CBP Issues Guidelines For Assessment & Mitigation of Claims for Liquidated Damages
10/17/08 12:10 AM
On
October 17, 2008, the U.S. Customs and Border Protection (CBP)
issued a
general notice announcing
guidelines for the assessment of liquidated damages claims as an
alternative sanction to counter late payment of entry duties and
fees.
Under the current procedure, if a bond principal fails to pay Periodic Monthly Payment Statement estimated duties in a timely fashion, CBP requires the bond principal to file entry summary documentation with estimated duties and fees attached before its merchandise may be released from any CBP port.
Under the new guidelines, when a Periodic Monthly Statement estimated duty payment is not paid in full on or before the 15th of the working day after the month in which the entry or release of the merchandise has occurred, CBP has the authority to jointly and severally assess liquidated damages against the bond principal and surety.
Before issuing any claims for liquidated damages, CBP will notify the statement filer electronically or by paper notice on or before the first day of the month following the month that the payment was due that those estimated duties and fees have not been paid. The statement filer will have two working days from the date of notification to pay the estimated duties and fees or correct the situation. If the late fees are not paid after the two-working day period, the CBP will issue a liquidated damages claim to bond principals and sureties, jointly and severally, for non-payment of the estimated duties and fees.
If the estimated duties and fees are paid in an untimely manner, CBP may issue a liquidated damages claim or a broker penalty claim. Payment of the estimated duties and fees within the two-working day period does not relieve any charged party from incurring a claim for late payment of those estimated duties and fees.
Furthermore, CBP may exercise its authority to suspend any bond principal (the importer of record) from participating in the Periodic Monthly Payment Statement test and require that the bond principal pay estimated duties and fees on an entry-by-entry basis. CBP may also exercise its authority to require the bond principal to file entry summary documentation with estimated duties and fees attached before merchandise is released from any CBP port.
Under the current procedure, if a bond principal fails to pay Periodic Monthly Payment Statement estimated duties in a timely fashion, CBP requires the bond principal to file entry summary documentation with estimated duties and fees attached before its merchandise may be released from any CBP port.
Under the new guidelines, when a Periodic Monthly Statement estimated duty payment is not paid in full on or before the 15th of the working day after the month in which the entry or release of the merchandise has occurred, CBP has the authority to jointly and severally assess liquidated damages against the bond principal and surety.
Before issuing any claims for liquidated damages, CBP will notify the statement filer electronically or by paper notice on or before the first day of the month following the month that the payment was due that those estimated duties and fees have not been paid. The statement filer will have two working days from the date of notification to pay the estimated duties and fees or correct the situation. If the late fees are not paid after the two-working day period, the CBP will issue a liquidated damages claim to bond principals and sureties, jointly and severally, for non-payment of the estimated duties and fees.
If the estimated duties and fees are paid in an untimely manner, CBP may issue a liquidated damages claim or a broker penalty claim. Payment of the estimated duties and fees within the two-working day period does not relieve any charged party from incurring a claim for late payment of those estimated duties and fees.
Furthermore, CBP may exercise its authority to suspend any bond principal (the importer of record) from participating in the Periodic Monthly Payment Statement test and require that the bond principal pay estimated duties and fees on an entry-by-entry basis. CBP may also exercise its authority to require the bond principal to file entry summary documentation with estimated duties and fees attached before merchandise is released from any CBP port.
Retroactive Filing of First Sale Declaration Extended
10/15/08 11:50 PM
On
October 15, 2008, the U.S. Customs and Border Protection (CBP)
issued a notice to extend the last filing date for retroactive
First Sale declarations until October 17, 2008, which was effective
August 20, 2008.
The First Sale declaration requires that importers of merchandise enter an “F” next to the declared value at the line level on CBP Form 7501, or the electronic filing equivalent, when the declared transaction value is based on the First Sale. Under the First Sale method, the value of imported merchandise is determined on the basis of the earlier than the last sale prior to the introduction of the merchandise into the U.S.
Due to the short notice of the implementation of the First Sale declaration requirement, CBP allowed the trade a 30-day grace period to comply with the first sale requirements, covering entries filed between August 20, 2008 and September 19, 2008. Importers were allowed to submit spreadsheets listing entry summary lines that needed an “F” indicator added or removed to the ports of entry where the entry summaries were filed. A sample spreadsheet can be found here.
These corrections, originally to be submitted to CBP no later than September 26, 2008, can now be submitted to CBP until October 17, 2008. The period covered remains August 20, 2008, through September 19, 2008.
The First Sale declaration requires that importers of merchandise enter an “F” next to the declared value at the line level on CBP Form 7501, or the electronic filing equivalent, when the declared transaction value is based on the First Sale. Under the First Sale method, the value of imported merchandise is determined on the basis of the earlier than the last sale prior to the introduction of the merchandise into the U.S.
Due to the short notice of the implementation of the First Sale declaration requirement, CBP allowed the trade a 30-day grace period to comply with the first sale requirements, covering entries filed between August 20, 2008 and September 19, 2008. Importers were allowed to submit spreadsheets listing entry summary lines that needed an “F” indicator added or removed to the ports of entry where the entry summaries were filed. A sample spreadsheet can be found here.
These corrections, originally to be submitted to CBP no later than September 26, 2008, can now be submitted to CBP until October 17, 2008. The period covered remains August 20, 2008, through September 19, 2008.
CBP Issues Softwood Lumber Act Interim Rule CBP Issues Softwood Lumber Act Interim Rule
09/23/08 07:26 PM
On September 22, 2008, the U.S.
Customs and Border Protection (CBP) has issued an interim rule with instructions on
implementation of the Softwood Lumber Act of 2008 (SLA).
Enacted on June 18, 2008, SLA applies to softwood lumber products that are imported into the United States from any country on or after September 18, 2008. For purposes of determining if a product is within the scope of SLA, merchandise descriptions should be used.
Entry Summary (CBP 7501) Requirements:
For products within the scope of SLA, importers must provide the following information at the time of entry summary filing:
The export price and the estimated export charge must always be expressed in U.S. dollars.
If an importer claims that a shipment of softwood lumber home packages or kits is exempt from SLA per § 804(c)(7), the importer is required to retain, and produce upon request by CBP:
The SLA does not provide for a de minimis provision. Thus, all shipments of softwood lumber products as defined in the SLA, regardless of value, must comply with these requirements.
A sample entry summary form (CBP 7501) with instructions of entries for purposes of SLA, can be found here.
Enacted on June 18, 2008, SLA applies to softwood lumber products that are imported into the United States from any country on or after September 18, 2008. For purposes of determining if a product is within the scope of SLA, merchandise descriptions should be used.
Entry Summary (CBP 7501) Requirements:
For products within the scope of SLA, importers must provide the following information at the time of entry summary filing:
- Export price;
- Estimated Export charge – if any, calculated by applying the percentage determined and published by Department of Commerce, found here, to the export price; and
- Importer declaration – each importer must provide a softwood lumber declaration on the electronic entry summary by entering the letter code “Y” on the relevant line of the entry summary. By entering “Y” on the import declaration, the importer will represent to CBP that the importer has made an inquiry (including seeking appropriate documentation from the exporter and consulting the determinations published by the Department of Commerce). Furthermore, the declaration serves to show that the information provided was to the best of the person’s knowledge and belief that: (a) the export price provided is determined in accordance with the definition set forth in SLA, and is consistent with the export price provided on the export permit, if any, granted by the country of export; and (b) the exporter has paid, or committed to pay, all export charges dues in accordance with the volume, export price, and export charge rate or rates.
The export price and the estimated export charge must always be expressed in U.S. dollars.
If an importer claims that a shipment of softwood lumber home packages or kits is exempt from SLA per § 804(c)(7), the importer is required to retain, and produce upon request by CBP:
- A copy of the appropriate home design, plan, or blueprint matching the customs entry in the United States;
- A purchase contract from a retailer of home kits or packages signed by customers not affiliated with the importer;
- A listing of all parts in the package or kit being entered into the United States that conforms to the home design, plan, or blueprint for which such parts are being imported; and
- If a single contract involves multiple entries, a listing of all items included in each individual shipment.
The SLA does not provide for a de minimis provision. Thus, all shipments of softwood lumber products as defined in the SLA, regardless of value, must comply with these requirements.
A sample entry summary form (CBP 7501) with instructions of entries for purposes of SLA, can be found here.
New Customs Declaration Requirements for Imported Plants and Wood Products
09/16/08 08:39 AM
With enactment of the 2008 Farm
Bill, the Lacey Act was amended with a purpose to prevent illegal
harvesting and commerce of protected plants and trees. As amended,
the Lacey Act expands the scope of covered products to include
trees in the definition of a plant, and adding products made from
plants or trees.
Moreover, prior to the amendment, the Lacey Act covered only plants native to the U.S. that are protected by a U.S. State law conserving species threatened with extinction. After the amendment, the Lacey Act extends the scope of coverage to any plants under protection of a U.S. State or any foreign law.
