CBP Proposes Elimination of Substantial Transformation Rule

On Friday, July 25, the Federal Register contained a Notice of Proposed Rulemaking (NPR), which proposes to eliminate the use of substantial transformation as one of the two methods for determining origin of imported goods.



Under the current regulations, there are two primary methods that CBP uses to determine the country of origin of imported goods that are processed in, or contain materials from, more than one country. One method provides for case-by-case adjudication to determine whether goods have been “substantially transformed'' in a particular country. The other method uses the codified rules in 19 CFR Part 102 , also known as the “tariff shift rules”, which also determine whether a good has been “substantially transformed'' by assessing changes in tariff classification.



CBP proposes to apply the Part 102 rules to future free trade agreements. This change will also affect many of the current free trade agreements such as GSP, CBERA and the AGOA; however, these rules will not be applied where current agreements specify another origin test for determining origin. Since use of FTA’s are often complex, please consult the notice in the Federal Register for more detail concerning these changes


CBP believes that the use of one codified standard will result in more objective uniform country of origin determinations instead of the subjective determinations that have resulted from the use of substantial transformation rules.

Comments related to this notice must be received on or before September 23, 2008. Make your opinion count and post your comments! Comments must be identified by docket number and submitted by one of the following methods.



Federal eRulemaking Portal:

http://www.regulations.gov/. Docket number USCBP-2007-0100

Mail:

Trade and Commercial Regulations Branch
Regulations and Rulings, Office of International Trade

U.S. Customs and Border Protection

1300 Pennsylvania Avenue, NW., (Mint Annex)

Washington, DC 20229.

CBP Posts Notice of Exam for October 2008

U.S. Customs and Border Protection has posted a notice to its web site announcing the October 2008 Customs Broker License Exam. The exam will be held on Monday, October 6, 2008 and applications (CBP 3124E) to take the exam must be received on or before Friday, September 5, 2008. Please note the important information about the following references.

Harmonized Tariff Schedule of the United States (2008 version – Supplement 1)
Questions on the exam were written using the 2007 HTSUS. 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, 2007) (Parts 1 - 199)(No Supplements)
Questions on the exam were written using the 2007 CBP Regulations. However, anybody with the 2006 Regulations can use that book if it contains the updates through April 2007 (5th update).

CBP did not delete any of the supplemental materials listed from the April 2008 exam or add any new ones. The complete list of reference texts along with specific instructions for application to take the exam can be found on the CBP web site.

Note: CBP added the C-TPAT Minimum Security Criteria for Customs Brokers (3-20-2007) to the list of reference materials for the April 2008 exam and asked five questions related to that document. Be sure to read the C-TPAT document thoroughly and review the questions from the April Exam!

It’s time to get ready for the next Customs Broker Exam! Click HERE for a complete list of our study plans and products designed to help you study and pass the exam! As always, the only way to guarantee that you receive the correct editions prior to the Notice of Exam posting is the get the Required Testing Material package through Boskage. Don’t forget to 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!

Annual CBP Trade Symposium Scheduled

U.S. Customs and Border Protection announced the dates for its annual Trade Symposium to be held on October 29-31, 2008 at the JW Marriott Hotel in Washington, DC. Check the CBP web site for additional information regarding registration procedures and program details that should be available in September.

“First Sale” Update

During the Senate Finance Committee hearing on June 24, Commissioner Basham stated that CBP would not proceed with the proposed changes to the “first sale” rule. In accordance with the previous suggestions by Congress, CBP will collect data to provide to the ITC for analysis. CBP will revisit the proposed change again in January 2011.

CFR Amended to Implement CAFTA-DR Provisions

On June 13, 2008, U.S. Customs and Border Protection “CBP” published an interim rule in the Federal Register outlining amendments to Title 19, Code of Federal Regulations (CFR) related to the Dominican Republic-Central America-U.S. Free Trade Agreement (CAFTA-DR). The interim rule was effective June 13, 2008.

The majority of the regulations have been included within Subpart J of Part 10 in the CFR (19 CFR Part 10, Subpart J); however, the Federal Register Notice discusses all changes to the CFR, including those outside of Subpart J, Part 10.

The full text of the interim rule, including instructions for submitting comments, can be accessed online at: http://edocket.access.gpo.gov/2008/E8-13252.htm. The changes to 19 CFR Part 10 can also be seen in the Electronic Code of Federal Regulations.


