing the exam. The use of additional study materials also improves comprehension and makes better use of limited study time.

Some people learn better by actually doing a task, while others need to read the instructions or hear the instructions. Determining your style of learning and how you learn the best is the key to studying for the exam. If you do not have time to go to lectures, you may prefer correspondence or online courses. If you comprehend better by hearing the information, you may prefer audio lectures or classroom instruction. You should seriously consider the time you have to commit to studying and your learning style when selecting study courses and training materials. We have listed just a few options for using supplemental study aids and courses here.

1. Past Exams
Taking the past exams is a good way to become familiar with the format and types of questions that appear on the test. Using past exams as a study aid also helps you learn the materials, boosts confidence, shows your progress, as well as areas that need improvement. Although not a frequent occurrence, almost all of the questions on the October 2009 came from the collection of previous exams.

2. DVD's, CD's & MP3’s
If you want the convenience of learning at your own pace, DVD's CD's and MP3’s allow you to study from the comfort of your home or office and may be reviewed as often as you like. CD's and MP3’s provide audio which is great for listening to during your daily commute or walk around the block. The DVD's usually simulate a classroom environment, but the advantage is that you can view the lectures at your convenience rather than commute to a class.

3. Online Study Courses
For students who want the convenience of studying at their own pace, online courses provide instruction, examples, quizzes and other tools that are usually available 24/7 anywhere you have an Internet connection.

Boskage Commerce Publications offers a variety of courses, study plans and other materials designed to fit different learning styles, experience levels and needs of students. Click HERE to view a variety of materials and courses. Consider your learning style as you review each of these options. We sincerely believe you will find that one or a combination of several can fit your needs perfectly; however, we may be able to customize plans to fit your needs. Be sure to check out the Customs Broker Exam Room Guide, a perfect resource for regular study and use on test day. This coil bound book contains all CATAIR sections, Directives and miscellaneous resources that will be tested on the upcoming exam. The Guide also includes quick-reference fact sheets such as Incoterms, trade program indicators, types of appraisement, acronyms, CBP fees and more.

Stay tuned to the Boskage Trade News for more helpful hints on studying for the Customs Broker Exam! The next article will provide the pros and cons of using the loose-leaf version of the CBP Regulations. We also welcome any suggestions on topics you would like to see discussed.

CBP Posts New C-TPAT Risk Assessment Information

2010-07-22T08:46:00.005-04:00

U.S. Customs and Border Protection (CBP) recently posted risk assessment information for C-TPAT on its web site. Along with this document, they also posted frequently asked questions (FAQ) related to the supply chain security risk assessment. The Supply Chain Security Specialists have been making comments related to specific risk assessment activities during validation and revalidation reviews.

Click HERE to view the "C-TPAT 5 Step Risk Assessment Process Guide"

Click HERE to view the FAQs.

For organizations that are members of C-TPAT, check the documents section in your secure portal for additional risk assessment documents and information from other workshops conducted earlier this year.

CBE Study Tip 1: Required Resources

2010-07-20T10:52:00.004-04:00

If you plan to take the October exam, it is important develop a study plan that guarantees your chances of success. Boskage wants to help you achieve your goal of passing the exam; therefore, we are starting a series of articles to support you on your journey to success! Our first topic in this series focuses on exam resources.

The first step in your plan should be acquiring the required texts and study materials. These materials come in two categories, “required” and “study aids”. Required materials are those that students must have because questions on the exam have been selected from these sources. CBP lists the required materials in the Notice of Examination. The required materials are listed below and you should obtain them now if do not already have them. All of the required materials can be purchased from Boskage Commerce Publications.

Required Exam Resources

Harmonized Tariff Schedule of the United States (2010 version)
It is important to use this edition since questions often require the determination of the correct HTS number, duty rate and applicability of Free Trade Agreements, all of which may change slightly from year to year.

2.Title 19, Code of Federal Regulations (revised as of April 1, 2009) Parts 0 to140, 141 to 199
Last year, CBP included Parts 200 to End on the Exam; however, it appears that these will not be required for the October 2010 Exam.

Part 149 covering ISF was added to Title 19 in 2009, so the new material would be a great target for this exam.

3. Customs and Trade Automated Interface Requirements (CATAIR)

• Appendix B - Valid Codes
• Appendix D - Metric Conversion
• Appendix E - Valid Entry Numbers
• Appendix G - Common Errors
• Appendix H - Census Warning Messages
• Appendix L - Drawback Errors
• Glossary of Terms

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

5. Submission Changes for Supplemental Information Letters and Post Entry Amendments

6. Remote Location Filing Eligibility Requirements

7. Directives
• 3510-004, Monetary Guidelines for Setting Bond Amounts
• Amendment to 3510-004 for Certain Merchandise Subject to Antidumping/Countervailing Duty Cases
• 3550-055, Instructions for Deriving Manufacturer/Shipper Identification Code
• 3550-067, Entry Summary Acceptance and Rejection Policy
• 3550-079A, Ultimate Consignee at time of Entry or Release
• 3560-001A, Census Interface-Processing Procedures
• 5610-002A, Standard Guidelines for the Input of Names and Addresses Into Automated Commercial System (ACS) Files

Note: The use of any versions of the listed references other than those recommended is at the applicant's own risk.