The amended Lacey Act prohibits the import, export, transport, sale, receipt, acquisition, or purchase in interstate or foreign commerce of any plants that were harvested in violation of a U.S. State, or any foreign laws protecting those plants. Furthermore, the Lacey Act makes it unlawful to produce or submit any records that falsely identify any plant.
The Lacey Act, as amended, defines “plant” as any wild member of the plant kingdom, including roots, seeds, parts, or products thereof, and including trees from either natural or planted forest stands.” Excluded from the definition of “plant” are: (1) common cultivars (except trees) and common food crops; (2) live plants that are to remain, be planted, or replanted; and (3) scientific specimens of plant genetic material to be used for research (with some exceptions).
One new feature of the Lacey Act is the new import declaration requirement. Beginning December 15, 2008, the Lacey Act requires an import declaration for plants and plant products, except for plant-based packaging materials used to pack the merchandise being imported. Such import declaration must contain:
(a) the scientific name of any plant (including the genus and species of the plant contained in the importation);
(b) a description of the value of the importation and the quantity, including the unit of measure, of the plant; and
(c) the name of the country from which the plant was harvested.
The Lacey Act provides that violations may be prosecuted through either civil or criminal enforcement actions. The penalties for knowing violations of the Act may result in civil fines of $10,000 per violation. Criminal penalties under the Act may result in up to five years incarceration. Finally, imports in violation of the Lacey Act are subject to forfeiture.
Moreover, prior to the amendment, the Lacey Act covered only plants native to the U.S. that are protected by a U.S. State law conserving species threatened with extinction. After the amendment, the Lacey Act extends the scope of coverage to any plants under protection of a U.S. State or any foreign law.
The amended Lacey Act prohibits the import, export, transport, sale, receipt, acquisition, or purchase in interstate or foreign commerce of any plants that were harvested in violation of a U.S. State, or any foreign laws protecting those plants. Furthermore, the Lacey Act makes it unlawful to produce or submit any records that falsely identify any plant.
The Lacey Act, as amended, defines “plant” as any wild member of the plant kingdom, including roots, seeds, parts, or products thereof, and including trees from either natural or planted forest stands.” Excluded from the definition of “plant” are: (1) common cultivars (except trees) and common food crops; (2) live plants that are to remain, be planted, or replanted; and (3) scientific specimens of plant genetic material to be used for research (with some exceptions).
One new feature of the Lacey Act is the new import declaration requirement. Beginning December 15, 2008, the Lacey Act requires an import declaration for plants and plant products, except for plant-based packaging materials used to pack the merchandise being imported. Such import declaration must contain:
(a) the scientific name of any plant (including the genus and species of the plant contained in the importation);
(b) a description of the value of the importation and the quantity, including the unit of measure, of the plant; and
(c) the name of the country from which the plant was harvested.
The Lacey Act provides that violations may be prosecuted through either civil or criminal enforcement actions. The penalties for knowing violations of the Act may result in civil fines of $10,000 per violation. Criminal penalties under the Act may result in up to five years incarceration. Finally, imports in violation of the Lacey Act are subject to forfeiture.
CBP Publishes COAC Quarterly Meeting Minutes CBP Publishes COAC Quarterly Meeting Minutes CBP Publishes COAC Quarterly Meeting Minutes
09/15/08 07:45 AM
U.S. Customs and Border Protection
(CBP) has posted on its website the minutes from the August 7, 2008 quarterly
meeting of the
Departmental Advisory Committee on Commercial Operations of Customs
and Border Protection and Related Homeland Security Functions
(COAC). The discussion included the following:
1. C-TPAT Partners. As of July 21, 2008, there were 8,527 certified C-TPAT Partners, of which 600 are new companies. Buffalo and Houston were added to the C-TPAT field offices with focus primarily on Canadian and Mexican supply chains. A total of 8,519 C-TPAT validations were conducted, with 1,916 validations conducted this year. CBP is taking actions to suspend companies that fail the validation process. Of the 593 members that failed the validation, half were highway carriers. Mexico’s highway carriers are revalidated annually to ensure their improvement. The validation cycle time has improved according to latest information, and is currently at 60 days. CBP has reduced the cycle time it takes to issue reports to a partner from 100 days to 45 days.
2. Mutual Recognition (MR) Arrangements. CBP Commissioner has signed new MR arrangements with Jordon and Canada. CBP continues to work with the European Union (EU) on supply chain security and hopes to sign an MR arrangement with the EU by next year. CBP has been working with Japan on joint validations and hopes to have an MR agreement completed by the end of this year. CBP is working with Canadian Customs on a single set of rules that would be applicable to companies common to both the U.S. and Canadian Supply Chain Security Programs; there are about 1,000 such companies.
3. Automated Commercial Environment (ACE) Program Status and Int’l Trade Data System (ITDS). CBP had expected to replace the Vessel and Rail e-manifest system by October of 2008. Issues with testing the new software have delayed the implementation of the e-system. CBP hopes to have a system in place by December 2008, which the Trade can participate in testing. The Entry Summary Processing deployment from January 2009 is also pushed into the future, probably one month after the Rail and Vessel elements are completed.
4. Import Safety Initiatives. Import Safety and Intra-Agency Requirements, Office of Int’l Trade (OT) of CBP, addressed the effort of the interagency working group. The initiative is active and will implement the Import Safety Action plan. The Consumer Product Safety Commission (CPSC) Reauthorization Bill is expected to be signed by the President in the near future. Importer Self Assessment (ISA) Module will include a Product Safety Component. Work is being done to identify good safety practices. It is desirable that the practices be administered on a company, rather than a commodity, basis. CPSC has conducted several foreign factory visits. CPSC only has 9 officers in the field but this number will be increased to 50 officers.
5. Lacey Act Amendments. The effective date of the Lacey Act Amendments is December 15, 2008. The Act requires that the name of the plant, the value, the quantity of the plant and the Country of Origin (COO) of the plant must all be declared at entry. The schedule that identifies the Harmonized Tariff Schedule (HTS) chapters that will be affected by the Act will be available in the near future. There are 8,000 lines that come in daily that will be required to submit the Import Declaration. If actual COO is not known at the time of entry, the Import Declaration must state all possible COOs. The COO form is currently a paper form, and so all 8,000 lines that were paperless will now require a paper form. The United States Department of Agriculture (USDA) does not have an automated feed into CBP’s system as Food and Drug Administration (FDA) does. Development of an electronic method to add the name into the system will be difficult because of the length of the plant genus or species name. There are over 1,500 genus and species of tress in the world that could potentially be recorded.
6. Agricultural Program Update. Wood boring insect. – an emerald ash borer – was found in Virginia. The insect is established in the Midwest and has, so far, killed 20 million trees and has endangered millions more. Enforcement of wood packing requirements needs to be increased.
7. 10+2. First Data Format was distributed in May 2008 and comments in response were received. Second version was distributed on July 17, 2008, and comments are still being accepted. Industry Working Group introduced account-based filing for 10+2 and the way it would work. This will be shared with CBP and on the November meeting agenda.
8. Secure Freight Initiative (SFI). SFI of CBP’s Office of Field Operations is facing challenges with the initiative, largely because the technology for anomaly detection is not available. Equipment has not been used in high-volume ports yet. Issues also arise with respect to space and trade flows at various ports. Setting up a lane to use the equipment is difficult when land is scarce. The system is already operational in Hong Kong, and should become operational in Oman and Korea.
9. CBP Trade Strategy. CBP has introduced, in the May meeting, the CBP Trade Strategy in a multi-level approach. CBP has provided the Trade Strategy report to COAC and is expecting comments. The implementation of the Strategy is expected October 1, 2008.
10. Proposed Rules of Origin. Currently, CBP is running two systems: one is a case-by-case analysis of past legal cases, which has been done for the past 200 years; another is based on Decision Tree, which codifies inputs and existing body of law, which has been in existence for the past 15 years. The traditional system is problematic because it is subjective, and therefore the Court has difficulty applying the decisions consistently. Similarly, the Trade faces issues of certainty and predictability as well as the reasonable care requirements. The new system, on the other hand, has yielded terrific results: less than 1% of the decisions are revised. Thus, decision has been made to move to the more modern system, which already applies to 40% of the Trade. 60-day comment period was opened since the Issue Date.
11. First Sale. Office of Int’l Trade is withdrawing the First Sale Proposal because they need to focus on the Farm Bill Act. CBP is working on a yes/no question with respect to whether the valuation is based on the first sale. The yes / no answer will be required at the entry line level and will become electronic. If it is first sale, CBP form 7501 on the Automated Broker Interface (ABI) will simply need to be marked “F” and left blank, if the entry valuation is not on first sale basis.
12. Proposed Closure of the Los Angeles Drawback Center. The question is raised whether to reassign the Los Angeles drawback officers to the San Francisco Office. The number of drawback specialists would not be reduced. CBP will issue a Federal Register Notice before the office is closed and will provide the public with opportunity to comment.
The next COAC meeting is schedule for November 20, 2008 in Washington, DC.
