Serving the Air Cargo Industry

since 1972


The Official Air Cargo Directories Serving the USA,

Canada, Latin America and the Caribbean

Published Annually

THE GOOD THE BAD AND THE UNKNOWN – CBP “RECENT” INITIATIVES

By Carl Soller
Soller Law Intl

 

Customs and Border Protection (CBP) has continued to proceed with new initiatives to improve both commercial and security goals. The long-term outcome is yet to be determined.

Reimbursable Services Program (RSP)

The Cross-Border Trade Enhancement Act of 2016 authorizes agreements between Customs and the private sector. In its reasoning for this program the Government has acknowledged what the trade has known for some time. Because of a lack of sufficient personnel and infrastructure resources there is an “increase in cargo backups” and thus equivalent delays in the delivery of that cargo to the U.S. purchaser. “The RSP enables partnerships between CBP and private sector or government entities to address these challenges.”

The services impacted are all elements that CBP provides or additional services upon “the request of stakeholder,” but won’t “unduly impact existing services.” The costs may include and cover salaries, benefits, overtime expenses, administration and transportation costs. Airport services, except for “small airports,” can only be used for “overtime and agriculture services.” 

Although in this article we are only concerned with cargo, the RSP also applies to passenger activity.

There is no “formal application,” but a detailed list of required application information is available from CBP.

Thus far the program has resulted in over 60 agreements scattered among large and small air and seaport locations as well as warehouse facilities across the country.

Due to certain geographical restrictions on Customs Port oversight abilities, it is expected that Bonded facilities outside those geographic locations will be permitted to thrive because of this “Public-Private” partnership program.

CBP Centers of Excellence and Expertise (CEE)

CBP has long sought the ideal methodology to capture and incorporate expertise and experience in centralized locations. More than 20 years ago CBP initiated a program to centralize commodity groups reviewing particular classes of imports (oil, shoes, wearing apparel, machinery, et al) in specific locations throughout the US. It was deemed by CBP to be transparent for the trade as only review of import “entries” would occur after the importer or its Customs Broker filed the entry. The program was “junked” because it was determined that experienced “commodity specialists” and inspectors could only do their jobs effectively if they could “examine freight” at the actual location of the freight. As a result, those “centralized locations” were eliminated and the expertise was restored to the individual CBP port locations.

Forward to 2015: a seemingly similar rationale, which was debunked as explained above, is now in place as CEE’s.

As you are all aware CBP has implemented the CEE concept. There are distinctive CEE centers placed throughout the country. Conceptually each is located in a geographic district that is a center for import of a specific commodity: e.g. oil in Houston; wearing apparel in San Francisco. Each is required to have the requisite knowledge and experience to advise the trade on the sometimes complex and esoteric concepts and procedures attendant to the importation of that commodity.

The concept makes sense; however, as a practical matter the delegation of authority often creates further confusion. As an example, an importer files an entry at the port of arrival in California of automotive devices. The entry is detained by CBP. Often that merchandise remains at the pier for days or weeks because the entry has no CBP official “owning” or responsible for the review and resolution of the problem and the CBP ACE/automated program is regularly unable to direct the importer or even the local Port Director to the CEE official authorized to review and resolve the issue.

What is created is often very costly to the importer, as storage and demurrage charges accumulate because of processing delays and not because of any error in the import process. It is predicted by some that the CEE program will either be discontinued or revamped so that the required experience is again available at all ports of entry.  

Protest: Who has it and how to get a copy

This last issue is the prototypical result of implementing a system before all of the legal or technological kinks are removed. CBP and the trade often disagree on the correct “classification or appraisal” of imported goods stated on the filed CBP entry.

The procedure in place by statute is for the importer, its agent or attorney to contest the CBP decision by filing a “protest” after the final decision by CBP is rendered (the liquidation). Under the CBP Automated Commercial Environment (ACE) System, CBP has authorized submission and filing of the protest via the ACE system. This sounds great and consistent with modern technology enhancing the efficiency of both the trade’s and CBP operations.

What’s missing? CBP is not able to electronically create a copy of the protest with attachments to send to the filer. It is essential to be certain that what you have submitted has been properly filed and stored by CBP. If your protest is denied, the option is to appeal to the Court of International Trade. Can you imagine the Court’s reaction if told by CBP or the involved party that a copy of the protest is unavailable because CBP did not implement automated procedure necessary to produce documents required by the Court?

Currently there is only one secure option: Continue to submit protests manually.  

Carl R. Soller, Customs, International Cargo and Regulatory Compliance Attorney is counsel to companies engaged in all elements of the import/export supply chain and a recognized expert in his practice areas.  He and his firm concentrate their International, Regulatory and Cargo Practice in all business and regulatory matters on a nationwide basis.  He offers advice on supply chain security and its related Government Regulations to the Cargo Community as well as advice and a vast range of assistance to importers and exporters of all kinds of consumer goods.  He can be reached at (516) 812-6650 or

In-Bond Shipments: Evolving Changes at U.S. Border

By Debbie Dent
Director, Program Services
Border Connect, Inc.

 

The in-bond process allows imported merchandise to be entered at one U.S. port of entry without payment of duties and transported by a bonded carrier to another U.S. port for entry or export. The new requirements apply to Immediate Export (IE) bonds, Immediate Transportation (IT) bonds, and Transportation & Exportation (T & E) bonds.

A moving target date for implementation has been occurring. On Jan. 4, 2018 U.S. Customs & Border Protection (CBP) announced the time frame for initial implementation for these regulatory changes will now be July 2, 2018. On that date paper forms will no longer be accepted for input into the ACE system by CBP Officers.

The changes to be expected:

  • Paper in-transit bond applications will no longer be allowed and an electronic in-bond application must be filed for in-bond merchandise transported by ocean, rail or truck, except for merchandise transported by pipeline and truck shipments transiting the U.S. from Canada. It is expected that air in-bond shipments will eventually be fully paperless, but CBP is not amending those applicable regulations at this time
  • The HTS classification number (to the six digit) will be required on the in-bond application
  • The quantity must be declared on the in-bond application at the smallest external packing unit
  • Diversion to an alternate port of destination or exportation must be electronically requested for approval by Customs
  • The preparer of the in-transit bond application, or any other party that is permitted to file the in-bond application, must electronically report the arrival date and location within two business days of arrival at the destination or exportation port. CBP has clarified that the party whose bond is obligated is the party that is responsible for ensuring the in-bond record is up-to-date

On Aug. 6, 2018 electronic reporting for all transactions will be mandatory. CBP will no longer accept copies of CBPF 7512 to perform arrival or export functions. These responsibilities will be the requirement of the carrier. Additionally, a diversion to a port other than reported on the original in-bond will be required. An ACE edit will reject arrival if not performed. Electronic reporting of bonded cargo location (FIRMS Code) will be required.