Seeing this list of resources on paper and as a stack of documents on your desk can seem quite overwhelming. We’ll discuss organization of your materials in an upcoming article. Stay tuned to the Boskage Trade News for more helpful hints on studying for the Customs Broker Exam. The next article will cover the second category of exam resources, the “Exam Study Aids”.

CBP Posts Notice of Exam for October 2010

2010-07-14T11:43:00.005-04:00

U.S. Customs and Border Protection posted a notice to its web site announcing the October 2010 Customs Broker License Exam. The exam will be held at various locations on Monday, October 4, 2010. Contact your local port office to verify testing locations. Applications (CBP 3124E) and the exam fee of $200 must be received on or before Friday, September 3, 2010. Applicants should bring the following reference materials to the exam. Please note the appropriate editions for the HTSUS and CFR.

- Harmonized Tariff Schedule of the United States (2010 version)
It is important to use this edition since questions often require the determination of the correct HTS number, duty rate and applicability of Free Trade Agreements, all of which may change slightly from year to year.

- Title 19, Code of Federal Regulations (revised as of April 1, 2009) Parts 0 to140 and 141 to 199
Last year, CBP included Parts 200 to End on the Exam; however, it appears that these will not be required for the October 2010 Exam.

Part 149 covering ISF was added to Title 19 in 2009, so it is a target for this exam.

- Customs and Trade Automated Interface Requirements (CATAIR)

Appendix B - Valid Codes
Appendix D - Metric Conversion
Appendix E - Valid Entry Numbers
Appendix G - Common Errors
Appendix H - Census Warning Messages
Appendix L - Drawback Errors
Glossary of Terms

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

-Submission Changes for Supplemental Information Letters and Post Entry Amendments

-Remote Location Filing Eligibility Requirements

- Directives

3510-004, Monetary Guidelines for Setting Bond Amounts
Amendment to 3510-004 for Certain Merchandise Subject to Antidumping/Countervailing Duty Cases
3550-055, Instructions for Deriving Manufacturer/Shipper Identification Code
3550-067, Entry Summary Acceptance and Rejection Policy
3550-079A, Ultimate Consignee at time of Entry or Release
3560-001A, Census Interface-Processing Procedures
5610-002A, Standard Guidelines for the Input of Names and Addresses Into Automated Commercial System (ACS) Files

It’s time to get ready for the next Customs Broker Exam! Click HERE for a complete list of the Boskage study plans and products designed to help you study and pass the exam! Remember, there is no substitute for actually reading and studying the required materials. Visit the Boskage Trade News Blog for additional for import/export news updates, articles about specific trade topics and helpful posts related the Customs Broker Exam!

NEW:
The online course with a dedicated instructor and online discussion forum started July 12th. It’s not too late to get started. Click HERE to check it out!

Welcome DAP & DAT!

2010-07-13T11:18:00.002-04:00

After much work by the ICC appointed experts, Incoterms® 2010 is scheduled to be launched in September and go into effect on January 1, 2011. Used in international and domestic contracts for the sale of goods, Incoterms help parties avoid misunderstandings by clearly identifying the obligations of the buyer and seller.

Although the book has not been officially released, a few details have been provided for the public. The 2010 edition will include 11 terms instead of the 13 in the previous edition. We welcome two new terms to the list of 11, DAT and DAP. We say goodbye to DAF, DES, DEQ and DDU. In addition to the 11 rules, Incoterms® 2010 includes:

· Information on security-related responsibilities for shipments.
· Guidance for the use of Incoterms in domestic trade.
· Notes and graphics to assist users in selecting the correct rule for the transaction.
· Information about the use of electronic procedures.

The Incoterms are arranged in two categories as follows:

Any Mode of Transport
CIP - Carriage and Insurance Paid
CPT - Carriage Paid To
DAP - Delivered At Place
DAT - Delivered At Terminal
DDP - Delivered Duty Paid
EXW - Ex Works
FCA - Free Carrier

Sea and Inland Waterway Transport Only
CFR - Cost and Freight
CIF - Cost, Insurance and Freight
FAS - Free Alongside Ship
FOB - Free On Board

Starting in late September 2010, the U.S. Council for International Business will offer a series of one-day seminars to familiarize U.S businesses with the new rules. Classes will be taught by Incoterms expert and appointed member of the revision team, Frank Reynolds. Attendees will receive a copy of the official ICC Incoterms® 2010 book and a companion book, Incoterms® for Americans®, as well as comprehensive seminar notes. Click HERE to view the seminar.

