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We went right to the experts for a new advice column
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10 Steps in Dealing With the FDA
(Published in The JOURNAL of COMMERCE ONLINE November 19, 2007)
 to view printable article.

Against the backdrop of repeated general press stories about contaminated food and other invalid products being exported from China to the U.S. and elsewhere, the focus at the Food and Drug Administration changed dramatically in the summer of 2007. The agency was already overburdened with sorting through the mass of imported shipments that were arriving. When the bad news hit, the FDA quickly changed gears and started holding up almost any food or other regulated product arriving from China that did not belong to a well-recognized company. While currently focused on items originating in China, the delays caused by not being in compliance with FDA rules and regulations can impact any product subject to the agency’s jurisdiction. Whether you import food, drugs, medical devices, dietary supplements or nutraceuticals (health promoting ingredients), you must know what is expected of you, or your just-in-time shipment will sit at the border, dock or warehouse where it arrived. Whether you lose your order or have to explain the situation to your customer, it is a very unhappy and unpleasant place in which to find yourself.

The suggestions below cannot guarantee that your dealings with the FDA will be problem-free, but if you follow them, you will at least be ready for those problems should they arise.

1. Know your product.
It is no longer enough to concentrate on only the financial aspects of your transaction. To make sure you do not run into delays, you also must know the regulatory requirements that apply to those products. In fact, even that is no longer enough. It is one thing to know that your dietary supplement meets the required sanitary standards and is safely packed, and good manufacturing practices were followed, but what about its packaging? How should it read? How is the product advertised on the Internet? Have the requirements under the Nutrition Labeling and Education Act been met for your food importation? Was prior notice filed properly and timely under the Bioterrorism Act? Is your importation even subject to prior notice?

2. Know your business partners.
Given how easy it is to find yourself in a situation where the product you ordered is not what is delivered, what steps have you taken to screen your business partners? Promises of good quality, timely delivery and a reasonable price are important, but what have you done to confirm that your proposed supplier can really deliver as promised? Is the supplier the subject of an FDA Import Alert? If so, do you really want to do business with him?

3. Screen your business partners.
In the FDA context, one of the most important questions you can ask your suppliers is about their good manufacturing practices or other standard operating procedures. Is the food additive generally recognized as safe? If so, how has the supplier documented that conclusion and how recently was that documentation updated? If a seafood product or orange juice, you should ask to see a copy of the Hazard Analysis and Critical Control Points (HACCP) plan. Is it current? Is it complete? When was that plan last updated? Is it maintained in English or just in the home country language? How does the farmer who grows your fresh fruit or produce keep track of which pesticides are used and which ones are to be avoided?

4. Know the regulatory requirements.
Once you have determined that your imported shipment meets Customs’ requirements of being properly valued and classified, you still need to meet the admissibility, or FDA, requirements. Do you know the differences in the regulatory scheme between the FDA regulations that apply to food, drugs, medical devices, dietary supplements or nutraceuticals? If not, how do you expect to get your product to market in time and on budget?

5. How are your goods labeled?
FDA and Customs, of course, require that every imported product be marked with its country of origin. There are also special rules that apply if you state your U.S. address on the label, but beyond that, what claims have you made for your product? Have you made statements that make the dietary supplement or nutraceutical you plan to sell sound like it will cure a disease or ailment? If so, you just turned it into a drug. Do you have the necessary testing ready behind it to have FDA accept those claims? How have you described the wonderful things your medical device can do? Do you transform it from a Class 1 device to one that is in Class 2 or 3 by making those claims? If so, have the proper tests been performed and the necessary registrations filed? Is your food free of prohibited pesticides? If canned, is the facility properly registered as a low-acid canned-food establishment? Is that registration current? Does it include the specific food you are importing?

6. How are your products being advertised?
One of the evolving areas is Internet advertising. In many instances, you may purchase a product for sale and be told by the seller exactly what you are allowed to say about it on your Web site, or in the product inserts or other forms of marketing materials. Keep in mind that FDA is viewing Web sites when it looks at a given product and how it is packaged and marketed. If your Web site makes unacceptable claims, your product will get held up. The same is true if the marketing materials or product inserts say the wrong thing. When was the last time you checked to make sure you were not making unacceptable claims?