CBP is soliciting comments, due by August 12, 2008, related to the “economic, environmental or federalism effects that might result from this interim rule”. Comments must be identified by docket number and submitted by one of the following methods:


Federal eRulemaking Portal:
http://www.regulations.gov/. Docket number USCBP–2008–0060.




Mail:
Trade and Commercial Regulations Branch, Regulations and Rulings
U.S. Customs and Border Protection

1300 Pennsylvania Avenue, NW., (Mint Annex)

Washington, DC 20229.

BIS Creates Emerging Technology and Research Advisory Committee

In May, the Bureau of Industry and Security (BIS) announced the creation of the Emerging Technology and Research Advisory Committee (ETRAC). ETRAC, a technical advisory committee will assist BIS in reviewing and making recommendations concerning currently controlled technologies and emerging technologies that may have national security interest.

The ETRAC will provide recommendations to BIS on how to help keep the Commerce Control List current with respect to emerging technologies and research and development activities that have dual-use applications. The committee will assess new and existing regulatory controls that are of greatest consequence to U.S. national security and study the implications of the release of dual-use technology to foreign nationals under current deemed exports licensing requirements.

The ETRAC will be responsible for:

(1) identifying emerging technology and research development activities related to dual-use commodities;

(2) prioritizing new and existing controls that affect national security; and

(3) addressing the potential impact of dual-use export controls requirements on research activities.


BIS was seeking 25 individuals from the private sector to join and requested interested applicants to submit a copy of their resume to BIS by June 24, 2008. Qualified leaders in industry, academia and research were encouraged to apply. Members are expected to have in-depth knowledge of U.S. research and emerging technology that could affect U.S. national security and be able to qualify for Secret clearance. Additional information can be found in the Federal Register Notice.

Report Trade Violations to CBP

U.S. Customs and Border Protection launched a new system called e-Allegations that will make it easier for the public to report violations of import and export laws.

e-Allegations can be used to report violations related to issues such as misclassification, country of origin, health and safety, intellectual property, textiles and other trade violations. For example, if you know that a company is declaring the wrong country or origin on a product to obtain lower duty rates, that violation could be reported through the online system. The system cannot be used for reporting security issues such as potential terrorist activities or weapons of mass destruction.

If you have knowledge of a violation of United States trade law, you can access the online system at https://apps.cbp.gov/eallegations/ and click the "Report Trade Violations" button after reading the Privacy Policy. Complete the short form explaining the violation. The following information will be required; (1) type of trade violation, (2) description of what has occurred, and (3) products or goods involved and the alleged violator’s name and/or company. Other information may be included on a voluntary basis. These reports are confidential and may be made anonymously. Once you have submitted the form, a confirmation e-mail will be sent to the address you provided, if you gave one. You may also report trade violations by calling 1-800-BE-ALERT.

BIS Launches Online Advisory Database

The U.S. Bureau of Industry and Security has launched an online database containing advisory opinions on certain export issues subject to the Export Administration Regulations. Although the BIS Advisory Opinions are not as comprehensive as the rulings found on the CBP Cross database, BIS plans to add future advisory opinions as appropriate.

Protecting Your Laptop from Thieves, Terrorists and CBP

International travelers, beware of what you store on your laptop. As a result of a recent court case, travelers may see increased inspection of laptop computers. On Monday, April 21, 2008, the U.S. Court of Appeals for the Ninth Circuit ruled that CBP may examine the electronic contents of a passenger’s laptop computer and other electronic devices without any suspicion of criminal wrongdoing.

CBP officers at Los Angeles International Airport requested that a passenger returning from the Philippines boot up his laptop. The officers reviewed pictures found on the laptop and found one showing two nude women. Agents with Immigration and Customs Enforcement (“ICE”) were called and the computer was seized after the agents found other images that appeared to be child pornography. The grand jury charged the passenger with various pornography violations. The passenger filed a motion to suppress the information because the government conducted the search without reasonable suspicion and the district court granted the motion. However, the U.S. Court of Appeals for the Ninth Circuit reversed the district court based on a series of cases that demonstrated reasonable suspicion is not needed for customs officials to search a laptop or other personal electronic storage devices at the border. One government official analogized that rummaging through a computer's hard drive is no different from looking through a suitcase. Click HERE to read the entire ruling.

What should you do to protect private information? Are you required to provide passwords and encryption information to CBP officials? Deleting browser histories and cookies and encrypting the entire hard drive is something that should be done for security in case the computer is lost or stolen. The courts are divided on the issue of providing passwords and encryption information to CBP. A recent decision, which is being appealed by the government, ruled in favor of the defendant stating disclosure of the information was a violation of his Fifth Amendment rights. While the traveler may decide not to provide the information, CBP may retain the laptop to obtain a warrant requiring the decryption key. Businesses should review their current policies to ensure adequate procedures are in place to safeguard proprietary information. Additionally, employers should instruct employees on how to respond to CBP and other government officials requesting access to the proprietary information.