New Trade Agreements on the Horizon

2010-07-06T09:50:00.004-04:00

We take a little break from the discussion of current trade agreements to give you a preview of the various agreements that are currently being considered.

U.S. –Korea Free Trade Agreement

The KORUS FTA was signed by the Republic of Korea and the United States in 2007, but has not been approved by Congress. This agreement would the first U.S. free trade agreement with a North Asian country and could be the catalyst for other agreements in the region. Under the FTA, nearly 95 percent of bilateral trade in consumer and industrial products would become duty free within three years of the date the FTA enters into force, and most remaining tariffs would be eliminated within 10 years.

There are still some issues to be addressed before President Obama will present it to Congress. Some of the concerns involve leveling the playing field for U.S. workers and manufacturers in the automotive and beef industries.

Click HERE to read the final text of the agreement.

U.S. – Colombia Free Trade Agreement

The U.S. –CFTA was signed in 2006 and is also awaiting approval by Congress. The Colombia FTA will immediately eliminate approximately 80% of tariffs on U.S. exports, with all remaining tariffs phased out over ten years. The Colombia FTA also includes important disciplines relating to customs administration and trade facilitation, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, and labor and environmental protection.

This agreement created more concern because of the blatant disregard for human rights and violence against workers in Colombia. The AFL-CIO opposed the agreement until the Colombian government could show sustained improvements in this area. The implementation of this act was delayed in 2008 when it was removed from the ‘Fast Track” timetable. President Obama opposed this agreement during his campaign; however, he met with Colombian President Alvaro Uribe in June 2009 and asked the USTR to work with Colombian representatives to move the agreement forward.

Click HERE to read the final text of the agreement.

Click HERE to read the U.S._CFTA: Economic and Political Implications (April 2010)

Trans-Pacific Partnership

The United States entered negotiations for a regional, Asia-Pacific trade agreement, known as the Trans-Pacific Partnership (TPP) Agreement to create a high standard, broad-based regional trade agreement and expand American exports in the Asia-Pacific region. The first round of negotiations took place from March 15-19 in Melbourne, Australia. The second round took place from June 14-19 in San Francisco, CA. During this meeting, approximately 25 U.S interested parties were represented, including AFL-CIO, FedEx, National Farmers Union and the U.S. Chamber of Commerce. There are currently eight partner countries - Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, the United States, and Vietnam. Negotiations are expected to extend into 2011.

Click HERE to read additional information about the TPP.

Oil Spill Dredges Up The Jones Act

2010-06-30T08:25:00.001-04:00

--UPDATE--

Since this article was originally published, the U.S. accepted 22 offers of assistance from 12 countries. Click HERE for information about the offers.

Many Americans may be wondering why no one has come to help us contain the oil spill. Within a week of the explosion, 13 countries offered assistance from vessels and crews with experience in removing oil spill debris. The State Department acknowledged that it received 21 offers of assistance from 17 countries. However, a 1920 law, the Jones Act, foreign vessels and crew are not permitted in U.S. waters.

The Merchant Marine Act of 1920 (P.L. 66-261) is a federal statute that regulates maritime commerce in U.S. waters and between U.S. ports. Section 27, also known as the Jones Act, requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and containing crews of U.S. citizens and permanent residents. At the time this law was enacted, there was a need to support the U.S. merchant marine industry; however, this law favors labor unions and hinders free trade, especially for agricultural products by increased shipping costs.

So, it’s not that other countries don’t want to help; our laws don’t allow them to help. Last week, Senator John McCain introduced legislation that would repeal the Jones Act. A notable point in his speech was the reference to an ITC study in 2002 that showed repeal of the Jones Act would have an annual positive effect of $656 million. Click HERE to read about some of the benefits McCain highlighted in his speech.

The Administration has the ability to grant a waiver of the Jones Act; however, this has not been done. Therefore, some Senators have put forward legislation to waive the Jones Act during emergency situations such as this one; however, McCain proposes to permanently repeal the Jones Act to avoid situations like this one and saving consumers hundreds of millions of dollars
The Maritime Cabotage Task Force, a lobbying group representing Jones Act carriers, shipyards and dredgers seem to support a waiver. The task force said that if foreign-flag vessels are needed for cleanup within domestic waters, it would not oppose waivers to the Jones Act.

The big question still looms like the oil in the Gulf. Will a waiver or repeal happen in time to provide some relief in the Gulf?

Share your thoughts with us by taking the poll located on the top right corner of the page.