7. Are there other agencies that can stop your importation?
While food is typically subject to the jurisdiction of the FDA, it is important to keep in mind that the U.S. Department of Agriculture has regulatory jurisdiction over meat, poultry and egg and other products. Milk, wine and similar products also may be subject to state regulation. Have you done your homework to make sure you don’t get held up by any of those agencies? Have you figured out which products may be subject to joint FDA and USDA jurisdiction simply because they are a prepared food subject to FDA’s rules which also contains something subject to USDA’s rules, such as a meat ingredient?

8. Are there terms and conditions that apply?
In the air and ocean environment, there are internationally agreed upon limits of liability. Do you know them and the other usual terms and conditions that transport companies apply? Have you insured your shipment? Have you read your commercial and transportation documents and your insurance policy? Have you checked the terms and conditions that your customs broker, forwarder, NVOCC and trucker impose? Have you properly documented your loss and reported it timely?

9. Do you regularly communicate with your business partners?
If your suppliers have encountered problems shipping your goods on time, do you know why? Are they having trouble with their subcontractors or suppliers? Have the materials or ingredients used to make your products changed? Are supplier standard operating procedures inadequate or out-of-date? Have you figured out the impact of the peak season on getting your goods to market timely? Do you know the changes your business partners are planning? Have you told them what you are planning to do in the future?

10. Keep up-to-date.
With the advent of the widespread use of the Internet and presentations in the form of webinars, it is just a matter of making the time to find out the latest information about those factors important to your business. If a new strain of contaminant has been discovered, wouldn’t you want to know about it to make sure your shipment is released promptly and your cost does not go up? Wouldn’t you want to know about impending regulatory changes with which you will need to comply? As things change so rapidly, now, more than ever, it is critical for international traders to stay up-to-date about the changes that affect their bottom lines and not just where and when you may order goods.

Every transaction has different factors or considerations to it. These tips are intended to mention some of the most important ones that are typical to the different types of goods subject to FDA’s rules and regulations. These also are the ones most likely to take money out of your pocket if you have not planned ahead properly. There is no way to fully explain the ins and outs of importing FDA-regulated merchandise in this short an article. So, the best tip of all is to make sure you have good advisers around you. Following a competent and energetic staff, they are the best way to keep out of trouble.
 

We went right to the experts for a new advice column
that gives you the critical information you need right now....

10 Tips on Dealing With U.S. Customs
(Published in The JOURNAL of COMMERCE ONLINE November 19, 2007)
 to view printable article.

In the post-9/11 environment in which we all now live and operate, the push from the U.S. government has been to obtain more details about shipments earlier in the process. The government in general and Customs and Border Protection in particular also have moved away from simply letting companies know that mistakes have been made toward imposing serious penalties of greater size and much more quickly. As a result, many more shipments are being inspected and detained than ever. With the current just-in-time delivery environment in which international traders now routinely operate, companies cannot afford to have shipments delayed, even if they are later released. Try explaining to a customer why Customs’ inquiry is not well-founded when it takes several weeks to resolve!

The suggestions below cannot guarantee your dealings with Customs will be problem-free, but if you follow them, you will at least be ready for those problems should they arise.

1. Know your product.
It is no longer enough to concentrate on only the financial aspects of your transaction. To make sure you do not run into delays, you need to make sure whether those goods have someone else’s trademark or copyright on them and, if so, that proper authorizations are in hand. You also need to know what it will cost you to get those goods imported and that you are dealing with reliable business partners. The remaining tips are intended to help you in these areas.

