CBP had proposed for the first time in January 2008 a new interpretation of the expression “sold for exportation to the United States” for purposes of determining transaction value. CBP suggested that, in a transaction involving a series of sales, the price actually paid or payable for the imported goods when sold for export to the U.S. would be the price paid in the last sale occurring prior to the entry of goods into the U.S., rather than the first sale. The effect of the proposed interpretation would have been that the transaction value would be determined on the basis of the price paid by the buyer in the United States.
Import Trade Trends provides a snapshot of the global economy. It allows CBP to analyze trade activity during the last six months and to readily establish trend lines derived from comparisons with performance in previous years. Based on the data that’s been collected by CBP, CBP has confirmed that ordinary seasonal patterns are recurring in a manner that reflects our recovering economy.
The report’s statistical highlights for mid-fiscal year 2010 are:
- During the first
six months of fiscal year 2009, U.S. imports
rapidly declined. Seasonal patterns resumed by
mid-year 2010, resulting in a moderate recovery
• Imports are now at levels last seen in fiscal year 2006. Continued stability and modest growth are projected for fiscal year 2010.
- The total value
of imports processed by U.S. Customs and Border
Protection was slightly more than $1.7 trillion
in fiscal year 2009, a 25 percent decrease from
the previous year. By year end 2010, it is
projected that the value of imports will increase
6 percent, totaling $1.8 trillion.
• Consistent with recent years, only 29 percent of imported goods were dutiable. The remaining goods were duty free or free under tariff preference programs.
• During the first six months of fiscal year 2010, CBP collected $15 billion in revenue for the U.S. government. It is projected that $31 billion will be collected by year end.
• A total of $130 million in antidumping/countervailing duties were collected during the first half of fiscal year 2010, down slightly from the same period last year.
• After the Revenue Gap declined for five, consecutive years, preliminary measurements indicate that the level of uncollected duties rose to 1.4 percent, which is roughly equivalent to levels reported in fiscal year 2007.
• Based on a random sampling, 98.6 percent of the fiscal year 2010 imports were materially compliant with all U.S. trade laws and regulations. This compliance rate is slightly higher than recent years.
• Entry volume at the mid-point of fiscal year 2010 is 13 million. By year end, 27 million entries are expected, an increase of 5 percent from fiscal year 2009.
• China surpassed Canada as the United States’ top source of imports in fiscal year 2009, and is projected to maintain its lead through fiscal year 2011.
C-TPAT Director, Bradd Skinner, stated, “This is a great accomplishment for our trade partnership program considering the program began with seven original members in 2001. Achieving 10,000 members indicates that the program is meeting the needs of the trade community, while the member survey results will assist us in taking C-TPAT to the next level.”
According to the CBP press release, approximately half of C-TPAT members companies are small or mid-sized, having less than fifty employees. C-TPAT importer partners are responsible for approximately 50 percent by value of all imported merchandise into the U.S. C-TPAT is the first and the largest anti-terrorism partnership program throughout the world.
“As American consumers spend a little less and save a little more, it has never been more important to connect U.S. businesses to the 95 percent of the world's consumers who live outside our borders,” U.S. Commerce Secretary Gary Locke said. “Helping American companies sell more abroad will create jobs and boost our economy. This report is a blueprint for doing just that.”
The administration’s efforts, through the NEI, are focused on five areas that include access to credit, especially for small and midsize firms; increased trade advocacy and export promotion efforts; removal of barriers to the sale of U.S. goods and services abroad; enforcement of trade rules; and pursuing policies that will increase global economic growth so that there’s a strong worldwide market for U.S. goods and services.
The report outlines ways the U.S. government can expand efforts to help U.S. businesses win more foreign government contracts, find buyers worldwide, participate in more trade missions and trade shows, receive more export financing, and learn new ways to sell products and services overseas. A central focus of the plan is providing additional assistance to small and medium-sized businesses, which are major drivers of new job creation.
According to the report, nine months into a five-year plan, progress is already evident: “Exports in the first six months of this year were 18 percent higher than exports in the first six months of 2009. Furthermore, exports have contributed more than one percentage point to GDP growth (at an annual rate) in each of the four quarters of recovery and have contributed over 1.5 percentage points to growth in the last year. This was a larger contribution than either consumption or fixed investment.”
In the report, the Export Promotion Cabinet provides recommendations to help achieve the priorities established in the NEI Executive Order:
Small and Medium-Sized Enterprises (SMEs): a National Outreach Campaign to raise awareness of export opportunities and government export assistance for U.S. small and midsize companies; a re-launch of export.gov, the Government’s export internet portal, with new export training opportunities to educate companies on how they can begin selling their products overseas or break into new markets if they are already exporting.