Free Trade Tuesday - DR-CAFTA

2010-06-29T11:59:00.000-04:00

The Dominican Republic – Central America Free Trade Agreement (DR-CAFTA) is a multilateral agreement between the U.S. and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Dominican Republic. The agreement is designed to develop economic relations and encourage trade between the parties through the reduction and elimination of tariffs and other barriers to trade. When launched in 2006, DR-CAFTA immediately eliminated tariffs on more than 80 percent of U.S. exports of consumer and industrial products, phasing out the rest over 10 years. DR-CAFTA does not have an expiration date and all duties should be completely phased out by January 1, 2025. The agreement also eliminates the payment of the 0.21% merchandise processing fee for qualifying articles.

The DR-CAFTA uses a methodology similar to NAFTA, CFTA, and AFTA to determine whether a good qualifies for preferential tariff treatment; however, the responsibility for providing information to substantiate the claim is on the importer. A certificate of origin is not required to be presented in order to obtain benefits, unless requested by CBP. The U.S. Commercial Service maintains a sample form, which is similar to the NAFTA Certificate. Click HERE for some interesting CAFTA trade information on exports to and imports from CAFTA countries.

DR-CAFTA - Key Facts
Expiration: N/A
HTS General Note: GN 29
Imported Directly: No additional production allowed. Must stay under Customs control.
SPI: P
De Minimis:
· 10% - Non Textiles (Value)
· 10% - Textiles (Weight)
· Some Exceptions
Origin Criteria:Tariff Shift, RVC - Build-up/Build-down, Accumulation
MPF: Originating Goods Exempt
Countries: El Salvador, Nicaragua, Honduras, Guatemala, Dominican Republic, Costa Rica, United States
Related Regulations: 19 CFR 10. 581

Who Is Looking At Your Credit Report?

2010-06-28T12:55:00.007-04:00

Most of us realize that when we borrow money, creditors access our credit reports to determine whether to lend us money. But who else looks at our credit and why would they need information about our credit?

First, you should be looking at your credit report at least once a year to check for accuracy, especially with the rise of identity theft. Reviewing your credit report once a year and knowing your rights are some of the most important steps you can take to safeguard your credit and privacy.

Credit reports are a gold mine of information about consumers. They contain Social Security number, date of birth, current and previous addresses, telephone numbers (including unlisted numbers), credit payment status, employment, even legal information. However, they do not medical information. In the case the report is requested by an employer or potential employer, it will not contain information related to age, marital status or race.

The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) allows consumers to request a free copy of their credit report annually from each of the three credit bureaus - Equifax, Experian, and TransUnion. Reports can be ordered online at http://www.annualcreditreport.com/.

So, why are you reading about this in an international trade blog? Good question. There are two reasons – your employer and the government.

The federal Fair Credit Reporting Act (FCRA) and state laws restrict who has access to your sensitive credit information and what uses can be made of it. The following is a list of parties that can access your credit report. Pay close attention to 4, 6 and 8.

1. Parties considering granting you credit.
2. Landlords.
3. Insurance companies.
4. Employers and potential employers (but only with your consent).
5. Companies with which you have a credit account for account monitoring purposes.
6. Those considering your application for a government license or benefit if the agency is required to consider your financial status.
7. A state or local child support enforcement agency.
8. Any government agency (limited usually to your name, address, former addresses, current and former employers).

Let’s take a look at employers first. Some of our readers may be looking for a new job or a promotion with their current employer. Some employers use credit reports to screen applicants as a general indication of an applicant’s financial and personal integrity, while some also review them when considering promotions to sensitive positions. For those of you who are members of C-TPAT, look at your business partner and personnel requirements. In the best practices materials, CBP suggests verification of financial soundness of business partners and background checks including financial history on employees. Therefore, if your employer is a member of C-TPAT, it is likely that they have reviewed your credit report. This should also put you on notice that if you apply for a new job with another company, they may also review your credit report. If you are looking for a job, this is another good reason to review your credit report and correct errors that you may find. Note that employers and potential employers may only check your report if you provide permission. Do you remember reading the small print in one of those documents you signed?

Next, we will look at the government. For those of you who are taking the Customs Broker Exam or are awaiting your license, guess what? CBP wants to review your credit report too! Although not specifically included in the CFR, CBP states that the background investigation includes a review of character references, credit reports and arrest records. This review relates to business integrity, which is specifically referenced in 19 CFR 111.14. Question 15 on the CBP 3124 asks about debt and bankruptcy. While negative information on the credit report might not disqualify you from obtaining your broker’s license, it’s another good reason to check your report and try to fix any inaccurate entries. Notice that the government does not seem to need your consent to probe into your background. The signature block does not give them permission to perform the background check; it just certifies you have provided accurate information.

If you want to know who has been looking at your credit report and review your credit history, it’s time to request your report. In addition to the information about your credit, you will find that the report contains information on any credit inquiries within the past 12 months.

What Is PS-Prep?

