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Shipping Act Violations: FMC Informal Small Claims

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Part of the Federal Maritime Commission’s (FMC) job is to regulate international ocean transportation as it relates to U.S. exporters, importers and consumers.  One way the FMC fulfills its mission is by protecting the trading community from financial harm through dispute resolution and proceedings.  The FMC can hear disputes that arise under the Shipping Act of 1984 as amended by the Ocean Shipping Reform Act of 1998, which governs international ocean shipment of goods, codified at 46 U.S.C. § 40101-41309.  So what does this mean for you, the importer, exporter, or consumer?

 

You may have found yourself in the situation where, as a shipper, you cannot determine the location of your cargo, or your cargo was lost or damaged and you are having problems processing your claims.  You may have economic problems with an NVOCC that is defaulting, or you might not be able to agree with a carrier on a service contract.  As a freight forwarder, you may have difficulty collecting compensation from a carrier, or you may have issues with a carrier objecting to your document preparation.  If any of these issues involves a claim of less than $50,000.00, then FMC small claims proceedings are one of the ways you can go about resolving your problem.[1]

 

The FMC provides a standard format for preparing a small claim, whether prepared by an attorney or on your own, and it must include the following[2]:

 

  • a statement of which section of the Shipping Act you believe has been violated (46 U.S.C. Ch. 411)
  • a dated, signed, sworn, and notarized statement that the information contained in the claim is true and correct

 

In addition to those requirements, you would generally set out the facts of your case briefly and succinctly then send to the FMC the original claim along with two copies of the claim and any documentation you have that supports your claim.  Keep in mind that your claim must be filed within three years from the date of the violation.  As of this publication, the filing fee for a small claim complaint is $67.00[3].

 

Once you have filed your claim, the FMC will allow the person or company against whom you are complaining (the respondent) 25 days to object to the informal small claims procedure.  If the respondent objects, then the claim would go through the formal process in front of an Administrative law judge as required under Subpart T of the FMC rules.  If there is no objection, an FMC Settlement Officer appointed by the FMC’s Alternative Dispute Resolution Specialist will decide the issue on behalf of the parties.[4] 46 C.F.R. §502.304 The Settlement Officer will issue a decision that is final after a 30 day period as long as no individual Commissioner decides to review the decision and neither of the parties involved asks for reconsideration.

 

Going through the informal procedure can be faster and less onerous than more formal proceedings, and may be a good option for you if you find yourself harmed by someone’s violation of the Shipping Act.  For more information on small claims and other proceedings before the FMC, please contact us by phone at (800) 583-0250 or (850) 893-0670; by fax at (850) 391-4228; by mail at 1911 Capital Circle N.E., Tallahassee, FL 32308; or by email at smorrison@customscourt.com or nmooney@customscourt.com.  You may also find more information by visiting the FMC website at www.fmc.gov.

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TRADE POLICY: OBAMA vs ROMNEY

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International trade is vital to our economy, so much of the debate in the upcoming Presidential election has surrounded the candidates’ foreign trade policies. President Barack Obama (D) and his challenger, Governor Mitt Romney (R), have each publicly stated support for free trade; however their trade philosophies are very different.

 

President Obama introduced the National Export Initiative (“NEI”) in 2010 and stated his goal of doubling exports over the following five years.[1]The U.S. is currently on track to not only reach, but also to exceed this goal with a current annual increase in exports of 16%.[2] Although President Obama has not opened any new trade negotiations, he has worked with Congress to pass three free trade agreements that were previously languishing:  Panama, South Korea, and Colombia.[3]  The Obama administration has also participated in negotiating a trade pact with Pacific nations known as the Trans-Pacific Partnership (TPP).[4]  Although he acknowledges and supports the necessity of international free trade, President Obama still endorses the need for Americans to “Buy American”.[5]

 

Governor Mitt Romney has been thorough in outlining his foreign trade policies, a main objective of which is to create a “Reagan Economic Zone”, similar to that which President Reagan attempted during his presidency.[6]  Gov. Romney anticipates that the Zone would standardize practices and create a network of “like-minded” nations that are committed to free enterprise and open markets.[7]    According to Romney, “for every $1 billion in U.S. exports, another 5,000 jobs are created in the U.S.”.[8]  Thus, continued pursuit of current and new trade agreements will help stimulate the economy.

