CBP To Close Drawback Center at Port of Los Angeles-Long Beach
05/05/10 09:40 AM
On May
5, 2010, the U.S. Customs and Border Protection
(CBP) issued a final rule in Federal
Register announcing closure of the Los Angeles
(L.A.) Drawback Center effective June 4, 2010.
This decision is due to a small and continuously
decreasing number of drawback claims filed and
processed at the L.A. Drawback Center since
2003.
Any future drawback claims must be submitted to one of the four remaining drawback centers location in San Francisco, Chicago, Houston, or New York. All remaining claims that were filed at the L.A. Drawback Center prior to closure that have not yet liquidated and still require CBP review will be forwarded to the San Francisco Drawback Center for final processing.
Any future drawback claims must be submitted to one of the four remaining drawback centers location in San Francisco, Chicago, Houston, or New York. All remaining claims that were filed at the L.A. Drawback Center prior to closure that have not yet liquidated and still require CBP review will be forwarded to the San Francisco Drawback Center for final processing.
CBP Publishes Proposed Rule re: Customs Broker Recordkeeping Requirements
03/23/10 11:52 PM
On
March 23, 2010, Customs and Border Protection (CBP)
published a notice of proposed
amendments to title 19 of
the Code of Federal Regulations (CFR) regarding
customs broker recordkeeping requirements as
they pertain to the location and method of
record retention.
Specifically, CBP proposes to amend the regulations to permit a licensed customs broker to store records relating to his customs transactions at any location within the customs territory of the United States, so long as the broker’s designated recordkeeping contact, identified in the broker’s permit application, makes all records available to CBP within a reasonable period of time from request at the broker district that covers the CBP port to which the records relate.
This proposed rule also intends to remove the requirement, as it currently applies to brokers who maintain separate electronic records, that certain entry records must be retained in their original format for the 120-day period after the release or conditional release of imported merchandise. The changes proposed in the notice are intended to conform CBP’s recordkeeping requirements to reflect modern business practices whereby documents are often generated, stored and transmitted in an electronic format. The proposed changes serve to remove duplicative recordkeeping requirements and streamline recordkeeping procedures for brokers who maintain electronic recordkeeping systems without compromising the agency’s ability to monitor and enforce recordkeeping compliance.
Comments must be received on or before May 24, 2010.
Specifically, CBP proposes to amend the regulations to permit a licensed customs broker to store records relating to his customs transactions at any location within the customs territory of the United States, so long as the broker’s designated recordkeeping contact, identified in the broker’s permit application, makes all records available to CBP within a reasonable period of time from request at the broker district that covers the CBP port to which the records relate.
This proposed rule also intends to remove the requirement, as it currently applies to brokers who maintain separate electronic records, that certain entry records must be retained in their original format for the 120-day period after the release or conditional release of imported merchandise. The changes proposed in the notice are intended to conform CBP’s recordkeeping requirements to reflect modern business practices whereby documents are often generated, stored and transmitted in an electronic format. The proposed changes serve to remove duplicative recordkeeping requirements and streamline recordkeeping procedures for brokers who maintain electronic recordkeeping systems without compromising the agency’s ability to monitor and enforce recordkeeping compliance.
Comments must be received on or before May 24, 2010.
CBP Proposes to Cease Paper Courtesy Notices of Liquidation
03/16/10 05:50 PM
On
March 16, 2010, U.S. Customs and Border Protection
(CBP) issued a notice in the Federal
Register proposing to amend Title 19 of the Code
of Federal Regulations (CFR) pertaining to the
distribution of courtesy notices of liquidation.
Specifically, CBP proposes to amend 19 CFR 159
by removing any reference to Customs Form 4333-A
when used in connection with courtesy notices.
Currently, CBP’s Technology Center transmits electronic courtesy notices to all Automated Broker Interface (ABI) filers and mails paper courtesy notices, on CBP Form 4333-A, to all importers of record whose entry summaries are set to liquidate by each port of entry. As a result, importers of record who are also ABI filers receive two notices: a paper notice and an electronic notice that the ABI filer receives on behalf of the importer of record.
CBP is proposing to discontinue mailing paper courtesy notices to importers of record whose entry summaries are filed in ABI because the ABI filer, who is either the importer of record or a customs broker, already receives an electronic courtesy notice of liquidation. CBP estimates that this amendment will save the agency $3.8 million annually by eliminating 90% of the paper courtesy notices currently sent to importers.
The proposed changes will not affect CBP’s obligation to post the official bulletin notice of liquidation in the customhouse at all ports of entry pursuant to 19 CFR 159.9(b). In addition, CBP Form 4333-A will continue to be used as a notice of extension and suspension.
Comments on the proposed rule are due May 17, 2010.
Currently, CBP’s Technology Center transmits electronic courtesy notices to all Automated Broker Interface (ABI) filers and mails paper courtesy notices, on CBP Form 4333-A, to all importers of record whose entry summaries are set to liquidate by each port of entry. As a result, importers of record who are also ABI filers receive two notices: a paper notice and an electronic notice that the ABI filer receives on behalf of the importer of record.
CBP is proposing to discontinue mailing paper courtesy notices to importers of record whose entry summaries are filed in ABI because the ABI filer, who is either the importer of record or a customs broker, already receives an electronic courtesy notice of liquidation. CBP estimates that this amendment will save the agency $3.8 million annually by eliminating 90% of the paper courtesy notices currently sent to importers.
The proposed changes will not affect CBP’s obligation to post the official bulletin notice of liquidation in the customhouse at all ports of entry pursuant to 19 CFR 159.9(b). In addition, CBP Form 4333-A will continue to be used as a notice of extension and suspension.
Comments on the proposed rule are due May 17, 2010.
CBP Inches Closer to Accepting APA-Approved Transfer Prices
03/01/10 04:05 PM
On
December 8, 2009, U.S. Customs and Border
Protection (CBP) issued an Internal Advice Ruling
(Headquarters Ruling Letter
(“HQ&rdquo
H029658) approving
the use of import values based on prices set
pursuant to a bilateral Advance Pricing
Agreement (APA).
In HQ H029658, the importer was an exclusive distributor of motor vehicles and parts imported from a foreign parent company and the affiliate of the parent company. To establish the proper basis of appraisement for motor vehicles and parts, the importer provided CBP with a detailed description of its sales process. In 2003, the importer applied for and received a bilateral APA that was approved by the Internal Revenue Service (IRS) the foreign tax authorities that covered all of its imported items for 5 years.
In its APA, the importer selected the comparable profits method (CPM) as the best method for evaluating its related party, or controlled, transactions. Pursuant to the CPM, an arms’ length price range was selected by comparing the profitability of the importer (or “tested party&rdquo to that of a set of unrelated
companies that performed similar functions and
assumed similar risks as the importer.
However, none of the 21 selected companies
were automobile distributors or manufacturers
because pricing data for sales from such
companies to unrelated distributors did not
exist.
In considering whether or not the import values declared to CBP based on the APA-approved transfer prices were acceptable transaction values under the Customs Regulations, CBP first considered whether the prices were based on bona fide sales. After determining that the underlying transactions were based on bona fide sales, CBP considered whether or not the price actually paid or payable by the buyer to the seller was influenced by the relationship between the parties. CBP did so by examining the circumstances of sales (COS) between the parties.
Under the COS test, CBP focused on:
CBP found that pricing data for independent distributors of the same vehicles in other regions of the world was not helpful due to differing volumes, consumer preferences, and government regulations. CBP then looked to whether the sales prices were set in a manner consistent with the normal pricing practices of the automotive industry. CBP stated that the importer had submitted evidence that the sales prices were set in a manner consistent with the automotive industry, but CBP would not address the validity of the CPM selected and approved by the IRS and the foreign tax authority.
CBP next examined whether the sales prices were adequate to ensure the recovery of all costs plus a profit equivalent to the company’s overall profit realized over a representative period of time. To prove that the sales prices were adequate in this regard, the importer relied on the approved bilateral APA and claimed that the IRS’ approval of its profitability range would ensure that the company recovered all costs plus a profit as required by the Customs regulations.
While CBP acknowledged that the APA’s comparison between the importer’s profitability and that of other companies “may provide some evidence that the price is adequate to ensure recovery of all costs plus a profit,” CBP found this kind of information to be “less valuable since the companies are not engaged in the sale of the same class or kind of merchandise.” HQ H029658 at 9.
Finally, CBP looked to whether any other factors indicated that the relationship between the parties did not influence the sales price. CBP noted that whether IRS reviewed and approved importer’s transfer pricing methodology was a significant factor. Here, he importer’s transfer pricing analysis was reviewed and accepted by the IRS and the foreign tax authority. In addition, all of the buyer’s imports were covered by the APA, thus reducing the possibility of profit manipulation.
The importer also provided CBP with a waiver that enabled CBP to access the documents that were submitted to the IRS in the APA process. The fact that foreign tax authorities had approved the APA mandated profit levels was another factor in establishing that the relationship between the parties did not affect the price. Finally, CBP made note of the negotiations between the buyer and seller to determine an FOB price that permitted the importer’s operating profit to fall within the interquartile range established by a reference to unrelated comparables.