At this time no date is set for implementation of the provision requiring the 6-digit Harmonized Tariff Schedule requirement for Immediate Transportation Movements.

Further details regarding the final rule can be found in the Federal Register Notice dated Sept. 28, 2017 at the following link: https://www.gpo.gov/fdsys/pkg/FR-2017-09-28/pdf/2017-20495.pdf

The only thing consistent at the border is change”

Debbie Dent, can be reached at 1-800-596-5176 or by e-mail

Reshipping of Packaged Hazardous Materials

By Sonia Irusta
Dangerous Goods Bureau

It is a common practice in the transportation industry to reship packaged hazardous materials, most commonly for distribution purposes. Is this acceptable?  Yes, it is, provided the reshipper fully complies with all Federal and International regulations applicable to the mode(s) of transportation being utilized (highway, air, vessel or rail). 

As noted in Title 49 of the U.S. CFR, a person who either receives hazardous materials from another company and reships them (reshipper/offerer), or accepts a hazardous material for transportation, and transports that material (carrier), is responsible for ensuring that the shipment complies in all respects with Federal hazardous materials transportation law. In both cases, the reshipper or carrier independently may be subject to enforcement action if the shipment does not comply.

Reshipping a package of hazardous materials that was received as damaged, mis-declared, undeclared or simply not prepared in full compliance with the regulatory requirements is a violation of the law if the shipment is not brought to full compliance by the reshipper prior to it being offered for transport.   Appendix A to Subpart D of Part 107—Guidelines for Civil Penalties sets forth the guidelines PHMSA uses in making initial baseline determinations for civil penalties. The first part of these guidelines is a list of baseline amounts or ranges for frequently-cited probable violations. Following the list of violations are general guidelines PHMSA uses in making penalty determinations in enforcement cases.

Violations of the Federal hazardous materials transportation law are preventable!

Proper training in compliance with the  49 CFR Subpart H-Training requirements is the solution.

Think before you RESHIP!

Sonia Irusta is a highly accomplished business and technical professional instrumental in domestic and international transportation solutions for shippers, freight forwarders and carriers.  She can be reached at Bureau of Dangerous Goods (609) 860.0300 Ext. 327  or via E-mail

 

2018: What Is on the Horizon for Ocean/Air Intermediaries?

By Carlos Rodriguez, Partner
Husch Blackwell LLP

On the Federal Maritime Commission (“FMC”) side, there are two developments expected early in 2018. One has to do with deregulation of Negotiated Rate Arrangements (“NRAs”) and NVOCC Service Arrangements (“NSAs”) for NVOCCS pursuant to Docket No. 17-10, and the other with hearings scheduled to review information and data raised in FMC Petition P4-16 by the Coalition for Fair Port Practices related to issues resulting in detention, demurrage, and per diem charges which have been deemed as unfair when they occur during situations or events which are not attributable to the shipping public. Lastly, we think it is relevant, even at this early stage so close to the holiday season, to note that the e-commerce explosion will continue in full force and will in the natural course of events bring intermediaries more into the 3PL space in the delivery of fulfillment services.

The future of e-commerce. The extended and most recent seasonal experiences dictate that this is an area that intermediaries cannot easily overlook. The numbers are too compelling, and the phenomena involves the large scale movement, storage and distribution of cargo across international borders and domestically, which is the traditional arena for the forwarder, NVOCC, Customs Broker, IAC and other intermediary entities. These numbers should not be overlooked:

  • Per the U.S. Department of Commerce, U.S. purchasers buy at the pace of $1.2 billion a day online;
  • This number has doubled in the last five years;
  • It is projected to double again in the next five (we think that this projection may be too conservative);
  • During this last (2017) Black Friday/Thanksgiving Day $7.9 billion worth of goods were sold via e-commerce;
  • Alibaba Global “Singles Day” Sales (2017), which is a day selected by them for special sales events, reached $25 billion in e-commerce sales for that day;
  • The Industry has forecast $107.4 billion in holiday sales for online orders this year, making 2017 the first to reach the $100 billion mark.

The value of these numbers is not just the raw dollar data, but rather the fact that these numbers represent the movement of substantial quantities of cargo which normally would be handled through more traditional channels which are now moving and being handled through a growing number of fulfillment centers. These fulfillment centers here and abroad are being developed not only by Amazon and large multi-national logistics companies, but also by smaller mid-sized companies, many of which are providing 3PL services that previously were being handled by ocean and air intermediaries. There are also a lot of 3PL newcomers to the field specializing as fulfillment center providers which do not come from the forwarder/broker ranks. The last mile delivery functions are also becoming more and more varied, creative and competitive. This new environment puts a large premium on efficiencies and cost-consciousness. Our firm, which traditionally provided services to the larger intermediaries in this arena, is now also providing these same services to many mid-sized and smaller entities who are also now engaging in this relatively new field of fulfillment services. IT companies are also fast developing software platforms which address the integration of order and inventory management, shipping delivery platforms and customer transparency, all important components for fulfillment service centers.

In any case, keep an eye on developments in this arena so that your company can take appropriate steps in this competitive area which is only growing. 

FMC Deregulation: NVOCC NRAs and NSAs/Docket No. 17-10. The FMC is getting closer to effecting the following changes to NRAs and NSAs:

1) That NSAs be continued as a basic agreement between NVOCCS and their customers for more comprehensive longer termed ocean transport agreements with provisions similar to those included in ocean carrier service contracts, with two basic differences:

  1. that the NSAs and amendments not be filed with the Commission as they are now required in order to take effect; and
  2. that the Essential Terms no longer be required to be published in an Essential Terms tariff.

2) That NRAs terms be allowed to include:

  1. that Shippers accept NRA quotes without a writing as it is now required by regulation; Shippers will be able to now accept NRA terms by merely booking/tendering cargo after an agreement is reached on the quotations made by the NVOCC;
  2. that NRAs would be now amended when commercial factors change by agreement of the parties without having to terminate them and initiating new ones; and
  3. that additional services and other terms be allowed in NRAs to expand their service scope with respect to “non-rate economic terms” (this last qualification appears to still have some regulatory tone to it);

This acceptance of an NRA via a booking and the amendment of same are major departures from prior regulatory positions taken by the Commission staff, and are welcomed.  