 

China is a hot topic for trade, and it is one of the key points for both Romney and Obama’s campaigns.  Among Romney’s objectives is the decision to take Chinese businesses to court and litigate against unfair trade practices, as well as declaring China a “currency manipulator”.[9]  In contrast to Gov. Romney’s stance, President Obama has never openly reprimanded China for manipulating its currency to fit its needs; however, the President’s administration has litigated unfair trade cases against China.[10]

 

The purpose of this blog post is solely to help inform our readers and not as a means of endorsing either candidate.  We hope that all our readers will be better informed to make the decision on November  6, 2012 that best fits their values and beliefs.

 

For more information on the 2012 Presidential Candidates please visit the links referenced in this post or the nominees’ websites directly at http://www.barackobama.com/ and http://www.mittromney.com/. For more information on the 2012 Presidential Election, how and when to vote visit http://www.presidentialelection.com/.

[1] U.S. Dept of Commerce, International Trade Administration: National Export Initiative http://trade.gov/nei/nei-introduction-state-of-the-union-012710.asp

[4] Executive Office of the President, Office of the U.S. Trade Representative: The U.S. in the Trans-Pacific Partnership http://www.ustr.gov/about-us/press-office/fact-sheets/2011/november/united-states-trans-pacific-partnership

[5] Business without Borders: Trade Off, Obama vs Romney on the politics of foreign trade http://www.businesswithoutborders.com/industries/importexport/trade-off/

[6] Mitt Romney’s Campaign Website: Issues, China & East Asia http://www.mittromney.com/issues/china-east-asia

[7] Id.

[8] Business without Borders: Trade Off, Obama vs Romney on the politics of foreign trade http://www.businesswithoutborders.com/industries/importexport/trade-off/

[10] Business without Borders: Trade Off, Obama vs Romney on the politics of foreign trade http://www.businesswithoutborders.com/industries/importexport/trade-off/

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The OSCARs: Creating Greater Efficiency in Transpacific Agricultural Shipping

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The United States Department of Agriculture has teamed up with members of the Westbound Transpacific Stabilization Agreement[1] to enhance shipping and exports in the agricultural market by creating weekly projected equipment and container availability reports designed to increase efficiency and transparency of containers flows.

Current carriers including data for the initiative are APL, COSCO, Evergreen, Hanjin Shipping, Hapag Lloyd, Yang Ming Transportation Corporation, OOCL, NYK Line, K Line, and Hyundai Merchant Marine.[2]  The data is compiled each week to offer from information provided by these carriers from each of 18 intermodal locations regarding estimated container availability and supplies and is “based on up-to date bookings or reservation information in the westbound transpacific trade lane.”[3]

Weekly data on container availability as well as overview data for up to 6 prior months is available from these lines in the following 18 locations:

  • Charleston, SC
  • Chicago, IL
  • Cincinnati, OH
  • Columbus, OH
  • Dallas, TX
  • Denver, CO
  • Houston, TX
  • Kansas City, MO
  • Los Angeles and Long Beach, CA
  • Memphis, TN
  • Minneapolis, MN
  • New Orleans, LA
  • New York, NY
  • Norfolk, VA
  • Oakland, CA
  • Savannah, GA
  • Seattle and Tacoma, WA

Shippers can find the weekly reports, which also container more information on the initiative and how to read the reports, by visiting http://www.ams.usda.gov/AMSv1.0/ATContainerReport.

The Federal Maritime has also weighed in on the new initiative, applauding the efforts of the USDA and the WTSA and urging full shipper participation.  More information here:  http://www.fmc.gov/chairman_lidinsky_applauds_new_usda_container_availability_report_and_urges_full_shipper_participation/.

[1] The “Westbound Transpacific Stabilization Agreement (WTSA) is a research and discussion forum of container shipping lines operating in the trade lane from the U.S. to Asia.”  http://www.wtsacarriers.org/home_nf.html

[3] Id.