1. C-TPAT Partners. As of July 21, 2008, there were 8,527 certified C-TPAT Partners, of which 600 are new companies. Buffalo and Houston were added to the C-TPAT field offices with focus primarily on Canadian and Mexican supply chains. A total of 8,519 C-TPAT validations were conducted, with 1,916 validations conducted this year. CBP is taking actions to suspend companies that fail the validation process. Of the 593 members that failed the validation, half were highway carriers. Mexico’s highway carriers are revalidated annually to ensure their improvement. The validation cycle time has improved according to latest information, and is currently at 60 days. CBP has reduced the cycle time it takes to issue reports to a partner from 100 days to 45 days.
2. Mutual Recognition (MR) Arrangements. CBP Commissioner has signed new MR arrangements with Jordon and Canada. CBP continues to work with the European Union (EU) on supply chain security and hopes to sign an MR arrangement with the EU by next year. CBP has been working with Japan on joint validations and hopes to have an MR agreement completed by the end of this year. CBP is working with Canadian Customs on a single set of rules that would be applicable to companies common to both the U.S. and Canadian Supply Chain Security Programs; there are about 1,000 such companies.
3. Automated Commercial Environment (ACE) Program Status and Int’l Trade Data System (ITDS). CBP had expected to replace the Vessel and Rail e-manifest system by October of 2008. Issues with testing the new software have delayed the implementation of the e-system. CBP hopes to have a system in place by December 2008, which the Trade can participate in testing. The Entry Summary Processing deployment from January 2009 is also pushed into the future, probably one month after the Rail and Vessel elements are completed.
4. Import Safety Initiatives. Import Safety and Intra-Agency Requirements, Office of Int’l Trade (OT) of CBP, addressed the effort of the interagency working group. The initiative is active and will implement the Import Safety Action plan. The Consumer Product Safety Commission (CPSC) Reauthorization Bill is expected to be signed by the President in the near future. Importer Self Assessment (ISA) Module will include a Product Safety Component. Work is being done to identify good safety practices. It is desirable that the practices be administered on a company, rather than a commodity, basis. CPSC has conducted several foreign factory visits. CPSC only has 9 officers in the field but this number will be increased to 50 officers.
5. Lacey Act Amendments. The effective date of the Lacey Act Amendments is December 15, 2008. The Act requires that the name of the plant, the value, the quantity of the plant and the Country of Origin (COO) of the plant must all be declared at entry. The schedule that identifies the Harmonized Tariff Schedule (HTS) chapters that will be affected by the Act will be available in the near future. There are 8,000 lines that come in daily that will be required to submit the Import Declaration. If actual COO is not known at the time of entry, the Import Declaration must state all possible COOs. The COO form is currently a paper form, and so all 8,000 lines that were paperless will now require a paper form. The United States Department of Agriculture (USDA) does not have an automated feed into CBP’s system as Food and Drug Administration (FDA) does. Development of an electronic method to add the name into the system will be difficult because of the length of the plant genus or species name. There are over 1,500 genus and species of tress in the world that could potentially be recorded.
6. Agricultural Program Update. Wood boring insect. – an emerald ash borer – was found in Virginia. The insect is established in the Midwest and has, so far, killed 20 million trees and has endangered millions more. Enforcement of wood packing requirements needs to be increased.
7. 10+2. First Data Format was distributed in May 2008 and comments in response were received. Second version was distributed on July 17, 2008, and comments are still being accepted. Industry Working Group introduced account-based filing for 10+2 and the way it would work. This will be shared with CBP and on the November meeting agenda.
8. Secure Freight Initiative (SFI). SFI of CBP’s Office of Field Operations is facing challenges with the initiative, largely because the technology for anomaly detection is not available. Equipment has not been used in high-volume ports yet. Issues also arise with respect to space and trade flows at various ports. Setting up a lane to use the equipment is difficult when land is scarce. The system is already operational in Hong Kong, and should become operational in Oman and Korea.
9. CBP Trade Strategy. CBP has introduced, in the May meeting, the CBP Trade Strategy in a multi-level approach. CBP has provided the Trade Strategy report to COAC and is expecting comments. The implementation of the Strategy is expected October 1, 2008.
10. Proposed Rules of Origin. Currently, CBP is running two systems: one is a case-by-case analysis of past legal cases, which has been done for the past 200 years; another is based on Decision Tree, which codifies inputs and existing body of law, which has been in existence for the past 15 years. The traditional system is problematic because it is subjective, and therefore the Court has difficulty applying the decisions consistently. Similarly, the Trade faces issues of certainty and predictability as well as the reasonable care requirements. The new system, on the other hand, has yielded terrific results: less than 1% of the decisions are revised. Thus, decision has been made to move to the more modern system, which already applies to 40% of the Trade. 60-day comment period was opened since the Issue Date.
11. First Sale. Office of Int’l Trade is withdrawing the First Sale Proposal because they need to focus on the Farm Bill Act. CBP is working on a yes/no question with respect to whether the valuation is based on the first sale. The yes / no answer will be required at the entry line level and will become electronic. If it is first sale, CBP form 7501 on the Automated Broker Interface (ABI) will simply need to be marked “F” and left blank, if the entry valuation is not on first sale basis.
12. Proposed Closure of the Los Angeles Drawback Center. The question is raised whether to reassign the Los Angeles drawback officers to the San Francisco Office. The number of drawback specialists would not be reduced. CBP will issue a Federal Register Notice before the office is closed and will provide the public with opportunity to comment.
The next COAC meeting is schedule for November 20, 2008 in Washington, DC.
FTZ Board Revises Proposal for Site-Designation and Management Framework
09/13/08 07:12 PM
On September 11, 2008, the
Foreign-Trade Zones (FTZ) Board published a notice in the Federal Register
that modifies its
proposal to make available an alternative framework for designation
and management of the general purpose FTZ sites. In response to the
comments received to an earlier notice, the key proposal revisions
include allowance for a special transitional phase for each grantee
applying to transfer to the alternative framework, elimination of a
general initial limit on the number of “usage-driven” sites,
elimination of an “anchor” site concept, and the sunset limits
duration flexibility for “magnet” sites – with five years
established as a minimum rather than a fixed standard.
The FTZ Board proposed framework includes:
Under the proposed plan, existing FTZ grantees will have the option to reorganize their FTZ by incorporating the proposed elements. Comments on this proposal are due by October 31, 2008.
The FTZ Board proposed framework includes:
- The “service area,” housing general-purpose FTZ sites, is required to comply with the adjacency requirement of the FTA Board’s regulations (60 miles / 90 minutes driving time from Customs Port of Entry boundaries), the enabling legislation, and the grantee organization’s charter. The FTZ Board evaluation of the proposed service area could potentially involve the convenience of commerce factor.
- An initial limit of up to 2,000 acres of designated FTZ space within the service area. Acreage within the 2,000-acre limit not applied to specifically designated sites would effectively be “reserve” acreage available for future FTZ designation.
- The usefulness of the 2,000 available acres would be enhanced by emphasizing “floating” or, available for activation, acreage within an individual site’s boundaries.
- Designation of a limited number of “magnet” sites selected by the grantee for ability and readiness to attract multiple FTZ uses.
- Possible designation of “usage-driven” sites to serve companies which are not located in a magnet site but which are ready to pursue conducting activity under FTZ procedures.
- Unlike magnet sites, usage driven sites could be designated through the current minor boundary modification (MBM) mechanism in addition to FTZ Board action.
- No specific limit on the number of usage-driven sites.
- Regarding numbers of magnet sites, the framework would reflect a general goal of focusing each FTZ on six or fewer simultaneously existing magnet sites.
- Magnet sites and usage-driven sites would be subject to “sunset” time limits, which would self-remove FTZ designation from a site not used for FTZ purposes before the site’s sunset date. For magnet sites, the default sunset period would be five years with sunset based on whether a site had been activated with CBP. For a usage-driven site, the sunset limit would require within five years of approval admission into the site of foreign non-duty paid material for a bona fide customs purpose.
- Magnet sites and usage-driven sites would also be subject to ongoing “recycling” where activation at a site during the site’s initial sunset period would serve to push back the sunset date by another five years (the sunset test would then apply again).
- An optional five year transitional phase would be available for grantees of zones with existing configurations that differ from the general parameters envisioned in the proposal.
- For the transitional phase for a particular zone, the grantee would have the option of requesting usage-driven designation for any site where a single entity is conducting FTZ activity.
- The five-year transition period for a specific grantee would begin with approval of the grantee’s reorganization application by the FTZ board.
- The transitional phase for any zone would be limited by the defining 2,000 acre limit inherent in the proposed framework.
Under the proposed plan, existing FTZ grantees will have the option to reorganize their FTZ by incorporating the proposed elements. Comments on this proposal are due by October 31, 2008.
First Sale Declaration Requirement Effective August 20, 2008
08/26/08 10:04 PM
Starting August 20, 2008 and
effective for a one year period, all importers are
required at the time of entry to provide
the United States Customs and Border Protection (CBP) with a
declaration as to whether the transaction value of the imported
merchandise is calculated on the basis of the First Sale Rule.
Under the Rule, when the merchandise is introduced into the United
States as a result of a series of sales, the transaction value is
calculated based on the first or earlier, rather than later sale.