2010-06-23T09:00:00.000-04:00

The trade community is quite familiar with C-TPAT, the joint government-business program to strengthen the supply chain and border security; however, there is another government-private sector partnership that is starting to receive some attention, PS-Prep.

PS-Prep is a partnership between DHS and the private sector that allows private organizations to obtain certification by DHS for emergency preparedness programs. Similar to C-TPAT, the program is currently voluntary.

Title IX of the 9/11 Commission Act of 2007, the Department of Homeland Security (DHS) is required to develop and implement a voluntary program of accreditation and certification of private entities to encourage private sector preparedness, including disaster management, emergency management and business continuity programs. While this program will not prevent disasters, PS-Prep seeks to enable businesses to respond and recover from a disaster in an efficient effective manner. Private sector entities such as companies, not-for-profit corporations, hospitals, universities, etc. may be certified by an accredited third party to verify that the entity adheres to one or more preparedness standards adopted by DHS.

The final standards for the program were published in the Federal Register on June 16, 2010. There are currently three accepted standards for the program:

ASIS SPC. 1-2009 – American Society for Industrial Security
British Standard 2599-2.2007 – British Standards Institution
NFPA 1600:2007/2010 - National Fire Protection Association

DHS is responsible for monitoring the effectiveness of the program and make improvements and adjustments to PS-Prep as needed. For a nation trying to recover from a recession, floods, oil spills and other woes, the new program is likely to generate a few questions and comments from the trade community.

Free Trade Tuesday - Singapore

2010-06-22T09:00:00.002-04:00

Implemented in 2004, the United States-Singapore Free Trade Agreement (SFTA) eliminates tariffs on most goods originating in the United States and Singapore over a maximum transition period of ten years. There is no expiration date and duties on eligible goods should be phased out by 2013.

The rules of origin for goods that are not wholly obtained from the United States or Singapore are based on a tariff-shift method and/or regional value-content method similar to the rules under NAFTA. When it is necessary to use the RVC, SFTA uses a “build-up & build down” calculation. A notable difference in the SFTA is that the responsibility is on the importer, rather than the exporter, to demonstrate that a good qualifies for preferential tariff treatment. Eligible goods are designated by the letters "SG" in the Special subcolumn.

Special Requirements

Generally, under the SFTA, a non-textile good will qualify for preferential tariff treatment as a "product of Singapore" if:

The good is wholly obtained or produced entirely in Singapore, the U.S. or both, or,
Each non-originating material used in the production of the good imported from Singapore undergoes the specified tariff shift, or the good otherwise satisfies applicable Regional Value Content.

Goods that qualify for preferential tariff treatment are not subject to the Merchandise Processing Fee (MPF), though textile merchandise entered under TPL numbers 9910 will still be subject to MPF.

Tariff Preference Levels (TPLs) have been established for certain apparel products of cotton and man-made fibers, to allow entry under a reduced duty rate up to a specific quantity of goods that are not originating goods. Once that quantity is reached, the product is dutiable at the column 1 rate and MPF is due. A valid preferential Certificate of Origin/Eligibility (Certificate) is required whenever a TPL claim is made. This Certificate must be an original and must be filed with the entry documents. If a good does not qualify as originating under SFTA or under the established TPLs, but it is still considered a product of Singapore, then the normal column 1 rate would apply, and MPF is due.

SFTA - Key Facts

Expiration: N/A

HTS General Note: GN 25

Imported Directly: Yes - unloading/reloading in third countries allowed. No additional production allowed.

SPI: SG

De Minimis:

10% - Non Textiles (Value)
7% - Textiles (Weight)
Some Exceptions

Origin Criteria:

Tariff Shift
RVC - Build-up/Build-down
Accumulation

MPF: Originating Goods Exempt
Countries: Singapore, United States
Related Regulations: 19 CFR 10.501 – 10.570

A Customs Fairy Tale and Importers Nightmare

2010-06-17T09:03:00.006-04:00

Once upon a time, there was a large importer of computers and parts. The computer equipment lived in a large brick warehouse called a foreign trade zone (FTZ). When the computer equipment left the FTZ, the importer entered the secondary batteries for notebook computers as automatic data processing machines under 8471, which was the same HTS code as the notebooks. The classification carries a free rate of duty. The importer was very happy!

One day while the importer was minding their own business, Customs and Border Protection Officers came knocking on the door. The officers demanded that the importer change the classification of the batteries to other storage batteries under 8507 and a 3.4% rate of duty. The importer was not happy!

The importer tried to explain that customers ordered the notebook containing the primary battery and then had the option of ordering additional items such as the secondary battery. The standard notebook package contained the computer, primary battery, power cord and operator manuals. When secondary batteries were ordered, they were tossed in the box and classified under the same provision as the computer.