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Rail and Ocean Carriers: Transition to the ACE e-Manifest

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Customs recently published an important reminder for all rail and sea carriers regarding the impending transition from the Automated Manifest System (AMS) to the Automated Commercial Environment (ACE) e-Manifest system.  As you’re probably aware, ACE is the gradual consolidation and automation of Customs’ current border processing systems, which is being implemented through the constantly-improving ACE Secure Data Portal.  In August of last year, Customs updated the e-Manifest system, previously used only for the processing of truck cargo, to be an alternative to the AMS for rail and sea carriers as well.  The latest planned shift, scheduled to occur on September 29, 2012, marks yet another step towards consolidation by eradicating the AMS entirely.  So if your company hasn’t yet started to transition to the new e-Manifest system, it is advisable that you heed the advice contained within this Customs bulletin (reproduced below) and contact your software provider as soon as possible.[1]

——————————————–

“Are you ready for ACE e-Manifest: Rail and Sea (M1)?

The 60 day countdown has begun!

 In less than 60 days, effective September 29, 2012, ACE will be the only approved EDI for transmitting required advance rail and sea cargo information and ABI in-bond transactions to CBP.

As of July 31, 2012, 96% of ocean carriers and 83% of ABI software developers impacted by the transition to M1 have either completed or are in the onboarding process. All rail carriers are either in production or currently testing.

** If you are part of the 4% of the ocean carriers or the 17% of the ABI software developers who are NOT yet testing ACE Rail and Sea Manifest, NOW is the time to contact your Client Representative for assistance.**

CBP is finding that many software developers have misinterpreted sections of the Implementation Guidelines that have resulted in programming changes to trade software. If you have not been in touch with your Client Representative to begin certification testing, please do so immediately!

If you submit sea or rail cargo information, file ABI in-bond transactions, or receive broker download information via ABI, you or your software provider must transition to ACE, or your transactions will fail when the current Automated Manifest System (AMS) for rail and sea is decommissioned.

In order to ensure that EDI messages for rail and sea manifest and ABI in-bond transactions do not fail, it is essential that by September 29, 2012:

  1. The required programming changes are completed,
  2. Certification testing is completed in coordination with your Client Rep, AND
  3. The switch to production for ACE e-Manifest: Rail and Sea is made.

For additional information, please refer to the recently-conducted webinar available on CBP.gov at

https://connect.hsin.gov/p67194661/?launcher=false&fcsContent=true&pbMode=normal. 

Further information on ACE e-Manifest: Rail and Sea is available at

http://www.cbp.gov/xp/cgov/trade/automated/modernization/manifest_railsea/.

As of July 29, only 60 days remain to complete all of the steps necessary to make the transition to ACE rail and sea manifest filing.”[2]

 

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Wholesalers To Colombia Beware: Your Business Could Be Part Of An International Money-Laundering Scheme

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The Black Market Peso Exchange (BMPE) is a long lived and widely used method for converting Colombian pesos into US dollars and vice versa.  Boasting the ability to exchange money at a much lower rate, the BMPE evolved from the black market exchange that existed in Colombia for decades and was used by legitimate businessmen and drug dealers alike for the singular purpose of saving money.  The BMPE is now one of the most sophisticated (and common) money laundering schemes employed by the cartels in the Colombian drug trade.  Raymond Kelly, former Commissioner of the US Customs Service calls it the “ultimate nexus between crime and commerce, using global trade to mask global money laundering.”

 

Here is a brief outline of how it works (though there are multiple variations of this basic model):

 

  1. Colombian traffickers or their US counterparts contact a ‘Black Market Peso Broker’ (money brokers who purchase US dollars that are derived from street drug sales) to negotiate an exchange rate.  The rate is often approximately 40% less than the official rate.

 

  1. Once the rate is agreed upon, the drug dealers deliver the cash to the Broker’s US office or some other agreed upon location for the exchange.  At this point, all risk for movement of the money from the US to Colombia falls onto the Broker.  Should anything go wrong, e.g. the money is seized, the drug dealers and traffickers look to the Broker for repayment.

 

  1. The Broker then processes the cash by employing runners to deposit the cash into US banks throughout the nation in increments of less than $10,000.00 to avoid the bank’s reporting requirements under the US Currency and Foreign Transactions Reporting Act, 31 U.S.C. §5311-5355.

 

  1. Simultaneously, the Broker’s Colombian office exchanges pesos (also at a lower rate than the official rate) with legitimate Colombian businesses who are looking for cheaper US dollars, which will enable them to do more business with legitimate US exporters.