However, this rule will not be enforced until September 20,
2008.
The First Sale Declaration Requirement was established under § 15422(a) of the Food, Conservation and Energy Act of 2008, commonly referred to as the Farm Bill. To meet the Requirement, an importer must enter “F” next to the declared value of the merchandise on CBP Form 7501, or its electronic filing equivalent, if the declared transaction value of the imported merchandise is determined on the First Sale basis. If First Sale is not the basis for the transaction valuation, the box will remain blank.
The trade community has advised CBP that it would not be ready to comply with the Declaration Requirement by August 20, 2008 because of the complex programming changes required. In response, to permit the community sufficient time to comply, CBP has delayed enforcement of First Sale Declaration Requirements for 30 days until September 20, 2008. Thus, imports made between August 20 and September 19, 2008 will not be rejected based on the First Sale Declaration Requirement; however, these entries will require amendment. Information on the amendment requirements will be forthcoming.
The First Sale Declaration Requirement will enable CBP to gather information on the frequency of the first sale valuation, which will be reported to the International Trade Commission.
The First Sale Declaration Requirement was established under § 15422(a) of the Food, Conservation and Energy Act of 2008, commonly referred to as the Farm Bill. To meet the Requirement, an importer must enter “F” next to the declared value of the merchandise on CBP Form 7501, or its electronic filing equivalent, if the declared transaction value of the imported merchandise is determined on the First Sale basis. If First Sale is not the basis for the transaction valuation, the box will remain blank.
The trade community has advised CBP that it would not be ready to comply with the Declaration Requirement by August 20, 2008 because of the complex programming changes required. In response, to permit the community sufficient time to comply, CBP has delayed enforcement of First Sale Declaration Requirements for 30 days until September 20, 2008. Thus, imports made between August 20 and September 19, 2008 will not be rejected based on the First Sale Declaration Requirement; however, these entries will require amendment. Information on the amendment requirements will be forthcoming.
The First Sale Declaration Requirement will enable CBP to gather information on the frequency of the first sale valuation, which will be reported to the International Trade Commission.
CBP Announces Trade Symposium 2008 Details
08/25/08 10:15 PM
On August 25, 2008, Customs and
Border Protection announced the dates and topic for its Trade
Symposium 2008, The topic of this year’s symposium is "Global
Trade: Continuity Through Transition.'' The Symposium will focus on
U.S. Customs and Border Protection’s (CBP) commitment to security
and trade programs amidst transition within the administration.
Sessions will include:
The symposium will be held at the JW Marriott Hotel, 1331 Pennsylvania Avenue N.W., Washington, DC 20004. Registration is expected to open September 2, 2008, and must be made on-line. The registration fee is $250.
- CBP Trade Strategy
- Importer Security Filing
- Import Safety
- Automated Commercial Environment
- Trade Partnerships
- Regulatory Changes
- World Customs Organization
- CBP Agriculture Mission
The symposium will be held at the JW Marriott Hotel, 1331 Pennsylvania Avenue N.W., Washington, DC 20004. Registration is expected to open September 2, 2008, and must be made on-line. The registration fee is $250.
CIT Dismisses Gender Discrimination in Tariff Classifications Case
07/07/08 12:50 PM
On July 3, 2008, the U.S. Court of
International Trade (CIT) dismissed the lead gender discrimination
in tariff classifications case, Totes-Isotoner Corporation v.
United States, Slip Op. 08-73
(July 3, 2008). In the
case, the Totes-Isotoner, an importer of men's gloves, claimed that
by setting out different tariff rates for certain men's and other
gloves (i.e., 14% duty for men's gloves and 12.6% duty for gloves
"for other persons") the Harmonized Tariff Schedule of the United
States (HTSUS) violates Totes' right to equal protection under the
law because it discriminates on the basis of gender and/or age. A
three judge panel decided the case.
The government sought to dismiss the case on the basis of three claims: (1) the complaint presented a political question that was non-justiciable; (2) Totes did not have a sufficient stake in the matter so as to possess standing to bring an equal protection claim; and (3) Totes failed to state a claim upon which relief could be granted. The CIT denied the government's motion to dismiss for lack of jurisdiction on the first two claims, but dismissed the case without prejudice because it found that Totes did not plead sufficient facts to state a claim of unconstitutional jurisdiction.
Specifically, the court found that the case did not involve a non-justiciable political question as ". . . Totes' challenge to the discriminatory operation of the HTSUS properly invokes the Court's traditional role of--and standards for--constitutional review." Thereafter, the court found that Totes had sufficient standing to raise its claim by having both constitutional standing as the payor of an allegedly discriminatory tax and prudential standing as Totes' claim is within the zone of interests protected by the Constitution's Equal Protection guarantee.
Finally, the court found that Totes failed to state a claim upon which relief could be granted. Specifically, the court stated:
Slip Op. 08-73 at 14 [citations omitted]. The court found that because the tariff provisions Totes challenged were not "actual use" provisions that require the imported gloves to be actually sold or used by people of the same sex or of some age category, but were "chief" or "principal use" provisions, the complaint did not allege sufficient facts to establish the government had engaged in gender-based discrimination. The court stated:
Moreover, the discrimination alleged in Totes' Complaint, results from the imposition of the duty, or tax, imposed by tariff classifications. But, as alleged by the Compliant, that duty or tax falls on importers, and there is not factual indication in the Complaint that the classification results in discriminatory application of the tax. Therefore, Totes' additional allegation of discrimination "on the basis of sex" is simply conclusory . . . .
Slip Op. 08-73 at 17 [citations omitted].
Since the court dismissed the claim without prejudice, Totes may revise the case and re-file with the CIT or appeal the CIT decision to the Court of Appeals for the Federal Circuit. We will keep you all posted!
The government sought to dismiss the case on the basis of three claims: (1) the complaint presented a political question that was non-justiciable; (2) Totes did not have a sufficient stake in the matter so as to possess standing to bring an equal protection claim; and (3) Totes failed to state a claim upon which relief could be granted. The CIT denied the government's motion to dismiss for lack of jurisdiction on the first two claims, but dismissed the case without prejudice because it found that Totes did not plead sufficient facts to state a claim of unconstitutional jurisdiction.
Specifically, the court found that the case did not involve a non-justiciable political question as ". . . Totes' challenge to the discriminatory operation of the HTSUS properly invokes the Court's traditional role of--and standards for--constitutional review." Thereafter, the court found that Totes had sufficient standing to raise its claim by having both constitutional standing as the payor of an allegedly discriminatory tax and prudential standing as Totes' claim is within the zone of interests protected by the Constitution's Equal Protection guarantee.
Finally, the court found that Totes failed to state a claim upon which relief could be granted. Specifically, the court stated:
In order to state such a claim for violation of the equal protection clause based on gender, Totes must allege that the government has engaged in gender-based discrimination without an exceedingly persuasive justification, or in other words, that the government has used discriminatory means that are not substantially related to important government objectives. In so doing, Totes' complaint must include a factual allegation that demonstrates a governmental purpose to discriminate.
Slip Op. 08-73 at 14 [citations omitted]. The court found that because the tariff provisions Totes challenged were not "actual use" provisions that require the imported gloves to be actually sold or used by people of the same sex or of some age category, but were "chief" or "principal use" provisions, the complaint did not allege sufficient facts to establish the government had engaged in gender-based discrimination. The court stated:
Moreover, the discrimination alleged in Totes' Complaint, results from the imposition of the duty, or tax, imposed by tariff classifications. But, as alleged by the Compliant, that duty or tax falls on importers, and there is not factual indication in the Complaint that the classification results in discriminatory application of the tax. Therefore, Totes' additional allegation of discrimination "on the basis of sex" is simply conclusory . . . .
Slip Op. 08-73 at 17 [citations omitted].
Since the court dismissed the claim without prejudice, Totes may revise the case and re-file with the CIT or appeal the CIT decision to the Court of Appeals for the Federal Circuit. We will keep you all posted!
Applications for EU Duty Suspensions Due Mid-July
06/28/08 03:32 PM
Are you importing products into
the EU and paying duties? It may be possible to have the duties
suspended on a particular product if the EU Commission approves
your application for duty suspension. The EU Commission will allow
the suspension of customs duties to companies that apply for the
relief on the basis of a valid economic argument as to why the
import of duty-suspended goods will benefit and stimulate economic
activity in the EU Community.
The EU Commission accepts duty suspension applications twice annually. The application process itself takes 12 months to complete. The current deadline for duty suspension applications is July 25, 2008 for applications that would take effect on July 1, 2009.
All current duty suspensions are listed by the EU Commission by EU Regulation. Normally, if a company succeeds in getting a duty suspension on a product, it remains on the list unless an objection is lodged at some point in the future.
Duty suspensions will not be granted where:
If you are interested in learning more about obtaining a duty suspension in the EU, please contact Global Trade Expertise or Eamonn Flood (eamonn@crannaghtrade.eu) or Carol Lynch (carol.lynch@crannaghtrade.eu) of Crannagh & Co. (www.crannaghtrade.eu).