2. Know your business partners.
One of the best things you can do to minimize problems with CBP is to join the Customs-Trade Partnership Against Terrorism. It allows you a structure to work with your business partners to carefully manage your supply chain. For more details, see http://www.customs.ustreas.gov/xp/cgov/import/commercial_enforcement/ctpat/http://www.custom s.ustreas.gov/xp/cgov/import/commercial_enforcement/ctpat/. C-TPAT is designed to enhance supply-chain security, but a closer working relationship with your business partners can only have positive effects.

3. Screen your business partners.
What do you know about your business partners? Meeting someone at a trade show who claims to be able to fill your order is not enough. How do you know the goods you order will be delivered on time, intact and at the agreed upon price? Unless you perform due diligence on your business partners, you cannot be sure they are reliable. The same is true for your service providers and transportation companies. Each segment of the supply chain has its indicia of reliability. Come to know them sooner rather than later.

4. Know the regulatory requirements.
How have you made sure that the value of your commercial deal meets Customs’ value requirements? How can you properly cost your resale deal if you have not figured out the duty rate that applies to your imported goods? Are you eligible to take advantage of a free-trade agreement? If so, do you know the basic requirements and how to document them? Do you know your record-keeping obligations?

5. Are your goods legally marked?
The law requires that each imported good have its country of origin legibly, indelibly and permanently affixed on the good and its outer packaging. Are your goods marked that way? Do they state a U.S. address and, if so, has that been factored into the marking? Does an exception apply? Do you have someone else’s trademark or copyright on your goods? If so, do you have proper written authorization to use that mark?

6. Does anti-dumping or countervailing duty apply to your goods?
Have you checked the CBP www.customs.ustreas.gov/xp/cgov/import/add_cvd/), International Trade Commission (www.usitc.gov/trade_remedy/731_ad_701_cvd/index.htm) and International Trade Administration (http://trade.gov/ia/index.asp) Web sites to ensure that antidumping and/or countervailing duties have not been imposed on the goods being exported to you? If not, you could be in for a major shock. These duties are imposed on top of what is provided for in the Harmonized Tariff Schedule (www.usitc.gov/tata/hts/) and can sometimes involve staggering numbers, often well in excess of 100 percent!

7. Can other agencies stop your imports?
Are there other federal and/or state agencies with jurisdiction over the importation or transportation of your goods? Have you identified them and complied with their requirements?

8. Do any terms and conditions apply?
In the air and ocean environment, there are internationally agreed upon limits of liability. Do you know them and the other usual terms and conditions that transport companies apply? Have you insured your shipment? Have you read your commercial and transportation documents and your insurance policy? Have you checked the terms and conditions that your broker, forwarder, NVOCC and trucker impose? Have you properly documented your loss and reported it timely?

9. Do you communicate regularly with your business partners?
Do you know why your suppliers have encountered problems shipping your goods on time, if that is the case? Are they having trouble with their subcontractors or suppliers? Have the materials or parts used to make your goods changed? Have you figured out the impact of the peak season on getting your goods to market timely? Do you know the changes your business partners are planning? Have you told them what you are planning to do in the future?

10. Keep up-to-date.
With the advent of the widespread use of the Internet and presentations in the form of webinars, it is just a matter of making the time to find out the latest information about those factors important to your business. If a new court case has decided an important fact, such as the classification and duty rate that applies to your goods, wouldn’t you want to know if your cost is rising or falling? Wouldn’t you want to know about regulatory changes with which you will need to comply? As things change so rapidly, now, more than ever, it is critical for international traders to stay up-to-date about the changes affecting their bottom lines and not just where and when you may order goods.

Every transaction has different factors or considerations to it. These tips are intended to mention some of the most important ones that are typical to a vast array of transactions. These are also the ones most likely to take money out of your pocket if you have not planned properly. There is no way to fully explain the ins and outs of importing in this short an article, so the best tip of all is make sure you have good advisers around you. Following a competent and energetic staff, they are your best resource for success!

Customs Update: Import safety
 (Published in The JOURNAL of COMMERCE ONLINE October 18, 2007)
 to view printable article.