 

  1.  Once the legitimate Colombian businesses give the Broker their pesos, the Broker then pays the business’s debts in the US via wire transfer or direct deposit, allowing for the facilitation of legitimate international trade.  The pesos in turn go back to the drug dealers and traffickers to spend in Colombia.

Part of what makes this scheme so attractive to the drug cartels is that the transactions in step (5) above appear like ordinary international trade transactions so the authorities are far less likely to investigate them (if at all), even though the payments are made by unrelated third parties.  As a result, many U.S. businesses (large and small)[1] are completely unaware that they actually have a role in the illicit drug trade.

 

Unfortunately, it seems very difficult for U.S. enforcement officials to sympathize with the businesses involved. In a classic case of the public and private sectors failing to understand each other, the United States cannot see how businesses could possibly participate in such a system unwittingly.  In many cases where this scheme is uncovered, entire U.S. bank accounts are seized and forfeited based on the assertion that the owners must have been aware that the money was dirty.  In some cases money is seized before it is even proven to be of illicit origins!

 

Here are two warning signs that your business may be inadvertently participating in this sophisticated money-laundering scheme:

  • You ship goods to Colombian clients, but the goods are paid for by a separate entity in a different country
  • You receive payment in multiple small amounts
  • You receive payment through third party checks
  • You receive this payment in lump-sum wire transfers, with the balance to be credited towards future purchases

 

Although there is every possibility that a buyer with the above warning signs may be perfectly legitimate, it may not be worth the risk that their money isn’t as legitimate.  Your hard-earned money could be seized and you don’t want that, because once the United States has seized your assets, it’s a long, hard road to getting them back, if you ever do.

[1] Hewlett Packard, Ford, Sony, General Motors, Whirlpool, General Electric are all entities that have been inadvertently involved in the BMPE and have taken steps to correct their involvement.

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Behind the Scenes: CBP Fines, Penalties, and Forfeitures Processes

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Yesterday, the American Bar Association’s Section of International Law hosted a program for its members to hear from and speak directly with CBP Office of Regulations and Rulings, represented by Chief of the Penalties Branch, John Connors.  Mr. Connors told the group in attendance (live and via phone conference) that while he is not authorized to discuss recent or pending cases, he would be discussing the general process within CBP when it is either contemplating or has issued a penalty or seizure notice.

Mr. Connors first explained that many people are confused as to which CBP offices have authority in different cases, and that there are also 3 headquarter branches that deal with penalties either after review by the Fines, Penalties, and Forfeiture Officers in the field at the 300+ ports or concurrent with such review in certain cases dealing with penalties over $100,000.00.  If a case is deemed referred to “Headquarters” it could be with 1)the Office of Field Operations, 2) the Office of International Trade (commercial enforcement), or 3) the Office of Regulations and Rulings.  Thus, there is a need to clarify exactly which office your case is being assessed.

Backing up to the beginning of the process:  First, when goods are being imported or exported, field officers at each port will make initial determinations of whether there are any issues with the goods in question or with the process of importing and exporting the goods.  For example, CBP Officers will look to see if there are any issues with the vessel’s manifest, trademark or copyright infringement, drawback penalties, misclassification of goods, etc.  If there are issues, the field officers will report it to a Fines, Penalties, and Forfeitures Officer (“FPFO”) at their respective ports.  There are currently 42 FPFOs that deal with penalty actions.  These officers then determine whether there is a need to issue a penalty or pre-penalty notice or to simply cancel the case without further inquiry.  Mr. Connors reported that cancellation at this stage is extremely rare.

Pre-penalty notices are required to be issued for the following:

Commercial fraud and negligence (19 USC 1592)

Drawback penalties (19 USC 1593a)

Customs Broker penalties (19 USC 1641)

Recordkeeping penalties (19 USC 1509)

Falsity of lack of manifest (19 USC 1584(a)(1))

Equipment and vessel repairs (19 USC 1466).[1]

Once the pre-penalty or penalty notice is issued (depending on the statute), the interested party to whom the notice is issued then has a specified number of days in which to submit a petition requesting relief or to simply pay whatever penalty is assessed.  The relief petition should be sent to the FPFO from whom it was originally issued.  A general rule is that if the penalty is issued for $100,000.00 or less, the initial review of the petition stays with the FPFO who would then respond based on a review of the newly presented facts and arguments within the petition.  If the penalty is issued for greater than $100,000.00 the FPFO would review it then send it directly on to the Chief, Penalties Branch, Office of Regulations and Rulings (ORR), that is, Mr. Cooper.