CBTPA Extended and First Sale Rule Delayed

On May 22, Congress overrode President Bush's veto of H.R. 2419. Two specific provisions related to imports include the extension of CBTPA benefits and delayed implementation of revisions to CBP’s first sale rule.

Originally scheduled for expiration on September 30, 2008, the provisions of the Caribbean Basin Trade Partnership Act (CBTPA) have been extended until September 30, 2010.

Congress expressed that CBP should not implement changes to the current usage for the first sale rule prior to January 1, 2011 and created a requirement for collecting and analyzing information about first stale transactions, as well as consulting with House Ways and Means and Senate Finance before taking action. For one year, beginning 90 days after enactment, importers will be required to provide declaration with each entry submitted to CBP providing information on whether the importer has used the first-sale methodology in declaring transaction value for the entry. The data will be analyzed and reported to Congress. So, importers have a couple of years some time to analyze their current transactions and plan for alternatives in the event CBP is able to make those changes to the first sale calculations and importers taking advantage of CBTPA benefits have two more years to enjoy the reduced and free duty provisions.

Special Notice: Explanatory Notes Now Available In Four Installments At Reduced Rates

Boskage Commerce Publications, the only authorized U.S. distributor of the Explanatory Notes to the HTSUS, has changed the pricing and terms of purchase of that publication.

The Explanatory Notes is the main publication tool used in classification, and is published by the World Customs Organization, in Brussels, Belgium. The newest edition was released in January of 2007, at WCO-set prices that were considerably higher than the previous edition. Last week, Boskage announced a discount and new terms, in response to a perceived growing need.

Starting today, Boskage is offering the Notes for $890 -- $200 off the list price of $1090 -- and allowing the tool to be purchased in four monthly installments. "We hope to allow a wider range of clients to acquire this landmark classification tool," said Boskage CEO Scott Warren Taylor. "The Explanatory Notes should be used by every individual engaged in classifying. We hope that this move will help make that necessity a reality."

CBE Appeal Checklist

If you plan to appeal your CBP Exam score, it is important to follow CBP’s appeal requirements. CBP will reject the appeal if it:

• is incomplete, is untimely, or is in the wrong format


• includes any arguments written by another person


• does not provide supporting arguments


• argues for an answer the applicant did not select


• contests an incomplete erasure or insufficient marking on the applicant’s answer sheet

CBP will provide to the examinee written notice of the decision on the appeal. If the CBP decision on the appeal affirms the result of the examination, the examinee may request review of the decision on the appeal by writing to the Secretary of Homeland Security, or his designee, within 60 calendar days after the date of the notice of that decision. 19 CFR 111.13(f)

To help you submit an appeal that complies with CBP requirements, we’ve created the CBE Appeal Checklist. Be sure to review each item and place a check mark next to the individual requirements.

New Regulations Require Electronic Filing of Export Documents

The final rule requiring the mandatory filing of electronic export information was published in the Federal Register on June 2, 2008. The Bureau of Census announced the final rule requiring mandatory electronic filing of export information through the Automated Export System (AES) or AESDirect for shipments where a Shipper’s Export Declaration is required. The AES is an electronic method for filing the paper SED information directly with the U.S. Customs and Border Protection (CBP) and the Census Bureau. The AESDirect is the Census Bureau's free Internet-based system for filing SED information through the AES. The current $2,500 exemption level for reporting will not change since this would increase the number of shipments reported and neither Census nor CBP has the resources to process the information.

Under the new regulations, exporters or their agents will be required to file electronic data in roughly the same time intervals as import cargo: 24 hours for ocean cargo, two hours in advance for rail and air, and one hour before trucks arrive at the border. Effective July 2, exporters will be required to file all export documents electronically; however, exporters will be given 90 days to adjust before enforcement actions will be taken. Even though the majority of exporters currently file electronically, may exporters at the southern border still file paper copies.

