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CUSTOMS AND INTERNATIONAL TRADE
 CUSTOMS
CBP OFFICE OF TRADE
09/06
Just ahead of Congressional action, CBP Commissioner Ralph Basham recently announced a reorganization within the agency. Not surprisingly, the way in which CBP was structured
before coming into DHS no longer makes the agency as efficient as it wants to/should be. As such, CBP is creating the Office of Trade effective October 15, 2006. This new Office is
expected to consolidate trade policy, program development and compliance measurement into one group. It would appear the Office of Field Operations (OFO) will continue to be the
operational arm of Customs, while Trade will become the policy shop. Of course, the devil is always in the details, but Trade is apparently also going to be the group within Customs that
works most closely with the private sector.
The new Office of Trade will include the former Office of Strategic Trade (which includes the
auditors), the Office of Regulations and Rulings and the policy work of OFO. It will be headed by Asst. Comm. Dan Baldwin.
CBP OVERWHELMED BY IMMIGRATION ISSUES
09/06
Illegal immigration problems are overwhelming the activities of CBP at the Southwest border. Perhaps most remarkable about that admission by Comm. Basham is that he acknowledged
the immigration issue is taking so much attention from Customs that it has compromised trade facilitation and security issues. Basham also acknowledged that greater staffing is
needed in Field Operations. He promised Congress to hire more Import Specialists by the end of the year.
Finally, Basham also advised that by the end of the year, CBP is opening a second National Targeting Center. It will focus on analyzing cargo data. The original targeting center will focus
on passengers/travelers.
FILE YOUR ENTRIES EARLIER
03/06
Such is the advice of the Harbor Talking Group (port operators, terminals, brokers and others in the trade community) in LA/LB. To speed up shipment release, the ports issued a letter
recommending filing entry as early as possible. While quite practical advice, it has to be weighed against the plan of Pier Pass to raise its rates. The new fee is supposed to be
announced on March 20th.
The single biggest problem at the terminals is not when the entries are filed, but rather when
cargo is made available for pick-up. We continue to hear that night gates are not fully staffed, causing all sorts of complications when things don’t line up just right. Things aren’t much
better during the day. What difference does it make if you file your entry earlier when your trucker can’t get in to pick up your cargo? How is that problem cleared up by charging more
to pick up during the day?
On a more positive note, Pier Pass is distributing RFID devices to truckers to speed up the
process, plus there is at least discussion about Sunday gates for part of the year.
Reminder to Customs Brokers - Permit and Triennial Fees Are Due
02/06
This memorandum addresses the requirements regarding the annual permit user fee and
broker triennial report and associated fee. The annual permit user fee and triennial report are separate matters and require separate filings with Customs.
Annual Permit User Fee
An annual permit user fee of $125.00 is required for each permit and national permit held by
an individual, partnership, association, or corporate broker. This fee is payable for each calendar year in each port where a broker has a permit to do business. For the national
permit, the fee is payable at the port through which the applicant’s license was delivered.
This means that a corporate broker must submit the annual user fee for each individual office where the corporate customs broker has a permit to transact Customs business. In addition,
the corporate broker must submit the annual user fee for the national permit it holds.
The due date for filing the user fee is January 20, 2006. If the annual user fee is not paid by
January 20, 2006, the port director will notify the broker in writing of the failure to pay and will move to revoke the permit to operate.
Triennial Reports
The triennial report and associated fee of $100, which is payable every three (3) years, is required by Customs for each license holder (individual, partnership, association, and/or
corporate broker). Thus, this applies to ALL licensed brokers. The next triennial report and $100 fee is due by February 28, 2006, but is considered timely if filed anytime during the
month of February 2006.
Customs has the recommended form on which to make the report on its website - see http://www.customs.ustreas.gov/xp/cgov/import/broker_management/
Reports should be filed at the Port that issued the broker's license and be accompanied by
the $100.00 fee.
If the broker fails to file the report and associated fee, then the license will be first suspended and then revoked by operation of law.
Triennial Report Filing Procedures
The following procedures apply:
An individual triennial report should be filed at the Port where the license was issued;
include the required $100.00 fee with the report.
A corporate triennial report should be filed at the Port that originally issued the
corporate license; include the required $100.00 fee with the report. A partnership, association or corporate triennial report must be signed by a licensed member or officer.
The triennial report should include a current master “employee” list which should
include all people that are engaged in Customs business at each office. Pursuant to 111.28(b)(1)(i) of the Customs Regulations, the employee list should include the name,
social security number, date and place of birth, and current home address of each current employee. In many Ports, you are required to include a list of all the employees
of the company, even if not directly employed in brokerage operations. Check with your local Port if in doubt.
For more information call the Rodriguez O’Donnell attorney with whom you regularly deal or the Rodriguez O’Donnell office nearest you.
02/06
In Bauer Nike Hockey USA, Inc. v. United States, the CAFC ruled that certain imported hockey pants are properly classifiable as ice-hockey equipment under HTSUS subheading
9506.99.25/Free rather than as sports clothing under subheading 6211.33.00, reversing a 2003 decision issued by the U.S. Court of International Trade.
The garments at issue were constructed of two primary components: (1) an exterior nylon or polyester textile “shell” and (2) an interior assembly of hard nylon plastic guards and soft
polyurethane, polyethylene, or polyester foam padding attached to a belt. The CAFC held the hockey pants are sports equipment for tariff purposes as the pants were designed and
intended for use only while playing ice hockey. In addition, the appellate court held that hockey pants are more specifically provided for under subheading 9506.99.25 as ice hockey
equipment rather than under subheading 6211.33.00 as other garments of man-made fibers as the pants not only provide comfort, fit, and ventilation to the wearer, they also protect the
wearer from injury by absorbing and deflecting blows, collisions, and flying objects in areas of the body where serious injury may occur from playing hockey.
The classification of hockey pants under 9506.99.25/Free applies to hockey pants regardless of whether the padding and/or belt are permanently attached to the textile component of the pants.
While the Bauer Nike Hockey USA case dealt only with ice hockey pants, the definition of “athletic or sports equipment” as articles specially designed and intended for use only while
participating in the activities set forth in HTS Heading 9506 as set forth by the CAFC applies to other sports articles such as pants specially designed and intended only for football,
baseball, and similar activities. A determination as to whether other articles are sports equipments, however, will depend on the construction of the article and its padding. Thus, it
appears to us that specially designed wearing apparel for motocross, skateboarding, gymnastics, polo, soccer, baseball, lacrosse, and other sports might also be covered by the
Court’s decision.
If you are interested in learning more about this decision and whether it applies to specific
merchandise, feel free to contact the Rodriguez O’Donnell attorney at the office nearest you.
Rodriguez O’Donnell prevails in CIT Case Re Antidumping Annual Review Re Pasta From Italy
12/05
Chicago based Michael Johnson and Lara Austrins representing JCM, Ltd, an importer of pasta from Italy sold under the "Racconto" brand, have participated in convincing the Court of
International Trade (CIT) that the sixth annual antidumping review of JCM's unrelated supplier, PAM, S.p.A., was begun and carried forward contrary to law. In Slip Op. 05-124 (September
14, 2005), Judge Carman held that, having been begun in a manner contrary to law, the entire proceeding is void ab initio. The International Trade Administration, U.S. Department of
Commerce, had imposed punitive antidumping duties of over 40% on importations from PAM, S.p.A. as a result of the investigation and, since the Court has found that investigation to be
void, the rate will revert to that in the prior period: 4.7%. JCM was the largest importer from PAM, but the decision applies to all companies which imported pasta from PAM during the
period covered by the sixth annual review.
MY SHRIMP CAME FROM WHERE?
12/05
An antidumping petition was filed in December 2003 against Brazil, China, Ecuador, India, Thailand and Vietnam regarding shrimp exported to the U.S. A Final Determination of sales at
less than fair value was made in December 2004 and on November 2nd, the International Trade Commission found that it would continue the antidumping cases against India and
Thailand. Frankly, that has been the least of everyone’s headaches.
Beginning in late September/early October, U.S. Customs began notifying importers of shrimp
from Indonesia that they were under investigation for intentionally evading the pending antidumping case on the grounds that their shrimp, while shipped from Indonesia, was
actually of Chinese origin! The wave of notices started on the East Coast, but West Coast ports quickly caught up.
What apparently happened is Customs looked at the tonnage of shrimp being imported from Indonesia, saw a sizable increase over the last few years and sent a team to Indonesia to
investigate. Indonesian packers were interviewed (supposedly either 4 or 6) and at least one of them is reported to have admitted to Customs that he does indeed have orders far in excess
of what he can fill from Indonesian grown shrimp. Therefore, he imports shrimp from China and Vietnam and commingles it with his Indonesian grown shrimp. Based on that information plus
the noticeable increase in tonnage, likely plus other facts not publicly known, Customs opened an investigation and notified the importers accordingly. It appears Customs felt
pressure to act quickly in order to stop many entries from liquidating. Hence, the quick notice to the trade, even though few instructions have been issued to the Ports.
In it important to keep in mind that U.S. Customs has issued rulings holding the origin of shrimp is determined by where the larvae is hatched, not where the fresh shrimp is
processed. Apparently Indonesian law allows a change in origin provided a certain amount (supposedly 30%) is value added, for example through processing. Most of the affected
importers are visiting their packers to find out exactly what was shipped and what sort of inventory controls were in place. They are also looking to their packers to provide supporting
documents. It is still early in the investigation, but what is clear is Customs can be expected to demand the antidumping duties (at the all others rate) and likely impose sizable penalties
against any importer who cannot prove his fresh shrimp was born, bred, raised and processed in Indonesia. The standard is reasonable care so importers who simply relied on what they
were told by their packers could face serious consequences. Shrimp which is shipped in other than fresh and frozen condition (such as breaded) may be subject to a different rule of origin.
PRIORTIES FOR CUSTOMS
10/05
In last month's edition, we mentioned Customs had begun auditing companies regarding intellectual property rights. The following issues have been identified as additional priorities for
Customs: textiles and wearing apparel, agriculture, revenue, penalties, and antidumping and countervailing duty. Into how many of these categories do your products fall?
UNASSEMBLED DEFINED
10/05
In ABB, Inc. v U.S., Case 05-1003, the classification of certain cables was decided by the
Court of Appeals for the Federal Circuit. It did not agree with the importer that fiber optic and high-voltage electric cables which were joined together after importation constitute an
unassembled article. The cables had separate commercial value, were capable of functioning independent of each other and so had to be classified separately. If you import goods which
are not in their final form, a review of your classifications may be in order.
CUSTOMS AND IP RIGHTS
09/05
Surprise! Regulatory Audit has begun auditing companies regarding the trademarks and copyrights found on their products. It's easy to prove if you are the holder, but what if you are not?
Los Angeles Customs trumpets itself as accounting for about half the IP seizures in the country. When there is obvious infringement, it's an easy call, but what about those
circumstances where Customs alleges the imported goods bear a mark which is confusingly similar to someone else's? What about if the value of the goods doesn't warrant the cost of
the fight? There is a mountain of case law in this highly technical and complicated area. Given the complexity of many Customs elements of in audit, imagine where this new attempt could
lead? What about the NAFTA exception?
Customs Update: Bond Guidelines Change Again
(Published in the Journal of Commerce Sept. 16, 2005)
 to view document in printable format
A series of recent articles have reminded us all that Customs and Border Protection is still
being criticized for its processing of anti-dumping and countervailing duty entries. One such article reported that Customs collected only $25.5 million of the $195.5 million owed between
2002 and 2004! Another highlighted the dramatic increase in the number of anti-dumping cases filed since enactment of the so-called Byrd Amendment. The number of cases rose
from 15 in 1997 to more than 30 yearly in 2002 through 2004.
The Byrd Amendment, named for Democratic Sen. Robert Byrd of West Virginia, is part of the
Continued Dumping and Subsidy Offset Act of 2000. It mandates that companies which bring petitions alleging dumping or countervailing duties apply, if successful (and precious few are
not), are rewarded through distribution of the very funds collected as a result of their successful actions. Naturally, these types of proceedings are viewed as self-serving. Many
companies have benefited quite nicely. In fact, the latest figures suggest that 40-plus companies have received more than $1 million each. Of course, the World Trade Organization
has found the Byrd Amendment to violate its rules and several countries have already taken or will shortly retaliate against American products, notably the European Union, Canada and Mexico.
In response to that criticism, in July 2004 Customs published guidelines for the setting of
bond amounts involving agriculture/aquaculture goods subject to anti-dumping duties. At that time, Customs announced that in the future, bonds for shrimp would be set at the value of
product imported for the preceding 12 months multiplied by the dumping duties that value would generate. So if $1 million was the value and the dumping margin was 40 percent, the
bond amount becomes $400,000, plus the minimum continuous bond of $50,000, for a total bond amount of $450,000.