If the initial relief petition is denied and if there are any further facts or arguments that would potentially mitigate the issue that were not originally presented, then the interested party may submit a supplemental petition.  The FPFO (or ORR depending on the amount of penalty) will review again and decide whether to relieve the interested party or send the petition to either the Office of Field Operations or the Office of International Trade for further review.

If the penalty is already with ORR, Mr. Connors, will funnel the case out to one of the 18 attorneys working in his office for findings of fact and conclusions of law, which are then sent back to the FPFO for relay to the interested party.  Supplemental petitions are processed in the same manner as those with FPFO, i.e. they start with FPFO for initial review and further fact finding prior to being sent to ORR.  If a supplemental petition is denied, the case then proceeds to Border Security for final review and disposition.  Border Security takes into consideration the recommendations and comments of ORR, but ultimately makes the decision of whether to uphold the denial.

Mr. Connors also discussed the nature of timing when dealing with penalties and told attendees at the luncheon that when the process seems slow, it is because there are many parts that ultimately come together in making a final decision:  FPFO investigations at the outset and further investigations as necessary; hundreds of thousands of cases requiring processing; interested parties asking for extensions; etc.  Therefore, while the process can seem long and arduous, Mr. Connors assured his audience that CBP does what it can to speed things along even in light of the realities of running what amounts to a very, very large company.

The information in this article is meant as a review of Mr. Connors’s discussion of the penalty process and not as an exhaustive review of all that occurs or can occur with respect to CBP issued fines, penalties, and forfeitures.  If you find yourself in the situation of having received a detention notice, a pre-penalty or penalty notice, a seizure notice, or other type of CBP action, we can help you through the process and work towards release of your seized items or mitigation of your potential penalties.  With over 30 collective years of expertise in the field of international trade and customs, the attorneys at the Mooney Law Firm have seen hundreds of cases through this process and are well-equipped to present your best case to Customs in recovering your seized goods or in mitigating or removing your penalties.  Please do not hesitate to contact us (via email at nmooney@customscourt.com or smorrison@customscourt.com or by phone at 800-583-0250) with your issue or with questions regarding this and other processes dealing with international trade and customs.

For more information, either contact us or visit http://www.cbp.gov/xp/cgov/trade/priority_trade/penalties/.

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Customs and Border Protection Meets the 21st Century: Highlighting U.S. Initiatives to Modernize International Trade at Our Borders

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U.S. Customs and Border Protection has been in the process of transforming and modernizing its trade initiatives for the 21st century with stated goals of seeking “to improve cargo security while increasing trade competitiveness” by means of “fully aggregating risk management.”[1]  This goal seems vague, but essentially, CBP is making efforts to consolidate trade processing at our borders.  Some of its efforts include implementing the Automated Customs Environment, where master trade data for importer accounts will be stored and accessed across accounts; Customs-Trade Partnership Against Terrorism (C-TPAT); Centers of Excellence and Expertise; Importer Self-Assessment (“ISA”), among other programs.  CBP has provided a vast amount of information on its trade transformation initiatives on its website at http://www.cbp.gov/xp/cgov/trade/trade_transformation/, but the following will give some insight into some of the most recent developments currently underway at our borders:

Automated Customs Environment (“ACE”) and Simplified Entry

Almost eleven years ago, CBP established ACE as an on-line tool to modernize, automate, streamline, and consolidate commercial trade processes connected with border security.[2]  As ACE continues to expand, much like any government program tends to do, the trade community will hopefully see positive benefits from CBP’s consolidation efforts.

The most recent development in CBP’s rollout of the ACE system is its “Simplified Entry” program, which segregates filing of transportation information from that of entry information.  This program allows entry documents to be filed earlier, and the documents require much less data than the current requirements.[3]  Only 3 ports and 9 companies were chosen by CBP to participate in the pilot program; however, CBP announced last week that the pilot program has been a success.  CBP has stated it will continue to evaluate the current program in the next 60-90 days[4]; then it will inform the trade community of the program’s expansion via notice in the federal register[5].