The EU Commission accepts duty suspension applications twice annually. The application process itself takes 12 months to complete. The current deadline for duty suspension applications is July 25, 2008 for applications that would take effect on July 1, 2009.
All current duty suspensions are listed by the EU Commission by EU Regulation. Normally, if a company succeeds in getting a duty suspension on a product, it remains on the list unless an objection is lodged at some point in the future.
Duty suspensions will not be granted where:
- Identical, equivalent or substitute products are manufactured in sufficient quantities within the Community
- The goods in question are finished products intended for sale to end-consumers without further substantial processing or without forming an integral part of a bigger final product for whose functioning they are necessary
- The goods are covered by an exclusive trading agreement
- A suspension would entail a conflict with any other Community policy
- Uncollected customs duties of the goods in question is estimated to be less than ECU 20,000 per year
If you are interested in learning more about obtaining a duty suspension in the EU, please contact Global Trade Expertise or Eamonn Flood (eamonn@crannaghtrade.eu) or Carol Lynch (carol.lynch@crannaghtrade.eu) of Crannagh & Co. (www.crannaghtrade.eu).
First Sale Valuation to Remain Permissible Through At Least 2010 & "10+2" Rule May Be Finalized by End of Summer
06/26/08 04:36 PM
On June 24, 2008, U.S. Customs and
Border Protection (CBP) Commissioner Ralph Basham testified before
the Senate Finance Committee regarding CBP's trade functions and
enforcement actions. (Basham's written testimony can be
found here.) Of great interest to the trade
community was Basham's remarks regarding first sale
valuation.
Specifically, Basham stated that in January of this year, CBP published in the Federal Register a Notice of Proposed Interpretation seeking public comment of the phrase "sold for exportation to the United States" for purposes of applying the transaction value method of valuation in a series of sales scenario. Under the proposed interpretation, transaction value would be based on the price paid by the buyer in the U.S. to the foreign manufacturer, which is a departure from the current application of the valuation statute, which allows importers to use the price paid by an intermediary to the foreign manufacturer as the basis for transaction value. Basham noted that the proposed re-interpretation of the valuation statute that would disallow "first sale" valuation has been "controversial."
Basham noted that the recently passed Farm Bill (Food, Conservation and Energy Act of 2008 (Pub. L. No. 110-246)) requires CBP to collect valuation information from importers and included a sense of Congress that CBP should not publish a final interpretative rule on this issue before January 1, 2011. He then stated that, "CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with Congress and the private sector, or without the explicit approval of the Secretary of Treasury." With respect to first sale, Basham stated:
Other items of interest include the status of the proposed "10+2" rule or Importer Security Filing, which requires importers to provide CBP with 10 data elements plus 2 data elements from carriers electronically at least 24 hours prior to vessel loading at foreign ports of origin. The proposed ten data elements are:
The two additional elements required from carriers are: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the United States; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).
It has been reported that in response to questioning by the committee, Basham stated that CBP hopes to submit the rule to the Office of Management and Budget (OMB) by the end of the week and have it ready for publication by the end of the summer.
Specifically, Basham stated that in January of this year, CBP published in the Federal Register a Notice of Proposed Interpretation seeking public comment of the phrase "sold for exportation to the United States" for purposes of applying the transaction value method of valuation in a series of sales scenario. Under the proposed interpretation, transaction value would be based on the price paid by the buyer in the U.S. to the foreign manufacturer, which is a departure from the current application of the valuation statute, which allows importers to use the price paid by an intermediary to the foreign manufacturer as the basis for transaction value. Basham noted that the proposed re-interpretation of the valuation statute that would disallow "first sale" valuation has been "controversial."
Basham noted that the recently passed Farm Bill (Food, Conservation and Energy Act of 2008 (Pub. L. No. 110-246)) requires CBP to collect valuation information from importers and included a sense of Congress that CBP should not publish a final interpretative rule on this issue before January 1, 2011. He then stated that, "CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with Congress and the private sector, or without the explicit approval of the Secretary of Treasury." With respect to first sale, Basham stated:
-
The Farm Bill instructs CBP to require each importer of merchandise to declare whether the transaction value of the imported merchandise has been determined on the basis of a first or earlier sale.
-
CBP is required to submit a report that includes the number of importers that declare transaction value on the basis of first sale, the tariff classification of such merchandise and the value of the merchandise, on a monthly basis to the United States International Trade Commission (USITC).
-
We have had preliminary discussions with the trade and are examining the most efficient means of collecting the required information while minimizing the impact on the trade.
-
The Farm Bill also includes a sense of Congress that CBP should not proceed with its proposed interpretative rule until January 1, 2011 and upon certain coordination and consultation with Congress, the Commercial Operations Advisory Committee, the International Trade Commission, the Secretary of Treasury, and the trade. CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with the Congress and the private sector, or without the explicit approval of the Secretary of Treasury.
Other items of interest include the status of the proposed "10+2" rule or Importer Security Filing, which requires importers to provide CBP with 10 data elements plus 2 data elements from carriers electronically at least 24 hours prior to vessel loading at foreign ports of origin. The proposed ten data elements are:
- Manufacturer (or supplier) name and address
- Seller (or owner) name and address
- Buyer (or owner) name and address
- Ship-to name and address
- Container stuffing location
- Consolidator (stuffer) name and address
- Importer of Record number/foreign trade zone (FTZ) applicant identification number
- Consignee number(s)
- Country of origin
- Commodity Harmonized Tariff Schedule number
The two additional elements required from carriers are: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the United States; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).
It has been reported that in response to questioning by the committee, Basham stated that CBP hopes to submit the rule to the Office of Management and Budget (OMB) by the end of the week and have it ready for publication by the end of the summer.
GAO Issues Report Critical of C-TPAT Progress
05/27/08 08:17 PM
On April 25, 2008, the
U.S. Office of Government Accountability Office (GAO) issued a
report on the status of the Customs-Trade Partnership Against
Terrorism (C-TPAT) program entitled, "U.S. Customs and Border Protection Has Enhanced
Its Partnership with Import Trade Sectors, but Challenges Remain in
Verifying Security Practices." Highlights can be
found here and a summary can be
found here.
In 2005, GAO reviewed the C-TPAT program and noted operational challenges. Under the program, roughly 8,000 importers, port authorities and air, sea and land carriers are granted benefits such as reduced scrutiny of their cargo. In exchange, the companies submit a security plan that must meet U.S. Customs and Border Protection's minimum standards and allow officials to verify their measures are being followed. For this report, GAO was asked to assess the progress U.S. Customs and Border Protection (CBP) has made since 2005 in (1) improving its benefit award policies for C-TPAT members, (2) addressing challenges in validating members' security practices, and (3) addressing management and staffing challenges.
Among the problems the GAO found were:
"Until Customs overcomes these collective challenges, Customs will be unable to assure Congress and others that C-TPAT member companies that have been granted reduced scrutiny of their U.S.-bound containerized shipments actually employ adequate security practices," investigators wrote. "It is vital that Customs maintain adequate internal controls to ensure that member companies deserve these benefits."
Responding in part, CBP officials in the report agreed they could do more to follow up on suggested security improvements but noted that employees often use their expert discretion in assessing the potential danger before certifying a company. CBP also said the program overall has made the nation safer.
In sum, GAO recommends that CBP improve its electronic validation instrument, improve the validation process, enhance its records management system, and establish performance measures for improving supply chain security. CBP concurred with each of its recommendations.
In 2005, GAO reviewed the C-TPAT program and noted operational challenges. Under the program, roughly 8,000 importers, port authorities and air, sea and land carriers are granted benefits such as reduced scrutiny of their cargo. In exchange, the companies submit a security plan that must meet U.S. Customs and Border Protection's minimum standards and allow officials to verify their measures are being followed. For this report, GAO was asked to assess the progress U.S. Customs and Border Protection (CBP) has made since 2005 in (1) improving its benefit award policies for C-TPAT members, (2) addressing challenges in validating members' security practices, and (3) addressing management and staffing challenges.
Among the problems the GAO found were:
- A company is generally certified as safer based on its self-reported security information that Customs employees use to determine if minimum government criteria are met. But due partly to limited resources, the agency does not typically test the member company's supply-chain security practices and thus is "challenged to know that members' security measures are reliable, accurate and effective."
- Customs employees are not required to utilize third-party or other audits of a company's security measures as an alternative to the agency's direct testing, even if such audits exist.
- Companies can get certified for reduced Customs inspections before they fully implement any additional security improvements requested by the U.S. government. Under the program, Customs also does not require its employees to systematically follow up to make sure the requested improvements were made and that security practices remained consistent with the minimum criteria.
"Until Customs overcomes these collective challenges, Customs will be unable to assure Congress and others that C-TPAT member companies that have been granted reduced scrutiny of their U.S.-bound containerized shipments actually employ adequate security practices," investigators wrote. "It is vital that Customs maintain adequate internal controls to ensure that member companies deserve these benefits."
Responding in part, CBP officials in the report agreed they could do more to follow up on suggested security improvements but noted that employees often use their expert discretion in assessing the potential danger before certifying a company. CBP also said the program overall has made the nation safer.
