Final Rule Regarding MIDs for Textile and Apparel Importers

Importers of textile and apparel products may face higher levels of reasonable care now that U.S. Customs and Border Protection (CBP) has adopted (with some changes) the interim amendments to its regulations relating to the country of origin of textile and apparel products. Specifically, CBP eliminated the Textile Declaration, which used to accompany textile and apparel imports, but now requires importers to provide a manufacturer identification code (MID), defined as the company performing the operations that confer the country of origin of the imported article under sections 102.21 or 102.22. The MIDs must appear on CBP Form 3461 (Entry/Immediate Delivery), CPB Form 7501 (Entry Summary) and all electronic data submissions requiring manufacturer information.

CBP has stated that obtaining the MID will assist CBP, who has the responsibility of preventing entry of goods with false origin information, to verify the country of origin, leading to better enforcement of trade in textile and apparel products. This may be true, but this amendment also imposes increased obligations on the textile and apparel importer to exercise reasonable care to ensure that it is providing accurate manufacturer information. Under the revised regulations, CBP has the power to reject the entry, or take other appropriate actions, which may include civil penalties under Section 1592, if CBP is not convinced that the importer exercised reasonable care in providing the MID.

There are several situations where meeting this requirement may prove difficult for importers. For example, it may be difficult to determine the MID in those situations where the textile or apparel product is made in multiple countries. In these cases, it is imperative for the importer to ask at the time of ordering for the name and address of the manufacturer, information about the origin of fabrics and information about the work performed by the manufacturer. If CBP seeks additional information about the MID, CBP will expect the importer to produce documentation to demonstrate the information it provided is accurate. Failure to do so may constitute a failure of exercise of reasonable care and lead to civil penalties.

Second, verifying MID information may also be difficult where the U.S. importer is purchasing from a seller who is not the manufacturer, but rather serves as the intermediary and may not want to disclose the MID for fear that the buyer may contact the manufacturer directly and cut the intermediary seller out of the transaction. CBP has stated that this is not a sufficient reason to provide incorrect MID information. Importers are required to know the manufacturer, regardless of whether they are purchasing directly from the manufacturer or through an intermediary. Failure to provide MID, or providing inaccurate MID for this reason could lead to civil penalties.

Finally, under section 102.21(e)(2), the country of origin of some products depends upon where “the fabric comprising the good was both dyed and printed when accompanied by two or more of the following operations….” Under this scenario, it will be difficult to determine the origin-conferring operation if more than one manufacturer performs these operations within one country. CBP has indicated that in this situation, it will consider the entity performing the final step of these origin-conferring operations as the MID. CBP has recommended that importers seek a ruling if the company is unsure about which company confers the country of origin.

Would A $5 Million Penalty Get Your Attention?

Export penalties usually receive more publicity than import violations. Therefore, when we read about an import penalty, it must be a big one! Obviously, a $5 million violation for an importer is big enough news to warrant a prominent place on the CBP web site and several newspapers and online publications. To make a long story short, Pep Boys, a large automotive aftermarket retailer, imported over 200,000 vehicles and engines from China that did not meet U.S. emission standards under the Clean Air Act.

Other than the hefty price tag of $5 million in civil penalties, let’s examine some of the reasons why this story is newsworthy.

(1) Importers Receive Penalties

This case serves as a reminder to importers that they can receive penalties too! The EPA, CBP and the Department of Justice claim that the Pep Boys penalty is the largest importation case in Clean Air Act history.

(2) Large Importers Are Not Exempt

With over 580 stores in 35 states, Pep Boys is a large importer of automotive aftermarket parts and government employees like to go shopping too! We don’t know how this case was initiated, but let’s be honest, we think about importing and exporting when we go shopping. Come on, don’t deny that you flip over products to see where they are made. Have you ever gone into a store that sold textile samples and wondered how they could sell the clothing that had small rips or contained “sample” stamped on them? The EPA said its inspectors and CBP officers “discovered the violations through inspections conducted at Pep Boys stores, at U.S. ports, and through a review of importation documents” provided to the EPA by the company.


(3) CBP Isn’t the Only Agency Importers Need to Worry About

Classifying everything correctly, using the proper origin marking and declaring the correct value makes CBP happy, but it doesn’t mean that the importer is off the hook. Importers should take note that CBP is the gatekeeper for dozens of government agencies; however, most importers are primarily concerned with fewer than ten of those agencies. In this case, the importer was required to ensure that the imported engines and vehicles complied with the same EPA Clean Air Act requirements that applied to domestic products.

Learn from the lessons of your fellow importers! Review your products for compliance with other government agency requirements. Save your organization from the potential fines, penalties and publicity that result from a violation of CBP laws as well as those of other government agencies. Not sure if your products are subject to other agency regulation? Check with your broker, attorney or other trade compliance consultant. If in doubt, contact the government agency you suspect may regulate your product.

Click HERE to read the Settlement Summary.

Click HERE to read the Consent Decree.