Next Steps: The Commission has proposed a Notice of Proposed Rule Making (“NPRM”) for issuance and publication of these regulation changes in the Federal Register. Acting Chairman Khouri also directed that the NPRM be amended to allow for supplementary information and has solicited additional  public comments on whether, as requested by various petitioners, the Commission should expand the NRA exemption in order to allow inclusion in NRA’s of “non-rate economic terms.” Final comments are due Jan. 29, 2018. We expect that these new regulations will be in place by the Spring. 

FMC Petition P4-16 by the Coalition for Fair Port Practices. The FMC published a notice identifying 26 individuals scheduled to testify as witnesses on one of six different panels at next month’s hearing exploring issues related to detention, demurrage, and per diem charges raised in a petition filed by the Coalition for Fair Port Practices (Petition P4-16). The following witnesses for the Intermediary Panel have been named by the FMC:      

  • Richard J. Roche, Vice President of International Transportation, Mohawk Global Logistics, and NVOCC Sub-Committee Chairman at NCBFAA
  • Charles Riley, Chairman, Board of Governors, New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (NYNJFFFBA), and Vice President, Steer Company
  • Jeanette Gioia, Vice President Exports, NYNJFFFBA, and President, Serra International, Inc.
  • Cameron W. Roberts, Esq., representing Roberts & Kehagiaras LLP and the Foreign Trade Association
  • Joseph T. Quinn, President, Sefco Export Management Company, Inc.

These are important hearings to the extent that in the recent past we have seen the application of demurrage, detention and per diem charges applied in circumstances wherein the shipping public had no involvement with the causes which gave rise to these charges such as labor actions, weather conditions, chassis dislocations and other such phenomena not under the control of the shipping public.

Carlos Rodriguez is a partner at Husch Blackwell LLP in Washington, D.C. He concentrates his practice on international and domestic transportation law, admiralty, regulatory maritime law, international commercial transactional law, transportation litigation and export licensing and compliance matters. He is also involved with transport and security issues involving the U.S. Customs and Border Protection and the Transportation Security Administration. He is transportation counsel to the New York/ New Jersey Foreign Freight Forwarders and Brokers Association. Mr. Rodriguez can be reached at (202) 378-2365 or via email at

 

Lithium Battery Holiday Safety

By Roger Erickson
Bureau of Dangerous Goods

With the holidays rapidly approaching, an influx of new electronic devices will soon occur in homes across America. While these new gadgets are sure to be fun and exciting gifts for children and adults alike, it is important to also remember that many of them contain a potentially hazardous lithium ion or lithium metal battery. Lithium batteries have become popular in the world of electronics because they are able to harness a massive amount of energy into a relatively small casing, but this also makes them extremely dangerous in the event of malfunction or mishandling. Improperly stored or charged lithium ion batteries can be prone to overheating or even exploding in some cases, creating a fire risk that is often times avoidable. Button-type lithium metal batteries also pose a significant risk if swallowed, so it is crucial to keep them out of the hands of small children. There are some simple safety tips that consumers can adhere to that will reduce the risks associated with these devices and ensure that the holiday season remains both safe and enjoyable.

 It is important when selecting gifts for both children and adults that one carefully chooses the safest and most reliable products. Many of the batteries that are most susceptible to malfunction are coming from companies that have tried to cut costs in the manufacturing process by ignoring important safety standards. Make sure when purchasing electronic devices that the company that manufactured them is reputable; never sacrifice safety for a good deal.

Once the device has been gifted, it is easy for the recipient to get carried away with the excitement of a new toy and forget about how potentially dangerous the battery inside can be. Make sure to take the time to review the procedures for safe use and charging of the device. Only charge electronic devices with the charging cable provided by the manufacturer. This cable has been designed specifically for the battery contained in the device, and using any other charger puts the battery at risk of malfunctioning. Never place a device on a flammable surface such as a bed or a couch while charging. Should the device begin to overheat, being near any sort of flammable surface will greatly increase the risk of fire. When not in use, store devices containing batteries in an area free from direct sunlight; this outside source of heat could trigger an unsafe reaction within the battery.

Anyone purchasing a lithium metal button-type battery powered device for a child should also pay attention to the location of the battery in the device itself. Battery compartments should be secure and out of view of the child to prevent the battery from being removed. Within curious young hands, a battery becomes exponentially more dangerous, and one of these potential dangers is accidental swallowing. Once ingested, a lithium battery becomes activated by saliva, potentially causing it to burn through anything with which it comes into contact. Symptoms of a swallowed battery include coughing, chest pain, fever, and nausea. If a child is suspected to have swallowed a battery, they should be taken to the emergency room immediately; nothing should be given by mouth and vomiting should not be induced.

The world of personal electronic devices has been completely revolutionized by lithium batteries. It is exciting to be a part of this technology-driven world, and the holidays are an excellent time to give the gift of electronics. However, above all else, safety should be the priority of all consumers. After all, the holidays are all about family, so make sure to keep loved ones safe this holiday season by following these simple tips for battery safety. Enjoy your holidays and your wonderful new gifts, and remember to always stay safe!

Roger Erickson has been a customer service representative at the Bureau of Dangerous Goods for the past year. In his time with BDG, he has developed an appreciation for the intricacies of the dangerous goods regulations. He hopes to expand his knowledge of the hazmat industry while continuing to work closely with the incredible team of specialists employed by the Bureau of Dangerous Goods. Roger can be reached at 609.860.0300 or at www.BureauDG.com  

Issuance of Wood Packaging Material Penalty- Effective Nov. 1, 2017

U.S. Customs Border Protections – Update

By Debbie Dent
Director, Program Services
Border Connect, Inc.