The officers didn’t like this explanation and a big argument ensued. The importer and officers could not come to an agreement, so they decided to let a judge decide what they should do. The judge took out his rulebook and cited the General Rules of Interpretation, and something about common meaning. He also used a big book call the Explanatory Notes to help him decide. He told the importer and officers if they didn’t play nice together that he would throw that big book at them!

The importer offered two reasons why their classification was correct. First, they argued that the secondary batteries were functional units of the notebook. Just in case the judge didn’t like that idea, the importer added that the batteries should be classified as a component of the retail set under GRI 3(b). The importer was hopeful!

The judge took these arguments into consideration and tossed them both out. The batteries couldn’t be functional units because they are not essential to the performance. The primary function of the computer is served by the primary battery that is already encased in the computer. In reviewing the argument that the batteries are a component of a retail set under GRI 3(b), things started to look better for the importer, as the secondary battery helps meet a particular need or carries out a specific activity required by GRI 3(b). However, the judge dug a little deeper and discovered that 3(b) requires that the merchandise be “put up” together with the other components. The importer argued that the batteries were put up with the rest of the components, but the judge got out the big book, which explained that “put up” means that the goods are offered together for retail sale or displayed or shown together for retail sale. The batteries were offered for sale as individual units and customer could purchase one or more secondary batteries, along with other items when purchasing the notebook. The additional items were tossed in the box that already contained the computer. The judge ruled that the batteries should be classified under 8507 and told the importer and agents to play nice in the future.

The End!

Click HERE to read the true story this fairy tale was based on.

Free Trade Tuesday - AGOA

2010-06-15T11:30:00.001-04:00

Implemented in 2000, the African Growth and Opportunity Act provides for the duty free entry of certain non-textile articles previously excluded from preferential treatment under the Generalized System of Preferences program, as well as, the duty and quota-free entry of certain textile and apparel articles that meet certain specific production requirements. The AGOA is intended to encourage economic growth in more than three dozen sub-Saharan countries. This program will be in effect until September 30, 2015.

The origin criteria under AGOA are similar to that of GSP. In order to be eligible special duty treatment under AGOA, an article must meet the following criteria:

·The article is imported directly from a designated beneficiary country.

·The sum of (1) the cost or value of the materials produced in one or more designated beneficiary countries, plus (2) the direct costs of processing operations performed in the designated beneficiary country, or in one or more members of an association of countries which is treated as one country, is at least 35 percent of the appraised value of the article.

·Up to 15 percent of the 35 percent local value content requirement may be attributable to the cost or value of materials produced in the United States.

·Origin will not be based on simple combining or packaging operations or dilution with water or another substance, as these processes do not materially alter the characteristics of the article.

AGOA Key Facts

Expiration: 9/30/2015 - GSP Provisions
HTS General Note: GN 16
Imported Directly: Yes
SPI: D
De Minimis: 10% Weight - Textiles
Origin Criteria: 35% - with 15% U.S. Origin Content Allowable, Substantial Transformation MPF: No Exemption
Countries: Click for list.
Regulations:
19 CFR 10.211
10.178a

Export or Outsource - Does Your Heart Care?

2010-06-14T15:54:00.008-04:00

When most people think about international trade, they picture goods moving across borders. What does it mean to export a service? What is the difference between exporting services and outsourcing jobs?

Export.gov defines exports as goods and services produced in one country and sold in other countries in exchange for goods and services, gold, foreign exchange, or settlement of debt.

Export.gov defines activities such as banking, telecommunications, advertising, data processing, and consulting as services. Service industries account for approximately two-thirds of the economic activity of the United States and for an increasing percentage of U.S. exports. Therefore, when a U.S. accounting firms contracts with a Swedish company for the U.S. firm to perform accounting services on behalf of the Swedish firm, we have a service export.

Merriam-Webster’s Online Dictionary defines outsourcing as the procurement of goods or services needed by a business or organization under contract with an outside supplier. Therefore, when a company in the U.S. creates a call center in the Philippines to provide customer service to its customers, this activity is called outsourcing.

So, maybe exporting and outsourcing aren’t the same, but they could be related because some of the same services that are being sold to other countries, such as accounting and data processing are also being outsourced.

What is being outsourced to foreign countries? Call centers for numerous companies are located all over the world. Just try to get technical help with your Internet or computer and you’ll likely be talking to someone in India or the Philippines. However, Sen. Charles Schumer, D-N.Y. introduced legislation earlier this month that proposes a charge to U.S. companies for calls transferred to a foreign call center. This proposal opens up another can of worms that should test the difference between exporting and outsourcing. Is there an actual service being exported or has this service been outsourced? It may depend on where the initial call is actually answered? If one argues that it is an export, then the proposal may meet with some constitutional challenges under the Export Clause of the Constitution.