Expanded Role of the Broker

 

Another discussion of change currently taking place in the trade community surrounds likely expansion of the role of Customs brokers. CBP is presenting webinars throughout this summer (June through September 2012) outlining some of the issues and suggested modifications to the broker regulations in an effort to inform as many members of the trade community as possible of the potential future of the role of Customs brokers.  CBP is also meeting with local and regional broker associations in hopes of learning more about the actual issues that should be addressed with regard to expanding the role of brokers.  The webinars cover topics such as the rewrite of the broker regulations (19 C.F.R. part 111); establishing “bona fides”; Broker continuing education, applications, licensing, apprenticeships, and permitting; Broker penalties, etc.[6]

CBP has highlighted five (5) major proposals regarding the Role of the Broker:

  1. Expanded Role
    1. Pre-certification of C-TPAT applicants
    2. Pre-application support for ISA applicants
    3. Broker Responsibilities
      1. Requirements for bona fides (Broker to obtain evidence)
      2. Importer POA must be sent directly to Broker
      3. Customs business conducted in U.S. territory
      4. Professionalism
        1. Apprenticeship experience for broker permitting
        2. Continuing education to maintain active license
        3. Modernization
          1. Automatic annual reporting (replacing the triennial)
          2. Employee data upload into ACE
          3. Continuing education reporting
          4. Penalty Regime
            1. Allow for immediate suspension of license pending review of the case with due process
            2. Focus on bad actor’s license rather than filer code remediation[7]

The trade transformation initiatives have been ongoing since 2001 and will continue to grow in the coming years.  As they do, we can only hope that these changes will result in CBP’s meeting the lofty goals it has set for itself and the trade community.

For more information on these and other trade initiatives visit www.cbp.gov.  You can also call our offices to discuss how your business might benefit from these changes and how to take advantage of the new programs.  We are available via phone at (800) 583-0250 or via email at nmooney@customscourt.com or smorrison@customscourt.com.

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CBP Recordkeeping Requirements: UPDATE!

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A long-overdue modification of CBP’s recordkeeping requirements has been announced this week, with an anticipated effective date of January 11, 2013.  Current regulations require that all records are to be kept “within the broker district that covers the Customs port to which they relate,” a requirement which severely complicates the recordkeeping process for many companies. The new regulations will eliminate this requirement, allowing any licensed customs broker “to store records relating to his or her customs transactions at any locations within the customs territory of the United States.” CBP has also included plans, effective on the same date, to provide exemptions from the 120-day requirement for customs brokers not serving as the importer of record to retain certain records in their original format. These exemptions will clear the way for companies to embrace the less burdensome and more environmentally friendly methods of electronic recordkeeping.

These policy changes were proposed by CBP as early as March of 2010, prompting discussion and commentary on the issue. After assessing that the response to the proposed changes was largely positive, and correcting a few minor errors noticed by the commentators, Customs has finally set a date by when the changes will be implemented. The altered language of 19 CFR parts 111 and 163 will read as follows:

PART 111 – CUSTOMS BROKERS
* * * * *
§ 111.23  Retention of records.
(a) Place of retention.  A licensed customs broker may retain records relating to its customs transactions at any location within the customs territory of the United States  in accordance with the provisions of this part and part 163 of this chapter.  Upon request by CBP to examine records, the designated recordkeeping contact identified in the broker’s applicable permit application, in accordance with § 111.19(b)(6) of this chapter, must make all records available to CBP within 30 calendar days, or such longer time as specified by CBP, at the broker district that covers the CBP port to which the records relate.
(b)  Period of retention.  The records described in this section, other than powers of attorney, must be retained for at least 5 years after the date of entry.  Powers of attorney must be retained until revoked, and revoked powers of attorney and letters of revocation must be retained for 5 years after the date of revocation or for 5 years after the date the client ceases to be an “active client” as defined in § 111.29(b)(2)(ii), whichever period is later.  When merchandise is withdrawn from a bonded warehouse, records relating to the withdrawal must be retained for 5 years from the date of withdrawal of the last merchandise withdrawn under the entry.
PART 163 — RECORDKEEPING   
The revisions read as follows:
§ 163.5  Methods for storage of records.
* * * * *
(b) * * *
(2) * * *
(iii)  Except in the case of packing lists (see § 163.4(b)(2)), entry records must be maintained by the importer in their original formats for a period of 120 calendar days from the end of the release or conditional release period, whichever is later, or, if a demand for return to CBP custody has been issued, for a period of 120 calendar days either from the date the goods are redelivered or from the date specified in the demand as the latest redelivery date if redelivery has not taken place.  Customs brokers who are not serving as the importer of record and who maintain separate electronic records are exempted from this requirement.  This exemption does not apply to any document that is required by law to be maintained as a paper record.
* * * * *
(5)  Failure to comply with alternative storage requirements.  If a person listed in § 163.2 uses an alternative storage method for records that is not in compliance with the conditions and requirements of this section, CBP may issue a written notice informing the person of the facts giving rise to the notice and directing that the alternative storage method must be discontinued in 30 calendar days unless the person provides written notice to the issuing CBP office within that time period that explains, to CBP’s satisfaction, how compliance has been achieved.  Failure to timely respond to CBP will result in CBP requiring discontinuance of the alternative storage method until a written statement explaining how compliance has been achieved has been received and accepted by CBP.
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FMC Simplifies Negotiated Rate Arrangements