Pursuant to U.S. Code of Federal Regulations 7 CFR § 319.40-3 (effective since Sept. 16, 2005), non-exempt wood packaging material (WPM) imported into the United States must have been treated at approved facilities at places of origin to kill harmful timber pests that may be present. The WPM must display a visible, legible, and permanent mark certifying treatment, preferably in at least two sides of the article. The mark must be approved under the International Plant Protection Convention (IPPC) in its International Standards of Phytosanitary Measures (ISPM 15) Regulation of wood packaging material in international trade (https://www.ippc.int/en/publications/640/). Any WPM from foreign origin found to be lacking appropriate IPPC-compliant markings or found to be infested with a timber pest is considered not properly treated to kill timber pests and in violation of the regulation. The responsible party (importer, carrier, or bonded custodian) for the violative WPM must adhere to the Emergency Action Notification stipulations and be responsible for any costs or charges associated with disposition.

The purpose of the WPM requirement is to prevent the introduction of exotic timber pests. Introduced exotic pests lack the natural environmental controls that may be found in their respective native lands to keep them in check. When exotic timber pests go unchecked they can cause widespread tree mortality with detrimental ecological impacts. Additionally, there may be economic impact for the lumber, fruit, and nut industries, as well as the loss of horticultural trees. Eradication efforts can prove to be very expensive and ineffective once an exotic pest is introduced, as is the case with the Emerald Ash Borer which was introduced with infested WPM. Therefore, preventing introduction is critical with these exotic pests.

U.S. Customs and Border Protection is responsible for enforcing the regulation at ports of entry. To motivate WPM compliance, effective Nov., 2017, responsible parties with a documented WPM violation may be issued a penalty under Title 19 United States Code (USC) § 1595a(b) or under 19 USC § 1592. This is a change from the previously published threshold of five violations. There will be no yearly reset for calculating repeat violations so each WPM violation may incur a penalty.

Save the Date- Annual Detroit Area Trucking Seminar- Friday, Nov. 3, 2017

Event will be held from 8:30 a.m. to noon at the Sheraton Detroit Metro Airport, at 8000 Merriman Road, Romulus, MI. A great venue to learn what’s new or changing. For more information contact Dean & Fulkerson, Troy Michigan by e-mail

Debbie Dent can be reached at 1-800-596-5176 or by email

 

Imports and Exports: A Short List of Common Problems and Opportunities

 

By Thomas J. O’Donnell and Lara A. Austrins
Clark Hill PLC

Introduction

Many people are not aware of the magnitude of U.S. foreign trade. In 2014, U.S. gross domestic product totaled $17.7 trillion, with imports accounting for $2.8 trillion of this total and exports accounting for $2.3 trillion of this total. Thus, for 2014, imports (16%) and exports (13%) accounted for almost 30% of U.S. GDP. Despite the size of their import/export trade, we have found that companies often pay scant attention to minimizing their duty exposure and other risks that are part of the import/export process, even though Customs holds them primarily accountable for exercising reasonable care over these transactions. These same companies often devote substantial resources to minimizing U.S. and foreign income taxes, but have minimal internal controls for managing their foreign trade transactions. This approach is shortsighted as it fails to adequately manage the risks associated with the import/export process and also fails to exploit the special tariff tools and processes that competitors may use to their advantage.

Fifty years ago, there was a much clearer line of demarcation between “domestic producers” and “importers.” In today’s international economy, this line is blurred, and most U.S. manufacturers and distributors deal in both domestic and imported products. In this regard, it often comes as a surprise to “U.S. manufacturers” just how much of their business involves the importation and exportation of goods.

The main “gatekeeper” in the import/export process is U.S. Customs and Border Protection, although a number of other agencies play a very crucial and active role in administering and regulating imports and exports. Customs determines the duties that apply to the products (including whether antidumping or countervailing duties are applicable), whether the products are properly valued, whether they are properly marked in accordance with U.S. law, whether they violate the intellectual property rights of other companies, and whether the products are even admissible into the United States. In making these and other determinations, Customs enforces the laws of some 40 other government agencies.

The purpose of this memorandum is to acquaint importers and exporters with some of the key areas of concern to them. While certainly not exhaustive, these areas are on the short list of items that most commonly give rise to problems, present opportunities for reducing duties, or present opportunities for doing things more efficiently. Below are synopses of many of these key areas, and the article’s electronic version has hyperlinks to more detailed articles for those who wish to explore a particular subject in more detail.  If you would like to receive a version of the article with the operative hyperlinks to these articles, please contact the article’s authors.  

IMPORTS

Tariff Classification – The most fundamental of all Customs determinations. The tariff classification of an article determines its duty rate and its eligibility for preferential free trade programs such as GSP or free trade agreements such as NAFTA, can alert an importer that other agencies may be interested in its products (FDA, EPA, CPSC, etc.), and can be helpful in determining whether the article may be subject to antidumping or countervailing duties or quotas. Incorrect tariff classifications almost always lead to preventable problems. For these reasons, prudent importers compile tariff classification databases and update them as new products are added and as changes in the language of the tariff necessitate.

The lawyers in Clark Hill’s International Trade Practice Group have a wealth of experience in tariff classification issues and have successfully litigated a number of tariff classification cases in the U.S. Court of International Trade and the U.S. Court of Appeals for the Federal Circuit.

Customs Valuation – What do you mean the value on the invoice is not the dutiable value? Because almost all duty rates are expressed as percentages of the dutiable value of imported merchandise (ad valorem rates), determining the proper value of imported products is essential. The Customs value of goods generally is the price paid or payable by the importer, with required additions to value for items such as royalty and license fees, year-end price adjustment payments, payments to reflect currency fluctuation “assists,” and separate payments that are not reflected on the commercial invoice. These additions to value commonly are overlooked, and almost always result in problems with Customs down the road.

“Assists” are anything of value furnished to a foreign seller free of charge or at reduced cost and used in the production of the imported goods. The value of assists must be added to the invoice value to arrive at the total Customs dutiable value of imported merchandise. Common assists consist of tooling, machinery and equipment, components, and engineering and R&D, where such engineering and R&D is undertaken outside the U.S. Customs initiates a large number of penalty cases each year for failure to declare assists.

Customs closely scrutinizes transactions between related parties (5% or more of voting stock) and examines the circumstances of sale to satisfy itself that the relationship between the parties did not influence the price paid or payable. It has become increasingly routine for related parties to retroactively adjust prices, often on a yearly basis. In general, Customs requires the tender of additional duties where post-importation price increases occur, but will not refund duties where post-importation price reductions have occurred. An important exception to this general rule exists where post-importation price decreases occur between related parties pursuant to a formula that the importer uses when filing its income tax returns.