In August 2005, Customs issued a clarification. In the past, it was only in the context of textile and apparel imports that Customs sought production records to prove where a given
shipment was processed. Requests for similar documents are now often made in the context of shrimp importations. In the past, under the now expired textile quota system, importers
(some with the complicity of their suppliers and others without any knowledge of what was being done) often found their goods had been transshipped, i.e. made in one country (e.g.
China), shipped to a second country (e.g. Vietnam), relabeled to reflect the name of the second country and then exported to the U.S. That syndrome has now impacted the shrimp
industry. As a result, its announcement Customs advised that changes are being made to the way in which bond amounts will be set.
First, it appears Customs intends to expand the types of products subject to the new guidelines as it announced Customs will now give 60 days notice for any new products
subject to these increased bond guidelines. At the same time, Customs states that if a product has been subjected to the guidelines and the need changes, it will remove the product
from the list.
In deciding whether to include products under these revised bond guidelines, a series of factors will be considered:
1. Previous collection problems concerning a specific case or industry;
2. Similarity to previous cases or industries experiencing uncollected revenue problems;
3. Whether the merchandise is subject to very low duty rates or was it duty free prior to the dumping case being initiated;
4. Projected ability of the industry to pay future duty liabilities;
5. Low capitalization of the involved industry such that new or increased duty liabilities
create increased risk;
6. Whether the involved industry is so highly leveraged that new or increased duty liabilities create increased risk; and
7. Any other relevant factors.
In publishing its notice, Customs also advised it may choose to increase the bond of a given
importer, even if calculated in accord with the newly stated formula. If so, the importer will be given 30 days notice and will have 30 days to respond. The new bond amount will not take
effect until 14 days after the response is reviewed and a final determination sent to the importer.
In gauging the importer's response, Customs will evaluate:
1. The importer's prior record regarding timely payment of all duties, taxes and
charges;
2. The importer's prior record in complying with redelivery demands and responses in other enforcement and administrative actions;
3. The value and nature of the merchandise involved;
4. The degree and type of supervision Customs will be required to exercise over the transactions;
5. The importer's prior record in honoring bond commitments, including payment of liquidated damages and anti-dumping/countervailing duties;
6. Any additional information contained in any bond application;
7. Any other factors, such as whether the importer has switched sourcing so as to lower its duty liability.
While the list does not specifically mention transshipment, it seems obvious that if an
importer has participating in transshipping or had its suppliers do so, Customs would need to more closely supervise those importations, and that, in and of itself, could lead to a higher
bond amount.
Most importers of shrimp have encountered problems with the new bond requirements
because the number of sureties writing these types of bonds has decreased dramatically and the few who are still writing them are requiring 100-percent collateral, often through stand-by
letters of credit.
If subject to Customs' August directive, the formula used to set an importer's bond amount will
consider sudden changes in declared value, claimed country of origin, classification and the
like. If Customs concludes the importer has flunked the "attitude test," the bond will be set by
multiplying the 12-month import value by the deposit rate in effect on date of entry. A similar formula may also be applied to first time importers.
If subjected to this higher bond requirement, the importer must wait 3 months before seeking reconsideration. A decision on any such request will be made within 30 days.
Now more than ever, having a good reputation with Customs is important. Flunking the "attitude test" will come at an ever higher price!
SEAFOOD THAT GOT HIGH!
08/05
On August 1st, Florida's Agriculture and Consumer Services Commissioner announced the arrest of two men for allegedly trying to smuggle nearly 200 pounds of marijuana from Florida
to New York in a refrigerated truckload of seafood.
SOLID WOOD PACKING MATERIALS
08/05
Customs has published another announcement reminding importers the soft wood packaging materials regulations will become effective in the U.S. on September 16, 2005. Shipments will
be stopped. Make sure you are ready.
BASMATI RICE SEIZED
08/05
FDA recently announced that U.S. marshals seized over $80,000 worth of basmati rice. FDA held the Pakistani rice to be adulterated by insect contamination - weevils, beetles and insect
larvae were found during a laboratory analysis.
As is typical, the goods were held at the importer's premises under embargo but when the
importer refused to destroy or recondition, FDA took the action of asking the U.S. Marshal to intervene.
KING CRAB SHIPMENT FORFEITED
07/05
The U.S. Court of Appeals for the Ninth Circuit issued a decision in June 2005 holding that King crab taken in violation of Russian fishing regulations is forfeited under the Lacey Act. The
facts of the case involve two Russian vessels which were suspected of catching the crab in waters protected by Russian law while having their monitoring equipment turned off. When the
crab was off-loaded in Blaine, WA, Customs seized it under the Lacey Act, 16 U.S.C. § 3372(a)(2)(A), relying on evidence provided by Russian authorities. The importer argued he
held a security interest in the load through a financing agreement with the Russian fishing vessels and there was nothing inherently illegal about possessing crab. Besides, said the
importer, I know nothing about where the crab was caught.
The trial court held the innocent importer defense was not available because the crab itself
was contraband because of where it was caught, even though the load might not otherwise be illegal to possess. The Lacey Act makes it illegal to import, export, transport, sell, receive,
acquire or purchase any fish or wildlife or plant taken, possessed, transported, or sold in violation of any law, treaty, or regulation of the U.S., any Indian tribal law, if the law or
regulation of any State is violated or in violation of any foreign law. See 16 U.S.C. §3372(a).
The Act provides for both civil and criminal penalties. On appeal, the Ninth Circuit affirmed the decision of the lower court.
While decided by a federal appellate court which has jurisdiction only over the U.S. western
states, this case puts all traders of fish, wildlife and plants on notice to be sure they know and can properly document where their product originates. In this case, what cost the
importer his goods was the fact he did not know (or at least claimed not to know) the vessels went into protected waters.
For more details, see USA v. Deep Sea Fisheries, et al, No. 03-36006, D.C. No. CV-02-02167-JCC (June 9, 2005).
EU ADDS TO HELP DESK
07/05
The EU recently announced the launch of the second phase of its on-line Export Helpdesk. The site includes information about the import requirements of the EU and its member states.
It also provides an excise tax and VAT overview, along with details about import procedures and general EU requirements. For more details, see http://export-help.cec.eu.int.
CUSTOMS SEEKS TO LIMIT HOLDING
06/05
In Park B. Smith v U.S., 347 F.3d 922 (Fed.Cir. 2003); 25 C.I.T. 506 (2001), the Court of Appeals upheld a Court of International Trade decision regarding the classification of certain
cotton woven linens, many with decorative holiday designs. Finding neither court addressed what Customs considered to be the key issue of the Explanatory Notes, the agency is now
invoking the provisions of 19 U.S.C. 1625(d) and proposing the holding in the case be limited to the entries before the court. Comments on Customs’ proposal must be filed no later than
July 29, 2005.
C-TPAT UPDATE
02/05
Working through various trade groups and COAC, Customs has now issued five (5) different versions of the C-TPAT requirements. While Customs seeks to enhance and upgrade the
program, none of the proposals really address the important questions, such as - is the program mandatory or voluntary? what happens if you can’t secure the supply chain at point
of manufacture but will elsewhere? what happens in case of non-compliance? how does one make the program meaningful for small companies?
Of equal importance is where is the long promised “green lane” or expedited release? Comm. Bonner says it is coming, but when? will it be available to the thousands of companies still
waiting to have their applications approved? or must a company be validated prior to getting the benefits?
Will FDA finally recognize C-TPAT in enacting its trusted shipper program?
MISC. TRADE BILL CHANGES
02/05
On December 3rd, the Misc. Trade and Technical Corrections Act of 2004 was signed into law. While much of the bill deals with the usual litany of duty suspensions, there are
provisions of general interest to the trade and take effect for entries filed on or after December
18, 2004. For more details, review the bill – H.R.1047, but here are some of the highlights:
Protests – the time within which to file has been extended from 90 days to 180 days after
liquidation, but clerical erRodriguez O’Donnell claims under 1520(c) [which could be filed up to a year after entry] are eliminated. Claimants will now only have one method by which to
challenge Customs’ actions upon liquidation or other protestable action – the filing of a protest.
Reconciliation is extended to 21 months from earliest entry summary date. However, NAFTA claims are still governed by the one year rule due to language in the NAFTA agreement itself.
Of particular interest is the provision which extends the time within which to pay the duty from 10 to 12 working days. While Customs Headquarters has not yet issued its interpretation, it is
expected the 12 day time limit will regularize the way in which ACH payments are processed, nothing more, and will not extend the current 10 business day rule.
AAEI EXAM PROJECT
12/04
AAEI has extended the time frame within which to participate in its Customs exam survey to January 31, 2005. AAEI wants to know about the frequency of these exams and what it is
costing the trade. For more information call 202-857-8009
WHO SUPPLIED THE SILLY PILL?
10/04
In the waning days of this Congressional session, Senator Hollings' bill moved forward seeking
to impose a $5,000 per bill of lading penalty on all goods sitting on the pier/wharf more than seven (7) calendar days after unloading, unless entry has been filed. Due to the efforts of
various trade groups, the language has been changed to allow goods without entry to be moved to public stores, general order or a centralized exam site. It appears in-bond cargo
may be exempt from this requirement.
Another bill introduced in the late stages of this session would require 10% of all containers
entering the U.S. to be manually examined. This proposal includes C-TPAT member cargo among the goods to be examined. Senator Schumer has apparently now agreed that any
containers x-rayed would be counted in this 10%!
Wondering about the impact of trade issues on your company? Contact the FTA -foreigntrade@earthlink.net - about its comprehensive program in L.A. on Oct. 18 and 19 -
Partnering for Trade Prosperity and Growth.
DNA SPREADING ITS WINGS
10/04
DNA testing has been used in a wide variety of contexts and now is being used by an international team of scientists to pinpoint the geographic origin of illegal ivory shipments.
Samples of DNA were extracted from elephant droppings and skin biopsies obtained in 16 African countries. The resulting information was used to build a DNA-based reference map to
assign tusk origin. Given this development, one can imagine it will be only a matter of time before science of many difference types is used to determine origin.
ADVANCED TRADE DATA INITIATIVE
07/04
Customs Comm. Bonner has introduced a new program - the Advanced Trade Data Initiative - which is designed to identify the true port of origin and all intermediate stops; learn all the
parties associated with the shipment; determine the veracity of commodity descriptions; and improve risk targeting and anomaly analysis.
While the principles have been articulated, little was said about how this program will work. Certainly many of these facts will be much easier to gather once ACE is in place, but what
happens in the meantime?
PARTIAL RELEASES
07/04
A continuing frustration for importers is the examination of part of a shipment. Customs keeps changing how it will treat those containers not part of the goods being examined, so check with your broker before breaking the seal to avoid a penalty.
BOND AMOUNTS CHANGED
07/04
Given the dramatic rise in dumping cases and the breath-taking number of uncollected dollars due to companies going out of business and having bonds too small to cover the dumping
duties assessed, Customs has changed the guidelines by which ports will set bond amounts. For more details, check the Customs website for the Amendment to Bond Directive
99-3510-004 which was issued July 9, 2004.
EXPECT FDA CIVIL PENALTIES TO START
06/04
During this phase of enforcement (Phase 3), if no prior notice is filed, goods will be refused admission and a civil penalty from Customs is possible. If prior notice is filed but the
information is either inaccurate or untimely, a civil penalty is possible.
On August 13, 2004, penalties will become mandatory for all types of violations regarding prior
notice. Are you ready?
MEXICAN INFO EXCHANGE
04/04
The Mexican and U.S. governments have agreed to an exchange of limited information which
is intended to assist the Mexicans in reducing commercial fraud. Mexico has also signed an agreement for assistance with SGS. Traders are reminded that under Mexican law, the
confidentiality which applies to document submissions to the government does not apply when providing those same documents to a private party. To overcome this dilemma, what
many in Mexico are doing instead is arranging meetings with government officials to satisfy any concerns which may exist.
SEVERE DELAY PENALTY
04/04
The Maritime Security Act (S. 2279) currently under consideration contains a provision calling
for a fine of $5,000 per bill of lading for cargo left on the pier more than five (5) days. Such a
provision is, of course, at odds with the Customs regulations regarding general order. To avoid the penalty, the bill also allows cargo movement to a public store or general order warehouse
for inspection, which is clearly contrary to the requirement placed on importers to file an entry before moving cargo.
RAIL AMS ANNOUNCED
04/04
When Customs (CBP) implemented the advance manifest rules, exceptions were written in
regarding rail transport until such time as the Automated Manifest System (AMS) could be made fully operational. CBP has announced that rail AMS is now operational and has
published the mandatory AMS dates which occur between July and September.