Thus, although CBP did not allow the importer to rely solely on the bilateral APA transfer pricing agreement, CBP held that the importer had showed that the sales price was not influenced by the relationship for the purposes of circumstances of sale test, and, as a result, transaction value was the proper method of appraisement for the related-party import transaction.
H029658) approving
the use of import values based on prices set
pursuant to a bilateral Advance Pricing
Agreement (APA).
In HQ H029658, the importer was an exclusive distributor of motor vehicles and parts imported from a foreign parent company and the affiliate of the parent company. To establish the proper basis of appraisement for motor vehicles and parts, the importer provided CBP with a detailed description of its sales process. In 2003, the importer applied for and received a bilateral APA that was approved by the Internal Revenue Service (IRS) the foreign tax authorities that covered all of its imported items for 5 years.
In its APA, the importer selected the comparable profits method (CPM) as the best method for evaluating its related party, or controlled, transactions. Pursuant to the CPM, an arms’ length price range was selected by comparing the profitability of the importer (or “tested party&rdquo
to that of a set of unrelated
companies that performed similar functions and
assumed similar risks as the importer.
However, none of the 21 selected companies
were automobile distributors or manufacturers
because pricing data for sales from such
companies to unrelated distributors did not
exist.
In considering whether or not the import values declared to CBP based on the APA-approved transfer prices were acceptable transaction values under the Customs Regulations, CBP first considered whether the prices were based on bona fide sales. After determining that the underlying transactions were based on bona fide sales, CBP considered whether or not the price actually paid or payable by the buyer to the seller was influenced by the relationship between the parties. CBP did so by examining the circumstances of sales (COS) between the parties.
Under the COS test, CBP focused on:
- Whether the sales prices of the transactions were settled in a similar manner to the way the seller settled prices with unrelated parties or with the normal pricing practices of the industry;
- Whether the sales prices were adequate to ensure the recovery of all costs plus a profit equivalent to the company’s overall profit realized over a representative period of time; and
- Whether there were any other factors that indicated that the relationship between the buyer and seller did not influence the sales prices.
CBP found that pricing data for independent distributors of the same vehicles in other regions of the world was not helpful due to differing volumes, consumer preferences, and government regulations. CBP then looked to whether the sales prices were set in a manner consistent with the normal pricing practices of the automotive industry. CBP stated that the importer had submitted evidence that the sales prices were set in a manner consistent with the automotive industry, but CBP would not address the validity of the CPM selected and approved by the IRS and the foreign tax authority.
CBP next examined whether the sales prices were adequate to ensure the recovery of all costs plus a profit equivalent to the company’s overall profit realized over a representative period of time. To prove that the sales prices were adequate in this regard, the importer relied on the approved bilateral APA and claimed that the IRS’ approval of its profitability range would ensure that the company recovered all costs plus a profit as required by the Customs regulations.
While CBP acknowledged that the APA’s comparison between the importer’s profitability and that of other companies “may provide some evidence that the price is adequate to ensure recovery of all costs plus a profit,” CBP found this kind of information to be “less valuable since the companies are not engaged in the sale of the same class or kind of merchandise.” HQ H029658 at 9.
Finally, CBP looked to whether any other factors indicated that the relationship between the parties did not influence the sales price. CBP noted that whether IRS reviewed and approved importer’s transfer pricing methodology was a significant factor. Here, he importer’s transfer pricing analysis was reviewed and accepted by the IRS and the foreign tax authority. In addition, all of the buyer’s imports were covered by the APA, thus reducing the possibility of profit manipulation.
The importer also provided CBP with a waiver that enabled CBP to access the documents that were submitted to the IRS in the APA process. The fact that foreign tax authorities had approved the APA mandated profit levels was another factor in establishing that the relationship between the parties did not affect the price. Finally, CBP made note of the negotiations between the buyer and seller to determine an FOB price that permitted the importer’s operating profit to fall within the interquartile range established by a reference to unrelated comparables.
Thus, although CBP did not allow the importer to rely solely on the bilateral APA transfer pricing agreement, CBP held that the importer had showed that the sales price was not influenced by the relationship for the purposes of circumstances of sale test, and, as a result, transaction value was the proper method of appraisement for the related-party import transaction.
2009 CBP Trade Symposium Recap
12/30/09 10:51 PM
The
U.S. Customs and Border Protection (CBP) held its
2009 Trade Symposium was from December 8 -10, 2009
in Washington D.C. The symposium, titled "A Decade
of Progress through Partnership," marked the 10th
anniversary of this event.
The symposium was organized in a workshop setting and also included a number of lectures and presentations. Some of the most important topics included Importer Security Filing (ISF), shared border issues between the U.S., Canada, and Mexico, Customs’ intellectual property rights (IPR) policy, and Customs’ rulings process.
Regarding the ISF process, CBP reported that from January 2009 through December 2009 it received 3.65 million filings from more than 100,000 ISF importers. CBP reminded that it will begin enforcing ISF requirements beginning January 26, 2010. It was clear from the discussions that Customs has no intention of delaying the enforcement of mandatory ISF filing past the intended enforcement date. However, CBP plans to adopt, at least initially, an informed compliance approach, which, at first, will include use of the least punitive measures.
At the beginning of the ISF enforcement period, Customs expects to use Do Not Load Directives only in the most serious cases. Customs is most interested in receiving the necessary ISF data rather than holding back the cargo or issuing monetary penalties, which range from $5,000 for ISF transmission violations and are capped at $10,000 per filing. The importers must also consider that the cost of Customs withholding cargo is likely to exceed the penalty of $5,000 or $10,000.
The ISF penalty process will be, for now, centralized at the Customs’ Headquarters (HQ) level. Individual ports will initiate the penalty proceedings but the review and handling of the violation will be forwarded to Customs HQ.
On the border issues, a panel of Customs officials from the U.S., Mexico and Canada stressed the importance of harmonizing countries’ customs processes, including requirements for advance data submission otherwise known as 10+2. The U.S. and Canada continue to work on harmonizing partnership programs like C-TPAT. Mexico will be initiating its own Authorized Economic Operator (AEO) program in 2010.
Overall, the discussions stressed the importance of developing businesses’ risk management programs including integration of internal controls related to trade and those involving key business and financial operations.
Regarding Customs’ IPR policy, CBP issued over 1,000 fine notices totaling $94 million against importers attempting to import counterfeit merchandise. Of that amount, CBP was able to collect only $2 million from the violators. Therese Randazzo, Customs’ IPR Policy and Programs Division Director, indicated that the U.S. Attorney Office is hesitant to bring cases against violators since adding a fine in addition to the seizure and forfeiture of goods may be considered an excessive fine under U.S. law.
With respect to the Customs Rulings process, Customs reminded importers to submit Ruling Requests via CBP’s new e-Rulings system (except the Ruling Requests must be submitted by paper if a physical sample is submitted to CBP). Advance Ruling Requests still remain the best way of predicting proper import requirements, including proper classification and valuation.
Customs’ failure to timely process ruling requests has been a constant complaint among the practitioners. Headquarters rulings should be issued in 90 days, while New York rulings should be issued in 30 days. While the average ruling processing time at New York port is 22 days, there still remains a significant backlog of the requests.
The event highlights can be accessed on U.S. Customs’ website here. Presentations from the trade symposium can be found here.
The symposium was organized in a workshop setting and also included a number of lectures and presentations. Some of the most important topics included Importer Security Filing (ISF), shared border issues between the U.S., Canada, and Mexico, Customs’ intellectual property rights (IPR) policy, and Customs’ rulings process.
Regarding the ISF process, CBP reported that from January 2009 through December 2009 it received 3.65 million filings from more than 100,000 ISF importers. CBP reminded that it will begin enforcing ISF requirements beginning January 26, 2010. It was clear from the discussions that Customs has no intention of delaying the enforcement of mandatory ISF filing past the intended enforcement date. However, CBP plans to adopt, at least initially, an informed compliance approach, which, at first, will include use of the least punitive measures.
At the beginning of the ISF enforcement period, Customs expects to use Do Not Load Directives only in the most serious cases. Customs is most interested in receiving the necessary ISF data rather than holding back the cargo or issuing monetary penalties, which range from $5,000 for ISF transmission violations and are capped at $10,000 per filing. The importers must also consider that the cost of Customs withholding cargo is likely to exceed the penalty of $5,000 or $10,000.
The ISF penalty process will be, for now, centralized at the Customs’ Headquarters (HQ) level. Individual ports will initiate the penalty proceedings but the review and handling of the violation will be forwarded to Customs HQ.
On the border issues, a panel of Customs officials from the U.S., Mexico and Canada stressed the importance of harmonizing countries’ customs processes, including requirements for advance data submission otherwise known as 10+2. The U.S. and Canada continue to work on harmonizing partnership programs like C-TPAT. Mexico will be initiating its own Authorized Economic Operator (AEO) program in 2010.