In sum, GAO recommends that CBP improve its electronic validation instrument, improve the validation process, enhance its records management system, and establish performance measures for improving supply chain security. CBP concurred with each of its recommendations.
CBP Announces International Registered Traveler (IRT) Pilot Program
04/12/08 01:51 PM
On April 11, 2008, Customs and
Border Protection (CBP) announced in the Federal Register a pilot
International Registered Traveler (IRT) program and requested
comments. The IRT program will allow for expedited clearance of
pre-approved low-risk air travelers into the United States. The
pilot program will initially be conducted at three airports: John
F. Kennedy International Airport in New York (JFK), the George Bush
Intercontinental Airport in Houston (IAH), and Washington Dulles
International Airport (IAD). The program may be expanded to other
locations as announced.
Applications to be an initial participant in the pilot program should be submitted by May 12, 2008 and the pilot program will commence on June 10, 2008. Applications to participate will be accepted throughout the duration of the pilot and are available through the Global On-Line Enrollment System (GOES) at www.cbp.gov. At this point, applicants must be either a U.S. citizen, national, or lawful permanent resident (LPR).
Expedited clearance will be effected using automated kiosks located in the Federal Inspection Services (FIS) area of each participating airport. IRT uses fingerprint biometrics technology to verify a participant's identity and confirm his or her status as a IRT participant. After arriving at the FIS area, the participant will proceed directly to the IRT kiosk. A sticker affixed to the participant's passport at the time of acceptance into the IRT program will provide visual identification that the individual can be referred tot he IRT kiosk. IRT participants need not wait in the regular passport control primary inspection lines.
In the Federal Register notice, CBP invites public comments concerning any aspect of the pilot program, provides eligibility requirements for voluntary participation in the pilot program, describes the basis on which CBP will select participants, and describes how the IRT program will operate.
Applications to be an initial participant in the pilot program should be submitted by May 12, 2008 and the pilot program will commence on June 10, 2008. Applications to participate will be accepted throughout the duration of the pilot and are available through the Global On-Line Enrollment System (GOES) at www.cbp.gov. At this point, applicants must be either a U.S. citizen, national, or lawful permanent resident (LPR).
Expedited clearance will be effected using automated kiosks located in the Federal Inspection Services (FIS) area of each participating airport. IRT uses fingerprint biometrics technology to verify a participant's identity and confirm his or her status as a IRT participant. After arriving at the FIS area, the participant will proceed directly to the IRT kiosk. A sticker affixed to the participant's passport at the time of acceptance into the IRT program will provide visual identification that the individual can be referred tot he IRT kiosk. IRT participants need not wait in the regular passport control primary inspection lines.
In the Federal Register notice, CBP invites public comments concerning any aspect of the pilot program, provides eligibility requirements for voluntary participation in the pilot program, describes the basis on which CBP will select participants, and describes how the IRT program will operate.
CBP Publishes Current List of Priority Trade Issues
04/08/08 08:17 AM
U.S. Customs and Border Protection
(CBP) recently published on its website it's current list of Priority
Trade Issues (PTIs). CBP states that PTIs are "issues that cause
significant revenue loss, economic risk to U.S. industry or
represent health and safety concerns to citizens." They are
identified to be:
- Agriculture
- Antidumping and Countervailing Duties (ADCVD)
- Import Safety
- Intellectual Property Rights
- Penalties
- Revenue
- Textiles
CBP and EU Commission Adopt a Joint Roadmap Towards Mutual Recognition of Trade Partnership Programs
03/28/08 12:31 PM
On March 27, 2008, U.S. Customs
and Border Protection announced the adoption of the U.S.-EU Joint
Customs Cooperation Committee (JCCC) Roadmap towards Mutual
Recognition of Trade Partnership Programs. Mutual Recognition of
the U.S.'s Customs-Trade Partnership Against Terrorism (C-TPAT) and
the EU's Authorized Economic Operator (AEO) supply chain security
programs would allow companies to receive benefits similar to those
conferred on companies participating in the other country's
program.
The Roadmap outlines six areas that the U.S. and the EU will address to achieve the goal of implementing Mutual Recognition: political, administrative, legal, policy, technical/operational, and evaluation. The Roadmap sets forth key benchmarks for measuring progress in each area.
The U.S. and EU began working towards implementing Mutual Recognition of C-TPAT and AEO in 2007. The initial steps consisted of completing an in-depth comparison of both the U.S. and EU programs and conducting a pilot program in which CBP observed security components of the EU's AEO audit process. The Roadmap was drafted and endorsed based on the conclusions drawn from the initial U.S.-EU effort.
CBP states that, "Throughout the upcoming year, the U.S. and EU will:
The Roadmap outlines six areas that the U.S. and the EU will address to achieve the goal of implementing Mutual Recognition: political, administrative, legal, policy, technical/operational, and evaluation. The Roadmap sets forth key benchmarks for measuring progress in each area.
The U.S. and EU began working towards implementing Mutual Recognition of C-TPAT and AEO in 2007. The initial steps consisted of completing an in-depth comparison of both the U.S. and EU programs and conducting a pilot program in which CBP observed security components of the EU's AEO audit process. The Roadmap was drafted and endorsed based on the conclusions drawn from the initial U.S.-EU effort.
CBP states that, "Throughout the upcoming year, the U.S. and EU will:
- Establish guidelines regarding information exchanges, including the exchange of validation/audit results and legalities associated with the disclosure of membership details
- Perform joint verifications to determine remaining gaps between AEO/C-TPAT and resolve any discrepancies
- Explore and test an export component for C-TPAT
- Exchange best practices through joint visits and conferences
- Continue dialogue on legal and policy developments under the respective administrations
- Endorse and sign a Mutual Recognition Arrangement
- Evaluate Mutual Recognition benefits for AEO/C-TPAT members
Update on Proposed Re-Interpretation of "First Sale" Valuation
03/27/08 12:20 PM
Comments for the proposed
interpretation of the "First Sale" rule are due on
April 23, 2008. To date, 17 comments have
been posted. Two of the comments support the proposed
change. Comments against the proposed interpretation
include Boeing, Wicked Fashions Inc., RG Barry Corporation,
Northern Tool and Equipment Co., Inc., The New Zealand
Manufacturers and Exporters Association and COAC.
U.S. Customs and Border Protection ("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 Sales."
U.S. Customs and Border Protection ("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 Sales."
China and U.S. Launch Trade Security Pilot Program
03/25/08 10:01 AM
On
March 24, 2008, U.S. Customs and Border Protection (CBP)
announced the
start of a validation pilot program in China made possible by
cooperation between CBP and the General Administration of China
Customs. The pilot program involved three Customs-Trade Partnership
Against Terrorism (C-TPAT) importer partners whose supply chains
predominately originate in China.
CBP states that the U.S. companies were invited to participate based upon several factors including volume, product type, and location of their supply chains in China. The companies voluntarily agreed to participate in the pilot program with the concurrence of both administrations.
China Customs led the validations based on C-TPAT minimum security criteria as a guide and with CBP supply chain specialists providing technical assistance. Prior to the validations, the companies were receiving minimal C-TPAT benefits due to CBP's inability to validate their security procedures in China. However, the information gathered during the validation will now allow CBP the ability to assess whether greater C-TPAT benefits are warranted. Both CBP and China Customs will evaluate the success of the pilot program and determine next steps.
C-TPAT Director Brad Skinner stated, "It took several months of intense discussions to get to this point and we look forward to continuing this effort as we explore future cooperation. It is a win-win for all. CBP and China Customs have the knowledge that all parties involved have good security practices in place and the companies can benefit by receiving fewer exams."
CBP states that the U.S. companies were invited to participate based upon several factors including volume, product type, and location of their supply chains in China. The companies voluntarily agreed to participate in the pilot program with the concurrence of both administrations.
China Customs led the validations based on C-TPAT minimum security criteria as a guide and with CBP supply chain specialists providing technical assistance. Prior to the validations, the companies were receiving minimal C-TPAT benefits due to CBP's inability to validate their security procedures in China. However, the information gathered during the validation will now allow CBP the ability to assess whether greater C-TPAT benefits are warranted. Both CBP and China Customs will evaluate the success of the pilot program and determine next steps.
C-TPAT Director Brad Skinner stated, "It took several months of intense discussions to get to this point and we look forward to continuing this effort as we explore future cooperation. It is a win-win for all. CBP and China Customs have the knowledge that all parties involved have good security practices in place and the companies can benefit by receiving fewer exams."
CBP Extends 10+2 Comment Period
02/06/08 04:09 PM
On
February 1, 2008, U.S. Customs and Border Protection (CBP)
published a notice in the Federal Register extending the comment
period for its proposed "10+2" filing requirement for ocean cargo
by 15 days until March 18, 2008. It is expected that many
interested parties will be filing comments on the proposed
rule.
On January 2, 2008, U.S. Customs and Border Protection (CBP) published a proposed rule regarding importer security filing and additional carrier requirements, also known as the "10+2" rule. The proposed rule will require that importers and carriers to submit additional information regarding cargo before the cargo is brought into the U.S. by vessel. The information must be provided 24 hours prior to loading of the cargo on the vessel and via a CBP-approved electronic data interchange system.