Customs Update: What's going on at CBP?
(Published in the JOURNAL of COMMERCE OnLine Jan. 26, 2004)
 to view document in printable format
To fans of the old television show, "The Honeymooners," the phrase "To the moon, Alice!" has
a familiar ring. It is the statement used by Ralph Kramden when he became highly frustrated with the common-sense answers of his wife, Alice, to some of his more hare-brained
schemes and ideas! While what Customs and Border Protection (CBP) is currently trying to do is anything but hare-brained, it does make one wonder what is going on.
The Department of Homeland Security in general and CBP in particular are under enormous pressure to secure our borders. It isn't just a matter of owing that security to the American
public, it is also a matter that if CBP isn't able to come up with programs which work, Congress will, and that would be disastrous. Frankly, Congress has already shown how little
it understands about trade and business and were it not for the myriad of trade associations and lobbyists who work Capitol Hill on these issues, we would have an even bigger mess on
our hands.
C-TPAT should work for big AND small
Anyone who is an international trader knows the entire supply chain security system is based
on the honesty of the person who prepares the documents. None of us really believes a terrorist is going to accurately manifest the guns, ammunition, toxin or other device he intends
to smuggle into the U.S. and use to cause devastation. So, let's talk turkey! If CBP is serious about making the Customs-Trade Partnership Against Terrorism (C-TPAT) work, it should
focus on working with industry to make that program work for the smaller companies.
It is understandable that CBP began its efforts by focusing on the "big" guys. After all, to get
the program off the ground, you go to an audience you know will support your message. Large corporations are interested in security because they want to protect their brands, and rightly
so. But do any of us believe a real threat exists with the big guys? No! Of course, any shipment can be compromised, but there are perhaps 1,000 large importers (to use CBP's
figures). What about the other 399,000 importers in CBP's database? Undoubtedly there are small companies which are being innovative and so are able to take some steps towards a
more secure supply chain, but the small- or mid-size buyer simply lacks the clout to mandate what its supplier is required to do. So, what is the solution?
Let's begin by discussing international efforts towards agreed-upon security standards, including standards for equipment, training and staffing. It's great that we have inspectors in
foreign ports who look at manifest and intelligence information in selecting shipments to inspect, but does that really make any one feel safer? True, there is the occasional
well-publicized illegal shipment which gets seized, and thank goodness that happens. But what about a bigger bang for the buck?
It is generally accepted that a smaller company can be more easily corrupted than a large one, then how about tackling real cargo security? As noted, smaller companies cannot rely
on their buying clout to influence those with whom they do business, but they can take charge of who they use as service providers. What about making it worth their while? Some of
the larger freight forwarders and 3PLs have talked in terms of forming consortiums and purchasing their own mobile scanners or similar systems for the purpose of x-raying all the
cargo they transport.
We all agree that cargo security comes from being able to vouch for the contents of the
container. Since that generally cannot be accomplished at the plant where the goods are made, why not set up a system which acknowledges that fact but allows cargo security at the
next most logical point -- where it is stuffed in the container or, at least, comes into the custody of the forwarder? Given that a these x-ray systems cost approximately $1 million
each, what these forwarders want in exchange for such a sizable investment is some assurance from CBP that when their cargo arrives at destination, it will be given expedited
treatment. So far, the answer from CBP has been no.
This despite the fact these companies are willing and indeed want the foreign-based CBP
inspectors to visit their facilities to confirm they have properly trained their personnel, are accurately operating the equipment and are timely reporting any anomalies. If CBP isn't
prepared to make it worth their while to make such an investment, how can we say the supply chain is really more secure today than it was a year ago?
Sharing best practices a key
From the start of C-TPAT, Customs explained it went to the large companies first in order to
take advantage of their ability to force multiply, i.e., use their clout to make things happen. If
CBP is serious about the use of force multipliers and is equally interested in real supply chain
security, then it is going to have to shift its focus and find more creative ways of dealing with the trade beyond the large multi-nationals. One of the stated benefits of C-TPAT membership
is supposed to be the sharing of best practices. How about sharing with the public at large those best practices now being successfully used by small businesses so others can try to
build on them? Does anyone really believe the so-called "smart" containers are compromise-proof?
It's enough to make a trader want to go to the moon!
AMS SHIPPER CHANGE STAYED
02/04
As part of its ramp-up for national security, effective March 4th, CBP wanted to change the definition of shipper so as to require carriers to transmit the name of the foreign vendor,
supplier, manufacturer or similar party, rather than the name of the entity causing the shipment to be tendered to the carrier (such as the nvocc)! A number of trade associations
objected on different grounds, including by ignoring the party tendering the shipment, there is a gaping security hole.
The World Shipping Council, National Industrial Transportation League, Retail Industry Leaders Association and National Customs Brokers and Forwarders Association of America
all filed petitions. CBP is studying their comments and, in the meantime, has suspended the proposed change.
ABI PROGRAMMING UPDATE
02/04
CBP has completed programming changes so the ABI system now will accept U.S.-Chile and U.S.-Singapore special designations at time of transmission. If you filed entries earlier and
didn’t make claims under either agreement, be sure to file your refund claims now and monitor the liquidations.
CLASSIFICATION HEADACHES ABOUND
02/04
Even as duty rates drop, classification disputes remain. If you are involved in importing filter materials, a new tariff question has arisen regarding non-woven textile air filtering media.
Customs insists 5911.40.00 at 8.5% is correct. We contend 5911.90.00 at 4.2% is correct. If you are impacted, check our website for more details later in the week.
If you are importing multi-media monitors, you have run into the 8471 (Free) vs. 8528 (5%) dispute. Here, too, it appears to us Customs is incorrect.
Be advised criminal investigations are increasing over classification disputes!
to download “Filter Media Classification Issue” document in PDF format
TEXTILE IMPORTATIONS BECOME EVEN MORE COMPLICATED
12/03
We covered the issue of Chinese textiles and garments allegedly being smuggled into the
U.S. through the corruption of the in-bond system in an earlier edition of our newsletter. Now the process of importing textiles and garments is getting even more intense focus. At a recent
Los Angeles program, Customs announced that non-quota entries (regular consumption entries) will be subject to even more examinations nationally. Customs apparently has
evidence that textiles and garments are being misdescribed so as to circumvent quota/visa requirements.
Customs identified the following countries as the primary sources of suspected
transshipments: Vietnam, Russia, The Maldives, South Africa, Uzbekistan, Kenya and Botswana, in descending order of value. As a result, every shipment from these countries is
being carefully examined and in the vast majority of cases, production records are being demanded, often followed by seizure asserting allegedly counterfeit visas were submitted.
COOL RULES DELAYED
11/03
The effective date of the Agriculture country of origin labeling rules will apparently be delayed. Supposedly the rules may be lifted for two (2) years for meat, produce and peanuts, but not
fish. Seafood will be required to comply by September 2004. The outbreak of Hepatitis A from Mexican green scallion onions is apparently confounding the issue. For more details about
the COOL rules, check our website - www.rorlaw.com.
SPECIAL BILL HELD UP
11/03
What had been promised as the fix to the 24 hour rule computer mess has been delayed.
Originally announced to be in place by December 6, the so-called Special Bill, designed to allow nvoccs to transmit inbound manifest information which would be matched against
master bill of lading data transmitted by steamship lines and then allow vessel operators to handle arrival and in-bond transport, has been delayed because Customs is not satisfied with
the results of the testing conducted to date. While Customs has said it is working on system fixes, no new effective date has been announced.
Responses to Special Bill Discussion Points by Carriers and NVOCCs
to download document in PDF format
Customs Update: Details on Advance Manifest Rules
(Published in the Journal of Commerce on Jul 22, 2003)
CLICK HERE for a printable version of this article.
The long-awaited advance manifest rules are scheduled to be published in the July 23 Federal
Register. These new rules address each mode of transportation (vessel, air, truck and rail) separately stating individual time frames within which shipment notification must be given to
Customs and Border Protection (Customs) prior to arrival or departure.
Regardless of the mode of transportation, the manifest information must be sent to Customs
in an approved electronic format for targeting and analysis. However, in a worthwhile concession, the agency will transition the rules taking effect at different times for different
modes of transportation. Additionally, quite wisely, Customs built into the process an acknowledgment of the differing states of automation between vessel, air, rail and truck
movements. The new regulations will not take effect for 90 days, or until Oct. 22, 2003. Comments in response to the latest proposals are due no later than August 22, 2003.
In explaining the new regulations, one of the first points Customs makes is that business proprietary information will remain confidential, except those portions of the vessel manifest
which are already required to be publicly disclosed. In other words, air, rail and truck manifest
data will not be available to the general public in any form, but mail shipments remain exempt from these new rules.
Intending to build the manifest reporting system relying on existing technology, Customs is banking on the Automated Export System for all outbound shipments. The Automated
Manifest System already operating for vessel, rail and air will be relied upon for imports, while for truck shipments there is currently no automated system. Therefore, the Free And Secure
Trade System (FAST), Pre-Arrival Processing System (PAPS), Border Release Advanced Screening and Selectivity (BRASS) and Customs Automated Forms Entry System (CAFES)
and ABI In-Bond reporting will be called upon, at least until the Automated Commercial Environment (ACE) system is up and running.
For ocean shipments, the applicable time frame remains 24 hours prior to lading, but there was one notable change - the requirement that vessel operators file their manifests
electronically. While some in the trade argued in favor of eliminating the filing requirement for NVOCCs, Customs held fast arguing that it needed details at the shipment level in order to
make proper targeting determinations, especially since the advance manifest rule is an integral part of the success of the Container Security Initiative. While many of the concerns of
the trade were incorporated into these final rules, Customs rejected the idea that importers or their brokers should provide shipment details in support of manifest targeting, finding instead
that such an approach was "neither advisable nor practicable" at this juncture. Further, regardless of the mode, Customs reinforced that cargo remaining on board the carrier had to
be manifested and reported within the same time frames as cargo being off-loaded.
These regulations become mandatory for ocean shipments within 90 days of publication, by
Oct. 22, 2003, and apply to all vessel operators and only those NVOCCs choosing to participate.
Things have changed dramatically for air shipments. Customs' original proposal was 12 hours prior to lading but only eight hours for express courier shipments. From the outset, it was
obvious to the trade these time frames were unrealistic. Customs has agreed and so will require advance notification only four hours prior to arrival from all origins except North
America where a wheels-up approach is approved. North America includes Mexico, Canada, Central America, South America (north of the equator only) plus the Caribbean and Bermuda.
These rules are mandatory on all air carriers but allow a number of other parties to provide some of the data including ABI filers, CFS and consolidators, and express consignment
carrier facilities; freight forwarders may also participate provided they qualify in one of these
capacities and post the appropriate international carrier bond. In the event any of these parties
provide the data, an appropriate identifier must be transmitted by the air carrier. This difference between air and ocean shipments is due to the advanced capabilities of Air AMS.
These rules become mandatory for air shipments on or after 90 days from July 23, 2003 but there could be delays in implementation generated by the need for training of Customs
personnel, programming changes to Air AMS and/or time needed to complete certification testing of new participants.
For rail, the original proposal was 24 hours prior to lading. There was never any question, this time frame, too, was unrealistic. Customs will now require advance manifest information from
rail carriers no later than two hours prior to arrival of the cargo. Customs settled on this time frame with the expectation that rail carriers will transmit information about many shipments
well in advance of the two-hour time limit. Otherwise, Customs posited, it is likely there will be many more rail cars uncoupled for examination at the border!
Rail AMS is on par with Vessel AMS and so data will only be accepted from carriers. However, all forms of manifesting will be revisited when ACE is operational.
In responding to Customs' original proposal, many parties sought exemptions for one or another type of transaction or commodity. The rail context is the only one where one was
granted - to cargo transiting through Canada or Mexico on its journey between two points within the U.S.
Here again, the transition period is 90 days from the date a given port becomes operational. Customs will publish information when those ports currently incapable do become operational.
As in the ocean and air environment, all cargo remaining in the railcar must be manifested, even if it is transiting the U.S.
Needing to put something in place before Truck AMS is operational, Customs proposes a unique framework for truck shipments. Customs will allow 30 minutes advance notification if
the trucker and importer are part of FAST, due to the pre-qualification required to be a member of this program. Under PAPS or ABI In-Bond, the minimum time frame is one hour. However,
CAFES and BRASS will remain paper programs as neither, in the opinion of the agency, lends itself to automation. Eventually both will be phased out. For now, Customs is looking at
modifying BRASS so that the parties eligible will be gradually reduced. CAFES will be allowed only at land border crossings where no other automation is available for in-bond shipments.