Overall, the discussions stressed the importance of developing businesses’ risk management programs including integration of internal controls related to trade and those involving key business and financial operations.
Regarding Customs’ IPR policy, CBP issued over 1,000 fine notices totaling $94 million against importers attempting to import counterfeit merchandise. Of that amount, CBP was able to collect only $2 million from the violators. Therese Randazzo, Customs’ IPR Policy and Programs Division Director, indicated that the U.S. Attorney Office is hesitant to bring cases against violators since adding a fine in addition to the seizure and forfeiture of goods may be considered an excessive fine under U.S. law.
With respect to the Customs Rulings process, Customs reminded importers to submit Ruling Requests via CBP’s new e-Rulings system (except the Ruling Requests must be submitted by paper if a physical sample is submitted to CBP). Advance Ruling Requests still remain the best way of predicting proper import requirements, including proper classification and valuation.
Customs’ failure to timely process ruling requests has been a constant complaint among the practitioners. Headquarters rulings should be issued in 90 days, while New York rulings should be issued in 30 days. While the average ruling processing time at New York port is 22 days, there still remains a significant backlog of the requests.
The event highlights can be accessed on U.S. Customs’ website here. Presentations from the trade symposium can be found here.
Mexican Criminal Organizations Try to Infiltrate Border Patrol Ranks
12/18/09 04:03 PM
According to
a New York Times
report,
anticorruption investigators are worried that
Mexican drug organizations are making a
concerted effort to infiltrate Customs and
Border Protection (CBP) ranks. Facing increased
security on the border that now includes miles
of new fencing, floodlights, motions sensors and
cameras, Mexican traffickers target customs
agents with cross-border ties or even solicit
some of their own operatives to apply for
customs agents’ positions.
The report states that while the majority of CBP border patrol agents stay away from crime, cases have been reported where border patrol agents have helped traffickers smuggle drugs and illegal immigrants into the U.S. by tipping smugglers on where the border guards are or by admitting the smugglers’ vehicles into the U.S. without checking them.
To tighten the border security between the U.S. and Mexico, the U.S. has spent $11 billion in 2009 building physical barriers and developing the country’s largest law enforcement agency to patrol the area. Federal officials believe that drug traffickers are taking advantage of CBP’s hiring rush for customs agents. Criminal organizations direct people to apply to CBP positions only to help traffickers smuggle drugs and people into the country.
According to the Department of Homeland Security Inspector General’s Office, arrests of CBP agents and officers have increased 40 percent in the last few years as compared to the 24 percent growth in the agency itself. Currently, the office has 400 open investigations which sometimes take years to close.
The report states that while the majority of CBP border patrol agents stay away from crime, cases have been reported where border patrol agents have helped traffickers smuggle drugs and illegal immigrants into the U.S. by tipping smugglers on where the border guards are or by admitting the smugglers’ vehicles into the U.S. without checking them.
To tighten the border security between the U.S. and Mexico, the U.S. has spent $11 billion in 2009 building physical barriers and developing the country’s largest law enforcement agency to patrol the area. Federal officials believe that drug traffickers are taking advantage of CBP’s hiring rush for customs agents. Criminal organizations direct people to apply to CBP positions only to help traffickers smuggle drugs and people into the country.
According to the Department of Homeland Security Inspector General’s Office, arrests of CBP agents and officers have increased 40 percent in the last few years as compared to the 24 percent growth in the agency itself. Currently, the office has 400 open investigations which sometimes take years to close.
Importer Security Filing (ISF) Progress Reports Available
10/26/09 01:22 PM
On
October 26, 2009, Customs and Border Protection
(CBP) reminded importers that
it is still accepting registation for Importer
Security Filing (ISF) Progress Reports.
CBP will begin full enforcement of the Importer Security Filing (ISF), popularly known as the “10+2” rule, on January 26, 2010. The 10+2 rule requires that importers and carriers transmit certain cargo information to CBP for imports destined to enter the U.S. or a free trade zone in the U.S., via the Automated Broker Interface (ABI) or Automated Manifest System (AMS). In preparation for the new requirements, CBP is providing all ISF filers with a progress report. CBP urges companies to review these reports with their ISF filers to address filing inaccuracies or delayed data transmissions during the flexible enforcement period currently in effect.
ISF Filers and C-TPAT Tier 2 and Tier 3 are eligible for the progress report, and may request their copy by contacting: Progress_Report@cbp.dhs.gov.
The filers’ request should include: Company Name, Filer Code, Point of Contact, Point of Contact Telephone, and E-mail address to which the report should be sent.
C-TPAT Tier 2 and 3 importers should provide the same information except they should provide their tier level and, instead of a filer code, the importer of record numbers they wish included in the report.
CBP will begin full enforcement of the Importer Security Filing (ISF), popularly known as the “10+2” rule, on January 26, 2010. The 10+2 rule requires that importers and carriers transmit certain cargo information to CBP for imports destined to enter the U.S. or a free trade zone in the U.S., via the Automated Broker Interface (ABI) or Automated Manifest System (AMS). In preparation for the new requirements, CBP is providing all ISF filers with a progress report. CBP urges companies to review these reports with their ISF filers to address filing inaccuracies or delayed data transmissions during the flexible enforcement period currently in effect.
ISF Filers and C-TPAT Tier 2 and Tier 3 are eligible for the progress report, and may request their copy by contacting: Progress_Report@cbp.dhs.gov.
The filers’ request should include: Company Name, Filer Code, Point of Contact, Point of Contact Telephone, and E-mail address to which the report should be sent.
C-TPAT Tier 2 and 3 importers should provide the same information except they should provide their tier level and, instead of a filer code, the importer of record numbers they wish included in the report.
CBP Proposes Regulation Changes re: the Use of Statistical Sampling in Audits and Prior Dislcosures and Offsetting Overpayments and Over-Declarations
10/22/09 09:46 AM
On
October 21, 2009, Customs and Border Protection
(CBP) announced that it
had published in the Federal
Register proposed amendments to the Customs
regulations on the use of statistical sampling
in CBP audits and prior disclosure cases and the
use of offsetting overpayments and
over-declarations in audits. Written comments on
the proposed amendments may be submitted by
interested persons on or before December 21,
2009.
The proposed amendments to the regulations provide further guidance with regard to the use of statistical sampling in audits conducted by CBP under section 1509 of the Regulations and in independent reviews and lost revenue calculations for private parties for purposes of prior disclosure. Specifically, the amended regulations provide that: (1) CBP has the sole discretion concerning whether to employ statistical sampling in any given case, authorize a person being audited to perform self-testing and use statistical sampling, or accept the statistical sampling used by a private party conducting an independent review and calculation of lost revenue in a prior disclosure case. Once CBP approves the specfics of a statistical sampling plan, and the person being audited or submitting the prior disclosure agrees to waive its ability to challenge the validty of the sampling plan at a later date (any future challenges will be limited to computation and clerical errors), the audit (or self-testing) may proceed in accordance with the sampling plan. CBP reserves the reight in any case to conduct a full enty-by-entry audit if it deems such an audit to be appropriate.
Furthermore, the amendments provide that CBP auditors and private parties seeking to use statistical sampling with regard to a prior disclosure case may do so only when: (1) review of 100 percent of the transactions is impossible or impractical; (2) the sampling plan is prepared in accordance with generally recognized sampling procedures; and (3) the sampling procedure is executed in accordance with that plan. 19 C.F.R. § 163.11(c)(2) (as proposed).
With regard to offsetting overpayments and over-declarations, CBP is proposing updating the regulations to reflect an amendment to section 1509(b) made by Section 382 of the Trade Act of 2002. Prior to the Act, once liquidation had become final with respect to an entry that was overpaid, CBP was bound by the liquidation and could not offset an overpayment against the underpayments that formed the basis of a penalty action. CBP is now authorized under the statute to account for overpayments of duties and fees and over-declarations of quantities or values when calculating loss of duties, taxes, or fees and monetary penalties levied under section 1592, if:
(1) The overpayments or over-declarations are identified by CBP during an audit (review or examination) conducted by CBP under section 1509(b);
(2) The audit was completed on or after August 6, 2002, the effective date of the Act;
(3) The overpayments or over-declarations relate to liquidated entries;
(4) The overpayments or over-declarations are determined by CBP as having been made within the time period and scope of the audit as defined by CBP; and
(5) The overpayments or over-declarations are determined by CBP not to have been made for the purpose of violating any provision of law, including the customs laws and laws enforced by other agencies, including, but not limited to, the Internal Revenue Service.