U. S. colleges and universities as well as businesses often outsource some of the eLearning development work to India.

One of the newest and most controversial outsourcing ventures is called “medical tourism.” Medical tourism is a term that describes overseas travel for medical treatment and other health care services. Could U.S. citizens be required to travel to foreign countries for medical services? At some of the hospitals in India, U.S. trained doctors can perform heart surgery for $6,000, while the same surgery costs around $100,000 in the U.S. What’s next on the list? So far, I think home improvement projects may be safe. It’s not likely that someone in the Philippines will be able to fix my broken air conditioning unit today.

What does America need to do in order to export more and outsource less when it comes to jobs and services? It might be impossible to export or outsource some personal services such as cleaning and home maintenance, but if we continue to outsource certain services to other countries, what will Americans do? What will we export?

By the way, all of the bcpLearning courses are created and managed using U.S.A. labor. When you contact our support center or call our office, you are talking to someone in the U.S.A.

Recent Suspensions of Export Privileges

2010-06-09T11:27:00.003-04:00

As reported in the Federal Register on June 9, 2010, the Bureau of Industry and Security recently suspended the export privileges of the following parties and revoked licenses issued to them under the Export Administration Act or the EAR. Don’t let this happen to you!

Joseph Piquet of Port St. Lucie FL was convicted in May 2009 for conspiracy to purchase high-tech military and dual use electronic components for shipment to Hong Kong and China without the required export licenses. His export privileges have been suspended until May 14, 2019; however, it’s not likely he’ll miss them since he still has another four years to serve on his prison sentence.

Aaron Robert Henderson doing business as Valhalla Tactical Supply of North Liberty, Iowa pleaded guilty in September 2009 for knowingly and willfully exporting sighting devices from the U.S. to Taiwan and Afghanistan without the required licenses. Sentenced to time served and $100 payment to the Crime Victims Fund, his export privileges have been suspended until September 18, 2019.

Shu Quan-Sheng of Newport News, Va. pleaded guilty and was convicted for illegally exporting space launch technical data and defense services to China, as well as offering bribes to Chinese government officials. Export privileges have been suspended until April 10, 2014, however, he won’t likely miss those privileges with approximately three years left to serve on his prison sentence. He is also listed on the Department of State’s Debarred List.

Free Trade Tuesday: NAFTA RVC

2010-06-08T09:15:00.003-04:00

In order to determine NAFTA eligibility, a regional value content (RVC) calculation may be required. The RVC is a calculated percentage of the value of the product that represents its North American content. RVC must be calculated using either transaction value or net cost.

For example, plastic boxes classified under 3923.10 made from imported resins of 3901.20, must meet RVC even though it satisfies the tariff shift requirements. . The main areas of the tariff schedule that require a Regional Value Content calculation are automobiles, chemicals, footwear and machinery.

Under the transaction value method, the calculation is made on the value of non-originating materials as a percentage of the transaction value of the goods, which is the total price paid for the good, with certain adjustments for packing and other items. See 19 CFR 152 for additional information on transaction value. The value of the non-originating materials is calculated as a percentage of the invoice price actually paid for the goods. Because the transaction value method permits the producer to count all of its costs and profit, the required percentage of RVC under this method is higher than under the net cost method. Transaction value cannot be used when there is no sale, in some related party transactions and for certain motor vehicles and parts.

Transaction Value Formula: RVC = [(TV-VNM)/TV] X100

TV Example:
An electric curling iron (8516.32) is made in Mexico from Japanese hair curler parts (8516.90). Each curling iron is sold for $4.40; the value of the non-originating curler parts is $1.80. [(4.40-1.80)/4.40] X 100 = 59% The hair curler will not be considered an originating good under this method, since the required RVC is 60%.

RVC using net cost is calculated as a percentage of the net cost to produce the merchandise. Net cost represents all of the costs incurred by the producer, minus expenses for sales promotions, royalties, shipping, packing costs, and non-allowable interest costs. The percentage content required under the net cost method is lower than under transaction value because of the exclusion of certain costs from the net cost calculation.

Net Cost Formula: RVC = [(NC-VNM)/NC] X100

NC Example:
The producer of the curling iron in the TV example states that the cost is $3.90, which includes $0.25 for shipping and packing. There are no costs for royalties, sales promotion or non-allowable interest. The net cost is $3.65. [(3.65-1.80)/3.65] X100 = 50.1% The hair curler would be considered originating, since the required RVC is 50% when the net cost method is used.

Answer to NAFTA Tariff Shift Question 6/1/2010

First, we should look up the HTSUS number provided to make sure it is eligible for duty-free treatment from Singapore. We find the symbol "SG" in the Special subcolumn which indicates that the HTSUS is indeed eligible for duty-free treatment if the non-originating items satisfy the tariff shift. Turning over to General Note 25, we find the tariff shift must be from any other chapter to Chapter 96. All of the non-originating products on our list EXCEPT the toothbrush meets this requirement; therefore, the kit it not eligible for special treatment under the Singapore FTA.

