Tag Archives: Cbp

Understanding General Average

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Import and export traffic in our globalized world generally runs quite smoothly, but occasionally, the very real risks associated with the natural elements at sea or simple human error impact transportation adversely. Severe weather including wind, rain, swells  and lightning storms can create a recipe for disaster for traveling ships. Less violent, but still serious issues can arise when technology fails or a mistake is made by a crewman which puts the ship and cargo in peril.  General Average (GA) is the legal principle in maritime law that permits the ship-owner to voluntarily sacrifice part of the ship or cargo to save the rest or majority of the vessel  and cargo. The term “average” in this case should be understood to mean “loss”. When an event is declared as a General Average, the ocean carrier is fully relieved of the liability of loss; that burden is instead, distributed collectively  to each cargo owner who’s goods were on that ship.

The most common instance of GA is when crews jettison cargo to lighten a threatened ship; other bases for GA claims include stranding, fires and collisions that may occur either in international waters or on the high seas. These partial losses may be small or reflect millions of dollars in damage. An insurance policy with a General Average protection can, in these instances, protect cargo owners from thousands in out of pocket costs for these claims. It is important to note that there is a difference between General Average protection and Particular Average protection which is covered under a marine insurance policy.

To have a valid General Average claim, the sacrifice must be a voluntary, rather than inevitable decision, necessary for common interests, not merely a part of the property involved, and successful. When a GA claim is made, landed cargo will be detained until a cash bond or security deposit is provided prior to release. Until such bond or security is made, ship-owners hold a lien on the cargo (see our recent post about liens by clicking here). If the General Average claim is small, and the cargo is insured, ship-owners may release the cargo under a General Average Guarantee. This guarantee is a simple form that states the insurers agree to pay the ship owner the owed contribution for the General Average, salvage and any other incurred charges. This guarantee form should include the:

  • Ship/ vessel name
  • Date
  • Brief description of goods insured

Note that you may be required to also place an Average Bond along with the Guarantee if the insured amount of the cargo is less than its contributory value. Please click here for more detail

The General Average claim will be assessed by a general average surveyor who is responsible for determining and reporting the official loss amount. This process can take years and the fee for the adjuster is also billed across the cargo owners. Once all the fees have been applied and totaled with the damages, billing is typically split by percentage according to the amount and value you had on the vessel. The ultimate goal of the General Average Principle is to place the carrier who incurred the loss in as close to a financial position as the carriers for whom the sacrifice was made.

For a full breakdown of General Average as well as a look at the York-Antwerp Rules which govern this principle please click here.

If you are facing legal action with regard to a General Average claim or have any further questions, please contact us.

 

Other useful links:

http://www.shapiro.com/resource-center/resources/cargo-insurance-what-is-general-average/

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SOLAS  New Container Weighing Requirements

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Change is on the horizon in the shipping industry, and it is important to make sure you are staying informed. Effective July 1st, 2016, changes adopted by the International Maritime Organization (IMO) regarding verified container weights will become effective. These changes were first introduced at the 2014 Safety of Life at Sea (SOLAS) Convention, but it is now time for implementation. The full text of the applicable SOLAS regulations can be found here

These regulations initially came about as a result of safety issues within the shipping industry. There were problems regarding overweight/underweight containers, misreported freight, poor weight distribution within containers, and more: see “Safety and Shipping Review 2014“. Ideally these changes will help accomplish a reduction in loss of containers from vessels, increased assurance to all parties within the supply chain, and overall improved safety.  These new requirements will apply to all 171 IMO member countries, as well as the three associate members of this organization.

The responsibilities of the shipper (as designated by the bill of lading) under these new regulations are particularly important. The shipper will now be required to verify the gross mass of each container via a signed document; this document must be physically signed (stamps will be unacceptable), and the form must be submitted in time to be used by the master and terminal representatives in the ship’s stowage plan.  The shipper has the option of submitting the container weight via the shipping instructions to the line, or in a specific communication such as a weight certificate. Regardless of submission method, the weight included must be designated as the “verified gross mass” and authorized by the accompanying signature. The shipper is able to determine whether they would prefer to weigh the contents of the container prior to or after loading, but the critical designation is that estimated weights are not permitted. The equipment used to weigh contents must meet national certification requirements, and the party verifying container weight is not permitted to use weight provided by a previous party. Click here for the Implementing Guidelines issued by MSC

The execution of enforcement for this new requirement will be put on the shoulders of the carriers. Essentially, carriers are highly encouraged to refuse to load containers for which a signed weight verification is missing. Refusing to carry these containers will encourage shippers to abide by the new requirements set forth by SOLAS. As July is only a few months away, it is important for shippers to begin proactively planning how they will adjust their processes to abide by these new requirements.

 

If you are in need of additional resources or more information, please visit the following link: http://www.worldshipping.org/industry-issues/safety/faqs.

 

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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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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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When Is C-TPAT Right For You?

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The Customs-Trade Partnership Against Terrorism (C-TPAT) was established to ensure the safety and security of cargo arriving in the United States. Although being C-TPAT certified is not required by any governmental agency, many private companies only partner with C-TPAT compliant businesses. Thus, Third Party Logistics Providers (3PLs) are strongly motivated to obtain certification.