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The Federal Maritime Commission revised its Negotiated Rate Arrangement (NRA) regulations to reduce recordkeeping requirements.   With immediate effect, the FMC is

a) eliminating the requirement for the shipper’s title and address in their written assent to rates,

b) eliminating the requirement that the bill of lading include a notice that a shipment is moving pursuant to an NRA; and

c) eliminating the requirement that an NVOCC retain all associated records and written communications pertaining to an NRA. List of Subjects in 46 CFR Part 532

 

Accordingly, the Federal Maritime Commission amends 46 CFR Part 532 as follows:

PART 532 – NVOCC NEGOTIATED RATE ARRANGEMENTS

  1. The authority citation for Part 532 continues to read as follows:

AUTHORITY: 46 U.S.C. 40103.

  1. In § 532.5, revise paragraph (b) to read as follows:

§ 532.5 Requirements for NVOCC negotiated rate agreements.

* * * * *

(b) Contain the names of the parties and the names of the representatives agreeing to the NRA;

* * * * *

  1. Revise § 532.6 to read as follows:

§ 532.6 Notices.

An NVOCC wishing to invoke an exemption pursuant to this part must indicate that intention to the Commission and the public by a prominent notice in its rules tariff.

4. Revise § 532.7 to read as follows:

§ 532.7 Recordkeeping and audit.

(a)        An NVOCC invoking an exemption pursuant to this part must maintain original NRAs in an organized, readily accessible or retrievable manner for 5 years from the completion date of performance of the NRA by an NVOCC, in a format easily produced to the Commission.

(b)        NRAs are subject to inspection and reproduction requests under § 515.31(g) of this chapter. An NVOCC shall produce the requested NRAs promptly in response to a Commission request. All records produced must be in English or be accompanied by a certified English translation.

(c)        Failure to keep or timely produce original NRAs will disqualify an NVOCC from the operation of the exemption provided pursuant to this part, regardless of whether it has been invoked by notice as set forth above, and may result in a Commission finding of a violation of 46 U.S.C. 41104(1), 41104(2)(A) or other acts prohibited by the Shipping Act.

* * * * *

For more information on NRA’s you can contact us via email at nmooney@customscourt.com or smorrison@customscourt.com or by phone at (850) 893-0670 or toll free at (800) 583-0250.

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Importer Tips to Avoid Misclassification of Goods

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            When importing goods into the United States the importer of record (the owner, purchaser, or a licensed Customs broker) must file entry documents with Customs at the port of entry.  Among the information contained in the entry documents are the merchandise descriptions and tariff classification information. Many importers rely on their suppliers or Customs brokers to accurately classify their goods, but sometimes the importers don’t supply enough information for Customs brokers to accurately classify.  What’s more, importers are often not aware that it is they, not the Customs broker, who are responsible for any errors or omissions in entry documents.