The transition period for truck shipments is much longer than any other mode, because, quite
simply, currently there is no automation. As a result, the effective date of these truck rules will be 90 days from publication when Customs informs the public that an approved data
interchange is in place and operational and states that carriers must commence using it to present documentation. Given the proposed interim system, either the carrier, the importer or
broker will be allowed to submit advance manifest data.
One other notable exemption is cargo which qualifies for informal entry on a C.F. 368 or 368A,
goods not valued in excess of $2,000 which are free of duty and entered on a C.F. 7523, and American products entered on a C.F. 3311. In those instances, the entry serves as both the
entry and the manifest.
The Trade Act of 2002 also requires advance manifest data be submitted for export cargo. As
there is no approved electronic data interchange system for exports, Customs has agreed to rely on the Automated Export System. AES is going to be upgraded by Census, but if there is
no export manifest module in place when the new rules take effect, Customs will accept the following data elements through AES: mode of transportation, carrier identification,
conveyance name, country of ultimate destination, estimated date of exportation and port of exportation.
Option 4 post-departure filing will be continued. Although not stated in the new proposal, Customs has announced publicly that it will continue to work with Census on AES but may
well require all current participants to reapply so as to be sure it has sufficient data with which to screen these shipments after the fact. Customs has also said it will work with TSA's
Known Shipper program. Clearly stated in the proposal is language explaining that Customs expects mandatory AES filing to be in place before mandatory AES manifest filing is enacted.
On the export side, the time frames are: vessel: no later than 24 hours prior to departure; for air: no later than two hours prior to scheduled departure; for truck, including express
consignment couriers: no later than one hour prior to arrival at the border, and for rail: no later than four hours prior to the locomotive being coupled to a border-bound train.
Customs reiterated that requirements placed on exports by other agencies will remain in place. Similarly, requirements placed on imports by other agencies will remain in place, such
as the FDA bioterrorism prior notice rules. Further, Customs' 72 hour advance notice requirement for vehicle exports remains unchanged.
One other area of contention with the trade was whether advance manifest notification would be mandated where no Census Shippers Export Declaration was required. Customs has
answered that question with a resounding no by stating Census' exemptions apply in the manifest context as well.
While there remain many problems with the already existing vessel advance manifest rules in terms of Customs holding NVOCCs liable for acts which are controlled by the vessel operator,
the fact remains Customs took the myriad of complaints it received to the original proposals, conducted many outreach efforts and seems to have come up with a framework which should
allow the agency to screen and target shipments without untoward delays. We just have to hope that the implementation process is not as painful as what happened in the ocean environment!
CUSTOMS ISSUES ADVANCE MANIFEST REGS.
07/03
In the July 23, 2003 Federal Register, Customs will publish its final advance manifest
regulations. The new system will be built relying on existing or expected computer capability, so AES will be used for outbound while Vessel, Air and Rail AMS will be used for inbound,
with Truck AMS to be relied upon once built.
The applicable time frames for imports are: Ocean - 24 hours; effective by October 21, 2003. Air - 4 hours unless being shipped from North America (Canada, Mexico, Central America,
South America (north of the equator only) plus the Caribbean and Bermuda and then wheels up governs; mandatory by October 21, 2003 unless extended for reasons such as training,
programming changes or time needed to certify participants. Rail - no later than 2 hours prior to arrival; exempt is cargo moving between two U.S. domestic points which transits either
Canada or Mexico; mandatory 90 days from the date each port becomes operational. For Truck which does not become automated until ACE is up and running, Customs opted to rely
on existing programs, specifically FAST (30 minutes prior to arrival) and PAPS and ABI in-bond (1 hour prior to arrival); with CAFES and BRASS the entry will serve as the manifest
so these program remain paper driven and will be phased out over time; effective 90 days from the date Customs publishes notification that an approved data interchange system is
operational and must be used.
Outbound time frames are: Vessel - no later than 24 hours prior to departure; Air - no later
than 2 hours prior to scheduled departure, Truck and Express Consignment Couriers - no later than 1 hour prior to border arrival; Rail - no later than 4 hours prior to the engine being
attached to the train to go foreign.
Option 4 remains with revisions, Census' exemptions re SED filing also will be honored.
Customs Update-Security Tops AAEI Agenda
[Published June 23, 2003 JOURNAL of COMMERCE ONLINE]
CLICK HERE for a printable version of this article.
NEW YORK — At a time when many traders complain there are too many important issues to manage, the American Association of Exporters and Importers held its annual conference
June 16-17 and focused on the biggest issue of the day - security. However, rather that "just"
talk about Customs-Trade Partnership Against Terrorism or the Container Security Initiative, AAEI structured its program to deal with security issues from both the regulatory and the
physical security perspective and by so doing encompassed all of the current hot-button issues.
The theme heard at all the sessions was that to be truly successful, companies will have to figure out on their own how to secure their supply chain. Any question about whether
government understood the shipment of goods was answered with a resounding "no" when Customs rolled out its advance manifest rules and the Food & Drug Administration proposed
its bioterrorism regulations. Equally important, there is no coordination of anti-terrorism activities by the federal government between the agencies.
One session reinforced the point further when an FDA representative described C-TPAT as focused on container security! Another session underlined the lack of communication between
the agencies when another panelist described a situation of importing a line of products subject to the jurisdiction of several different agencies. Representatives of two of those
agencies with offices down the hall from each other had never met until something came up on one of the speaker's company's shipments!
Further efforts by the government to insert itself into the process were evident when the idea of licensing shippers export declaration filers was described in some detail as focused on
requiring one licensed person at each filing location!
While the requirements of the Sarbanes-Oxley Act of 2002 - broad-based legislation affecting
corporate governance, financial disclosure and the practice of public accounting - were touched upon as they impact publicly-traded companies and how that level of structured risk
management will be expected from other companies by the government, perhaps the most useful parts of the program were the tips given by the speakers who represented various
import and export companies as to how they were able to successfully implement C-TPAT and other meaningful security measures. In each instance, it is clear a team assembled from
the various disciplines within the company was necessary, but more than anything else, the most successful programs were the result of active support from upper management.
There has been much criticism by business of C-TPAT as a make-it-look-good paper chase, what became quite clear from the many presentations at AAEI is that private industry has
taken to heart the need to develop its own security methods and to have those efforts result in ensuring that what goes into the packages which are stowed into the container, railcar or
trailer are what actually arrives at destination. The process is pushing documentation, security and all the other shipping formalities away from destination and toward origin.
FDA UPDATE
06/03
When FDA announced its prior notice regulations last April, the trade was caught off-guard by a proposal that the agency would build its own computer system. It turns out there was a
miscommunication between FDA and Customs which took intervention from the trade to resolve. The good news is Customs and FDA have now worked out a way to allow importers
to provide the required data to FDA through the existing Customs computer system.
Separate and apart from that event, in the May 9, 2003 Federal Register, FDA published the
last of the two major regulatory changes expected under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 which deal with record keeping and
detention of goods. Regulations regarding these two topics, along with the previously announced prior notice and registration provisions, will become effective no later than
December 12, 2003.
RUSSIAN CUSTOMS PRE-CLEARANCE PROGRAM
05/03
“Transatlantic Streamline” has been created to expedite cargo at the Port of St. Petersburg
Russia from the U.S. Under the approval of the Russian government, Customs duties may be collected, and documents, inspections and verifications performed in the U.S. and remitted for
Customs release prior to arrival in St. Petersburg. Under separate agreements between Russian Customs and the Port, other benefits are being finalized including preferential
berthing and advanced ordering and availability of rail cards.
For further information, contact AmeRussia Shipping at 201-438-1807 and 713-880-1117 or by e-mail at amerussia@carroll.com or ani-hou@swbell.net
DUTIABILITY OF QUOTA
5/03
Transaction value is the basis of appraisement used by Customs to appraise the vast majority
of merchandise imported into the United States. The theory behind this basis of appraisement is that the value of merchandise generally is what a party pays for it. The transaction value of
imported merchandise is the total payment received by seller which includes all money or other consideration given to the seller for the goods, whether paid directly to the seller or
indirectly. Therefore, transaction value generally consists of everything of value that was paid or given to the seller by the buyer for the imported goods.
A common addition to transaction value is the cost of quota. However, in certain circumstances, the cost of acquiring quota may be treated as a nondutiable charge. While
quota payments made by the buyer to the seller of imported merchandise, or to parties related to the seller, are dutiable, Customs has held that quota payments made by the buyer
to a third party unrelated to the seller are not part of the price actually paid or payable for the imported goods. Thus, quota charges paid by the buyer to an agent may not be part of the
price actually paid or payable so long as the payments are not remitted, directly or indirectly, to the seller. This situation also may apply when quota is obtained through third party quota
brokers. In addition, Customs has held that quota payments made by a U.S. importer to a foreign subcontractor who was unrelated to a Taiwanese vendor were not dutiable.
In order to determine how to structure transactions so as to avoid having quota charges included in the Customs value of imported merchandise, an importer's sale structure, entry
documents, and business relationship must be reviewed. However, even if a determination is made that the quota charges in current transactions are dutiable, there may be ways to
restructure the transactions to exclude these charges. Please contact todonnell@Rodriguez O’Donnellgw.com for more information.
Somebody Took a Stupid Pill -
4/03
A customs broker in Texas recently pled guild to forgery in using a Customs form to collect a
business debt. The broker took a Customs Notice of Penalty and altered it to state a $1 million penalty had been issued against the party owing him the money and would be
mitigated to $3,000 if paid within thirty (30) days. $3,000 was exactly what the Mexican customer owed the broker. The broker will be sentenced in May. The maximum penalty is
three years and a $250,000 fine. Of course, one expects his brokerage license to be revoked as well!
Change to Supplemental Information Letters
4/03
Customs recently announced that all Supplemental Information Letters must now be
accompanied by a Post-Entry Amendment cover sheet in order to be processed. The form is available on Customs website at www.customs.gov or from us.
Customs Begins Issuing C.F. 28s for Security Reasons
4/03
There is much conjecture in the trade as to whether the C.F. 28 (Request for Information) was
ever intended for this purpose, but Customs has nonetheless forged ahead and is issuing a set of security questions to importers who have not already indicated their willingness to join
C-TPAT. Rumors are flying as to whether Customs even reads the responses beyond looking to see whether the importer states it will now join the program. The program officer in charge
has assured various private sector individuals the only purpose for the issuance of these notices is to obtain a security assessment about an industry. Supposedly there are no right
or wrong answers, but who said C-TPAT was voluntary?
Steel FAQs
2/03
The Import Administration has posted to its website 31 frequently asked questions (and
answers) for those importing goods subject to the Steel Import Licensing System. For more information, check the ITA website - www.ia.ita.doc.gov/steel/license/fax.html .
Business Proprietary Information Is Publicly Available
1/03
Under current law, a wealth of proprietary information about import and export shipments is gathered by publishers who then sell that information to the public. As a result, shipper and
consignee names and addresses, ports of loading and unloading, quantities and product descriptions are easily obtained by anyone willing to pay the cost.
Knowing of industry’s concern about even more proprietary information becoming public due to the expanded requirements resulting from the new 24 hour advance manifest rule, Customs
has yet to take meaningful action. Therefore, importers and exporters are advised to seek confidential treatment of their shipping details to the full extent allowed by law.
Steel Entries Trigger Penalties
10/02
Importers and brokers are advised to exercise extra care when entering steel products.
Customs is strictly enforcing the section 201 sanctions on these products. Enforcement actions range from detailed requests for information to support claimed exemptions to penalty
actions for even minor infractions, some involving as little as a $3 or $4 revenue difference!
One importer reported that Customs threatened a penalty for that importer's refusal to deposit 201 duties on exempted products after the effective date of the exemption but before the
publication of an updated Harmonized Tariff Schedule. To avoid problems, the importer was forced to deposit the duties and then file for a refund after the revised tariff was published. The
strict enforcement of these sanctions is the result of their highly political nature and the exceedingly complicated scope of the sanctions and the exemptions.
Customs Proposes to Close Certain Drawback Centers
09/02
Still looking to consolidate the locations processing drawback claims, Customs has
announced plans to close Boston, Miami and New Orleans, leaving New York, NY/Newark, Houston, Chicago, Los Angeles and San Francisco operational.
Boston and New Orleans would close 30 days after the final rule is published. Miami would close 180 days after final rule publication. Personnel at these centers would process existing
claims for 12 months. Any open claims would then be transferred to one of the remaining centers. Following closure at 30 or 180 days, all subsequent claims must be filed at one of
the remaining drawback centers.