The proposed rule is intended to allow CBP to identify high-risk shipments to prevent smuggling and ensure cargo safety and security. The proposed regulations originate from the Security and Accountability for Every (SAFE) Port Act of 2006 and the Trade Act of 2002. CBP issued a news release about the rule here.
On January 2, 2008, U.S. Customs and Border Protection (CBP) published a proposed rule regarding importer security filing and additional carrier requirements, also known as the "10+2" rule. The proposed rule will require that importers and carriers to submit additional information regarding cargo before the cargo is brought into the U.S. by vessel. The information must be provided 24 hours prior to loading of the cargo on the vessel and via a CBP-approved electronic data interchange system.
The proposed rule is intended to allow CBP to identify high-risk shipments to prevent smuggling and ensure cargo safety and security. The proposed regulations originate from the Security and Accountability for Every (SAFE) Port Act of 2006 and the Trade Act of 2002. CBP issued a news release about the rule here.
Customs Proposes Eliminating "First Sale" Valuation
01/24/08 10:16 PM
CBP Proposes Eliminating "First Sale" Valuation
Proposed Change May Substantially Increase Duties and Fees for Importers
On January 24, 2008, U.S. Customs and Border Protection (CBP) published a notice in the Federal Register proposing to change its practices with regard to the proper customs valuation of imported products in multi-sale transactions.
Specifically, CBP is proposing rejecting the use of "first sale" valuation and instead requiring the use of the "last sale," i.e., the value paid by the U.S. buyer for the product, as the basis of transaction value for such products.
Under current conditions, importers may value imported products in situations involving multiple sales (e.g., those involving a sale from the manufacturer to a middleman overseas and a sale from the middleman to the buyer in the U.S.), at the "first sale" price between the manufacturer and the overseas middleman if certain conditions are met. Specifically, the first sale must be an arm's length sale and the goods must be clearly destined for export to the U.S.
CBP proposes changing its interpretation of the meaning of "sold for export to the United States" when determining the acceptability of transaction value in multi-sale transactions by accepting only the last sale to the U.S. in meeting this requirement of transaction value. CBP states this change is based on a report to the World Customs Organization (WCO) by the Technical Committee on Customs Valuation adopted in April 2007 -- Commentary 22.1, entitled, "Meaning of the Expression 'Sold for Exportation to the Country of Importation' in a Series of Sales" -- and would align CBP's treatment of such sales with most other World Trade Organization (WTO) members.
CBP's proposed action would overturn nearly 20 years of legal and administrative precedent and would cause importers to reevaluate their current customs valuations and abandon any current use of "first sale" valuations, resulting in the potential payment of additional duties and fees.
CBP is accepting comments on the proposed interpretation until March 24, 2008. Global Trade Expertise (GTE) can assist importers in determining the effect the proposed interpretation will have on an importer's customs valuations. GTE can also assist importers in drafting comments to CBP. Please contact us if you have any questions. We would be happy to discuss the matter with you at no charge.
Proposed Change May Substantially Increase Duties and Fees for Importers
On January 24, 2008, U.S. Customs and Border Protection (CBP) published a notice in the Federal Register proposing to change its practices with regard to the proper customs valuation of imported products in multi-sale transactions.
Specifically, CBP is proposing rejecting the use of "first sale" valuation and instead requiring the use of the "last sale," i.e., the value paid by the U.S. buyer for the product, as the basis of transaction value for such products.
Under current conditions, importers may value imported products in situations involving multiple sales (e.g., those involving a sale from the manufacturer to a middleman overseas and a sale from the middleman to the buyer in the U.S.), at the "first sale" price between the manufacturer and the overseas middleman if certain conditions are met. Specifically, the first sale must be an arm's length sale and the goods must be clearly destined for export to the U.S.
CBP proposes changing its interpretation of the meaning of "sold for export to the United States" when determining the acceptability of transaction value in multi-sale transactions by accepting only the last sale to the U.S. in meeting this requirement of transaction value. CBP states this change is based on a report to the World Customs Organization (WCO) by the Technical Committee on Customs Valuation adopted in April 2007 -- Commentary 22.1, entitled, "Meaning of the Expression 'Sold for Exportation to the Country of Importation' in a Series of Sales" -- and would align CBP's treatment of such sales with most other World Trade Organization (WTO) members.
CBP's proposed action would overturn nearly 20 years of legal and administrative precedent and would cause importers to reevaluate their current customs valuations and abandon any current use of "first sale" valuations, resulting in the potential payment of additional duties and fees.
CBP is accepting comments on the proposed interpretation until March 24, 2008. Global Trade Expertise (GTE) can assist importers in determining the effect the proposed interpretation will have on an importer's customs valuations. GTE can also assist importers in drafting comments to CBP. Please contact us if you have any questions. We would be happy to discuss the matter with you at no charge.
Customs Publishes Proposed "10+2" Rule for Ocean Cargo
01/03/08 08:37 AM
On January 2, 2008, U.S.
Customs and Border Protection (CBP) published a proposed rule regarding importer
security filing and additional carrier requirements, also known as
the "10+2" rule. The proposed rule will require that importers and
carriers to submit additional information regarding cargo before
the cargo is brought into the U.S. by vessel. The information must
be provided by way of a CBP-approved electronic data interchange
system and is intended to allow CBP to identify high-risk shipments
to prevent smuggling and ensure cargo safety and security. The
proposed regulations originate from the Security and Accountability
for Every (SAFE) Port Act of 2006 and the Trade Act of 2002. CBP
issued a news release about the rule here.
The "10+2" name for the proposed rule refers to the 10 additional pieces of information the importer is required to provide to CBP as an "Importer Security Filing" plus 2 data elements to be provided to CBP by carriers/vessel operators prior to loading the cargo: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the U.S. ; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).
The 10 additional data elements required to reported by importers are:
The "10+2" name for the proposed rule refers to the 10 additional pieces of information the importer is required to provide to CBP as an "Importer Security Filing" plus 2 data elements to be provided to CBP by carriers/vessel operators prior to loading the cargo: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the U.S. ; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).
The 10 additional data elements required to reported by importers are:
- Manufacturer (or supplier) name and address
- Seller (or owner) name and address
- Buyer (or owner) name and address
- Ship-to name and address
- Container stuffing location
- Consolidator (stuffer) name and address
- Importer of record number/foreign trade zone applicant identification number
- Consignee number(s)
- Country of origin, and
- Commodity Harmonized Tariff Schedule number
2008 HTSUS Posted on USITC Website
12/27/07 10:28 AM
CBP Announces Singapore to Scan U.S.-Bound Cargo as Part of Secure Freight Initiative
12/17/07 10:42 PM
Singapore - The United States and Singapore today arranged to cooperate on the Secure Freight Initiative, a joint effort of the Department of Homeland Security's U.S. Customs and Border Protection, the U.S. Department of Energy's National Nuclear Security Administration and the U.S. Department of State aimed at keeping radioactive weapons out of U.S.-bound cargo.
Singapore is a key location for this scanning. Among worldwide seaports processing containers with goods destined for the U.S., Singapore is first world-wide in terms of volume of transshipments, and sixth in terms of the volume of shipments and containers imported. In fiscal year 2006, for example, the country processed more than 375,000 shipments bound for the U.S., constituting approximately 3.68 percent of all shipments here.
Singapore will initially participate in the Secure Freight Initiative in a limited capacity. However, even this limited participation goes beyond the mandate of the Security and Accountability for Every Port Act (SAFE Port Act) of 2006. That law required that the U.S. evaluate, at three initial ports, the possibility of scanning 100 percent of U.S.-bound cargo for radiation.
The port of Singapore is part of the second group of international ports evaluating integrated cargo radiation detection and non-intrusive imaging capabilities in Phase 1 of the Secure Freight Initiative. Fully operational testing of Secure Freight Initiative equipment began October 12, 2007 at Port Qasim, Pakistan; Puerto Cortés, Honduras; and at the Port of Southampton, United Kingdom.
The second group of ports will provide radiation detection and imaging capabilities on a limited capacity basis that exceeds the requirements of the SAFE Port Act. In addition to Singapore, these facilities include: Hong Kong's Modern terminal; the Gamman terminal at Busan, Korea; and Oman's Port Salalah. These facilities were chosen to help determine the impact of radiation scanning at large volume ports, as well as at ports where a large number of transshipments are processed. Phase 1 results will provide guidance on future port expansion.
At Singapore, as at other ports, data from Secure Freight Initiative scanning and imaging equipment will be provided in near-real time to CBP officials on-site, as well as to officials at the National Targeting Center in the United States for analysis and automatic integration with U.S. systems.
In March 2003, the port of Singapore was designated a Container Security Initiative port. For more than four years, CSI officers have used manifest examinations and other information to determine whether x-ray and radiation detection equipment should be used to examine U.S.-bound cargo. The Port of Singapore began participating in Department of Energy's National Nuclear Security Administration Megaports Initiative in spring, 2004. The Secure Freight Initiative expands the use of radiation scanning and imaging equipment to examine more U.S.-bound containers, not just those determined to be high-risk.