Federal Export Assistance: bring more international buyers to U.S. trade shows and encourage more U.S. companies to participate in major international trade shows. In addition, implement a government-wide export promotion strategy for six newly designated “next tier” markets (Colombia, Indonesia, Saudi Arabia, South Africa, Turkey and Vietnam).
Trade Missions: substantially increase the number of trade missions abroad, particularly those led by senior U.S. Government officials, and foreign buyer trade missions to the United States.
Commercial Advocacy: level the playing field for companies bidding on projects abroad through improved coordination among government export promotion programs; formalize a path to escalate, for the first time ever, critical advocacy projects for direct White House and National Economic Council involvement where necessary.
Increasing Export Credit: extend more export credit through existing trade finance agencies, increase awareness of credit products, focus on SMEs and companies from underserved sectors of the U.S. economy, expand the eligibility criteria for SME export finance lending, and streamline the application and review process for SME exporters.
The NEI provides more funding, more focus and more cabinet-level coordination to grow U.S. exports. According to the report, since the President announced the NEI, the Department of Commerce’s Advocacy Center has assisted American companies competing for export opportunities, supporting $11.8 billion in U.S. exports and an estimated 70,000 jobs.
The NEI Report will be followed by the National Export Strategy, prepared by the Trade Promotion Coordinating Committee (TPCC) and delivered to Congress annually, which will detail the implementation of these recommendations and measure progress.
Full NEI report can be accessed here and the executive summary of the report is attached here.
Incoterms are generally revised every decade to reflect changes in trade practices. In the 2010 revision, the number of terms was reduced from 13 to 11. Terms Delivered at Frontier (DAF), Delivered Ex Ship (DES), Delivered Ex Quay (DEQ), and Delivered Duty Unpaid (DDU) have been eliminated. Two new terms have been added: Delivered at Terminal (DAT) and Delivered at Place (DAP). According to ICC, these terms attempt to better account for the role of cargo security and electronic data interchange now prevalent in international trade practices.
The new terms go into effect on January 1, 2011. A copy of the revised terms is available for purchase on ICC website.
John Sonderman of the BIS Office of Enforcement summarized the voluntary self-disclosure (VSD) enforcement program:
- In Fiscal Year
(FY) 2009, BIS closed 109 cases with an average
processing time of 17 months;
• In FY2010, the processing time decreased to 16 months;
• In 2010, 21 cases have been closed as of May 2010 with an average 6 week processing time. A notable change for this time period is that BIS officers located at headquarters replaced field officers as point of contact;
• In FY 2009 - 163 cases or 71% of VSDs resulted in a warning letter; 9 cases resulted in sanctions;
• In FY2009, 67% of VSDs resulted in a warning letter; 13 cases resulted in sanctions.
As for recent and upcoming BIS regulations, Hilary Hess of BIS Regulatory Policy Division stated that:
- On September 7,
2010, BIS published new rules regarding the
revised Wassenaar Arrangement’s list that affects
most CCL categories except for Category 3. The
new rules do not include some items on Category 6
as they are covered under the Directorate of
Defense Trade Controls (DDTC) jurisdiction.
Category 5, Part 2 will be covered separately as
part of an encryption rule;
• BIS recently updated its statement of legal authority outlined under the International Emergency Economic Powers Act (IEEPA);
• BIS amended the licensing process for commodities: the new process does not require determination of commodity jurisdiction;
• BIS amended its Foreign Product Rule to require a license on all foreign products using U.S. components destined for D1 list and Terrorist Supporting countries beyond Cuba;
• BIS revised CCL to cover crime control items potentially used for human rights violations. Items covered by the revision will generally be denied; infrasound sensors will be moved from the munitions list to the CCL; and
• BIS issued a Notice of Proposed Rule Making that concerns transshipment guidelines (not a rule).
Finally, Dale Kelly of Foreign Trade Division Bureau of the Census (Census) stated that the Foreign Trade Division (FTD) continues to work on revising the Automated Export System (AES) regulations and is waiting on concurrence from Department of Homeland Security (DHS) and Customs Border Protection (CBP). There is no indication as to when this may occur.
BIS states that, “The PECSEA draws on the expertise of its members to provide advice and make recommendations on ways to minimize the possible adverse impact export controls may have on U.S. industry. The PECSEA provides the Government with direct input from representatives of the broad range of industries that are directly affected by export controls.”
“PECSEA members are appointed by the Secretary of Commerce and serve at the Secretary's discretion. The membership reflects the Department's commitment to attaining balance and diversity. PECSEA members must obtain secret-level clearances prior to appointment. . . The PECSEA meets 4 to 6 times per year. Members of the Subcommittee will not be compensated for their services.”
“The PECSEA is seeking private-sector members with senior export control expertise and direct experience in one or more of the following industrics: Machine tools, semiconductors, commercial communication satcllitcs, high performance computers, telecommunications, aircraft, pharmaceuticals, and chemicals.”