On July 18 of this year, by Executive Order 13439, President Bush established the Interagency Working Group on Import Safety. While there is no question this action was in response to the recent well-publicized problems with imported pet food, toys, tires and other products, the Working Group exists and the issue for traders is, what does it mean to my bottom line? How will its findings and recommendations change my operations?

The Mission of the Working Group is "to identify actions and appropriate steps that can be pursued, within existing resources, to promote the safety of imported products, including the following:

(a) Reviewing or assessing current procedures and methods aimed at ensuring the safety of products exported to the United States, including reviewing existing cooperation with foreign governments, foreign manufacturers, and others in the exporting country's private sector regarding their inspection and certification of exported goods and factories producing exported goods and considering whether additional initiatives should be undertaken with respect to exporting counties or companies;


(b) Identifying potential means to promote all appropriate steps by U.S. importers to enhance the safety of imported products, including identifying best practices by U.S. importers in [the] selection of foreign manufacturers, inspecting manufacturing facilities, inspecting goods produced on their behalf either before export or before distribution in the United States, identifying [the] origin of products, and safeguarding the supply chain; and

(c) Surveying [the] authorities and practices of federal, state and local government agencies regarding the safety of imports to identify best practices and enhance coordination among agencies."

An initial report was issued by the Working Group on Sept. 11 and forms the basis for this column. The Working Group's Action Plan is due in mid-November.

There are some broad principles contained in the September Report to the President and accompanying letter. To its credit, the Working Group acknowledges that the government cannot accomplish the ultimate goal on its own. A partnership with the trade community, along with other stakeholders, is seen as necessary and desirable. In its cover letter, the Working Group specifically states: "[W]e recommend working with the importing community to develop approaches that consider risks over the life cycle of an imported product, and that focus actions and resources to minimize the likelihood of unsafe products reaching U.S. consumers."

Recognizing that working shipment-to-shipment is no longer viable, and that risk management requires a broader view of companies and their products, the Working Group laid out six "building blocks":

1) Advance a common vision,
2) Increase accountability, enforcement and deterrence,
3) Focus on risks over the life cycle of an imported product,
4) Build interoperable systems,
5) Foster a culture of collaboration,
6) Promote technological innovation and new science.

Before any final recommendations are made, the Working Group is seeking further public input. The strategy is to consider "risks at the points they are most likely to occur," and then target "the application of controls to those critical points to minimize the likelihood of unsafe products reaching U.S. consumers."

The initial report makes clear that more than half of all U.S. imports come from one of five countries: Canada, China, Mexico, Japan or Germany. In a database of approximately 825,000 importers, Customs found that 45 percent were one-time importers, another 35 percent import two to 10 times a year, and the other 20 percent are frequent importers.

Just as Customs quickly recognized after 9/11, the Working Group echoes the sentiment that the government can no longer simply rely primarily on inspections, examinations, and other border interactions and enforcement against violators. Instead, it talks in terms of comprehensive consideration of risk, i.e., risk-based preventive approaches, including verification. There is also an acknowledgment of the overlap between efforts made to combat security and those which deal with safety risks, plus the need for additional authorities.

The report reinforces the known fact that there is insufficient data currently available to government regulators. Like Customs, the Working Group found that tariff numbers alone are not enough and so there is a call for better advance data. How will this interface with the 10 2 security data initiative?

The concern about circumvention remains and there is also a mention about siloed systems, meaning the computer systems between agencies at all levels are incapable of integrating with each other. In fact, in some of the agencies, notably the Food and Drug Administration, the databases are unable to talk with each other inside the agency, never mind across agencies.

Against this backdrop, the Working Group articulated three organizing principles:

1) Prevent -- prevent harm in the first place;
2) Intervention -- intervene when risks are identified;
3) Response -- respond rapidly after harm has occurred.