MARKING REQUIRED -
08/02
Pointing out once again that every article must be marked with its country of origin, in HRL 562285 Customs rejected the idea of allowing underwear from many different countries to be
packaged in such a way that the outer boxes would state "See Garment for Country of Origin." While there are several rulings which allow reference to the product to determine
marking, Customs disallowed the operation proposed because the tags bearing the marking were not visible to the consumer through the proposed packaging.
SECURITY SURCHARGE
08/02
While the competing port security bills remain in conference in Congress, the complicated issue of who pays for that heightened security has been grossly simplified. There is currently
circulating a proposal which would assess a user fee of $15 per TEU for containerized cargo, $1 per metric ton for breakbulk cargo, and $.20 per metric ton for dry bulk cargo such as
grain. It is estimated this user fee (tax) would raise $700 million per year. Unlike the harbor maintenance tax, the fee would be collected and placed into a Port Security Trust Fund from
which 50% would be returned to the port where it was collected, with the remaining 50% being distributed to government agencies, other ports, shippers and others for security programs.
To discourage the idea of shipping goods through Canada, the user fee would apply to goods from there as well.
ACH Revised for Refunds
07/02
Customs has announced that importers may now receive refund payments through ACH. For more information, contact your customs broker.
Republicans Seek to Repay Political Debt
05/02
Many deals were struck by House Republicans in order to obtain the votes necessary to pass the fast track/normal trade relations bill (if finally approved, the bill would give the President
authority to negotiate trade bills and subject those bills to a straight approval/disapproval vote, rather than the usual Congressional procedure which allows amendments and extended
debate). One of the most widely publicized of those deals was the commitment made to Jim DeMint (R- SC). Coming from a textile producing state, Mr. DeMint wanted the rules of origin
for certain textile goods changed so those goods would only be eligible for the Caribbean benefits of the Trade and Development Act of 2000 if those textiles were dyed and finished in the U.S.
Republicans also promised that no trade-related measures would be brought before the House
for a vote until legislation was enacted which carried out that pledge. To repay their debt, the House leadership is rumored to have finally agreed to carry out its promise using the $29
billion emergency supplemental spending bill as its vehicle. It is understood a similar rule of origin will be included in any Andean Trade Preference Act renewal measure.
By using a spending bill, the measure by passes the jurisdiction of the House Ways and Means Committee where two of the most vocal opponents of the change are members,
Chairman Bill Thomas (R-CA) and Ranking Member Charles Rangel (D-NY). One should keep in mind that Cong. DeMint is up for re-election and the primary in South Carolina will be held
on June 11th.
Mr. DeMint is under heavy criticism in his home state and so one must conclude that yet
again, politics has reared its ugly head both in the fast track vote and at least the timing of the vote on the rule of origin change being proposed.
Interest Not Due on Delayed Drawback Refund
05/02
Confirming once again that statutes are to be interpreted in accord with their terms, the Court of Appeals for the Federal Circuit confirmed a Court of International Trade decision finding that
Hartog Foods International, Inc. was not entitled to a payment of interest simply because Customs failed to refund drawback eligible duties in a timely fashion. Both the lower court and
the appellate court pointed out that drawback refunds are not the types of collections described in 19 U.S.C. 1505 and, therefore, since there is no provision in 1505 for the
remittance of interest by the government in conjunction with drawback refunds, Hartog was not entitled to any interest payment. See Hartog Foods International, Inc. v. United States,
Case No. 01-1220, decided May 17, 2002.
Government Changes Abound
04/02
While much has been said about merging the border inspectional agencies into Homeland
Security and perhaps aligning them under the Dept. of Justice, other changes are also coming. For example, the Bureau of Export Administration (BXA) has been renamed the
Bureau of Industry and Security (BIS). This agency grants licenses and enforces the laws over a wide variety of goods sold by American companies for export from the U.S.
The Federal Aviation Administration is also undergoing changes. Some of its literature
renames it as part of the Transportation Security Administration.
Then there is C-TPAT. Customs has officially kicked off the Customs-Trade Partnership
Against Terrorism with a press conference in Detroit. Of note is the charter member companies - BP America, Daimler Chrysler, Ford Motor Company, General Motors Corp.,
Motorola, Inc., Sara Lee Corp. and Target.
One of the requirements to participate is an importer must be considered low risk by
Customs. In response to criticism that such a requirement was keeping many willing participants out of the program (not everyone has enjoyed a Customs audit!), Customs is
looking at ways to qualify companies as low risk without requiring them to go through an audit. At the same time, Customs has approached about 200 importers already designated as
low risk and invited them to join. The one meaningful carrot Customs is holding out to participants is expedited cargo release through the use of dedicated commercial lanes and
reduced inspections. While there remains serious question as to whether such benefits can be extended to those who trade across the U.S.-Mexico border (at least in the near future),
C-TPAT is further evidence that Customs continues to try to respond to the needs of the trade and the country with a variety of innovative programs. For more information about C-TPAT,
check the Customs web site at www.customs.treas.gov <http://www.customs.treas.gov>.
Duty on Steel
04/02
In response to the confusion which exists regarding which increase amount is to be imposed
of what steel product, Los Angeles Customs has issued Public Bulletin 02-010. It provides in question and answer format some clarity about this confusing situation. What it also includes
is a summary from the materials the U.S. Trade Representative issued about the products which are included and those which are excluded.
Freight Charges Deduction Revisited
04/02
At one point, in exercising reasonable care, Customs instructed importers to use $2.00 as the
figure to declare when the value of a shipment included international freight but the exact amount of the freight was not known. The purpose of the $2.00 figure was explained as a
means to flag for Census (which gathers trade statistics) that freight was included in the value of a shipment but was not deducted. According to Customs, that request has been withdrawn
by Census so importers are no longer allowed to make the $2.00 arbitrary deduction. Importers remain obligated, however, to insure the accuracy of their freight deductions and
also to make sure they can properly support those deductions with appropriate records.
Fax Power of Attorney Approved
04/02
In a move hailed by customs brokers as recognition of how business is really being done,
Customs issued 222743 back in 1991. Customs brokers have long been stymied by the conflicting problems of responding to the need to clear freight quickly while at the same time
making sure the importer provides them with an original and properly completed and executed power of attorney so as to not run afoul of the Customs regulations.
In the ruling request, it was pointed out to Customs that 19 C.F.R. § 111.23(d) requires the
original power of attorney to be retained. However, it also allows the copy to be retained. Based on the literal language of that regulation, Customs agreed that retention of a faxed
power of attorney complied with the regulatory requirements. Customs also went on to point out that while the agency may accept a faxed copy as adequate, it rendered no opinion as to
whether a court would do likewise. Therefore, importers should not be surprised if brokers continue to insist that the original power of attorney be immediately completed, executed and
returned.
Steel, Steel Everywhere, But Was Enough Done to Make a Difference?
03/02
While an avowed free trader, on March 7th, President Bush announced safeguard measures
intended to assist the U.S. steel industry to compete in the global marketplace. Imports from Canada, Mexico, Jordan and Israel were excluded. The text of the President’s announcement
along with other details can be obtained at http://www.whitehouse.gov. Information is also available from the U.S. Trade Representative’s web site at http://www.ustr.gov.
The safeguards exclude certain sources of steel products, i.e., those from what are described
as “developing countries” which are WTO members, provided the quantity of products imported from an individual developing country does not exceed three (3%) percent of imports,
or the developing countries as a whole do not account for more than nine (9%) percent of all imports. Exempt from the safeguards are such countries as Argentina, Bulgaria, The Czech
Republic, Hungary, India, Indonesia, Moldova, Poland, Romania, Slovakia, South Africa, Thailand and Turkey. Kazakhstan, Russia and the Ukraine are covered by the safeguards
because they are not WTO members. Data is to be reviewed on a quarterly basis and the USTR is instructed to initiate consultations with countries whose quantities increase. If
quantitative reductions do not follow, the USTR is authorized to modify the safeguards accordingly. Imports from GSP eligible countries are accorded similar treatment. Therefore,
China is not exempt as it is not GSP eligible.
The safeguard measures apply to certain flat steel, hot-rolled bar, cold-finished bar, rebar,
certain welded tubular products, carbon and alloy fittings, stainless steel bar, stainless steel rod, tin mill products, and stainless steel wire. While the higher rates of duty apply over a
three (3) year period, the rates drop progressively each year. For example, any finished flat plates over the established quota amount will be subject to a 30% rate of duty in year one,
24% in year two and 18% in the final year. Other covered products are similarly affected. The Secretary of Commerce is also directed to create an import license procedure.
To date, the Commerce Department had received about 1,000 requests for exemptions from
the higher tariffs, mainly from small manufacturing concerns who claim they are unable to obtain the specialized steel they need to make their products without importing it. So far,
about 150 exemptions have been granted. USTR and Commerce have until July 3rd to act on all such requests.
Further complicating matters was a Federal Register announcement on March 20th deferring
the payment of the higher duty rates until April 19, 2002. The stated reason for the deferral is
to allow the U.S. more time to consult with its foreign trading partners. Not waiting for the U.S. to act, the EU has developed a list of products on which retaliatory duty rates may be
imposed. Supposedly this list is intended to cause political harm to Mr. Bush and the Republicans in this year’s elections.
For more details about these steel safeguards, see this month’s Journal of Commerce column
which will be posted to the JOC web site in the near future. If you would like an advance copy, please e-mail us your request.
WHAT IS REASONABLE CARE? U.S. v. Golden Ship Trade Co., et al,
02/02
Slip Op. 01-7 is the first case attempting to address the question of - what is reasonable care?
The importer was alleged to have negligently presented material false statements on both the
entry documents and the t-shirts which misrepresented their origin. The t-shirts were imported from the Dominican Republic. Customs investigated and determined they were actually made
in China. The only operation undertaken in the Dominican Republic was to attach the sleeves. As such, there was no change in origin and so the claim of Dominican Republic origin was
materially false.
Customs then sought to impose a penalty for the misdeclaration and collect the ten (10%)
percent marking penalty for the falsification of origin on the garments themselves. The importer did not challenge Customs' final determination of Chinese origin but rather defended
on the grounds that reasonable care had been exercised. Citing the Pentax case, the Court of
International Trade found Customs failed to meet the burden of asserting that "but for" the mismarking, actual Customs duties were unpaid.
Failing to meet that burden meant Customs could not now seek recovery of the ten (10%)
percent marking penalty. As the importer did not challenge Customs' determination as to Chinese origin, the Government had met its burden of proof that a violation of 19 U.S.C. 1592
had occurred. Therefore, the defendant was left to explain what happened in order to minimize or avoid any penalty. The importer argued that it had been defrauded by the supplier and,
therefore, was not negligent. In the end, the court found that simply taking the statements of the supplier at face value without any attempt at verification is not reasonable care. The
importer did not inquire as to the origin of the fabric or the steps of production and where they were undertaken. Similarly, simply relying on the entry being prepared by the customs broker,
who itself relied on the supplier's commercial documentation, also fails the reasonable care test. Well now we know what reasonable care is not - perhaps soon we will get a judicial
framework to aid traders in identifying what is reasonable care!
CANADIAN SOFTWOOD LUMBER HIT WITH ADDITIONAL DUTIES
11/01
The U.S. Commerce Department has found softwood lumber from Canada is being dumped in
the U.S. and so seeks to impose a 12.58% antidumping duty, a move which has infuriated industry. The 12.58% was set in Commerce's preliminary determination released on Oct. 31.
That percentage gets added to the 19.3% countervailing duty imposed last August. In other words, the U.S. government has effectively imposed a 31.88% tax on lumber needed to build
homes and other woodbased products. What makes the result particularly interesting is the question of how a handful of U.S. lumber companies were able to so effectively push the Bush
administration for a new duty on Canadian softwood lumber at a time when the administration touts increased trade as one means to reinvigorate the moribund U.S. economy?
BORDER CROSSING DELAYS
11/01
For the latest information about heightened security steps and the attendant delays at the
land borders, log on to the U.S. Customs website at www. customs.treas.gov <http://www.%20customs.treas.gov>.
Tariff Engineering - Is it Still Viable?
Published in the Journal of Commerce on Sept. 25, 2001
Dating back to a court case decided in 1881, Merrit v. Walsh, 104 U.S. 694, a long-held principal of classification for importers is the concept of tariff engineering. Merrit also stands
for the proposition that goods are classified in their condition as imported. In its simplest terms, tariff engineering means an importer is allowed to make his product in such a way so
that the lowest possible duty rate applies at time of importation. In light of a recent appellate court decision, it is not at all clear how viable an option tariff engineering remains. See
Heartland ByProducts, Inc. v. United States, 001287, 001289, decided August 30, 2001.