When the enforcement starts in October, parties could be fined up to $10,000. Penalty amounts have been increased from $100 to $1000 each per day of non-compliance for a maximum of $10,000 per violation. Criminal penalties may be applied in which the penalty will not exceed $10,000 and/or imprisonment for not more than five years. Enforcement responsibilities have been delegated to the Bureau of Industry and Security (BIS), CBP and U.S. Immigration and Customs Enforcement (ICE). Other noteworthy provisions include information on how to submit voluntary self-disclosures of a violation or suspected violation of the reporting requirements, power of attorney requirements for agents and a section on record keeping that explains the documentation/records each party is expected to retain. Records must be maintained for 5 years from date of export.

Click HERE to view the full text of the new export regulations.

Kosovo Country of Origin Requirements

Since the United States has officially recognized the Republic of Kosovo as a sovereign state on February 18, 2008, imported goods must be marked in English using the words Kosovo or Republic of Kosovo. CBP recognizes that manufacturers and importers need time to adjust to the changes; therefore, goods entering the United States that are marked “Serbia” will be permitted entry until February 18, 2009.

Changes Proposed to Customs Broker License Examination Eligibility Requirements

On Tuesday May 27, the Federal Register contained a Notice of Proposed Rulemaking (NPR) concerning changes to the eligibility requirements for taking the Customs Broker License Examination. The proposed rule would require individuals to meet the following criteria prior to the date of the exam. In order to take the exam, individuals must be U.S. citizens,
21 years of age, and not be an officer or employee of the U.S. Government.

The proposed amendments would more closely align the requirements for taking the written examination with the requirements an individual must satisfy in order to obtain a customs broker's license. As a result, this proposed rule would facilitate the overall customs broker licensing process by helping to ensure that those taking the examination are not automatically precluded from obtaining a license by reason of age, citizenship status, or employment. These changes also resemble the requirements for obtaining a license that were changed in 2000 to allow applicants three years to meet the eligibility requirements after taking the exam.

Comments must be received on or before July 28, 2008. Make your opinion count and post your comments! Comments must be identified by docket number and submitted by one of the following methods:

Federal eRulemaking Portal:
http://www.regulations.gov/. Docket number USCBP–2008–0059.


Mail:
Trade and Commercial Regulations Branch, Regulations and Rulings
U.S. Customs and Border Protection
1300 Pennsylvania Avenue, NW., (Mint Annex)
Washington, DC 20229.

Changes to Antiquated Customs Broker Regulations Pending

At the NCBFAA Conference in April, Commissioner Ralph Basham stated that some changes needed to be made to antiquated broker processes. First, there needs to be change to the process of filing the Triennial Status Report. Initiated prior to automated systems, the party who forgets to mail the administrative report could lose their license almost immediately, which results in a penalty disproportionate with the infraction. Second, CBP needs to be able to suspend the licenses of brokers whose illegal activities threaten national security and the health and safety of individuals in the U.S. Just last year, brokers were indicted and arrested for smuggling, but CBP could not suspend their licenses. Basham told the attendees that new draft legislation addresses both of these issues.

New Informed Compliance Publications

Customs and Border Protection has been busy writing, reviewing and updating the Informed Compliance Publications this year. Three new publications have been added, and 24 were updated in the first quarter of 2008. Here’s a brief overview of the new publications along with a list of the publications that have been reviewed and updated.

New Publications:

Classification and Entry Requirements of Alcoholic Beverages and Spirits (February 2008)
This new publication provides detailed explanations of each heading, the related explanatory notes and some examples of products included in each heading. Additionally, it provides instructions on how to compute proof liters along with examples. This is a great source of information for importers of alcoholic beverages and for persons studying for the broker’s exam. CBP has asked questions related to the classification of alcoholic beverages and calculation of proof liters on past exams.

Classification of Coated and Water Resistant Apparel (January 2008)
Finding the proper classification of wearing apparel can be a difficult task, but determining the difference between coated and water resistant provisions is one of the most frequently misunderstood areas. This new publication presents information to clarify the distinctions between the visibly coated and water resistant apparel goods by explaining how the GRI, Chapter Legal Notes and the actual headings provide direction in classifying these goods. Since CBP recently asked a question related to a water resistant apparel good on the broker’s exam, this publication would also be helpful to those studying for the upcoming exam.

Eyewear Frames and Eyewear (January 2008)
The new publication provides a comprehensive discussion of eyewear, which encompasses the actual completed product, frames, accessories and cases. In addition to CBP regulations, this publication includes information concerning the regulation of eyewear by other government agencies.