Within this context, the Working Group calls for joint efforts to adopt an approach of building safety into manufacturing and distribution processes. These efforts are expected to involve producers, importers, manufacturers, retailers, distributors, regulators, testing entities, third party verifiers, and scientists, among others. The clear inference is that pre-entry documentation and certification requirements are likely to change. The focus is now going to be on prevention mechanisms. Additionally, swift action is advocated once problems arise. The cautionary tale is that criminal and civil enforcement will continue. The report is also replete with references to supply chain management, especially in the context of focusing on risk over the life cycle of a product. One of the preliminary recommendations calls for the government to move to a risk-based cost-effective approach to identify and mitigate risks posed by imported products. Sounds good, but how will it be implemented? How much influence will the private sector really have?

On a positive note, traders will be glad to hear the Working Group endorsed efforts to get the International Trade Data System (ITDS) up and running as quickly as possible, at the same time calling strongly for more collaboration between and among the regulatory agencies and greater harmonization of international product safety standards. Not surprisingly, this also involves the smart use of technology.

One thing which has most everyone scratching their heads is the recommendation that whatever is implemented be done with existing resources. Given how overtaxed and understaffed both Customs and FDA clearly are, how is this even a consideration, much less a possibility?

In its recommendations for Immediate Action, the Working Group calls for improved collaboration, including with private sector advisory groups; acceleration of interoperability, including mandating that the Office of Management and Budget take assertive action over the partner government agencies so that within 60 days each agency establishes or redefines its Implementation Plan, Memorandum of Agreement regarding ITDS, and its technical and business requirements for any program or system modifications which might be needed. OMB is also directed to give import safety agencies special priority for their ITDS efforts in the budget process. Similarly, Customs is directed to make changes to the Automated Commercial Environment to include importer and carrier data; advise other agencies how to best take full advantage of the current ITDS capabilities, and implement World Customs Organization Data Model messages. Finally, the partner agencies are also directed in their 2009 budgets to identify the resources they need to support ACE/ITDS interface and within 60 days to designate a senior executive responsible for implementing ITDS.

Bearing in mind that one of the issues which creates the most headaches for traders is lack of uniformity from one country's requirements to those of the next country, the Working Group called for increased international cooperation and collaboration. State has been put in charge of surveying how different countries handle import safety issues. At the same time, the various agencies are mandated to increase interagency awareness of ongoing and planned discussions with foreign governments regarding import safety agreements. To that end, agencies were encouraged to catalog ongoing and planned discussions with the Commerce Department and directed to hold regular advisory meetings.

A number of trade associations have already testified before the Working Group at its outreach meetings. The expectation is that whatever criteria are recommended by the Working Group, the recommendations in the Action Plan may well have impact across all products and all global trading regions. Make sure your voice is heard. Send the Working Group your comments and recommendations.


The Working Group is headed by Michael O. Leavitt, Secretary, Health and Human Services, Chair, Interagency Working Group on Import Safety, U.S. Department of Health & Human Services, 200 Independence Avenue SW, Washington, D.C., 20201. The more constructive comments and ideas the Working Group receives, the better!
 

Customs Update: Shipment data
(Published in The JOURNAL of COMMERCE ONLINE September 28, 2007)
 to view printable article.

In yet another effort to make the American public feel safer, the Democratic-led Congress recently enacted legislation which approves 100% scanning of all cargo, ocean and air. While H.R. 1 has been characterized in the general press as requiring 100-percent inspection, in fact, fortunately, it does not.

The bill includes a provision that requires 100-percent “screening” of all cargo carried on passenger aircraft. It also gives the Department of Homeland Security Secretary one year to publish a final rule plus the discretion of when to implement. At the same time, the maximum time frame allowed is that 50 percent of air cargo must be scanned within 18 months and 100 percent within three years. Clearly, Congress realized that it sounds good on paper, but that the technology is simply not there yet, plus there is the always-sensitive question of how this will be paid for and by whom?

Also required by the bill is 100-percent ocean container “scanning” using non-intrusive technology and radiation monitors. As in the air mode, this scanning must be accomplished prior to loading. These ocean shipment-related requirements must be in place by July 1, 2012 or as designated by the DHS Secretary, again a recognizing of possible technology hurdles.