Many importers purchase product through “middlemen” such as agents or trading companies. We routinely assist in structuring transactions so that the price from the factory to the middleman is acceptable to Customs as the dutiable value of the imported goods instead of the higher price from the middleman to the importer.

Free Trade Agreements/Trade Preferences – Significant duty savings, but a potential down side. The U.S. has over a dozen free trade agreements with various countries, including Canada, Mexico, Australia, Dominican Republic-Central America, Colombia, Israel, Singapore, and Korea, and currently is negotiating FTAs with the EU and a group of Pacific Rim nations. In addition, the U.S. offers duty free entry to the goods of a number of developing countries under trade preference programs such as the Generalized System of Preferences (GSP). There are more than 100 GSP-eligible countries, including Brazil, Ecuador, Egypt, India, Indonesia, Pakistan, Philippines, Serbia, South Africa, Thailand, and Ukraine. Determining the eligibility of products under these trade preferences and trade agreements can be complicated and is often misunderstood, resulting in erroneous duty free entry claims. Customs has begun more closely monitoring claims made under FTAs and preference programs, so importers entering goods under any of these regimes should satisfy themselves that their products meet all eligibility requirements.

Antidumping and Countervailing Duties – What do you mean the duty rate is 404%? Antidumping duties (“ADD”) are imposed to offset unfairly priced imports that are sold in the foreign market at prices higher than to the U.S. market. Countervailing duties (“CVD”) are imposed to offset subsidies paid by foreign governments for the purpose of promoting exports. Both ADD and CVD can be imposed at the same time, and individually or collectively, ADD and CVD rates can be prohibitively high. Moreover, the scope of ADD/CVD orders often are construed very broadly, thereby covering products that at first glance might not appear to fall within the scope of the orders. For example in the aluminum extrusions case, the order may apply not only to aluminum extrusions, but also to a wide variety of products made from or containing aluminum extrusions.

A good number of importers first become aware that ADD and CVD apply to their products only after the goods have been imported. In some instances, Customs seeks recovery of these duties going back several years, along with sizable penalties.

Global Trade Actions and Safeguards – I hear imports of aluminum, steel and potentially other products from across the globe could be assigned additional duties or quotas. Don’t ADD/CVD cases already target unfairly traded imports? Yes, however the U.S. has other trade remedy actions at its disposal with broader international scope to address situations where country-specific ADD/CVD orders are deemed to be insufficient. One such measure that has been recently dusted off is the Section 232 national security investigation. Where ADD/CVD are found to be too narrow in terms of geography and product coverage, a Section 232 investigation can offer the chance to take action against a broad range of products from a swath of countries if the Department of Commerce and the President agree that the imported products are a threat to national security. In those situations, the President can impose remedies such as tariffs, quotas or tariff-rate quotas to restrict imports.

Another measure with global implications is the Section 201 or “escape clause” because it permits a country to “escape” temporarily from its obligations under the WTO with respect to a particular product if a domestic industry is suffering serious injury substantially caused by rapidly increasing imports. The explicit purpose is to allow the domestic industry time to restructure. Under, Section 201, no one is being accused of breaking laws; rather, the domestic industry argues that a surge in imports is the source of the industry’s crisis. The decision to impose remedies which can be global in scope – is up to the President. The menu of available relief includes the imposition of a higher duty, a tariff-rate quota, a quantitative restriction, trade adjustment assistance to the effected U.S. industry (or any combination of these measures).

Country of Origin Determinations and Country of Origin Marking – Are you telling me we have to put country of origin labels on 10 containers of parts before we can sell them? With few exceptions, every article imported into the United States must be marked with its country of origin. Improperly marked products can be seized and forfeited, denied entry, subjected to liquidated damages equal to the value of the goods, subjected to penalties, or assessed special 10% marking duties. Country of origin marking issues often affect an importer’s entire product line and have the potential to severely delay the timely delivery of goods. The appropriate use of the “Made in U.S.A.” mark, which is governed by the Federal Trade Commission, also is a common issue addressed by Clark Hill lawyers. This area has received a lot of attention lately because of private, third party actions brought against manufacturers for violating state laws governing use of the “Made in U.S.A.” claim. For example, under California law, products may be marked “Made in U.S.A” only if every single component is of U.S. origin.

It is not at all unusual today for a finished product, component, or subassembly to be assembled in one country from components sourced from a number of countries. Determining the country of origin of the finished good is becoming increasingly complex. This process is significant because the country of origin can determine whether the article is fully dutiable or duty free under a free trade agreement or tariff preference program. Country of origin also determines whether a product is subject to antidumping and countervailing duties.

Intellectual Property Rights – Your company may not have had to deal with infringing imports – yet. Importers can record their trademarks, trade names, and copyrights with Customs, and Customs will examine imported merchandise to ensure that it is not infringing. Customs seizes and forfeits large quantities of infringing merchandise each year, and registering marks with Customs delivers a lot of bang for the buck.

Another potent weapon against imports that infringe intellectual property rights is provided by the International Trade Commission (ITC) under Section 337 of the Tariff Act of 1930, as amended. In Section 337 cases, the ITC conducts “fast track” proceedings that examine the validity of U.S. patents, trademarks and copyrights. These cases are concluded in a year, and if successful, result in the issuance of enforceable exclusion orders that bar the importation of infringing foreign products. U.S. Federal district courts are not required to defer to ITC determinations, but often do so. For this reason, a high percentage of parallel Federal district court cases are settled without trial once a favorable ITC determination has been made.

Drawback – Why am I hearing about this only now? Drawback programs permit companies to recover 99% of the duties they paid on imported merchandise under certain circumstances. There are two types of drawback: unused merchandise drawback and manufacturing drawback. Unused merchandise drawback can be used when the imported merchandise is not “used” in the U.S. and is exported within 3 years of importation. The following operations are not considered a “use” and therefore are permissible: testing, cleaning, repackaging, inspecting, refurbishing, repairing, reworking, freezing, blending, cutting, slitting, adjusting, replacing components, unpacking, and disassembling.

Manufacturing drawback is used when the imported materials or components are used in the manufacture of articles that are exported from the United States. Clark Hill’s International Trade lawyers have substantial experience with the complex regulations governing drawback and regularly advise clients regarding the establishment of drawback programs or in contesting denial of drawback.