Revised and Updated Publications:
· Agglomerated Stone - 03/13/2008
· Agricultural Actual Use Provisions - 02/01/2008
· Base Metal Mountings and Fittings - 02/13/2008
· Basic Forms of Non-Ferrous Metals - 02/26/2008
· Beauty and Skin Care Products of Heading 3304 - 03/06/2008
· Button, Snap Fasteners, Slide Fasteners and Similar Articles - 02/13/2008
· Buying & Selling Commissions - 01/08/2008
· Caviar - 03/20/2008
· Classification of Children's Apparel - 02/13/2008
· Classification of Cooking Ranges, Stoves and Ovens - 03/03/2008
· Classification and Marking of Watches and Clocks - 02/13/2008
· Coated Nonalloy Flat-Rolled Steel - 02/13/2008 02/13/2008
· Decorative Glassware - 03/13/2008
· Diodes, Transistors & Similar Semiconductor Devices - 02/21/2008
· Distinguishing Bolts from Screws - 02/21/2008
· Fasteners of Heading 7318 - 02/13/2008
· Hand Tool Sets Classified Within Subheadings
  8205.90.00 and 8206.00.00 - 02/13/2008
· Household Articles of Base Metal - 02/13/2008
· Mushrooms - 03/06/2008
· Peanuts and their Classification under the HTSUS - 03/06/2008
· Personal Digital Assistants (PDAs) and Electronic Organizers - 04/01/2008
· Stranded Wire, Rope and Cable, of Iron or Steel- 02/28/2008
· Vending Machines and Their Parts Under the HTSUS - 04/21/2008
· Waste & Scrap as it Relates to Base Metals of Chapter 81 - 02/26/2008

Tired of looking for updates? Click here to find out how you can have updated versions for all of the Informed Compliance Publications along with an extensive compilation of Customs Directives and other selected CBP information in looseleaf and searchable CD-ROM.

Importer Security Filing “10+2” Update

In May, the Federal Register published the regulatory agendas for various government agencies, including the Department of Homeland Security. The comment period for the implementation of 10+2 ended on March 18, 2008. Almost 200 comments were submitted in response to the proposed rulemaking have been published for review. Click here to view some of the comments. According the information published in the Federal Register, CBP projects that they will issue the final 10+2 rule sometime in September.

As we posted in September 2007 and February 2008, the Importer Security Filing rule will require that carriers and importers submit additional data elements by EDI. CBP states that collection of this information will enhance targeting and risk analysis capabilities, improve facilitation of lawful trade, and is required by the SAFE Port Act 203. In addition to the new reporting requirements, the rule also proposes to amend 19 CFR 113.62 to include payment of liquidated damages for violations of the proposed regulations. The principal could be liable for damages equal to the value of the merchandise for failure to comply with the regulations. Additional penalties of $5,000 per violation could be imposed for failure to comply with container status messages.

Even though the final rule will not be published until September and the implementation is likely to be phased in over 8 to 12 months, importers, brokers, forwarders and carriers need to prepare now.

Someone within your organization needs to have responsibility for obtaining the required information. For importers, should this responsibility be delegated to Customs Compliance, Logistics, or some combination of parties? Who will transmit the information – your company or an agent? Remember that the importer is solely responsible for submitting the information, but an agent may submit it if they have a power of attorney. For brokers, how will you manage this process with clients? What changes will need to be made to the software and other electronic data systems?

Take action now to avoid costly delays in cargo delivery later!

Customs Broker Exam Pass Rate - 20.6%

For all of you who have been patiently (or not so patiently) waiting on the results of the April 2008 Customs Broker Exam, CBP expects to have the answers posted their web site some time this week. CBP will start mailing letters at the end of this week, so you should start camping out by your mailbox next Monday.

The pass rate for this exam was 20.6%, which is higher than the 9.2% on the October exam. We’ll be watching the CBP web site for the answers so we can provide an updated list of correct answers and a list of potential protest questions. For those of you who purchased the Boskage Study Plans that included the detailed exam commentary, we’ll be completing that information and posting it as soon as possible after the official exam results are posted.

Priority Trade Initiatives

As most of the trade community may have noticed, U.S. Customs and Border Protection has been updating their web site. It may take a little extra effort to find some of the information and get used to the new format, but in time, we will enjoy the new features and expanded information. One of the new areas created during the update is the Priority Trade Issues (PTI). PTIs are identified as high-risk areas that are likely to cause significant revenue loss, economic risk to U.S. industry or health and safety concerns to citizens.

Currently, the following seven areas are identified as PTIs:

• Agriculture


• Antidumping and Countervailing Duties


• Import Safety


• Intellectual Property Rights


• Penalties


• Revenue


• Textiles

Click HERE to learn more about each PTI.