The bill also mandates that biometrics be used for outbound immigration purposes no later than June 30, 2009 or at a point in time when 97 percent of air passengers can be scanned, again as designated by the DHS Secretary, another acknowledgment of technology limitations.

None of these requirements are particularly troubling, in the sense that they have been long expected. What is giving traders cause for concern is what is being described as GTX, the Global Trade Exchange, especially since this new data storage and analysis regime is being proposed on top of all the other new programs recently mandated. H.R. 1 requires ocean containers to be scanned as noted, but also to be sealed with what are called “secure” seals. Of course, so far no details have been publicly announced by DHS or Customs and Border Protection as to what will constitute a secure seal. Now we are being told, even more is required, and again with very few details to date, but with potentially far more serious consequences.

In comments delivered to Treasury and Homeland Security's Commercial Operations Advisory Committee in mid-August, DHS Secretary Michael Cherthoff covered a myriad of security-related topics. Thankfully, he began by reinforcing the Bush Administration’s commitment to a “layered enforcement security process which is designed to reduce risk but not to eliminate risk.” Cherthoff made clear the only way to eliminate risk is to close the ports of entry, something which is blatantly impossible.
 
In his remarks, Cherthoff mentioned the Secure Freight Initiative, which involves overseas scanning of containers; the Customs-Trade Partnership Against Terrorism (intended to enhance supply chain security); 10 + 2 (the regulations for which were described as shortly on their way to the Office of Management and Budget for consideration and approval); future recognition of Authorized Economic Operators under a mutual recognition system, and the Container Security Initiative, which involves American Customs officials stationed in other countries working with local authorities to screen or inspect potentially problematic containers.

Cherthoff went on to make the point that what ties all of these programs together is gathering information and data about shipments as early in the process as possible as goods transit the supply chain. In this way, instead of stopping trade through the implementation of 100-percent inspections as proposed by some (which would clearly shut down the economy), the information and data gathered through these various programs would be used to determine which shipments are likely to be problematic and then address how they should be handled. Scanned? Inspected? Barred from loading?

The 10 + 2 requirements and C-TPAT offer means by which the trade provides data to the government. Other programs allow the government to gather data using its own resources. The goal is for all of these systems to be combined so that the U.S. Government is able to “receive, process and act upon commercial information in a timely way so that we can target, in a very specific fashion, the suspect shipments without requiring us to materially slow up the supply chain or cause our ports of entry to become clogged up.”

At the same time, Homeland Security continues to look for ways to increase the collection of helpful information so as to increase the transparency of the supply chain, which is where GTX comes in. The concept behind GTX is that companies will provide transaction details which will be placed into a central electronic repository. The administrator of GTX will be in the private sector, but no further specifics have been provided. While Cherthoff suggested a voluntary pilot program would be the first step, there are some important questions which must be answered before anyone is going to be willing to participate. For example,

1) What data is going to be required? Early reports suggest it will include details about purchases and purchasers, which means value, sourcing, etc.

2) How will the confidentiality of that data be secured and maintained? It’s easy to do under a contractual obligation of confidentiality in the U.S. What happens when the data is shared with others who are outside the U.S.?

3) What entities or individuals will be given access to the data? Are they in the U.S. only? GTX has been described as a central repository of data which will be available to any government official in almost any country. The likely exceptions are the usual “bad guys": Sudan, North Korea, Iran, etc. How do you impose enforceable confidentiality on those outside the U.S.?

4) Given that in some countries, the government also owns certain businesses, if one of that country’s officials accesses data about a specific shipment in GTX, how will proprietary information belonging to an American company be kept from competitors in that foreign country?

5) Most importantly, how is GTX going to be paid for and by whom?

There is no question that the more details any government has about a shipment prior to its loading, the more intelligent its risk assessment. There also seems to be unanimous agreement that manifest information is the least likely to be accurate. So, is GTX the answer? If not, what is? If GTX is the answer, how should it be structured? What happens if there is a breach? These (and others) are all serious questions that need to be addressed before the private sector is again required to spend hundreds of thousands of additional dollars changing the way it does business.

What do you think?