Special Tariff Provisions – How much did you tell me we can save? Is this something new? The U.S. tariff schedules contain many special tariff provisions that are of substantial benefit to U.S. importers and exporters. For example, one tariff provision permits deducting from dutiable value the cost of fabricated U.S. components that were assembled abroad into the imported article. This tariff provision is widely used by the automotive, wearing apparel, and electronics industries. Another widely-used provision covers articles (U.S. or foreign) sent abroad for repairs or alterations. Upon return to the U.S., duties are assessed only against the value of the repairs or alterations.

Although special tariff provisions are often “fleshed out” by the Customs regulations, in most instances they can be understood only after interpreting Customs rulings on the subject. For example, the term “alterations” means that the article shipped abroad must be fit for its intended use at the time of exportation and “alteration” means that the operations abroad fit it for a different use. Thus, the tariff provision covering articles sent abroad for repair or alteration does not apply where the exported articles are not fit for their intended use and the operations conducted abroad are simply part of the finishing operation that makes the article fit for its intended use. The point is that the language in special tariff provisions often employs terms of art that may not convey the actual parameters and requirements of the provision. Many companies learn this distinction the hard way when they are required to pay duties on the full value of what they thought was an article sent abroad for “alterations.” In appropriate circumstances, special tariff provisions can be used to good effect. However, it is incumbent upon importers to familiarize themselves with the meaning and requirements of these provisions before using them.

Customs Penalties – Customs has assessed a penalty against us of how much? The most common causes of Customs penalties are tariff classification errors, failure to declare assists, failure to declare antidumping and countervailing duties, trademark infringement, improperly claiming duty free entry under trade agreements or special tariff programs, failure to declare payments made to foreign suppliers that are not reflected on the invoice price of the goods, and failure to comply with the requirements of other government agencies, such as FDA, EPA, CPSC, USDA, etc. Customs penalties are among the most severe of any agency. Penalties in the range of 2 to 4 times the loss of revenue (plus repayment of the loss of revenue) are not unusual. Moreover, loss of revenue in these cases often is substantial as the statute of limitations covers merchandise imported over the previous 5 years. Thus, the monetary losses incurred by importers for Customs violations are routinely doubled or tripled. Our attorneys have an excellent track record in minimizing or eliminating importers’ penalty liability. We also routinely assist importers in preparing voluntary disclosures of violations, which usually reduce the penalty assessment to repayment of the loss of revenue plus interest.

Customs Compliance Programs and Customs Audits – Compliance programs pay for themselves. Importers must exercise “reasonable care” in determining the classification, value, and country of origin of imported goods, and must monitor their compliance with all the other laws and regulations governing the imported merchandise. An effective compliance program is essential to meeting the “reasonable care” standard. Clark Hill’s International Trade lawyers have helped numerous clients implement compliance programs that are tailored to their specific needs.

To ensure compliance, Customs conducts regular audits, some of which can last for years. However, where an importer can demonstrate that it has an effective compliance program and that it is following its own internal procedures, the scope of an audit may be greatly reduced to Customs testing a small sample of transactions. If it is satisfied that the procedures are being followed and it discovers no significant violations during the sampling process, Customs routinely concludes the audit in a few months. We regularly guide importers through this complex and sometimes time-consuming process.

Foreign Trade Zones – FTZs help U.S. companies reduce costs of manufacturing and distribution. An FTZ is an area that for Customs duty purposes is treated as being outside the commerce of the United States. Candidates for FTZs include manufacturers who import raw materials and components, as well as distribution companies that import over $50 million per year (can be through multiple facilities).

When a manufacturer admits merchandise into an FTZ, it may elect to pay duty on the imported article based upon its condition at time of admission to the zone or its condition at time of transfer from the zone. This is called the “inverted tariff” and can result in substantial duty savings. Major industries using the FTZ program include but are not limited to:

  • Automobile manufacturing and assembly
  • Petroleum storage, refining, and blending
  • Pharmaceutical manufacturing
  • Aerospace manufacturing and assembly
  • Electronics assembly

For manufacturers and distributors, the weekly Customs entry authorized for FTZ users can result in saving more than $320,000 per year in Customs merchandise processing fees. In addition, Customs duties are deferred until after merchandise is transferred from a zone to the U.S. Moreover, where foreign merchandise is exported or scrapped (e.g., obsolete materials, components, or finished products), no duties are ever paid. See the FTZ benefits estimator for the savings in duties manufacturers can realize from the inverted tariff.

Vessel Manifests and Your Proprietary Data – My company’s confidential import/export data is available to my competitors? Vessel manifests provide a wealth of information about a shipper’s business, including a description of the imported/exported goods, the names of suppliers, consignees, importers, piece count, and weight. Many importers and exporters assume that this information is confidential. However, it is readily available to anyone unless confidentiality is expressly granted by Customs. Of particular concern to importers and exporters is the availability of their shippers’ and consignees’ names and addresses and a description of the goods. For a few hundred dollars, your competitors can discover your sources of supply and customers. We assist importers and exporters in filing confidentiality requests with Customs and monitoring the manifest reports to make sure that Customs continues to suppress this confidential information.

Hazardous Materials – I know fireworks are dangerous, but what does this have to do with trade? If your company ships hazardous materials (a/k/a “HAZMAT”), a single mistake could cause your business to incur hundreds of thousands of dollars in penalties. HAZMAT is a substance or material which has been determined by the U.S. Department of Transportation (DOT) to be capable of posing an unreasonable risk to health, safety and property when transported in commerce. HAZMAT can include medicines, chemicals, household cleaners, fuel, and batteries to radioactive, toxic, and explosive materials. Fireworks are a class of explosive pyrotechnic articles. Prior to transportation into and within the United States, all explosives, including fireworks, must be classed and approved by the DOT. Federal HAZMAT transportation law authorizes the DOT to issue classification documents—EX Approvals—in accordance with the HAZMAT regulations. These EX Approvals are also used for international shipments. Approval holders also must comply with the rules set forth by the U.S. Coast Guard; U.S. Customs and Border Protection; Bureau of Alcohol, Tobacco, Firearms and Explosives; as well as the Consumer Product Safety Commission.

EXPORTS

Exports Subject to Control and the Agencies Involved – Everything exported from the U.S. and some things that aren’t are subject to export controls. All U.S. items, which include commodities, software, and technology, are subject to control when exported from the United States, and may remain subject to U.S. controls when exported to a third country. The level of control depends on the nature of the item, its destination, the end-user, and the end-use. Most U.S. export controls are administered by two agencies, the Commerce Department’s Bureau of Industry and Security (BIS) and the State Department’s Directorate of Defense Trade Controls (DDTC). BIS, under the Export Administration Regulations, regulates exports of commercial items with potential military applications (“dual-use” items). DDTC under the International Traffic in Arms Regulations (ITAR), regulates exports of items and services specifically designed for military uses.

