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.

Ask the Wizard: Required Compliance Tools

Each Friday, the Wizard joins us to share an answer to one of the questions asked during the week. This week we had an excellent question about the publications that CBP requires brokers and importers to maintain.

Question:
Are U.S. importers required by Customs law to have a desktop copy of the U.S. Customs explanatory notes? If not, in a case of a customs audit will customs look to see if you have a copy for the purpose of reasonable care?

When dealing with import compliance, the answers are almost never quite as simple as “yes” and “no.” The CBP Regulations (19 CFR) do not require importers to maintain copies of the Explanatory Notes or other government publications; however, it is important for importers to have access to tools that will help them fulfill their responsibilities and demonstrate reasonable care. Additionally, a CBP audit requires importers to answer questions that indicate what resources are used and how they are used. Ask yourself this question. If CBP asked you to demonstrate how classification of a specific product was determined, how would you explain the process and what documentation would you provide? The Wizard might discuss this in another article if anyone is interested.

The types of tools importers maintain depend on the complexity and volume of transactions. For example, a low volume importer that only imports two products may not need to purchase the Explanatory Notes. However, an importer with hundreds of products and classifications or products identified as difficult to classify is more likely to need the Explanatory Notes, along with the HTSUS, access to binding rulings and other CBP publications. Remember, the importer has the ultimate responsibility for the accuracy for classifications, even if they use a broker. Another issue to consider is how the tools are used. It would be worse for an importer to purchase a copy of the Explanatory Notes, put them up on a shelf, and never use them, than to not have them at all. Consider the volume of imports, complexity of classifications, available resources, procedures and other factors. Don’t forget the other tools that are available.

• Code of Federal Regulations Title 19 (19 CFR)
• Harmonized Tariff Schedule of the U.S (HTSUS)
• Dictionaries and Reference Books
• Internet Access
• Procedures
• Customs Rulings

While it is not mandatory that importers have all of these tools, use of them helps demonstrate reasonable care and compliance. They also make employee's jobs easier, and increase productivity and accuracy.

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