The proposed amendments to the regulations provide further guidance with regard to the use of statistical sampling in audits conducted by CBP under section 1509 of the Regulations and in independent reviews and lost revenue calculations for private parties for purposes of prior disclosure. Specifically, the amended regulations provide that: (1) CBP has the sole discretion concerning whether to employ statistical sampling in any given case, authorize a person being audited to perform self-testing and use statistical sampling, or accept the statistical sampling used by a private party conducting an independent review and calculation of lost revenue in a prior disclosure case. Once CBP approves the specfics of a statistical sampling plan, and the person being audited or submitting the prior disclosure agrees to waive its ability to challenge the validty of the sampling plan at a later date (any future challenges will be limited to computation and clerical errors), the audit (or self-testing) may proceed in accordance with the sampling plan. CBP reserves the reight in any case to conduct a full enty-by-entry audit if it deems such an audit to be appropriate.
Furthermore, the amendments provide that CBP auditors and private parties seeking to use statistical sampling with regard to a prior disclosure case may do so only when: (1) review of 100 percent of the transactions is impossible or impractical; (2) the sampling plan is prepared in accordance with generally recognized sampling procedures; and (3) the sampling procedure is executed in accordance with that plan. 19 C.F.R. § 163.11(c)(2) (as proposed).
With regard to offsetting overpayments and over-declarations, CBP is proposing updating the regulations to reflect an amendment to section 1509(b) made by Section 382 of the Trade Act of 2002. Prior to the Act, once liquidation had become final with respect to an entry that was overpaid, CBP was bound by the liquidation and could not offset an overpayment against the underpayments that formed the basis of a penalty action. CBP is now authorized under the statute to account for overpayments of duties and fees and over-declarations of quantities or values when calculating loss of duties, taxes, or fees and monetary penalties levied under section 1592, if:
(1) The overpayments or over-declarations are identified by CBP during an audit (review or examination) conducted by CBP under section 1509(b);
(2) The audit was completed on or after August 6, 2002, the effective date of the Act;
(3) The overpayments or over-declarations relate to liquidated entries;
(4) The overpayments or over-declarations are determined by CBP as having been made within the time period and scope of the audit as defined by CBP; and
(5) The overpayments or over-declarations are determined by CBP not to have been made for the purpose of violating any provision of law, including the customs laws and laws enforced by other agencies, including, but not limited to, the Internal Revenue Service.
CBP Publishes Guidance on Lacey Act Declaration
10/16/09 12:30 PM
On
October 15, 2009, Customs and Border Protection
(CBP) posted guidance on the Lacey
Act on its website. The Lacey Act (16 U.S.C.
3371 et seq., the Act, as amended) makes it
unlawful to import, export, transport, sell,
receive, acquire, or purchase in interstate or
foreign commerce any plant, with some limited
exceptions, taken or traded in violation of the
laws of the United States, a U.S. State or a
foreign country.
On September 2, 2009, the U.S. Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS) published a notice in the Federal Register announcing a revised enforcement phase in plan for the Act’s requirement for a plant product import declaration (see 74 Fed. Reg. 45415 for details). The revised plan identifies a list of products and the associated Harmonized Tariff Schedule (HTS) Chapter or Heading as to which the requirement for a Plant Product Declaration Form (PPQ 505) is anticipated to be enforced.
In its guidance, CBP states that it has automated the process for collecting the PPQ 505 data elements. Data will be transmitted to CBP’s Automated Commercial System (ACS) through the Automated Broker Interface (ABI) in the cargo release module. Electronic filing of the PPQ 505 declaration will not preclude remote location filing. Additional information on how to electronically file the PPQ 505 data can be found in the Participating Government Agencies chapter in the Customs and Trade Automated Interface Requirements (CATAIR) page. An importer has the option to complete and present a paper PPQ 505 for each line. (Plant and Plant Product Declaration Form) If a paper form of the PPQ 505 is used, the importer must mail the form to USDA at the address on the form.
CBP states that it expects and urges most importers to use the electronic system to file the declaration. If an entry package is presented to CBP to obtain release, the CBP 3461 form will be annotated in Box 29 to indicate “PPQ 505-Paper” if the declaration is presented in paper or “PPQ 505-ABI” if the declaration information was submitted electronically. If a paper form is submitted to CBP as part of the entry package, the paper form will be returned to the importer (or importer’s representative) for mailing to USDA. CBP will not mail forms to USDA. As a reminder, providing false or misleading information to the U.S. government can result in civil or criminal actions against any involved party and may result in the seizure and forfeiture of the merchandise.
APHIS has been designated the lead regulatory agency for these new requirements and CBP is assisting APHIS with the electronic collection of data to fulfill the import declaration requirement. CBP will continue to work as part of the interagency working group, consulting with trading partners, importers, exporters, and other interested groups as the provisions of the Act are fully implemented. The most current information on implementation of the amended Lacey Act can be found on the USDA website.
If you have any CBP related questions, please contact Ms. Anne Rothrock, Office of International Trade, at (202) 863-6573.
On September 2, 2009, the U.S. Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS) published a notice in the Federal Register announcing a revised enforcement phase in plan for the Act’s requirement for a plant product import declaration (see 74 Fed. Reg. 45415 for details). The revised plan identifies a list of products and the associated Harmonized Tariff Schedule (HTS) Chapter or Heading as to which the requirement for a Plant Product Declaration Form (PPQ 505) is anticipated to be enforced.
In its guidance, CBP states that it has automated the process for collecting the PPQ 505 data elements. Data will be transmitted to CBP’s Automated Commercial System (ACS) through the Automated Broker Interface (ABI) in the cargo release module. Electronic filing of the PPQ 505 declaration will not preclude remote location filing. Additional information on how to electronically file the PPQ 505 data can be found in the Participating Government Agencies chapter in the Customs and Trade Automated Interface Requirements (CATAIR) page. An importer has the option to complete and present a paper PPQ 505 for each line. (Plant and Plant Product Declaration Form) If a paper form of the PPQ 505 is used, the importer must mail the form to USDA at the address on the form.
CBP states that it expects and urges most importers to use the electronic system to file the declaration. If an entry package is presented to CBP to obtain release, the CBP 3461 form will be annotated in Box 29 to indicate “PPQ 505-Paper” if the declaration is presented in paper or “PPQ 505-ABI” if the declaration information was submitted electronically. If a paper form is submitted to CBP as part of the entry package, the paper form will be returned to the importer (or importer’s representative) for mailing to USDA. CBP will not mail forms to USDA. As a reminder, providing false or misleading information to the U.S. government can result in civil or criminal actions against any involved party and may result in the seizure and forfeiture of the merchandise.
APHIS has been designated the lead regulatory agency for these new requirements and CBP is assisting APHIS with the electronic collection of data to fulfill the import declaration requirement. CBP will continue to work as part of the interagency working group, consulting with trading partners, importers, exporters, and other interested groups as the provisions of the Act are fully implemented. The most current information on implementation of the amended Lacey Act can be found on the USDA website.
If you have any CBP related questions, please contact Ms. Anne Rothrock, Office of International Trade, at (202) 863-6573.
CBP Publishes Joint-EU Brochure and Web Toolkit for Trademark, Copyright Owners
10/02/09 01:10 PM
On
October 1, 2009, Customs and Border Protection
(CBP) announced on its
website the joint
development with the European Union of a
brochure and web toolkit to assist trademark and
copyright onwers in preparing information to
help U.S. and EU customs agencies determine
whether goods are counterfeit or pirated.
The U.S.-EU brochure titled “Protecting Intellectual Property Rights at Our Borders” is a brochure of basic information for trademark and copyright owners on working with customs officials in the U.S. and the EU. It provides information on how trademark/copyright owners can protect themselves from the global problem of counterfeiting and piracy. Suggested protection includes the registration and recording of IPR, product identification training guides, and sharing of intelligence on suspect shipments.
The joint customs web toolkit provides a single set of guidelines for trademark and copyright owners to design web-based product to determine whether goods are counterfeit or pirated. These toolkits provide information to customs officials to assist them in determining whether suspect shipments are counterfeit or pirated.
Other joint projects include Operation Infrastructure, the first joint IPR border enforcement operation undertaken by U.S. and EU customs authorities. CBP states that the operation fulfilled a key deliverable of the U.S.-EU IPR Action Strategy. Targeting semiconductors and network hardware, the operation ran from November 26, 2007 through December 14, 2007, and resulted in the seizures of more than 360,000 counterfeit integrated circuits and computer network components bearing more than 40 different companies’ trademarks. Officials are continuing discussions on future joint operations.
The U.S.-EU brochure titled “Protecting Intellectual Property Rights at Our Borders” is a brochure of basic information for trademark and copyright owners on working with customs officials in the U.S. and the EU. It provides information on how trademark/copyright owners can protect themselves from the global problem of counterfeiting and piracy. Suggested protection includes the registration and recording of IPR, product identification training guides, and sharing of intelligence on suspect shipments.
The joint customs web toolkit provides a single set of guidelines for trademark and copyright owners to design web-based product to determine whether goods are counterfeit or pirated. These toolkits provide information to customs officials to assist them in determining whether suspect shipments are counterfeit or pirated.