The third agency involved in export controls is the Treasury Department’s Office of Foreign Assets Control (OFAC), which administers and enforces economic and trade sanctions against targeted countries and individuals to achieve particular foreign policy and national security goals. The controls may include restrictions or embargoes on imports, exports, investment, foreign transactions, and travel. OFAC maintains a List of Specially Designated Nationals (the “SDN List”), which identifies individuals known to assist target countries, terrorism sponsoring organizations, narcotics traffickers, and arms dealers. Transactions with SDNs are prohibited.

Deemed Exports – How can we be guilty of export violations when we don’t export? Technology can be exported without leaving the country. A “deemed export” occurs when foreign nationals are given access to technology in the United States. Depending on the nationality of the foreign national and the nature of the technology, a license may be required before the foreign national can access the item. This issue typically arises when foreign nationals employed in the U.S. have access to controlled items.  This also may raise immigration issues because certain types of visas require the employer to certify whether the controlled technology will be released to the employee as part of his or her job.

Encryption Items – Not just for highly sophisticated goods. Items that have the capability to encrypt or decrypt data are subject to specific export controls. There is a common misconception in the trade community that only highly sophisticated encryption items are subject to export controls. This is not the case as items such as WIFI routers and set-top cable TV boxes are covered by encryption controls.

Export Control Reform – Is there anything I should be doing differently? In 2013, BIS and DDTC implemented the first stage of the President’s Export Control Reform (ECR) Initiative. ECR is an ambitious project that will result in the removal of many items from the U.S. Munitions List. These items will then become controlled by BIS. The items covered by ECR are generally those that may be specifically designed for a military application such as a Humvee axle, but do not warrant control as a defense article. ECR requires companies involved in the defense trade to reconfigure their processes to comply with BIS controls.

Tom O’Donnell is a member of Clark Hill’s International Trade Practice Group and concentrates on issues arising from the movement of goods between countries.  He regularly deals with U.S. Customs and Border Protection, the Commerce Department, State Department, and other agencies that regulate U.S. imports and exports.   ;  312-985-5570.

Lara Austrins is a senior attorney in Clark Hill’s International Trade Practice Group in the firm’s Chicago Office.  She advises clients on all aspects of international trade regulation, including Customs, international trade agreements, preference programs, and export controls.  ; 312-985-5571.

Customs, by golly, offering support on both sides of the Northern Border

By Debbie Dent
Director
Border Connect, Inc.

 

AMPS / ACI Update

On June 1 2017, the Canada Border Services Agency (CBSA) implemented a 90-day evaluation period, allowing drivers in the highway mode who arrive without Advance Commercial Information (ACI) compliance to turn around and return to the U.S. in order to avoid penalty action.

The CBSA is extending that evaluation period and will continue to allow highway carriers to return to the U.S. to avoid ACI penalties until midnight of Dec. 31, 2017.

This is welcomed news to the carrier community!

Customs Trade Partnership Against Terrorism (C-TPAT) Update

As some of you may know Detroit was the host of the C-TPAT 2017 Conference this past Aug. 29-31, 2017.

Changes are coming including a new logo trademarked by CBP!

Two full days of workshops were offered to attendees and those workshops should be uploaded and available to all C-TPAT partners through document library within a few short weeks.

Some highlights included Best Practices Framework – Does your C-TPAT program include the following?

  • Senior Management Support
  • Innovative Business Process/Technology
  • Documented Process (that is regularly uploaded to your partner document exchange)
  • Checks, Balances, Accountability and Testing
  • Evidence of Implementation

Self-assessment and supporting evidence of implementation is the key to continued success in meeting your commitment to this program, experiencing a successful validation and most importantly avoiding a potential breach of security.

“The only thing consistent in this global world of ours is change!”

Debbie Dent, can be reached at 1-800-596-5176 or by e-mail

 

As an instructor, how important is it to be engaging in the classroom, and what kind of difference does this make to the students’ learning experience?

John Frantz 
Bureau of Dangerous Goods, LTD.

Let’s be honest. The majority of students would find a trip to the dentist for a root canal procedure preferable to having to sit through multiple days of hazmat training. The U.S. and international regulations are, by their nature, dry, exceedingly wordy, and chock full of dreaded “legalese” that can be confusing at times, especially for first time students.

During my introductions at the start of a class I usually ask the question: “How many of you volunteered to have hazardous materials duties?”  Almost no one ever raises their hand. Then I ask: “How many of you were “voluntold” to have hazardous materials duties?”  Just about every person will smile and raise their hands.  I think most of us, including myself, fall into the latter category.

So, how do we as instructors, combat this quite normal and common apprehension/aversion to training?

For me, the smiles in reaction to the “voluntold” question are my first visual key that I have begun the process of engaging the student. The importance of engaging the student cannot be overstated. Without it, we are just standing up there regurgitating information. Think of Ben Stein in the movie Ferris Bueller’s Day Off, standing in front of the class and speaking in monotone (anyone…anyone?) while his students all look like they are being tortured to death by boredom. 

Hazmat employees all have an enormous and important responsibility for ensuring the safe transport of hazardous materials. As instructors, it’s our job to ensure that students leave our training classes with the knowledge to do so. If we “Ben Stein” them, then that won’t be the case. 

A great first objective in class is to get the students to relax and feel comfortable. This is important to me as I encourage students to ask questions (no such thing as a stupid question in hazmat class) and share experiences and challenges that they face in their jobs with their fellow classmates.  I’ll have the students introduce themselves and give a bit of information on their companies and their responsibilities. It presents a good opportunity for everyone to get to know each other and often presents them with good networking possibilities. The class introductions can eat up some valuable class time, but in the end that time is well-spent in the interest of getting students comfortable and keeping them engaged.  This also helps the instructor to know what types of hazardous materials the students are dealing with so that they can be incorporated into the class. Anything that makes the training relatable to the student is a win for both the student and the instructor.