BIS Seeks Comments on the Effectiveness of Licensing Procedures for Agricultural Commodities Exported to Cuba
Comments must be received by October 8, 2010.
The notice also provided:
In January 2010, the Secretary of Commerce, on the recommendation of the Secretary of State, extended for one year all foreign policy-based export controls then in effect. BIS is now soliciting public comment on the effects of extending or modifying the existing foreign policy-based export controls for another year. Among the criteria considered in determining whether to continue or revise U.S. foreign policy-based export controls are the following:
1. The likelihood that such controls will achieve their intended foreign policy purposes, in light of other factors, including the availability from other countries of the goods, software or technology proposed for such controls;
2. Whether the foreign policy objective of such controls can be achieved through negotiations or other alternative means;
3. The compatibility of the controls with the foreign policy objectives of the United States and with overall U.S. policy toward the country subject to the controls;
4. Whether the reaction of other countries to the extension of such controls is not likely to render the controls ineffective in achieving the intended foreign policy objective or be counterproductive to U.S. foreign policy interests;
5. The comparative benefits to U.S. foreign policy objectives versus the effect of the controls on the export performance of the United States, the competitive position of the United States in the international economy, the international reputation of the United States as a supplier of goods and technology; and
6. The ability of the United States to effectively enforce the controls.
BIS is particularly interested in receiving comments on the economic impact of proliferation controls. BIS is also interested in industry information relating to the following:
1. Information on the effect of foreign policy-based export controls on sales of U.S. products to third countries (i.e., those countries not targeted by sanctions), including the views of foreign purchasers or prospective customers regarding U.S. foreign policy- based export controls.
2. Information on controls maintained by U.S. trade partners. For example, to what extent do U.S. trade partners have similar controls on goods and technology on a worldwide basis or to specific destinations?
3. Information on licensing policies or practices by our foreign trade partners that are similar to U.S. foreign policy- based export controls, including license review criteria, use of conditions, and requirements for pre- and post-shipment verifications (preferably supported by examples of approvals, denials and foreign regulations).
4. Suggestions for revisions to foreign policy-based export controls that would bring them more into line with multilateral practice.
5. Comments or suggestions as to actions that would make multilateral controls more effective.
6. Information that illustrates the effect of foreign policy-based export controls on trade or acquisitions by intended targets of the controls.
7. Data or other information on the effect of foreign policy-based export controls on overall trade at the level of individual industrial sectors.
8. Suggestions as to how to measure the effect of foreign policy-based export controls on trade.
9. Information on the use of foreign policy-based export controls on targeted countries, entities, or individuals.
BIS is also interested in comments relating generally to the extension or revision of existing foreign policy-based export controls.
Comments are due by October 8, 2010.
The following Export Control Classifications Numbers (ECCNs) are affected: 1A001, 1A002, 1B001, 1C002, 1C006, 1C007, 1C008, 1C010, 1C011, 1E002, 2B006, 3A001, 3A002, 3B001, 4A001, 4A003, 4D001, 4D993, 4E001, 5A001, 5B001, 5D001, 5E001, 6A001, 6A005, 6A006, 6A008, 6C004, 6D003, 6E993, 7A005, 7B001, 7D003, 7E004, 9A001, 9A003, 9B002, 9D003, and 9E003. 4D003 is removed by the final rule.
Changes pertaining to ECCNs 5A002, 5D002, 6A002, 6A003, 8A002 and all related ECCNs will be implemented in a separate rule because of the sensitivity of the items and controls for these items.
For more information, refer to the final rule, which can be accessed here.
Assistant Secretary Mills summarized BIS’ export enforcement activities over the past year. Specifically, he stated that:
- BIS has agents based around the United States as well as in critical hubs such as Hong Kong, Singapore, and the United Arab Emirates.
- The Office of Enforcement Analysis (OEA) evaluates export transactions, visas, press reporting, and intelligence information to help Special Agents identify and investigate bad actors. The OEA also conducts end use checks abroad.
- The Office of Antiboycott Compliance (OAC) negotiated settlements in 11 cases last year, resulting in fines of more than $350,000.
- The U.S. Government’s change in focus on export licensing will necessitate BIS’ export enforcement efforts as well. While BIS will continue to encourage Voluntary Self-Disclosures and provide mitigation of possible penalties for companies that had good internal compliance programs prior to a violation. But, BIS will be taking a harder line in other circumstances involving willful misconduct. Mills stated that although BIS typically sought penalties more against companies than individuals, BIS will now consider seeking penalties against an individual when a violation is a deliberate action of an individual, including seeking the denial of export privileges, fines, and imprisonment. This will also hold true for a supervisor who is complicit in these deliberate violations by a subordinate.
- BIS will focus on disrupting major illicit procurement networks as in the past decade, countries like Iran and North Korea have turned to foreign middlemen and front companies to acquire U.S.-origin goods. During the last two years, BIS has added 185 foreign entities to the Entity List.