CBP Textile Enforcement Fiscal Year 2007 Review
12/17/07 12:58 AM
On December 17, 2007,
the U.S. Customs House Guide posted a review of Customs and
Border Protection (CBP) for Fiscal Year 2007. The report states
that among this year's accomplishments
are:
-
In FY 2007 CBP increased foreign factory visits by 57%. CBP visited 671 foreign factories to monitor for illegal transshipment by sending textile production verification teams (TPVT) to confirm actual country of origin and compliance with trade preference programs. These teams examine production documents at foreign factories to ensure that potentially violative shipments are stopped before being shipped to the United States;
-
CBP visited 168 foreign factories in 10 countries in FY 2007 to verify claims involving Free Trade Agreements like the Central America - Dominican Republic Free Trade Agreement and other trade preference programs such as the African Growth and Opportunity Act;
-
CBP auditors conducted 66 audits on textile importers and recommended additional revenue collections of $5.61 million in FY 2007 - an increase of 57% in audit activity;
-
CBP officers at the ports of entry examined 13,327 shipments in FY 2007 and found more than 2,300 shipments where discrepancies were identified;
-
Further, Import Specialists initiated 1,905 reviews of entry documents resulting in 959 detained shipments and 314 seized shipments worth $48.1 million for violations of China quota restraints; and
-
CBP also initiated 68 actions totaling $50.1 million in penalties for commercial fraud.
CBP Plans to Launch New Message Broadcast System
12/06/07 09:45 AM
On December 6, 2007, the
U.S. Customs House Guide reported that U.S. Customs and
Border Protection (CBP) plans to launch a new free message
broadcast system called the Cargo Systems Messaging Service (CSMS).
CSMS will function as an email listserve and will be used by CBP to
provide information to the trade.
U.S. Customs House Guide states:
U.S. Customs House Guide states:
Currently, the only automated commercial system with an administrative messaging capability is the Automated Broker Interface. CBP has no broadcast mechanism for other commercial systems, such as ocean/rail manifest, air manifest and electronic truck manifest. The new CSMS listserve will allow CBP to broadcast messages not only to ABI users, but to users of all CBP automated commercial systems including the Automated Commercial Environment (ACE), Automated Commercial System (ACS) and more.
To receive messages via
CSMS, a user must subscribe and create a subscriber profile with an
email address, password (optional), and an indication of subjects
of interest. A link to the subscription page will be available at a
later date.
CBP Moves Ahead on C-TPAT for Air Carriers and 3PLs
11/19/07 08:53 PM
American Shipper reports that CBP officials had previously said they intended to open up enrollment for the first time to logistics providers by the end of last summer, but CBP is carefully studying the dynamics of the outsourced logistics sector and developing a common definition for such a service provider, which is proving difficult because the industry is using so many subcontractors. CBP wants to ensure that any security plans instituted by the 3PL are also pushed down the pipeline to the companies doing the actual work.
The C-TPAT office plans to complete a draft proposal for 3PL minimum security requirements by early December, get executive approval by the end of the month and present the standards to the Commercial Operations Advisory Committee for final review.
China to Host C-TPAT Meeting
11/15/07 05:46 PM
CBP reported last month that China's Minister of Customs, Mu Xinsheng, had finally agreed to allow U.S. CBP inspectors in the country to verify security compliance of manufacturers and logistics providers whose customers participate in C-TPAT. Prior to this, CBP had authorized the use of 11 private companies in the Third Party Validation Pilot program, but interest from the trade community had been minimal due to concerns about sharing proprietary business and security data and the costs associated with the validation, which were to be incurred by the importer. China had been the only country to refuse to allow access to U.S. Customs teams seeking to validate that foreign suppliers are following the security plans submitted by their U.S. import customers and approved by CBP.
Mullen stated that the two customs administrations have exchanged letters about moving forward with joint validations in which CBP supply chain specialists would accompany Chinese officials during on-site visits of domestic companies. The two sides are still in the process of setting up a meeting at the invitation of Mu, Mullen stated.
Importer Fined $7.5 Million for Declaring Incorrect Customs Values
11/12/07 02:13 PM
Based on the facts found at trial, Seaveg would negotiate the initial price for the produce with the Mexican growers by telephone and then, under an agreement with its suppliers, receive an invoice at 70% of the negotiated price, with the understanding that the remaining 30% would be paid within 60 days of delivery into storage after certain adjustments were made. At the time of entry, the invoice at 70% of the true sales price was declared value to Customs. However, neither Inn Foods, Seaveg, nor the customs broker informed Customs that the invoice values declared at the time of entry were "provisional."
Firstly, the court found that Inn Foods was responsible for all of the liabilities despite the fact that Seaveg and Inn Foods were incorporated as two separate entities because it found that Seaveg was an alter ego or alias of its sister subsidiary Inn Foods.
Secondly, the court found that Inn Foods' conduct was fraudulent as Customs had proved that Inn Foods had deliberately introduced merchandise into the commerce of the United States by means of material false statements with the intent to defraud the revenue or otherwise violate the laws of the United States. Although Inn Foods and Seaveg argued that there was no evidence adduced at trial that indicates that "Inn Foods knew or understood the legal effect of post-importation price adjustments to the price actually paid or payable to the grower/packers based on the U.S. resale prices," the court found the argument to needlessly confuse the crux of the wrongdoing. The court stated that the wrongdoing is that:
Inn Foods knew that (1) the prices on the subject entries were significantly undervalued, (2) these undervaluations caused a commensurate reduction in lawful Customs duties owed and (3) there was no plan or intention to correct these undervaluations. . . . Therefore, while Inn Foods correctly states that "there is nothing sinister, per se, about provisional pricing agreements," it is not the provisional pricing agreement here that is at issue, but the underlying undervaluation scheme which the provisional pricing agreements only play a part.
Customs sought $624,602.55 in unpaid duties and merchandise processing fees and civil penalties in the amount of $15,319,513.35 if Inn Foods' conduct was found to be fraudulent. In determining the penalty to be assessed, the court noted that for violations of fraud, the maximum penalty is the domestic value of the merchandise with no set minimum penalty and that the court possesses the discretion to determine a penalty within the parameters of the statute. After considering a number of factors as set forth in United States v. Complex Machine Works Co., 23 CIT 942, 949-50, 83 F. Supp. 2d 1307, 1315 (1999), the court ordered that Inn Foods pay $624,602.55 for unpaid duties plus pre-judgment and post-judgment interest, and civil penalties in the amount of $7,500,000.00, plus costs and fees and interest from the date of judgment.
This case represents a cautionary tale for importers who use any type of provisional invoices, including those importers who true-up customs valuations at some point after entry due to the additions to value, such as assists, royalties, buying commissions, etc. Importers have a continuing obligation to review the correctness of information contained in invoices used as entry documents, and to declare to Customs the true and correct value of the goods at the time of entry. See 19 U.S.C. §§ 1484 and 1485. Accordingly, importers should maintain proactive internal controls over their Customs valuation and understand the impact of the full financial transaction for imported goods, including any possible additions to value.
If an intercompany or transfer price is declared as the customs value of an imported good, an importer should assess whether the intercompany or transfer price satisfies the customs valuation statute independent of the acceptability of the price for tax purposes. See Customs' Informed Compliance Publication, Determining the Acceptability of Transaction Value for Related Party Transactions. In addition, importers who utilize a customs value that must be adjusted subsequent to entry should consider joining Customs' Reconciliation program. This program allows importers to declare estimated customs values and subsequently adjust those values to final values and pay or be refunded any additional duties or fees owed.
Finally, an importer may be able to limit its liabilities for valuation and other errors it discovers on its own by filing a prior disclosure with Customs. By filing a prior disclosure, an importer voluntarily discloses to Customs the factual circumstances of a violation of the customs statute and tenders any duties and fees owing. If the prior disclosure is done properly, the importer's liability for penalties can be reduced to the interest owed, unless fraud is found.
Global Trade Expertise can assist with an importer in assessing the validity of their customs valuations, joining CBP's Reconciliation program, and/or filing a valid prior disclosure with CBP. Please contact us for assistance.
Customs Seizes Counterfeit Footwear and Jackets Worth $2 Million
11/07/07 03:44 PM
The report states that during fiscal year 2006, CBP made more than 14,000 seizures of counterfeit goods worth more than $155 million that violated intellectual property laws. Footwear and wearing apparel are among the top commodities seized by CBP in fiscal year 2006.
New Customs Bulletin Issued
10/31/07 01:13 PM
The Customs Bulletin and
Decisions, Vol. 41, No. 45, October 31, 2007 can be found
here.
Of interest:
U.S.-Bahrain Free Trade Agreement - Interim rule effective October 16, 2007; comments must be received by December 17, 2007.
Of interest:
U.S.-Bahrain Free Trade Agreement - Interim rule effective October 16, 2007; comments must be received by December 17, 2007.
New Customs Bulletin
10/24/07 12:34 PM
Customs Bulletin Vol. 41, No. 44
was issued on October 24, 2007 and can be found here