Other joint projects include Operation Infrastructure, the first joint IPR border enforcement operation undertaken by U.S. and EU customs authorities. CBP states that the operation fulfilled a key deliverable of the U.S.-EU IPR Action Strategy. Targeting semiconductors and network hardware, the operation ran from November 26, 2007 through December 14, 2007, and resulted in the seizures of more than 360,000 counterfeit integrated circuits and computer network components bearing more than 40 different companies’ trademarks. Officials are continuing discussions on future joint operations.
Dates Announced for CBP Trade Symposium 2009
06/30/09 02:47 PM
On June 29, 2009, U.S. Customs and Border
Protection (CBP)
announced
the dates for the CBP Trade Symposium 2009, which
will be held from December 8 - 10, 2009 at
the
Walter E. Washington Convention
Center
in Washington, D.C.
CBP will provide further information regarding registration procedures and symposium details in early fall.
A block of rooms for Trade Symposium attendees at the Grand Hyatt at the price of $214 per night including internet has been reserved. Details will be posted on CBP.gov when this room block is open for reservations.
CBP will provide further information regarding registration procedures and symposium details in early fall.
A block of rooms for Trade Symposium attendees at the Grand Hyatt at the price of $214 per night including internet has been reserved. Details will be posted on CBP.gov when this room block is open for reservations.
GAO Testifies to Congress on CBP Efforts to Address Textile Transshipment
06/19/09 09:43 AM
On June 18, 2009, the Government Accounting Office
(GAO) issued a report of its testimony before the
Subcommittee on Rural Development,
Entrepreneurship, and Trade, Committee on Small
Business of the U.S. House of Representatives
entitled, “International Trade - Observations on
U.S. Government Efforts to Address Textile
Transshipment.”
In the report, the GAO summarized its key findings from prior reports on (1) U.S. government efforts to enforce laws related to imports of textiles and other goods, including transshipment, and (2) the revenue implications of these efforts, as well as discuss the recommendations GAO has made to improve those efforts. In its prior reports on the matter, the GAO identified three key challenges confronting CBP relating to: (1) the timeliness of finalizing reports and follow up by CBP’s Textile Production Verification Team; (2) improvements needed to support information from overseas Customs Attache offices and enforcement personnel; and (3) improvements needed to the in-bond program that allows importers to circumvent trade rules, including those applying to textile imports. The GAO found that CBP responded and made improvements to the first two challenges, but:
In the report, the GAO summarized its key findings from prior reports on (1) U.S. government efforts to enforce laws related to imports of textiles and other goods, including transshipment, and (2) the revenue implications of these efforts, as well as discuss the recommendations GAO has made to improve those efforts. In its prior reports on the matter, the GAO identified three key challenges confronting CBP relating to: (1) the timeliness of finalizing reports and follow up by CBP’s Textile Production Verification Team; (2) improvements needed to support information from overseas Customs Attache offices and enforcement personnel; and (3) improvements needed to the in-bond program that allows importers to circumvent trade rules, including those applying to textile imports. The GAO found that CBP responded and made improvements to the first two challenges, but:
Despite prior audit recommendations, important management weaknesses persisted in CBP's tracking of in-bond cargo, with the result that CBP still does not know whether in-bond cargo shipments of greatest security or revenue interest are in fact entered into U.S. commerce or exported as required. In particular, CBP continued to have high numbers of open in-bond transactions with uncertain disposition. In addition to needed improvements on specific programs, we also found that CBP had to find a way to better balance security and important trade functions such as revenue collection. Although CBP's priority mission relates to homeland security, it collected more than $34 billion in fiscal year 2008, making it the second largest revenue generator for the federal government. Because of the high concentration of duties collected on textiles and apparel--four percent of U.S. imports generate approximately 40 percent of U.S. duties collected--any efforts to focus on revenue functions would likely generate improved oversight of textile and apparel imports.
CBP Issues Interim Final Rule on “10+2” Importer Security Filing and Additional Carrier Requirements
11/25/08 09:08 PM
On November 25, 2008, the U.S. Customs and Border
Protection (CBP) issued an
interim final
rule
in the Federal Register on the Importer Security
Filing and Additional Carrier Requirements, also
known as the “10+2” Rule. The 10+2 Rule requires
importers and carriers to report additional data to
CBP for all vessel cargo headed for the U.S.
Effective January 26, 2009, the Importer Security Filing will require carriers to provide CBP with vessel stow plans and container status messages, while importers must report to CBP the following 10 data elements:
The 10+2 Rule requires that importers transmit an importer security filing no later than 24 hours prior to lading at the foreign port. This information must be submitted to CBP via a CBP-approved electronic data system. The container stuffing location and consolidator date may be filed no later than 24 hours before arrival at a U.S. port.
Under the new rule, importers will be legally responsible for the accuracy and timeliness of the Import Security Filing, regardless of whether a broker or other agent actually filed it. CBP has also revised the sanctions for failure to comply with the reporting requirements. Under the new rule, liquidated damages for violations of the Importer Security Filing requirements are changed from the value of merchandise to $5,000 per violation.
Effective January 26, 2009, the Importer Security Filing will require carriers to provide CBP with vessel stow plans and container status messages, while importers must report to CBP the following 10 data elements:
- Seller,
- Buyer,
- Importer of record number / Foreign trade zone applicant identification number,
- Consignee number,
- Manufacturer (or supplier),
- Ship to party,
- Country of origin,
- Commodity Harmonized Tariff Schedule of the United States (HTSUS) number,
- Container stuffing location, and
- Consolidator (stuffer).
The 10+2 Rule requires that importers transmit an importer security filing no later than 24 hours prior to lading at the foreign port. This information must be submitted to CBP via a CBP-approved electronic data system. The container stuffing location and consolidator date may be filed no later than 24 hours before arrival at a U.S. port.
Under the new rule, importers will be legally responsible for the accuracy and timeliness of the Import Security Filing, regardless of whether a broker or other agent actually filed it. CBP has also revised the sanctions for failure to comply with the reporting requirements. Under the new rule, liquidated damages for violations of the Importer Security Filing requirements are changed from the value of merchandise to $5,000 per violation.
2008 CBP Trade Symposium Materials Posted
10/31/08 12:39 AM
U.S.
Customs and Border Protection (CBP) hosted its 2008
Trade Symposium in Washington, D.C. on October 29 -
31, 2008. CBP posted remarks
by
CBP Commissioner W. Ralph Basham and
event materials
on
its website. The agenda for
the symposium is also available.
CBP To Permit Third Party Logistics Providers to Enroll in C-TPAT Starting January 2009
10/01/08 12:30 AM
On September 30, 2008, U.S. Customs and Border
Protection (CBP)
announced
that it will permit Third Party Logistics Providers
(3PLs) to enroll in the Customs-Trade Partnership
Against Terrorism (C-TPAT)
program starting in January 2009.
A 3PL is a firm that provides outsourced or “third party” logistics services to some, or sometimes all of a company’s supply chain management functions. 3PLs typically specialize in integrated warehousing and transportation services that can be customized to a customer’s needs based on market conditions and the demands and delivery service requirement for their products and materials. Typical outsourced logistics functions include inbound freight, customs and freight consolidation, and warehousing.
C-TPAT will provide for an implementation period to accept applications. The automated application process will take approximately 90 days to be available on-line. 3PLs interested in applying for C-TPAT can review the minimum-security criteria here.
The regulated minimum-security criteria areas include:
Effective January 1, 2009, these new minimum-security criteria establish the baseline level of security measures. All eligibility requirements must be met or exceeded for a 3PL to enroll in C-TPAT. CBP will continue to use validations to determine whether 3PLs have adopted these security criteria. Those 3PLs found to be deficient, may be suspended, or be removed from the program entirely.
A 3PL is a firm that provides outsourced or “third party” logistics services to some, or sometimes all of a company’s supply chain management functions. 3PLs typically specialize in integrated warehousing and transportation services that can be customized to a customer’s needs based on market conditions and the demands and delivery service requirement for their products and materials. Typical outsourced logistics functions include inbound freight, customs and freight consolidation, and warehousing.
C-TPAT will provide for an implementation period to accept applications. The automated application process will take approximately 90 days to be available on-line. 3PLs interested in applying for C-TPAT can review the minimum-security criteria here.
The regulated minimum-security criteria areas include:
- Business partner requirements (service provider screening; customer selection)
- Security procedures
- Container/trailer inspection, seals, storage, security (where applicable)
- Physical security and access controls
- Procedural security (document processing, manifesting, shipping & receiving)
- Information Technology (IT) security
- Security training and threat awareness
Effective January 1, 2009, these new minimum-security criteria establish the baseline level of security measures. All eligibility requirements must be met or exceeded for a 3PL to enroll in C-TPAT. CBP will continue to use validations to determine whether 3PLs have adopted these security criteria. Those 3PLs found to be deficient, may be suspended, or be removed from the program entirely.
CBP Extends Comment Period for Proposed Uniform Rules of Origin
09/10/08 10:54 PM
On
September 8, 2008, U.S. Bureau of Customs and
Border Protection (CBP) announced that the
comment period on the proposed uniform rules of
origin for imported merchandise has been
extended. Interested parties may submit their
comments to CBP on or before October 23, 2008.