- In February 2010, Balli Aviation agreed to pay $15 million, the largest civil penalty in the history of BIS. In addition, a federal judge imposed a $2 million criminal fine and a five year probation against a Balli subsidiary.
The duty was imposed pursuant to investigation under Section 302 of the Trade Act of 1974, where USTR determined in April 2009 that Canada had breached certain obligations to the U.S. under the 2006 Softwood Lumber Agreement (SLA). The investigation was initiated after an arbitral tribunal determined under the SLA that Canada had breached certain obligations. The tribunal issued a remedy award instructing Canada to collect an additional 10 percent ad valorem export charge on softwood lumber shipments from Ontario, Quebec, Manitoba, and Saskatchewan until an award amount of CDN $68 million had been collected. When Canada failed to collect the additional export charges, USTR imposed a 10 percent duty on imports under the April 2009 action until the U.S. collected the $54.8 million (U.S. dollar equivalent of CDN $68 million) remedy award.
Government of Canada has now adopted its own measures to address Canada’s breach of the SLA. Specifically, Canada will begin collection of an additional 10 percent charge on exports of softwood lumber products from the provinces of Ontario, Quebec, Manitoba, and Saskatchewan with respect to softwood lumber products shipped on September 1, 2010 or later. An understanding between the Governments of the U.S. and Canada has been reached that Canada will collect the additional charge on softwood lumber exports until the total of the remedy award is collected.
CBP will be monitoring all ports to ensure that the 10 percent duty has been paid on the softwood lumber imports from Canada with shipment dates of September 1 or later.
Effective September 1, 2010, DDTC-Licensing no longer accepts unclassified paper submissions of Technical Assistance Agreements, Manufacturing License Agreements, and Warehouse Distribution Agreements (to include major amendments). All submissions must now be made electronically via D-Trade 2 utilizing the DSP-5 form. Guidelines for Preparing Electronic Agreements can be accessed here.
Effective September 3, 2010, DDTC-Policy no longer accepts paper submissions of Commodity Jurisdiction (CJ) requests. All CJ requests must now be made electronically via EFS utilizing the DS-4076 Commodity Jurisdiction Request Form. Instructions for CJ requests can be found here.
BIS is updating the “best practices” list, which was developed following the solicitation of public comments, in light of the U.S. Government’s current export control reform efforts and the increased attention that reexport, transit, and transshipment trade has generated in recent years, both within the U.S. and globally.
BIS states that, “The best practices identified herein include the types of practices that industry has adopted to guard against diversion risk. Both government and industry recognize that implementing effective export compliance programs is an important component of responsible corporate citizenship and good business practices. BIS seeks information to refine and revise this proposed list of best practices to help ensure that industry and the government continue to prevent diversion of controlled items subject to the Export Administration Regulations (EAR) through transshipment points.”
In the notice, BIS stated:
The following reflect existing and emerging transshipment best practices that guard against diversion risk. BIS seeks comment on these and additional practices from the public based on experience.
Best Practice #1. Pay heightened attention to the Red Flag Indicators on the BIS Web site (see http://www.bis. doc.gov/Enforcement/redflags.htm) with respect to transactions to, from, or through transshipment hubs. When a company encounters a suspicious transaction, such as those outlined in the ‘‘Know Your Customer’’ Guidance and Red Flags (Supplement No. 3 to Part 732 of the EAR), it should inquire further and attempt to resolve any questions raised by the transaction.
Best Practice #2. An Exporter/ Reexporter should seek to utilize only those Trade Facilitators/Freight Forwarders that also observe these best practices and possess their own export management and compliance program.
Best Practice #3. Exporters/ Reexporters should have information regarding their foreign customers. In particular, a company should know if the customer is a trading company or distributor, and inquire whether the customer resells to or has guidelines to resell to third parties.
Best Practice #4. With respect to transactions to, from, or through transshipment hubs, Exporters/ Reexporters should take appropriate steps to inquire about the end-user and to determine whether the item will be reexported or incorporated in an item to be reexported.
Best Practice #5. Freight Forwarders should inquire about the details of a routed transaction when asked by a foreign principal party in interest to ship to a country or countries of destination or ultimate consignees that are different from those provided by the U.S. principal party in interest.
Best Practice #6. An Exporter/ Reexporter should communicate the appropriate Export Control Classification Number (ECCN) or other classification information (EAR99) for each export/reexport to the end-user and, where relevant, to the ultimate consignee.
Best Practice #7. An Exporter/ Reexporter should report such ECCN or the EAR99 classifications for all export transactions, including ‘‘No License Required’’ designations to the Trade Facilitator/Freight Forwarder or enter them in the Automated Export System (AES).
Comments must be received before October 18, 2010.