In 1995, Heartland obtained a classification ruling from U.S. Customs for a sugar syrup
product. The ruling request detailed Heartland's intended operations. Based on what was submitted, Customs found the syrup to be properly classified under 1702.90.40, HTSUS, i.e.,
outside any tariff rate quota provision. Heartland fashioned its U.S. operations in reliance on that ruling.
In January 1998, a domestic industry association filed a petition asking Customs to overturn
Heartland's 1995 ruling. The request basically argued the intermediate sugar syrup Heartland imported should be classified under one of the tariff provisions which is subject to quota
because Heartland was importing a product comparable to sugars subject to those quota restrictions. Customs' original ruling decision confirmed Heartland's sugar syrup contained
more than 6% soluble nonsugar solids so it was exempt from the sugar quotas. However, domestic industry claimed the product actually fell below that mark and/or properly belonged
under yet another tariff provision because it was more correctly described elsewhere.
In June 1999, Customs issued a notice of intent to revoke the original ruling and reclassify
Heartland's syrup under one of the provisions which carried with it a tariff rate quota. [A tariff
rate quota applies by allowing a set quantity of a good to be imported at one rate of duty and when the maximum quantity is reached, a substantially higher rate of duty applies to
subsequent importations.] Specifically, as a basis for the revocation, Customs determined Heartland's imported intermediate syrup product had no separate commercial use or identity
and so, as a matter of law, Customs held it could consider post-importation uses of the syrup in making a final classification decision. Heartland reached the 6% level by including
molasses which was added to the mixture prior to importation. In reaching its conclusion, Customs found the molasses to be a "foreign substance" relative to the sugar and so held it
was not to be considered when the 6% figure was calculated. What was shocking about Customs' position was that the sugar provisions under consideration were not "use"
provisions. In other words, in the past, Customs only considered post-importation activities if tariff classification was based upon use. If no use provision was under consideration,
classification was based on the terms of the specific tariff provision(s) which might apply. For example, the tariff provisions regarding computers are specific provisions, they classify
computers. However, if a printer was imported, how it was used would be considered in determining whether or not it was intended for use with computers so as to fall in the Chapter
84 computer peripherals provisions vs. elsewhere as a "regular" printer.
Needless to say, the domestic sugar producers were delighted with Customs' decision. Their
industry was to be further protected and competition reduced. The international trade associations were united in wholeheartedly criticizing Customs for once again trying to
unilaterally change the rules. As sometimes happens, Customs was not moved by what the trade said and so in September 1999, it issued a final revocation of the earlier ruling.
Heartland's sugar syrup was now to be classified under 1702.90.10/20, HTSUS. Underpinning its decision, Customs found the addition of the molasses was not a genuine manufacturing
step but was instead intended to "disguise" what Heartland was doing for the sole purpose of escaping a higher rate of duty. According to Customs, because Heartland's activities
constituted an "artifice," it was permitted to inquire into post-importation activities. The molasses was considered an illegitimate ingredient. Customs reasoned one does not mix
molasses with raw sugar to obtain "sugar syrup." Therefore, the molasses could be ignored and the resulting syrup contained less than the requisite 6% of nonsugar solids and so was
subject to quota.
Because that result was devastating to Heartland's U.S. operations, it filed suit at the Court of
International Trade seeking a permanent injunction to prevent Customs from enforcing the revocation of its 1995 ruling. Customs lost on every point before the lower court. Rehearing
was also denied.
Understandably unhappy with the result, the domestic industry association and Customs both
appealed. In the meantime, the U.S. Supreme Court decided United States vs. Mead Corp., 121 S. 2164 (2001).
Mead held that classification rulings may merit some deference, i.e., the court might have to
uphold what Customs decided rather than considering the matter from scratch. In other words, Customs' decision were entitled to Skidmore deference, named for Skidmore v. Swift & Co.;
323 U.S. 134 (1944). Not surprisingly, on appeal Heartland argued that Customs' actions were entitled to little deference because the agency's reasoning was flawed. Equally unremarkable,
domestic industry argued great deference was due and focused on what Customs called the "artifice" or disguise" supposedly designed to avoid application of the quota. Domestic
industry also argued that Customs was correct in looking at the commercial identity of the sugar syrup and determining it was not a legitimate commercial product. Further, domestic
industry urged the court to give great deference to Customs' interpretation of how to calculate the sugar solids.
In the end, the Court of Appeals for the Federal Circuit upheld Customs' position. The court
found the tariff was silent as to a definition of "foreign substances" in calculating sugar solids
and, since Customs has unique expertise in interpreting the Harmonized Tariff, the ruling revocation was entitled to deference because of its "persuasiveness."
In Mead, the Supreme Court found that rulings issued by Customs are like interpretations of
policy, agency manuals and enforcement guidelines. Therefore, whether a ruling is entitled to deference will depend on a variety of factors, e.g. the writer's thoroughness, logic and
expertness, its fit with prior interpretations and other sources of weight. If these are present in some combination, the ruling decision may be found to be binding, i.e., persuasive.
In Heartland, the appellate court found the revocation decision was issued pursuant to notice
and comment, so the public had an opportunity for input (and took it). The court also found that Customs considered the comments it received and responded with a thorough analysis
addressing the main points raised in the comments. The only factor the court found weighing against deference was the fact that the ruling revocation would overturn a prior ruling. However,
that fact alone was not enough. In the end, the court found because sufficient thoughtfulness was presented by Customs in justifying the revocation, combined with the opportunity for
public comment and Customs' unique expertise to interpret the tariff, Skidmore deference warranted upholding Customs' decision. As a result, the lower court's ruling was overturned.
As the period in which an appeal to the U.S. Supreme Court has not yet expired, one cannot
yet assume the decision is final. A close reading of the appellate court decision makes clear the court was persuaded as to the correctness of Customs' position, in part at least, because
it viewed Heartland as having been less than forthright in its ruling request in terms of how it
described its imported product. It is also likely that Customs took the actions it did because it
was enforcing a tariff rate quota. While it is true the agency might have acted differently if no quota issue were present, the fact remains that whether or not Heartland is overturned by the
Supreme Court, Customs has made clear its thinking if you are tariff engineering, you have yet one more factor to make sure is included in any ruling request commercial justification of
the intermediate product.
Customs Update: A CASE OF SCHIZOPHRENIA
8/01
Published in the Journal of Commerce on August 17, 2001
Click here for a printable version of this article <p-jocaug01.htm>
Talk about U.S. trade, and you're talking schizophrenia. Do we favor free trade or don't we?
We just don't seem to be able to decide, and certainly cannot reach consensus.
The U.S.Jordan Free Trade Agreement (USJFTA) was negotiated and signed. Now, as it goes
through the approval process, Congress and the Bush Administration are unable to decide whether or not they really want it.
Notable as the first trade agreement to include labor and environmental provisions (Nafta contained such provisions in side agreements), plus an additional one allowing for the
imposition of sanctions in lieu of reliance on domestic laws for trade remedies, the USJFTA faces serious opposition.
Elsewhere, the U.S.Singapore Free Trade Agreement is still in negotiation, while in July the draft text of the Free Trade Area of the Americas was released.
The U.S. reached agreement with China over that country's accession to the World Trade Organization, but lost to the Europeans over Foreign Sales Corporations, a provision in U.S.
law which allows tax benefits for certain income derived from foreign sales. The Europeans brought a WTO complaint which was sustained. The U.S. rewrote the law and, in a matter of
days, the Europeans sought and later obtained approval from the WTO to impose sanctions on $4 billion worth of U.S. goods, sanctions which will be delayed until September so the U.S.
may decide how it will respond.
While these steps suggest that Congress is at least somewhat receptive to free trade, we have an equal amount of backward movement.
For example, the Byrd Amendment snuck into law at the last minute as part of an agriculture funding bill. It allows the redistribution of dumping and countervailing duty monies to the
affected companies. Such a provision is thought to be a clear violation of the U.S.'s WTO obligations but was nonetheless approved! Similarly, a seeming violation of WTO obligations
comes with the renewal of the merchandise processing fee to fund the Patients Bill of Rights.
Meanwhile, further trade negotiations could be delayed by the Bush Administration's failure to obtain trade promotion authority because there are not enough Democrats who will support it
without labor and environmental provisions, and the Administration appears adamant in excluding them.
The Export Administration Act languishes again after what some have counted as a dozen attempts to rewrite it, due to a lack of consensus. Missing in this context is clear agreement
as to what is freely available in the market place so as to not be subject to restriction. Although U.S. industry is clear about what its foreign
competitors are selling, the government seems unwilling to act on that information.
We face a possible new round of WTO negotiations starting in Qatar in November on such
important topics as competition policy, electronic commerce and dispute settlement but, again, there is no consensus in these areas.
We have also seen the proliferation of U.S. dumping cases from the predictable to the unusual. For example, in the category of the unusual is the case brought by California grape
growers against China and Mexico. What makes this claim unique is the speed with which it was decided. The International Trade Commission dismissed it within a matter of weeks,
calling it a naked attempt to avoid competition.
The predictable example comes from an investigation that was recently opened regarding the
steel industry, predictable in the sense that steel makers have long complained that foreign steel is being sold in the U.S. at prices well below the cost of manufacturing (a classic
definition of dumping).
In order for the steel case to succeed, the threshold step the International Trade Commission
must take is to define the industry. Is it one industry or are there many? If many, which ones, if any, have been harmed? In terms of defining the industry, for example, should the making of
steel be treated as a different market depending on its constituent materials or its intended end use?
Whether the U.S. can find a cure for its trade schizophrenia is another question.
Customs Update: WHAT IS CUSTOMS TO DO?
7/01
Published in the Journal of Commerce on July 6, 2001
Click here for a printable version of this article <../p-jocjul01.htm>
In 1994, the ground rules between Customs and the trade community changed dramatically.
With the advent of the Mod Act, it was no longer Customs' responsibility to figure out the correct classification, value and admissibility standard for a given shipment. That
responsibility now fell to the importer. Customs clearly retained the right to confirm the accuracy of the importer's conclusions and impose enforcement action appropriate to the
circumstances if there are errors, but the first decisions became the importer's to make and make correctly.
The most serious criticism leveled against Customs prior to enactment of the Mod Act came
from the GAO which quite correctly pointed out that up to that time, Customs could not say with any degree of accuracy which importer or which industry was in compliance or its level of
compliance. Acknowledging that shortcoming, Customs changes its outlook and approach. One major change was the creation of Compliance Assessment Audits, which Customs relies
upon to determine a company's degree of compliance.
From the outset, Customs had trouble completing these audits because the methodology
originally used was derived from then existing audit techniques. The first CAT audits were reported to take up to three years to complete and were tremendously cumbersome.
Importers complained about the length of time they took. Importers also complained about the cost to respond to Customs varied requests for information and documentation.
Importers and Customs also vigorously disagreed whether a specific discrepancy was major
or minor, resulting in even more delays and frustrations for all concerned. To Customs' credit, changes were made and continue to be made. Also to Customs' credit, the entire handbook
used to conduct a CAT audit is available at <http://www.customs.ustreas.gov/impoexpo/impoexpo.htm>.
For those of us located on the West Coast, one of the more interesting features of the March
2001 CAT Kit is the section entitled "Common Importer Errors Identified During Compliance
Assessments." The listing is of particular interest to us because we have had the benefit of a
list of common "snafus" which were first disseminated in the mid1980s by the Regulatory Audit branch of the then Pacific Region.
That list of snafus reads:
1. Failure to include assist costs in importer values;
2. Additional payments to foreign manufacturers, in excess of prices on invoices, not included in product values;
3. Transfer prices on imports between related parties fail to cover all cost and profit;
4. Improper claims of foreign components as nondutiable American components on products
imported under HTSUS 9802.00.80 (formerly 807);
5. Lack of proof of origin on American components claimed as nondutiable for imports under HTSUS 9802.00.80;
6. Lack of documentation to substantiate claimed nondutiable buying commissions;
7. Failure to include dutiable quota costs in import values;
8. Products imported duty free under GSP fail to meet 35% foreign cost criteria;
9. Understatement of dutiable values on imports with CIF prices due to unsupported
deductions for nondutiable international freight and insurance; and
10. Failure to include dutiable royalty costs in import values.
11. Understatement of dutiable values on imports with CIF prices due to unsupported deductions for nondutiable international freight and insurance; and
12. Failure to include dutiable royalty costs in import values.
The West Coast auditors were quite frank in stating the way they found most of these
violations was the result of conversations with employees of a company in departments other than import-export. In particular, the information associated with many of the costs listed
above were maintained in engineering, accounting and sales, and were often not communicated to the import-export department. In many cases the information was requested
but the request was ignored because the recipients did not think there was any consequence to not providing it. Under those circumstances, one can imagine a company's shock when
presented with large demands for payment of additional duty.