           When mistakes occur on entry documents, for example, misclassified goods, Customs will require importers to pay any difference in duty and will likely assess fines and penalties. Here are a few measures you can take to help you avoid any errors in misclassifying goods on your entry documents and avoid supplemental duty payments as well as fines and penalties:

  • KNOW YOUR PRODUCT!
    • This is probably one of the most common oversights of importers. If the importer does not know all the details pertaining to their product then those acting on their behalf cannot be expected to know them either.  Importers should obtain photographs of the product where possible, specific details such as whether (for example) an auto part is a bearing or a wheel hub assembly that includes a bearing, the manufacturer (not just the seller), etc.  We have found certain trading companies involved in heavily regulated articles without being aware of mulitple agency jurisdiction at the time of entry, to the importer later dismay.
  • Retain an expert
    • Seek out the help of a licensed Customs’ broker with experience in entering your particular product or an attorney knowledgeable in Custom’s regulations.  This does not mean rely on the expert to tell you about your product. #1 is always to know your product thoroughly yourself.  This way you can provide the expert with a full, complete, and accurate description of it so he or she can then help you with compliance.  An expert can provide you with the correct questions to ask your seller or manufacturer so you ensure either that the product is correctly classified or with proof that you have taken reasonable care in performing due diligence to correctly classify your product.
  • Due Diligence and Reasonable Care
    • Clients often come to us saying they have never been asked for certain information. The fact is that transactions and merchandise may be handled differently at different ports, and Customs may not ask the exact same questions in every situation.  The general information will likely be the same, i.e. documents to prove origin of your product, production documents, transport/sale documents, etc.; however, your particular product may present a unique situation for Customs that may require it to seek alternate or differing information.  Even within the same port, an officer may request information that another officer doesn’t. Always discuss your importations with an expert or a Customs’ import specialist in advance so you know what to expect. 
  •  Informed Compliance
    • This responsibility is shared between CBP and the importer where CBP provides effective communication of its requirements to the trade community and importers are required to conduct their business in compliance with U.S. laws and regulations.   The Tariff schedules are available to the public, as well as many other publications discussing specific products and topics. You can also request an opinion on classification or a binding ruling on classification from Customs.  An import specialist in the port of entry can provide you with more information, as can your retained expert.
    • The following are questions (verbatim) posed by Customs’ in its informed compliance guide “Importing into the United States:  A Guide for Commercial Importers” to assist importers in using reasonable care[1]  to ensure proper merchandise classification:

Questions by Topic:

Merchandise Description & Tariff Classification[2]

Basic Question: Do you know what you ordered, where it was made, and what it is made of?

  1. Have you provided a complete, accurate description of your merchandise to CBP in accordance with 19 U.S.C. 1481? (Also, see 19 CFR 141.87 and 19 CFR 141.89 for special merchandise description requirements.)
  2. Have you provided CBP with the correct tariff classification of your merchandise in accordance with 19 U.S.C. 1484?
  3. Have you obtained a CBP ruling regarding the description of your merchandise or its tariff classification (see 19 CFR Part 177)? If so, have you followed the ruling and apprised appropriate CBP officials of those facts (i.e., of the ruling and your 28 compliance with it)?
  4. Where merchandise description or tariff classification information is not immediately available, have you established a reliable procedure for obtaining it and providing it to CBP?
  5. Have you participated in a CBP classification of your merchandise in order to get it properly described and classified?
  6. Have you consulted the tariff schedules, CBP informed compliance publications, court cases or CBP rulings to help you properly describe and classify the merchandise?
  7. Have you consulted with an expert (e.g., lawyer, customs broker, accountant, customs consultant) to assist in the description and/or classification of the merchandise?
  8. If you are claiming a conditionally free or special tariff classification or provision for your merchandise (e.g., GSP, HTS Item 9802, NAFTA), how have you verified that the merchandise qualifies for such status? Do you have the documentation necessary to support the claim? If making a NAFTA preference claim, do you have a NAFTA certificate of origin in your possession?
  9. Is the nature of your merchandise such that a laboratory analysis or other specialized procedure is advised for proper description and classification?
  10. Have you developed reliable procedures to maintain and produce the required entry documentation and supporting information?

 For more information on correct classification or if you are currently facing an issue with CBP regarding misclassified goods, you can reach us via email at smorrison@customscourt.com or nmooney@customscourt.com or by phone at (850) 893-0670 or toll free at (800) 583-0250.

[1] Reasonable Care is not easily definable since each import transaction has different facts and circumstances.  Visit CBP’s Importing Guide for more in depth information as to how you can ensure you are meeting your responsibility to import using “reasonable care.”

[2] U.S. Customs and Border Protection, “Importing into the United States:  A guide for Commercial Importers”, CBP Publication No. 0000-0504, revised November 2006, http://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf, last accessed May 30, 2012.

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