Simplifying the regulations whenever possible helps immensely as well. I often jokingly tell my students that my official job title is “Plain English Translator of Regulations”.  Just take a look at the definition of the word “Person” in 49 CFR 171.8 for an example of the need for this.  It’s painful…

Student boredom is the enemy of every instructor. The lecturing, PowerPoint reading, monotone speaking “Sage on the Stage” approach wears thin after about an hour. On the flip side, the trainer who makes excruciating efforts to be entertaining while skimping on actual class content is doing nobody any favors either. 

Using class exercises and the occasional game to break up and review the regulatory lecturing is very helpful.  As an instructor, you get pretty adept at reading body language. After lunch, around 2:30 or 3:00 pm (when students start yawning or looking at their phones or watches) is an especially good time to switch gears. At this point I like to use a game or even brief conversations of non-hazmat related topics, all of which can help in keeping the student engaged (and not to mention, awake).

Our students have a great responsibility to perform their hazmat duties in a compliant manner. As trainers, our primary goal is to maintain an environment that keeps them engaged and involved, and to provide them with competence and confidence in navigating the challenging regulatory turf. 

John became an instructor in 2008. John specializes in training shippers, managers, forwarders, consolidators and airline acceptance staff in the laws governing the transportation of Dangerous Goods for ground (49 CFR), air (IATA) and vessel (IMDG). In 2013, John became an IATA accredited instructor graduating with distinction at IATA’s Professional Skills for DGR Instructors Course. In addition to general hazardous materials courses, John also conducts specialized seminars on the shipment of lithium batteries as well as infectious substances as regulated by DOT, IATA and IMDG. John can be reached at 1.844.532.7634 or via email 

 

Customs And Border Protection “New” Programs Development

By Carl Soller
Soller Law Intl

Having practiced law in the Customs and Trade arena since the late 1970s, I have developed a perspective that many younger attorneys and Trade professionals have not yet acquired.  Sad to say, many of the so-called “modern technological advancements” currently in place and being developed can hardly be called developments, in a positive light.

As stated in the August 2016 U.S. Customs and Border Protection (CBP) “Fiscal Year 2016 Report to Congress,” ACE (Automated Commercial Environment), in addition to “strengthening border security” also “facilitates legitimate trade.”  Both the Trade community and longtime CBP officials will offer or concede that ACE, after the “2001” beginning of the “modernization effort” has yet to fulfill its mission.  Delays in the movement of “legitimate freight” and untested security programs are the sources of criticism from Congress and Trade participants.

As I have pointed to in earlier “Legal Corner” and sister publications, the Government Accountability Office (GAO) has regularly reviewed and commented unfavorably on CBP’s attempts to implement programs without proper and efficient testing and vetting.  Sad to say those same criticisms continue.

Private industry representatives also point to the continued lack of oversight of imports needed to prevent intentional “low” value declarations of imports in order to avoid duty payments and related commercial violations. 

Currently, imports valued at $800 or less (Section 321 entries with few exceptions) are released by CBP without the requirement of entry document submission or CBP scrutiny.  Principally used by “express delivery services” the level of abuse is uncharted and probably impossible to quantify, to say nothing about the security concerns and use of express services to import contraband.  Congress is aware of these issues, but seems helpless or not interested in resolving the perceived problems of fraud and intentional under-valuation to avoid payment of duties.

The final and long-awaited completion of ACE is even more perplexing.  CBP clearly has preempted practicality by buying into the fantasy that e-commerce is the solution to “lack” of manpower and proper training.  Conceptually a “one stop shop” enhances trade and is more efficient.  However, the desire to enable all information required to be submitted to and accepted by one Government Agency (CBP), and then distributed electronically to all other Government Agencies with oversight, has not been realized.  ACE remains a “jerry rigged” program still using the ABI/AMS existing elements and paper submissions to collect needed data.

Sadly, the “Memorandum of Understanding” (MOU) required to authorize CBP to collect and distribute needed and required entry information to other Government authorities such as FDA, Fish & Wildlife, EPA, DOT and 40 others have not been executed.  A Freedom of Information Act request for copies of such MOUs has been submitted, but with no response.  It was submitted in February 2016.  (Please contact Quick Caller if you want a copy of the request.)     

Moving on, what about commercial efficiency?  The implementation by CBP of the Centers of Excellence and Expertise (CEE) has created chaos.  The implementation was intended to create teams of experienced experts based on commodity descriptions.  Although in CBP’s words, the process is continuing, it certainly has created mass confusion.    

Recently, a client received a detention notice, not identifying the CBP issuing person or Team.  After contacting all in the CBP chain of command, it was established that no CBP official had “ownership” of the matter.  The CEE involved was centered in Buffalo, but no one there knew who, at the Port of Entry of the goods, was aware of the person / persons in charge.  Also, the Acting Port Director of the Port of Entry stated that the CBP “Manifest System” did not provide guidance.

Another issue arose with the ACE “protest module.”  A protest of a CBP decision was submitted and filing acknowledged by ACE.  It had substantial attachments.  When CBP “Protest” Officials were contacted, and copies of the protest and attachments were requested, we were informed that there is no methodology to make copies of the protest or to send the submission electronically to the Protest filer.  Since that document is required, if instituting an action in the Court of International Trade, CBP’s inability to retrieve duplicate copies of the submission would not be treated kindly by the Judges of that Court.

We could continue with unfavorable analyses ad nauseum, but I believe the picture painted is more than adequate to inform all that your comments are needed.     

Fortunately, on CBP’s Commissioner’s staff, a person is designated to deal with these concerns.  Valerie Neuhart ( – (202-344-1440) is the Acting Trade Relations designee.  I’m certain your concerns will be heard if you communicate your thoughts appropriately.

Carl R. Soller (Soller Law Intl) represents clients here and abroad in areas relating to international cargo transportation and the import/export, sale and purchase of consumer and manufactured products from art and antiquities through zebras and zithers. He has advised all segments of the international transportation industry relating to TSA, CBP, FDA and numerous other Government Agencies’ compliance requirements both in “National Security” issues as well as purely commercial activities.  Carl continues to be recognized in “Super Lawyers” as a “Top Rated” International Lawyer. As a participant with Government Representatives and other industry experts, Carl was instrumental in developing concepts for insuring the security of our supply chain and continues to advance “credible solutions” to the often deficient regulatory schemes.

Carl Soller can be reached at: (516) 812-6650 – (212) 643-6650 –   – JFK International Airport Office: 2016 Linden Blvd. Suite 18 Elmont, NY 11003