On July 25, 2008, CBP published a notice proposing to amend the CBP regulations to establish uniform rules of origin for imported merchandise. Under the proposal, application of the country of origin rules codified in 19 CFR Part 102 will be extended to all imported merchandise.
All merchandise imported into the U.S. undergoes country of origin determination. Under current regulations, CBP uses two primary methods to determine the country of origin of imported goods that contain material from, or were processed in, more than one country. To determine whether goods have been "substantially transformed" in a particular country, one method employs case-by-case analysis while the other primarily uses 19 CFR Part 102 rules detailing change in tariff classification.
Under the proposed regulations, CBP intends to eliminate the “substantial transformation” test codified in Part 134 of the CBP regulations, and adapt the Part 102 rules that currently apply to textiles (with some exceptions) and to products originating in the NAFTA region.
On July 25, 2008, CBP published a notice proposing to amend the CBP regulations to establish uniform rules of origin for imported merchandise. Under the proposal, application of the country of origin rules codified in 19 CFR Part 102 will be extended to all imported merchandise.
All merchandise imported into the U.S. undergoes country of origin determination. Under current regulations, CBP uses two primary methods to determine the country of origin of imported goods that contain material from, or were processed in, more than one country. To determine whether goods have been "substantially transformed" in a particular country, one method employs case-by-case analysis while the other primarily uses 19 CFR Part 102 rules detailing change in tariff classification.
Under the proposed regulations, CBP intends to eliminate the “substantial transformation” test codified in Part 134 of the CBP regulations, and adapt the Part 102 rules that currently apply to textiles (with some exceptions) and to products originating in the NAFTA region.
CBP Proposes New Uniform Rules of Origin for Imported Products
07/26/08 09:59 PM
On
July 25, 2008, U.S. Customs and Border Protection
(CBP) issued a proposed rule in the
Federal Register, which would
be a radical departure from its current rules of
origin for imported products. The proposed rule
would extend the application of the NAFTA-style
tariff shift country of origin rules of
19 CFR § 102
to
instances when the general "substantial
transformation" rules or origin currently apply.
Comments on the proposed rule must be received
by CBP by September 23, 2008.
CBP states that under the current regulations, there are two primary methods that CBP uses to determine the country of origin of imported goods that are processed in, or contain materials from, more than one country. CBP states that one method employs a case-by-case adjudication to determine whether goods have been "substantially transformed" in a particular country. CBP states that the other method employs codified rules, also used to determine whether a good has been "substantially transformed" primarily expressed through changes in tariff classification.
CBP states that the case-by-case substantial transformation standard has developed from federal court decisions issued over many years and was first applied by the U.S. Supreme Court in the case of Anheuser-Busch Brewing Association v. United States 207 U.S. 556 (1908). In a drawback decision, the Court held that manufacture requires a "transformation; a new and different article must emerge, 'having a distinctive name, character or use.'" Id. at 562 (quoting Hartranft v. Wiegmann, 121U.S. 609, 615 (1887)).
CBP states:
CBP goes on to state:
After going through the history of Part 102 of the CFR, CBP states that since 1996, the Part 102 rules have applied to all imports from Canada and Mexico, and nearly all textile product, accounting for approximately 40 percent of total U.S. imports. CBP states that it and the trade community have had extensive experience in applying Part 102 origin rules and in CBP's experience administering these rules, it has found that "by virtue of their greater specificity and transparency, codified rules result in determinations that are more objective and predictable than under the case-by-case adjudication method."
Therefore, CBP is proposing "to extend by application of the Part 102 rules of origin to all country of origin determinations made under the customs and related laws and the navigation laws of the United States, unless otherwise specified."
CBP states that under the current regulations, there are two primary methods that CBP uses to determine the country of origin of imported goods that are processed in, or contain materials from, more than one country. CBP states that one method employs a case-by-case adjudication to determine whether goods have been "substantially transformed" in a particular country. CBP states that the other method employs codified rules, also used to determine whether a good has been "substantially transformed" primarily expressed through changes in tariff classification.
CBP states that the case-by-case substantial transformation standard has developed from federal court decisions issued over many years and was first applied by the U.S. Supreme Court in the case of Anheuser-Busch Brewing Association v. United States 207 U.S. 556 (1908). In a drawback decision, the Court held that manufacture requires a "transformation; a new and different article must emerge, 'having a distinctive name, character or use.'" Id. at 562 (quoting Hartranft v. Wiegmann, 121U.S. 609, 615 (1887)).
CBP states:
Despite its heritage and apparent straightforwardness, administration of the substantial transformation standard has not been without problems. These problems derive in large part from the inherently subjective nature of judgements made in case-by-case adjudications as to what constitutes a new and different article and whether processing has resulted in a new name, character, and use. The substantial transformation standard has evolved over many years through numerous court decisions and CBP administrative rulings. Because the rule has been applied on a case-by-case basis to a wide range of scenarios and has frequently involved consideration of multiple criteria, the substantial transformation has been difficult for the courts and CBP to apply consistently and has often resulted in a lack of predictability and certainty for both CBP and the trade community.
CBP goes on to state:
In an effort to simplify and standardize country of origin determinations, Customs developed a codified method that uses specified changes in tariff classification (tariff shifts) and other rules to express the substantial transformation concept. Under this codified method, the substantial transformation that an imported good must undergo in order to be deemed a good of the country where the change occurred is usually expressed in terms of a specified tariff shift as a result of further processing.
After going through the history of Part 102 of the CFR, CBP states that since 1996, the Part 102 rules have applied to all imports from Canada and Mexico, and nearly all textile product, accounting for approximately 40 percent of total U.S. imports. CBP states that it and the trade community have had extensive experience in applying Part 102 origin rules and in CBP's experience administering these rules, it has found that "by virtue of their greater specificity and transparency, codified rules result in determinations that are more objective and predictable than under the case-by-case adjudication method."
Therefore, CBP is proposing "to extend by application of the Part 102 rules of origin to all country of origin determinations made under the customs and related laws and the navigation laws of the United States, unless otherwise specified."
CBP Commissioner Testifies re: Laptop Border Searches
07/14/08 04:07 PM
On
June 25, 2008, Jayson P. Ahern, Deputy Commissioner
of U.S. Customs and Border Protection (CBP),
testified before the Senate Committee on the
Judiciary Constitution Subcommittee in a hearing
entitled, "Laptop Searches and Other Violations of
Privacy Faced by Americans Returning from Overseas
Travel." His testimony can be found
here.
At the outset, the Deputy Commissioner objected to the title of the hearing and stated that, "CBP's efforts do not infringe on Americans' privacy." He stated that CBP is responsible for enforcing over 600 laws at the border, including those related to narcotics, intellectual property, child pornography and other contraband, and terrorism. He stated that CBP's ability to examine what is coming into the country is crucial to its ability to enforce these laws and keep the country safe from terrorism.
Mr. Ahern then discussed the recent Federal Court of Appeals cases from the 9th and 4th Circuits that upheld CBP's suspicionless search of an international traveler's laptop computer that uncovered child pornography. He stated that not only has CBP uncovered child pornography in conducting such searches of computers and electronic devices, but CBP has also limited the movement of terrorists, individuals who support terrorist activities, and threats to national security, stating that CBP has found "violent jihadist material, information about cyanide and nuclear material, video clips of Improvised Explosive Devices (IEDs) being exploded, pictures of various high-level Al-Qaida officials and other material associated with people seeking to do harm to U.S. and its citizens."
He then recounted an investigation where Immigration and Customs Enforcement (ICE) agents worked with CBP to conduct a border search of a laptop computer belonging to a Canadian national who was suspected of stealing ITAR-controlled software from a U.S. company with the intent to sell it to the Chinese. Mr. Ahern stated that the initial border search made possible the joint ICE and FBI investigation which led to the criminal prosecution of this individual.
Mr. Ahern continued to discuss how CBP's ability to search laptop computers and other electronic devices is essential to CBP's ability to ensure that a person entering the United States does not pose a threat to the safety and welfare of the country. He described certain factors that CBP uses to determine whether a search is necessary, such as the individual's travel history to countries with significant terrorist activity, narcotics smuggling or child exploitation or their physical description and behavior (e.g., in response to questioning). In addition, he stated that:
At the outset, the Deputy Commissioner objected to the title of the hearing and stated that, "CBP's efforts do not infringe on Americans' privacy." He stated that CBP is responsible for enforcing over 600 laws at the border, including those related to narcotics, intellectual property, child pornography and other contraband, and terrorism. He stated that CBP's ability to examine what is coming into the country is crucial to its ability to enforce these laws and keep the country safe from terrorism.