General Trade News

2010-06-04T09:47:00.007-04:00

It's been a slow week in trade news, so today's blog contains some interesting tidbits of general interest.

Summer Travel

With schools adjourning for the year and summer on the way, people are planning vacations. Airports will see an increase in travelers for the summer months. If you are planning to fly for personal or business, check out the Summer Travel Tips provided the Transportation Security Administration. Be sure to click on the link that provides additional information on how to pack to get through the line faster! Here’s an additional tip from the Wizard. If you are traveling some place warm, wear sandals. They are easy to slip off and on when going through security!

Importer v. Broker

It’s not uncommon to hear about importers and brokers suing U.S. Customs & Border Protection, but the news of importers suing customs brokers is rare. Recently, an importer filed a suit under the Lanham Act against a customs broker in Savannah, Georgia. The suit alleges that the broker failed to use “reasonable care” and their actions resulted in the furtherance of the distribution and sale of counterfeit goods. This is an unusual case, since CBP normally places the majority of responsibility on the importer. It will be interesting to learn more about the facts of this case see how it and a similar case filed by the same importer in New Jersey are resolved.

Illegal Exports of Electronic Components

In May, two Chinese nationals and a corporation owned by one of them were found guilty of conspiring to violate U.S. export laws and illegally exporting electronic equipment from the U.S. the China. For more than 10 years, some of the illegal exports were sent to Chinese military entities and included items such as military radar equipment and global positioning systems. Documentation produced revealed that the defendants and employees had knowledge that the restricted goods were being shipped to China without the required export license. The Chinese nationals each face 20 years in prison, $1 million in fines and deportation after serving their sentence. The corporation was fined $1.9 million dollars. Here’s a question from the Wizard. How much of that money with the government actually collect?

Update on Request for Increase in Informal Entry and De Minimis Amounts

2010-06-02T14:43:00.002-04:00

In April 2009, the Express Association of America (EAA) made a request to CBP for an increase in the informal entry amount from $2,000 to $2,500 and the de minimis amount for express couriers from $200 to $800. Just over a year later, Congressman Bill Owens introduced H.R. 5375, a bill to change the de minimis amounts under 19 U.S.C. 1321 from $200 to $1,000. Owens believes the increase would encourage economic developmen and reduce the number of entries filed. The current $200 limit was established in 1993 and has not been adjusted for inflation in 17 years. According to the EAA web site, CBP is working on the Notice of Proposed Rulemaking related to increases proposed last year. Projected publication for comments is late summer or early fall. Maybe by this time next year, we will have a resolution to these requests!

NAFTA Tariff Shifts

2010-06-01T08:51:00.003-04:00

Determining origin for free trade eligibility can be a complex and time consuming task. Use of the global economy often results in raw materials from multiple countries being shipped to one country for manufacture. Does the inclusion of a non-originating good eliminate the finished good from receiving benefits under a free trade agreement?

A non-originating article may be considered originating if that article undergoes a tariff shift. When a rule of origin is based on a change in tariff classification, each of the non-originating materials used in the production of the goods must undergo the applicable change in tariff as a result of production occurring entirely in the territory of one of the parties to the agreement.

This means that the non-originating materials are classified under one tariff provision prior to processing, and classified under another upon completion of processing. The specific rules of origin found in each of the agreements define exactly what change in tariff classification must occur for the goods to be considered "originating." A change in tariff classification may be from one heading in a chapter to another heading in the same chapter. In some cases, the list in GN 12(t) specifies that a shift must be from one specific chapter to another specific chapter.

Example 1- Heading Changes:
A good which will be classified in Chapter 17, under 1704, needs only to have been changed into heading 1704 from any other heading, which may include headings 1701, 1702, or 1703.

Example 2 -Chapter Changes:
In order for a good which is to be classified in Chapter 5 to be eligible under NAFTA, the good must have been changed into a good of Chapter 5 from any other chapter of the HTSUS.

Try the following problem on your own. We’ll provide the answer next week when we examine regional value content (RVC). For additional information, CBP posted a good explanation of tariff shifts on their web site. Although it is geared towards textile importers, the explanations and examples are helpful.

A travel kit imported into the U.S. from Singapore is classified under HTS 9605.00.0000. The kit contains components that originate in the U.S. or Singapore except for the following non-originating items?

· A plastic case classified under HTS 3923.10
· Sewing thread classified under HTS 5204.20
· Sewing needles classified under HTS 7319.90
· Toothpaste classified under HTS 3306.10
· A toothbrush classified under HTS 9603.21

Is the kit eligible for special treatment under the U.S. – Singapore Free Trade Agreement?