Apparently, things have not changed much because the common problems listed in the latest
CAT Kit read quite similarly:
1. Manufacturing assists;
2. Supplemental payments;
3. Nondutiable costs;
4. Merchandise classification;
5. HTSUSA Chapter 98XX;
6. Related-party transactions;
7. Buying commissions;
8. Record keeping.
Whether working from the old "snafu" list or the new "common problems" list, one thing is
clear. Those importers who set up solid internal controls will have the fewest problems. In fact, when CAT audits started, importers could pass them without having written procedures, but
no longer.
Customs now insists on a company not only having those written procedures but also proving
they are actually the procedures being employed in the day-to-day transaction of business. It is amazing how many companies have written procedures but the procedures reduced to
writing have nothing to do with how the company actually operates. Customs will not consider inaccurate written procedures to be satisfactory.
CAT Audits have also required importers to more closely monitor their inventory procedures.
One issue which has been a thorn in the side of both importers and Customs is quantity discrepancies. In the real world, most companies consider a variance of 5% or less to be
tolerable and of no consequence, because sometimes there are shortages and sometimes there are overages, but usually shortages. However, for Customs the requirement is 100%
accuracy. If there are overages, they must be reported. If there are shortages, they, too, must be reported. The problem for both the trade and Customs is the format in which those
changes are to be reported.
Customs Chief Counsel's office has interpreted the law to mean that any quantity discrepancy
is a matter of admissibility and so cannot be reported through reconciliation. Customs is hoping the Post Entry Amendment process recently enacted will be adopted as the reporting
mechanism of choice, but initial reports indicate few companies are using this mechanism. Instead, the very procedure Customs was trying to eliminate by adopting reconciliation has
continued individual importers working with local Import Specialists and reporting these changes in an ad hoc manner.
When CAT audits first started, importers were generally placed in one of three risk categories,
high, medium or low. Presumably the risk category (or "bucket" as it was sometimes referred to) dictated the frequency of exams. Importers have argued long and hard with Customs
saying examination of goods has nothing to do with the adequacy of documentation, correctness of classification or completeness of value, and so the choice of enforcement tool
is simply a waste of time for both sides. Hampered by the lack of truly effective enforcement tools in this context, Customs has clung to inspections as the option of choice simply
because it drives up the importer's cost of doing business. However, the buckets have been refined to now include, low, standard, moderate and high. The differences between one risk
bucket and another is not great and often only a matter of interpretation. However, one thing obviously sticks out. If a company lacks documented internal controls, it is placed in a higher
risk category.
In other words, regardless of the accuracy of its operation, a company better get its
import/export procedures reduced to writing.
One noticeable difference between the old "snafu" list and the new "common problems" list is
the addition of record keeping, something also required by the Mod Act. While quite a bit has been said about record keeping in a variety of contexts, the summary criteria applied by the
auditors is perhaps the best short explanation one can give. Are the records accurate? Are they easy to retrieve? Are they easy to understand? Do their entries correlate from one to the
other? If a company cannot answer yes to all of these questions, it will have trouble with a Customs audit (and likely an audit by any other agency or entity as well).
The question asked most often is, "Why did my company get selected for an audit?"
Customs previously announced that the top 1000 importers by value will be the subject of CAT audits. Similarly, the top 250 importers in each of the critical industries, e.g. advanced
displays, agriculture, auto parts, autos, bearings, chemicals and petrochemicals, circuit boards, fasteners, footwear, production equipment, retailing, steel, telecom, textiles, and
wearing apparel, will be similarly audited. Beyond those reasons, importers are most often targeted for audit by disgruntled ex-employees or ex-spouses; competitors; Customs
employees who see violative goods in stores; search warrants; computer research/trend analysis; cargo examinations and samples; Customs officers' knowledge regarding
commodities; importations from a new source or a new country; a large voluntary tender or prior disclosure (no specific dollar amount has been publicly identified); and a visit by
Customs to one importer who identifies errors by others in his industry.
Additional audit triggers come in the form of what Customs considers red flags, such as
invoice notations stating "For Customs Purposes Only" or "No Commercial Value;" invoices
with information crossed out or whited out; goods made in one country but shipped from another; related transactions and those involving transfer pricing; lower or higher than usual
prices; assists; and royalties. Customs also finds red flags with copyright, trademark or patent possibilities; quota restrictions and sanctioned goods or sanctioned countries.
Since most importers trigger at least one of these red flags, the question becomes where is
Customs most likely to invest its time and energy to get a worthwhile return? Generally, its focus has been the large corporations. However, it is not unusual for companies of all sizes,
especially small ones, to receive Requests for Information which lead to further enforcement activities by Customs, such as requests for samples and/or documentation, seizures,
penalties and the like. The bottom line for all companies is to make sure their transactions are properly documented and properly declared from the outset. Being required to pay more duty
long after the fact is the fastest way to lose money on a deal!
SUPREME COURT DECIDES MEAD
6/01
Click here for a printable version of this article <p-jun01.htm>
The trade community has been surprised at the number of import-export cases the U.S. Supreme Court decided to hear in the last year, a larger number of cases than it heard in the
previous ten years. The latest case involves Mead Corp. and the classification of its day planners and was decided on June 18, 2001.
For many years, Customs classified these day planners so they were free of duty. In 1993, Customs issued a ruling in which it changed its position and found them to fall under a
different tariff provision so they became dutiable. Mead filed the appropriate protests which were denied and the case made its way to court. The Court of International Trade found
Customs' classification decision to be correct. The Court of Appeals for the Federal Circuit found in favor of Mead and so Customs appealed to the U.S. Supreme Court. The basis for
Customs' appeal was that its interpretation of the relevant tariff provision should have been binding on the court because it explained the agency's position in interpreting that tariff
provision, sometimes referred to as Chevron deference. Not surprisingly, the importer vigorously disagreed. The question was framed for the Supreme Court as - to what degree of
deference, if any, are Customs rulings entitled? Put another way, can the court hearing a classification dispute simply start from scratch in deciding a case or must it follow Customs'
interpretation of a given tariff provision? In the end, the Court said - maybe!
The Supreme Court held that Customs rulings are not entitled to Chevron deference but may
nonetheless be eligible for Skidmore deference. In Haggar (decided while Mead was before the appellate court), the Supreme Court found that Chevron deference was due to actions by
Customs where Congressional delegation allowed it to interpret statutory provisions, in that case HTS 9802. The Court found that Chevron deference was also proper when Congress
delegates authority to the agency to make rules carrying the force of law. Such deference is generally given when an agency promulgates regulations through notice to the public and an
opportunity to comment, or adjudicates matters.
Clearly rulings do not go through a notice and comment process. They also do not generally
bind all importers. In fact, rulings can and often are reconsidered or later overturned. Through various means, Customs has warned importers not to rely on rulings unless they are the
recipient. As a result, the Supreme Court held that rulings are similar to "policy statements, agency manuals and enforcement guidelines." They are entitled to some weight but the
amount of weight is to be decided by reference to the criteria enunciated in Skidmore. Factors such as the specialized experience and broader investigation and information available to an
agency must be considered, along with the writer's thoroughness, logic and expertness, the decision's fit with prior interpretations and any other sources of weight. In the end, the
Supreme Court left the importing community and the courts to decide how much "power to
persuade" is contained in a given ruling by ordering the case back to the lower court for further hearings on the Skidmore deference question. In the broader scope of rulings generally,
obviously New York (and most Port) rulings will not be entitled to any amount of deference as they generally contain only the final decision and little explanation. Rulings issued by
Headquarters generally contain an explanation of the facts relied on, the law considered and sometimes even a clear explanation of why the decision was reached. However, just because
the ruling is well thought out does not automatically mean an importer cannot challenge it. For
example, if the ruling is based on material misstatements of fact or relies on the wrong law for
its result, it may still be challenged. In the end, the U.S. Supreme Court left the playing field between Customs and the importing community relatively level when it comes to rulings, a
good result for the trade given the enormously high cost of litigation.
DRAWBACK
08/01
Customs intends to reduce the drawback centers to four closing by San Francisco, Boston, New Orleans and Miami. If that change impacts you, let the NCBFAA know by submitting
your views to survey@ncbfaa.org.
MPF EXTENSION PROPOSED FOR NONCUSTOMS FUNDING
6/01
When Senate Bill 872 was just introduced, it has been proposed that the merchandise
processing fee be extended. It is currently set to expire on September 30, 2003. However, in order to fund the Patients Bill of Rights, the Democrats in Congress have proposed an eight
year extension. The trade community had hoped the fee would simply expire but, if it didn't, the goal was to fashion renewal so that the monies raised would be earmarked for use by
Customs (preferably to fund ACE) rather than going into Treasury's general fund.
Because the MPF is technically a user fee and not a tax, it is not subject to the jurisdiction of
the two trade committees House Ways & Means and Senate Finance. Even if it were, rumor has it that Max Baucus, D-MT, who now heads Senate Finance, supports mpf renewal. When
are those on the Hill going to understand that if Customs can't do its job, we run the risk of the economy crashing and contraband overrunning the country?
BONNER PROPOSED AS CUSTOMS COMMISSIONER
6/01
Robert C. Bonner, former DEA head, federal judge and U.S. Attorney, has been nominated to
head U.S. Customs. The trade community is hopeful that Mr. Bonner's last few years of representing corporate clients will make him more willing to understand and deal with the
concerns of the trade community rather than fan the flames of drug and law enforcement. Again, elected representatives must come to appreciate that legitimate goods and people
need to flow so that the economy continues to grow. Costs associated with importing and exporting are generally passed on to consumers. When do those costs (and attendant
delays) become so great that products are no longer price competitive? What does that do for the American consumer?
ITC OFFERS "INTERACTIVE" TARIFF ACCESS
6/01
The U.S. International Trade Commission has launched an "interactive" tariff and trade data warehouse for use by the public and other government agencies on the Internet. Called
DataWeb and available at http//dataweb.usitc.gov, the ITC has described the program as a "selfservice, interactive, Internet based system that provides access to extensive tariff and
trade data." Data is available for years 1989 through 2001 and can be retrieved in a number of classifications systems, including the Harmonized Tariff Schedule (HTS), the Standard
Industrial Classification (SIC), the Standard International Trade Classification (SITC), or the North American Industry Classification System (NAICS).
NAFTA Update: Unintended Consequences
4/01
Published in the Journal of Commerce on April 20, 2001
While opposition from the supporters of Ross Perot, most labor unionists and most
environmentalists was to be expected when Nafta was being debated and voted upon, like many an agreement, Nafta has had some unintended consequences which are only now
coming to light. They arise in the context of foreign investor rights.
Under the terms of Nafta, foreign investors are allowed to recover damages from government
regulatory actions which negatively impact their investments. A case currently garnering lots of attention is the action filed by Vancouver based Methanex Corp. regarding actions by the
State of California banning MTBE (a smog fighting gasoline additive).
California acted on the grounds MTBE causes contamination of water supplies. The damages
being sought by Methanex totals nearly $1 billion! Many have railed against this case, questioning whether Nafta was ever intended to allow a private company the right to recover
over the actions of a state government, or is relief from only federal government action what was intended? But the story does not stop there.
Mexico and Canada have both gone one step further. Metalclad (a U.S. based company) sued
Mexico under Nafta 's Chapter 11 seeking compensation for what it claimed was expropriation of property. The arbitration panel heard the case in Canada, the agreed upon neutral site, and
awarded approximately $17 million to Metalclad. Mexico appealed the panel's decision to the Canadian courts. Canada joined in that appeal.
The underlying facts involve a newly built plant. After the fact, the municipality apparently
rejected the construction application claiming the site was an ecological reserve. The arbitration panel found the municipality failed to consider relevant facts such as environmental
studies approving the project and Metalclad's compliance with relevant laws, permits and construction requirements. Even had the municipality not taken action, Mexican federal
regulators could have closed the plant, but not without compensating Metalclad.
Like the rest of Nafta, Chapter 11 refers to a "Party" being allowed or not allowed to take
certain actions, in this case the ban on expropriation of property. The argument being made by Canada and Mexico before the British Columbia court is that by the very terms of Nafta,
only the actions of the federal governments of the three signatory countries are governed by
the agreement. Since a municipality is not a "party" to Nafta, the arbitration panel overstepped
its bounds. Mexico also argued that the panel's decision imposed on it an obligation to explain possible road blocks which Metalclad might encounter in the approval process and
that duty was more than it was legally obligated to perform.
Canada is involved in another appeal, this one in a case where it lost to S.D. Myers for
banning the export of PCB waste chemicals. The award involved approximately $20 million. Canada instituted a temporary ban on exports of PCBs which Myers wanted to dispose of at
its Ohio facility. Myers had previously been exempted from U.S. law banning imports of PCBs.