Mr. Ahern then discussed the recent Federal Court of Appeals cases from the 9th and 4th Circuits that upheld CBP's suspicionless search of an international traveler's laptop computer that uncovered child pornography. He stated that not only has CBP uncovered child pornography in conducting such searches of computers and electronic devices, but CBP has also limited the movement of terrorists, individuals who support terrorist activities, and threats to national security, stating that CBP has found "violent jihadist material, information about cyanide and nuclear material, video clips of Improvised Explosive Devices (IEDs) being exploded, pictures of various high-level Al-Qaida officials and other material associated with people seeking to do harm to U.S. and its citizens."
He then recounted an investigation where Immigration and Customs Enforcement (ICE) agents worked with CBP to conduct a border search of a laptop computer belonging to a Canadian national who was suspected of stealing ITAR-controlled software from a U.S. company with the intent to sell it to the Chinese. Mr. Ahern stated that the initial border search made possible the joint ICE and FBI investigation which led to the criminal prosecution of this individual.
Mr. Ahern continued to discuss how CBP's ability to search laptop computers and other electronic devices is essential to CBP's ability to ensure that a person entering the United States does not pose a threat to the safety and welfare of the country. He described certain factors that CBP uses to determine whether a search is necessary, such as the individual's travel history to countries with significant terrorist activity, narcotics smuggling or child exploitation or their physical description and behavior (e.g., in response to questioning). In addition, he stated that:
In regards to the privacy of these searches, CBP officers conduct their work in a manner designed to adhere to all constitutional and statutory requirements, including those that are applicable to privileged, personal, and business confidential information. The Trade Secrets Act prohibits federal employees from disclosing, without lawful authority, business confidential information to which they obtain access as part of their official duties. Moreover, CBP has strict policies and procedures that implement constitutional and statutory safeguards through internal policies that compel regular review and purging of information that is no longer relevant. CBP will protect information that may be discovered during the examination process, as well as private information of a personal nature that is not in violation of any law.
Laptop Searches Criticized at Senate Hearing
06/27/08 04:51 PM
On
June 25, 2008, the Senate Judiciary Committee
(Subcommittee on the Constitution, Civil Rights and
Property Rights) held a hearing
on
"Laptop Searches and Other Violations of Privacy
Faced by Americans Returning from Overseas
Travel." At the hearing, advocacy groups and
some legal experts stated that it was
unreasonable for federal officials to search the
laptops of U.S. citizens when returning from
traveling abroad.
In April, the U.S. Court of Appeals for the Ninth Circuit ruled that U.S. Customs and Border Protection (CBP) could conduct searches of electronic devices such as laptops without reasonable suspicion. Specifically, the court ruled that border control agents who found child porn on a traveler's laptop didn't violate the man's right to be free from unreasonable searches. Judge Diarmuid O'Scannlain wrote, "We are satisfied that reasonable suspicion is not needed for customs officials to search a laptop or other personal electronic storage devices at the border." In 2005, the U.S. Court of Appeals for the Fourth Circuit upheld computer searches by border guard when a man drove from Canada to the U.S. with child porn on his computer.
As reported by the New York Times:
In April, the U.S. Court of Appeals for the Ninth Circuit ruled that U.S. Customs and Border Protection (CBP) could conduct searches of electronic devices such as laptops without reasonable suspicion. Specifically, the court ruled that border control agents who found child porn on a traveler's laptop didn't violate the man's right to be free from unreasonable searches. Judge Diarmuid O'Scannlain wrote, "We are satisfied that reasonable suspicion is not needed for customs officials to search a laptop or other personal electronic storage devices at the border." In 2005, the U.S. Court of Appeals for the Fourth Circuit upheld computer searches by border guard when a man drove from Canada to the U.S. with child porn on his computer.
As reported by the New York Times:
“If you asked most Americans whether the government has the right to look through their luggage for contraband when they are returning from an overseas trip, they would tell you ‘yes, the government has that right,’ ” Senator Russ Feingold, Democrat of Wisconsin, said Wednesday at the hearing of a Senate Judiciary subcommittee.
“But,” Mr. Feingold continued, “if you asked them whether the government has a right to open their laptops, read their documents and e-mails, look at their photographs and examine the Web sites they have visited, all without any suspicion of wrongdoing, I think those same Americans would say that the government absolutely has no right to do that.”
CBP Develops New Online Trade Violation Reporting System
06/18/08 10:53 AM
On
June 17, 2008, U.S. Customs and Border Protection
(CBP) announced
the
development of a new online trade violation
reporting system called eAllegations
to
provide concerned members of the public a means
to confidentially report suspected trade
violations to CBP. eAllegations is open for
public use as of June 17, 2008.
CBP states that eAllegations is not intended to be used for reporting security issues such as terrorism or weapons of mass destruction, but rather is intended for trade violations such as misclassification, under valuation, country of origin markings, health and safety violations, intellectual property rights violations, and/or textile or other trade violations. CBP provided the following example --
To report a possible violation, the following information must be submitted via eAllegations: the type of trade violation, description of what has occurred, the products or goods involved in the violation, and the alleged violator's name and/or company. Other information may be provided on a voluntary basis.
CBP has provided frequently asked questions (FAQ) here.
CBP states that eAllegations is not intended to be used for reporting security issues such as terrorism or weapons of mass destruction, but rather is intended for trade violations such as misclassification, under valuation, country of origin markings, health and safety violations, intellectual property rights violations, and/or textile or other trade violations. CBP provided the following example --
eAllegations will provide a means to report a possible violator who is importing substandard steel, claiming that it is of a higher grade, therefore creating a potential safety issue. Other possible violations that can be reported include a company claiming a lower than actual value on a product they are importing to pay less duty or a company who is importing textiles from one country to avoid quota restrictions.
To report a possible violation, the following information must be submitted via eAllegations: the type of trade violation, description of what has occurred, the products or goods involved in the violation, and the alleged violator's name and/or company. Other information may be provided on a voluntary basis.
CBP has provided frequently asked questions (FAQ) here.
Protective "First Sale" Language Included in Farm Bill
05/29/08 11:53 PM
On May
22, 2008, the U.S. Senate voted 82-13 and joined
the U.S. House of Representatives in voting 306-110
to overturn the President's veto of the Food,
Conservation, and Energy Act of 2008 (also known as
"the farm bill"). Of importance to the
international trade community is protective first
sale language that was added to the farm bill by
Sen. Max Baucus (D. - Mont.), Rep. Charles Rangel
(D.-NY) and other key lawmakers. This language was
not subject to any hearings and was not considered
in committee.
On January 24, 2008, U.S. Customs and Border Protection (CBP) published a notice in the Federal Register setting forth its proposed interpretation of the phrase "sold for exportation to the United States," which would effectively eliminate the use of "first sale" valuation. CBP's proposed interpretation has drawn bipartisan opposition in the House, where 51 members wrote Department of Homeland Security Secretary Michael Chertoff in an April 18 letter to ask that the CBP proposal be "immediately withdrawn."
The Senate summarizes the protective first sale language as follows:
Thus, while the language in the farm bill does not prevent CBP from eliminating first sale, it does require CBP to study the change to determine how much more revenue it would collect and companies would be affected. It also includes non-binding "sense of Congress" language that the change should not be implemented until 2011.
On January 24, 2008, U.S. Customs and Border Protection (CBP) published a notice in the Federal Register setting forth its proposed interpretation of the phrase "sold for exportation to the United States," which would effectively eliminate the use of "first sale" valuation. CBP's proposed interpretation has drawn bipartisan opposition in the House, where 51 members wrote Department of Homeland Security Secretary Michael Chertoff in an April 18 letter to ask that the CBP proposal be "immediately withdrawn."
The Senate summarizes the protective first sale language as follows:
First Sale. The longstanding practice of “first sale” allows an importer to assess the value of imported goods based on the first sale of goods destined for the United States, regardless of when that sale occurred. Without consulting Congress or the importing industry, U.S. Customs and Border Protection (CBP) has proposed regulatory changes to assess duties on the “last sale” rather than the “first sale” value of goods. Such a change could increase significantly the duties paid by American importers. The farm bill (1) requires CBP to collect information on the number of importers that value imports using the “first sale” methodology; (2) requires the United States International Trade Commission to provide Congress with a report on the number of importers using “first sale” methodology, and the value of those imports; and (3) expresses a sense of Congress that CBP should not implement its change in interpretation until at least January 1, 2011.
Thus, while the language in the farm bill does not prevent CBP from eliminating first sale, it does require CBP to study the change to determine how much more revenue it would collect and companies would be affected. It also includes non-binding "sense of Congress" language that the change should not be implemented until 2011.
Civil Liberties Groups Sue Department of Homeland Security over Searches and Harassment at U.S. Borders
02/11/08 05:33 PM
On
February 7, 2008, the Electronic
Frontier Foundation and the
Asian Law
Caucus, both civil
liberty groups based in San Francisco, filed
suit against the U.S. Department of Homeland
Security (DHS) for denying access to public
records on the questioning and searches of
travelers at U.S. borders. Filed under the
Freedom of Information Act (FOIA), the suit
claims to respond to growing complaints by U.S.
citizens and immigrants of excessive or repeated
screenings by U.S. Customs and Border Protection
(CBP) agents. The compliant can be found
here.