Canada is said to have banned the export of PCBs in an attempt to protect development of
Canadian based waste disposal facilities and to minimize cross border waste transportation. Canada countered by pointing to the Basel Convention which sets out international standards
regarding the handling of hazardous waste. [Canada later lifted the ban but the U.S. imposed a blanket ban on imports of the wastes following a court order.]
In its appeal, Canada argued the issue was not one of foreign investment but rather one
involving cross border trade and so outside the scope of Chapter 11.
At the same time, Canadian activists and labor leaders filed suit in March constitutionally
challenging Nafta's Chapter 11. Their argument is that Nafta allows private firms to sue the government over alleged trade discrimination, a right which is not similarly extended to
domestic companies. As with American activists opposed to Nafta, the Canadians argue their government's sovereign right to protect citizens' health, safety and wellbeing through their
courts and regulatory systems is being undermined by Nafta.
What is said to have triggered their outrage is the alleged claim by UPS that Canada Post,
the government postal service, was using its lucrative letter monopoly to unfairly subsidize its courier and express mail services.
UPS is reportedly demanding $156 million while at the same time admitting that similar
anticompetitive practices exist in the U.S., although it has no similar remedy under U.S. law. On the other hand, UPS supposedly admitted that a Canadian courier service could make a
similar claim against the U.S.
Also proceeding through the arbitration process in the U.S. is a claim by a Canadian funeral
home chain seeking $750 million in damages for what it claims was unfair treatment by the Mississippi courts. Civic groups are responding with complaints that taxpayers should not be
held responsible for jury awards in civil suits initiated by foreign investors. In response to the
claim, the U.S. tried, but failed, to convince the arbitration panel that it lacked jurisdiction to hear the matter. Loewen Group's claim focuses on anti-Canadian, racial and class biases
which it supposedly suffered at the hands of opposing counsel in the way the case was defended. The matter was settled between the parties but Loewen is arguing that because of
Mississippi's state law regarding the size of the appellate bond it would have to post ($625 million), it was effectively coerced into settling for $175 million and should now be entitled to
additional relief under Nafta 's Chapter 11. Critics fear that if Loewen's position is upheld, foreign investors will be able to bring unwinable civil suits, settle or lose and then seek
additional damages from American taxpayers, an option not available to American investors in the U.S.
For some time, Canadians have consulted with their American and Mexican counterparts
seeking clarifying language to Nafta's Chapter 11 without much luck. Neither the Americans nor the Mexicans have been willing to seriously engage on the issue. Given that the number of
cases is multiplying and the amounts claimed are staggering, perhaps clarifying language will be agreed upon. At the same time, in the absence of such language, one wonders whether
the U.S. will continue to argue that the principals in Nafta should serve as the boilerplate for all other multilateral trade agreements? Probably so but with modified language.
FABRIC IMPORTS TARGETED
4/01
Customs New York Strategic Trade Center has announced it is targeting the fabric industry for
patterns of discrepancy and noncompliance involving classification and marking. Informed compliance warning letters have been issued to the top 500 fabric importers. 120 days later
monitoring of entries will commence. In addition, water resistant wearing apparel is being separately targeted. Informed compliance letters on these products were sent to major
importers and those previously found to be noncompliant. Again enforcement follows an opportunity for corrective action.
TAIWAN EXPORTERS DENIED ENTRY
4/01
For a period of two years commencing April 9, 2001, textiles and textile products from Hong
Win Trading Company, City Art Printing, Hsu Chun Mei and Spring Information Industry Co., Ltd. will be denied entry. CITA directed Customs to act.
REASONABLE CARE
4/01
Looking for some new ideas about reasonable care? If so, take a look at our article published
in the Journal of Commerce website on March 23, 2001 titled "Complying with 'Reasonable Care." You can find it on our web site as well as at www.joc.com <http://www.joc.com>.
CUSTOMS PUBLISHES NEW CAT KIT
4/01
As part of its ongoing effort to be responsive to the trade community, Customs has yet again
revised its audit procedures. In support of those revisions, Customs has issued a new CAT Kit, a copy of which can be found at www.customs.gov/impexp1/comply/catkit.htm
<http://www.customs.gov/impoexpo/impoexpo.htm>.
CUSTOMS INVESTIGATION CLOSES CHINESE COMPANY MAKING GOODS WITH PRISON LABOR
3/01
Allied International Manufacturing Stationery Co., Ltd. in China exported binder clips to Officemate International Corp. in New Jersey. The handles and bodies were made at the
Nanjing factory but assembled at a nearby prison. The exporter pled guilty to transporting prison made goods to the U.S. and was fined $50,000. A principal of Officemate pled guilty to
tax evasion and will be sentenced in the near future and faces back taxes, interest, penalties and criminal and civil fines. Officemate also paid Customs $500,000 to settle any potential
civil charges. Customs learned of the scheme because a competitor filmed trucks leaving the Chinese factory with unassembled clips and returning from the nearby prison with assembled
clips. That competitor presented his evidence before Congress. As a result, Customs opened an investigation which was successfully concluded.
Customs Update: Complying with "reasonable care".
3/01
Published in the Journal of Commerce on March 23, 2001
Click here for a printable version of this article <p-jocmar01.htm>
Every which way you turn these days, the U.S. federal inspection agencies are talking about reasonable care.
They may not all call it that, but whether it is the Bureau of Export Administration, Consumer
Product Safety Commission, Federal Communications Commission, or any of the 60-odd agencies with jurisdiction over international trade transactions, they are all saying basically
the same thing: Know your product, and how it is going to be used and sold by your buyer. How to comply, then, is a problem for companies large and small.
Regulatory compliance flows from the top down. If a company's management does not value
compliance, its employees will simply ignore it.
Businesses typically start the process of regulatory compliance through the nuts and bolts of
systems and staff training. The system approach often starts with the Board passing a resolution stating that one of the company's goals is to have the highest possible level of
compliance - a critical cornerstone in this effort.
These resolutions become a permanent part of the company's history but are only a starting
point. Each company needs to identify its own unique compliance issues. Professional advisors, the trade press, trade associations and agency outreach all help create awareness;
and some even assist companies in creating their own compliance manuals (especially attorneys, consultants and customs brokers). Women in International Trade of Orange County
has a very active Customs User Group, a major goal of which is to help its member companies' Customs professionals create, maintain and update their compliance manuals and procedures.
The system part of the puzzle continues with the company either establishing procedures or
making sure that its existing procedures allow all interested individuals to exchange necessary information in a timely fashion, so that proper planning takes place. All too often,
different people within a given business have responsibility for different parts of the import or export function (and the related finance and inventory/warehouse operations) and fail to
regularly communicate. When that happens, trouble, or at least mass confusion, is sure to follow, as well as cost increases.
Despite these and other options, companies are still generally left to their own devices when it
comes to training programs. Given the unique nature of international trade, helpful programs are hard to find. The Foreign Trade Association of Southern California offers one of the
best-known courses designed to help individuals understand U.S. import requirements and prepare for the customs broker examination. The World Trade Institute in New York also offers
a wide range of substantive courses, but most trade association programs are general in nature or at least not specifically designed to fit the needs of an individual company. So where
do managers go for help when they want to train their staffs?
Customs Update: New turn for Mexican trucks?
2/01
Published in The Journal of Commerce February 22, 2001
Click here for a printable version of this article <p-jocfeb01.htm>
A number of interesting legal decisions have been published in the past month, but the one garnering the most attention is, of course, the decision regarding trucking and the North
American Free Trade Agreement (Nafta).
Prior to Nafta, Mexican-owned trucks had legal access only to what used to be called the ICC
50-mile zone, that is, they could transit anywhere within 50 miles north of the U.S.-Mexico international border. Under the terms of Nafta, operations were to be allowed so that Mexican
trucks could legally operate anywhere in the U.S. southern border states (Arizona, California, New Mexico and Texas) starting in December, 1995 and anywhere within the country starting
in January, 2000.
The issue of Nafta and Mexican trucks reemerged when the Clinton Administration decided to
bar all Mexican trucks from entering the U.S. beyond the immediate 50-mile zone, for safety reasons. While agreeing that safety regulations were important, Mexico challenged the
blanket ban before a Nafta arbitral panel. On February 6, 2001 that panel issued its decision.
What it said was the U.S. could not refuse to allow all Mexican trucks to enter the country.
Some press coverage has included predictions of doom and gloom, going so far as to suggest American highways will be in carnage. In fact, what the arbitral panel said was the U.S. could
not ban all Mexican trucks but it could apply its safety standards on a case-by-case basis. The U.S. based its position on what was described as the inadequacies of the Mexican
regulatory system related to such issues as driver hours of operation, logs, and other factors.
The Nafta arbitral panel stated that it was not determining what, if any, safety standards
should apply; nor did it disagree that safety of trucking services is a legitimate regulatory goal. The panel also said it was not advocating a quota or the approval of any or all Mexican
applications. In fact, reading the Findings and Determinations carefully, one sees a statement saying that not all the Mexican truck companies currently operating in the U.S. border zone
must be allowed to continue their operations.
The panel's holding also recognizes that different standards may be warranted depending on
the citizenship of the applicant trucking company. However, if different standards are applied to truckers from Canada and Mexico, those differences must arise in good faith, be based on
legitimate safety concerns and be Nafta-compliant. In other words, a blanket refusal is not allowed.
It should also be kept in mind that the safety issue, as legitimately important as it is, has
been somewhat distorted. California and Texas are the two states where the most number of trucks cross from Mexico into the U.S. In both cases, the state departments of transportation
have modern facilities available to conduct just the sort of safety inspections one would hope to see imposed. No one is foolish enough to believe that all trucks crossing the border will be
inspected but the point is, the two states most seriously impacted by this truck traffic have publicly stated their readiness to conduct the necessary inspections.
Additionally, there is the out-of-compliance issue which underpins much of the discussion
about safety concerns. The U.S. Department of Transportation released a survey which found 28 percent of U.S. trucks were out of compliance, while 35 percent of Mexican trucks were
similarly situated. At first glance, that seven percent difference seems huge. Put into proportion, one must keep in mind that many of the Mexican trucks inspected were those
which did nothing more than pull trailers across the international border. Many took cargo from Mexican long-haul drivers, hooked up to it, transited the international border and then handed
the cargo off to American truckers shortly thereafter. As such, if given the opportunity to deliver Mexican cargo to U.S. consignees, one would not expect the trucks previously
inspected to be the ones used. If they are, they should be inspected and turned back if out of compliance. However, Mexican truckers are not going to employ their newest equipment to sit
in long waiting lines in order to transport cargo only a few miles. It makes no sense economically.
Strikingly missing from these discussions has been wide spread interest on the part of
American truckers to deliver cargo in Mexico. Perhaps it has to do with the cost of American rigs and the condition of some Mexican roads. Perhaps it has to do with fears about personal
or property safety. These are legitimate concerns. However, more progressive American truckers have begun partnerships with Mexican operators in order to maximize their opportunities.
The big question is, how will the Bush Administration respond? Early indications are it will
comply with the panel's decision. The question of how remains open. It could be that the pending Mexican trucking applications will simply be reviewed relying on current standards.
There could be an attempt to develop and apply new standards. Stay tuned as this contentious issue plays itself out to conclusion.
CANADA CUSTOMS COMPLIANCE PLAN
01/01
Canada Customs has posted to its web site information about its 2000-2001 Compliance
Improvement Plan. Wondering how similar or different Canada is in its treatment of importers of goods into its country, check out the article at: www.ccra-adrc.gc.ca/customs/general/blue_print/compliance/plan-e.html
<http://www.ccra-adrc.gc.ca/customs/general/blue_print/compliance/plan-e.html>
PROTOTYPE IMPORTS
01/01
The Trade Suspension and Tariff Act of 2000 contains a provision which allows the importation
of prototypes. Until regulations are published, Customs has issued Administrative Message 00-1589 outlining the guidelines which apply for HTSUS 9817.85.01 and the importation of
prototypes, including their definition and the procedure to convert a TIB entry to a prototype consumption entry.
INSTRUCTIONS ISSUED REGARDING NAFTA DRAWBACK
01/01
U.S. Customs has issued a notice explaining the procedures to be followed in implementing
the duty deferral portion of NAFTA effective January 1, 2001 as it relates to Mexico. While duty will become subject to drawback, antidumping and countervailing duties, plus agricultural
and merchandise process fees are not subject to refund, waiver or reduction. Immediately affected are foreign trade zones, bonded warehouses and temporary importation entries.
Inbond entries remain unchanged.
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