ALC states that it has received more than 20 complaints from Northern California residents last year who said they were grilled about their families, religious practices, volunteer activities, political beliefs, or associations when returning to the United States from travels abroad. In addition, customs agents examined travelers' books, business cards collected from friends and colleagues, handwritten notes, personal photos, laptop computer files, and cell phone directories, and sometimes made copies of this information. When individuals complained, they were told, "This is the border, and you have no rights."
"When the government searches your books, peers into your computer, and demands to know your political views, it sends the message that free expression and privacy disappear at our nation's doorstep," said Shirin Sinnar, staff attorney at ALC. "The fact that so many people face these searches and questioning every time they return to the United States, not knowing why and unable to clear their names, violates basic notions of fairness and due process."
ALC and EFF asked DHS to disclose its policies on questioning travelers on First Amendment-protected activities, photocopying individuals' personal papers, and searching laptop computers and other electronic devices. The agency failed to meet the 20-day time limit that Congress has set for responding to public information requests, prompting the lawsuit.
"The public has the right to know what the government's standards are for border searches," said EFF Staff Attorney Marcia Hofmann. "Laptops, phones, and other gadgets include vast amounts of personal information. When will agents read your email? When do they copy data, where is it stored, and for how long? How will this information follow you throughout your life? The secrecy surrounding border search policies means that DHS has no accountability to America's travelers."
Interesting news articles on the suit have appeared in the Washington Post and the San Francisco Chronicle. Both of these articles regard the search and seizure of electronics. The search and possible seizure of laptops and other computer devices without suspicion or any articulated explanation is particularly troublesome to business travelers. The question of whether Customs inspectors have a right to search laptops and electronic devices without reasonable suspicion of a crime has already been under review in both the Fourth and Ninth Circuits. (See, United States v. Ickes, 393 F. 3d 501 (4th Cir. 2005) (did not directly address the level of suspicion required to search laptops but did rule that laptops fall within border search authority); United States v. Arnold, 454 F. Supp. 2d 999 (N.D. Cal. 2006) (reasonable suspicion required to search computers)).
Border searches are a well-recognized and long established exception to the probable cause and warrant requirements of the Fourth Amendment. Even so, the conduct of such searches, as with any search, must be reasonable. Sections 482 and section 1582, Title 19 of the United States Code authorize Customs officers to search and seize (detain) persons at the border. Removal of an outer coat such as a sport jacket or suit coat or the examination of a handbag are not considered searches of the person and are treated as searches of containers. Section 1496, Title 19 of the United States Code authorizes the examination of baggage of any person "arriving in the United States" without any suspicion.
Reasonable suspicion means that the facts known to the customs agents at the time of the search, combined with the agent's reasonable inferences from those facts, provides the agent with a particularized and objective basis for suspecting that the search will reveal contraband or a crime. (United States v. Montoya de Hernandez, 473 U.S. 531, 105 S.Ct. 3304 (1985)).
In recent years, CBP has argued that its authority to protect the country's border extends to looking at information stored on electronic devices such as laptops without any suspicion of a crime. CBP is taking the position that a laptop is the equivalent of a suitcase or container with the information stored on the laptop as the equivalent of physical merchandise packed in luggage. The question is whether the Courts will agree. We will follow this issue and keep you updated of any developments.
ALC states that it has received more than 20 complaints from Northern California residents last year who said they were grilled about their families, religious practices, volunteer activities, political beliefs, or associations when returning to the United States from travels abroad. In addition, customs agents examined travelers' books, business cards collected from friends and colleagues, handwritten notes, personal photos, laptop computer files, and cell phone directories, and sometimes made copies of this information. When individuals complained, they were told, "This is the border, and you have no rights."
"When the government searches your books, peers into your computer, and demands to know your political views, it sends the message that free expression and privacy disappear at our nation's doorstep," said Shirin Sinnar, staff attorney at ALC. "The fact that so many people face these searches and questioning every time they return to the United States, not knowing why and unable to clear their names, violates basic notions of fairness and due process."
ALC and EFF asked DHS to disclose its policies on questioning travelers on First Amendment-protected activities, photocopying individuals' personal papers, and searching laptop computers and other electronic devices. The agency failed to meet the 20-day time limit that Congress has set for responding to public information requests, prompting the lawsuit.
"The public has the right to know what the government's standards are for border searches," said EFF Staff Attorney Marcia Hofmann. "Laptops, phones, and other gadgets include vast amounts of personal information. When will agents read your email? When do they copy data, where is it stored, and for how long? How will this information follow you throughout your life? The secrecy surrounding border search policies means that DHS has no accountability to America's travelers."
Interesting news articles on the suit have appeared in the Washington Post and the San Francisco Chronicle. Both of these articles regard the search and seizure of electronics. The search and possible seizure of laptops and other computer devices without suspicion or any articulated explanation is particularly troublesome to business travelers. The question of whether Customs inspectors have a right to search laptops and electronic devices without reasonable suspicion of a crime has already been under review in both the Fourth and Ninth Circuits. (See, United States v. Ickes, 393 F. 3d 501 (4th Cir. 2005) (did not directly address the level of suspicion required to search laptops but did rule that laptops fall within border search authority); United States v. Arnold, 454 F. Supp. 2d 999 (N.D. Cal. 2006) (reasonable suspicion required to search computers)).
Border searches are a well-recognized and long established exception to the probable cause and warrant requirements of the Fourth Amendment. Even so, the conduct of such searches, as with any search, must be reasonable. Sections 482 and section 1582, Title 19 of the United States Code authorize Customs officers to search and seize (detain) persons at the border. Removal of an outer coat such as a sport jacket or suit coat or the examination of a handbag are not considered searches of the person and are treated as searches of containers. Section 1496, Title 19 of the United States Code authorizes the examination of baggage of any person "arriving in the United States" without any suspicion.
Reasonable suspicion means that the facts known to the customs agents at the time of the search, combined with the agent's reasonable inferences from those facts, provides the agent with a particularized and objective basis for suspecting that the search will reveal contraband or a crime. (United States v. Montoya de Hernandez, 473 U.S. 531, 105 S.Ct. 3304 (1985)).
In recent years, CBP has argued that its authority to protect the country's border extends to looking at information stored on electronic devices such as laptops without any suspicion of a crime. CBP is taking the position that a laptop is the equivalent of a suitcase or container with the information stored on the laptop as the equivalent of physical merchandise packed in luggage. The question is whether the Courts will agree. We will follow this issue and keep you updated of any developments.
CBP Extends Comment Period for Proposed Interpretation re: "First Sale" Valuation
02/08/08 08:31 PM
On
February 7, 2008, the U.S. Customs and Border
Protection ("CBP") published a
notice in the
Federal
Register extending by 30
days the comment period for its proposed
interpretation of the phrase "sold for exportation
to the United States" for purposes of applying the
transaction value method of appraisement when a
series of sales exist prior to importation into the
U.S.
CBP is proposing that the transaction value (or price paid or payable) for imported goods in a series of sales is the price paid or payable in the last sale occurring prior to the goods' importation into the United States, rather than the price in the first or earlier sale. CBP states that this is based on its proposed revised interpretation of the phrase "when sold for exportation to the United States" such that CBP no longer believes that the first (or earlier) sale qualifies as a sale for exportation to the United States. CBP states that this proposed interpretation is in line with the conclusions of the Technical Committee on Customs Valuation as set forth in Commentary 22.1, entitled, "Meaning of the Expression 'Sold for Export to the Country of Importation' in a Series of Sale."
On January 24, 2008, CBP published a notice in the Federal Register setting forth its proposed interpretation with a comment period to expire on March 24, 2008. CBP received correspondence requesting an extension of the comment period. Accordingly, CBP has decided to allow an additional 30 days for comments. Comments are now due on or before April 23, 2008.
CBP is proposing that the transaction value (or price paid or payable) for imported goods in a series of sales is the price paid or payable in the last sale occurring prior to the goods' importation into the United States, rather than the price in the first or earlier sale. CBP states that this is based on its proposed revised interpretation of the phrase "when sold for exportation to the United States" such that CBP no longer believes that the first (or earlier) sale qualifies as a sale for exportation to the United States. CBP states that this proposed interpretation is in line with the conclusions of the Technical Committee on Customs Valuation as set forth in Commentary 22.1, entitled, "Meaning of the Expression 'Sold for Export to the Country of Importation' in a Series of Sale."
On January 24, 2008, CBP published a notice in the Federal Register setting forth its proposed interpretation with a comment period to expire on March 24, 2008. CBP received correspondence requesting an extension of the comment period. Accordingly, CBP has decided to allow an additional 30 days for comments. Comments are now due on or before April 23, 2008.
For further information, contact: Lorrie Rodbart, Valuation and Special Programs Branch, Regulations and Rulings, Office of International Trade; Phone: (202) 572-8740.