However, in order for a 3PL to be eligible for C-TPAT certification it must meet some minimum requirements. For example, it MUST do all of the following:

1. Be directly involved in the handling and management of the cargo from point of stuffing overseas up to the first U.S. port of arrival. (Entities which only provide domestic services and are not engaged in cross border activities are not eligible.)

2. Manage and execute these particular logistics functions using its own transportation, consolidation and/or warehousing assets and resources.

3. Be licensed and/or bonded by one of the following: the Federal Maritime Commission, the Transportation Security Administration, U.S. Customs and Border Protection, or the Department of Transportation, and

4. Maintain a staffed office within the United States.

And in order to participate in the C-TPAT program a 3PL may NOT:

1. Subcontract any service beyond a second party other than to other CTPAT members (This means that CBP does not allow the practice of “double brokering”, the 3PL may contract with a service provider, but it may not allow that contractor to further subcontract the actual provision of this service to an unknown third party).

2. Be a non asset-based 3PL which only performs duties such as quoting, booking, routing, and auditing (these type of 3PL may possess only desks, computers, and freight industry expertise) without its own warehousing facilities, vehicles, aircraft, or any other transportation assets. These non-asset based entities are excluded from C-TPAT as they are unable to enhance supply chain security throughout the international supply chain.

If your business is not otherwise eligible for C-TPAT certification but desires to obtain it, it might consider obtaining one of the necessary agency licenses. If you have questions on doing so, we are able to help.

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Free Trade Agreement Series: Part 3- Andean Free Trade on a Roller Coaster

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The Andean Trade Promotion and Drug Eradication Act (ATPDEA) was enacted in 2002 by the second Bush administration. This trade preference agreement sought to grant four South American nations preferential treatment when exporting goods into the United States. With the purpose to promote economic development and eradicate drug trafficking, the agreement targeted four Andean countries, Bolivia, Colombia, Ecuador, and Peru. However, by the beginning of this year only two of these nations remained eligible for duty free exemptions. ATPDEA has been revised, eradicated, and reinstated continually since creation, today leaving Colombia and Ecuador as the only two beneficiaries. The several revisions made to ATPDEA have become a source of problems, creating confusion and uncertainty for importers and exporters, and even as we try to explain it Colombia is set to exit once its own separate FTA (Free Trade Agreement) is in place, most likely Dec. 1 2013 if there are no other changes.

ATPDEA expired for all beneficiary on December 21, 2009. The only country that maintained duty-free benefits was Peru, which was covered by the Free Trade Agreement it signed with the United States. One week later, on Dec. 28, 2009, an amendment to 123 Stat. 3484; Pub. L.  111-344, title II, Sec. 201(a), was enacted restoring Colombia until February 2011 and Peru through the end of 2010. Then it changed again!  On January 7, 2011 the termination section of ATPDEA was amended to remove all benefits of ATPDEA from Colombia and Peru. Finally, a retroactive provision allowing Colombia, but not Peru, duty free access was enacted by H.R. 3078, 112th Cong. (2011) which further extended the expiration of the ATPDEA to July 31, 2013, and especially for preferential tariff treatment under the regional fabric provision for imports of qualifying apparel articles from Colombia and Ecuador only through September 30, 2012.

All of this back-and-forth has created reams of unnecessary work for Customs at the ports of entry, for customhouse brokers, and for importers.  It has also created a bonanza for U.S. Customs and Border Protection’s (CBP) CBP’s penalty workers, as brokers and importers struggle to pay the correct duties on time and avoid tripping penalty wires.   Manufacturers are caught both in the penalty world and an uncertain universe of where to produce.  Long-term planning is impaired, if not impossible.   Thanks again, Congress!

With the latest renewal of the ATPDEA, which took place on October 21, 2011, CBP issued a memorandum stating that it will refund duties paid on ATDEAP-eligible merchandise imported or exported between February 14, 2011 and November 4, 2011, the period in which the program last lapsed. The memo also stated that ATPDEA benefits would commence again on November 5, 2011, but only for two countries. Those who are seeking refunds have 180 days to send the required documentation to CBP.   Again, the confusion created by the constant change in the ATPDEA ‘s status has effected exporters and importers tremendously. For example, those companies that enjoyed ATPDEA benefits and used raw materials from Peru will no longer receive these benefits although it was a regular ATPDEA member and has an FTA.

The problem with altering these agreements is that many manufacturers are not aware of the changes made to these programs, causing the manufacturers costs to increase due to the extra duties, causing some companies major losses.  In addition, the tariff itself has an error whereby it tells users, primarily customhouse brokers, to continue entering Peruvian goods duty free when in fact they are dutiable.  We have pointed this out to their association (the NCBFAA) so that the defense is available to any penalized importers or brokers.

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Free Trade Agreement Series: Part 2- Importer Requirements Under NAFTA

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Having originated nearly 20 years ago NAFTA, is a well established free trade agreement that continues to have a significant impact on importers and exporters.  In efforts to open global markets to U.S. businesses, the U.S. government has entered or is planning to enter into fourteen other free trade agreements and promotions.   The most recent agreements include the Colombian FTA, the KORUS (Korea) FTA, and the Panama TPA.

With these new FTAs comes the need to revisit basic principles of NAFTA in order to better understand the rules and regulations these new FTAs will impose on exporters and importers.  Throughout the next few weeks, this series on FTAs will delve not only into NAFTA requirements, but will move on to discuss the implications on free trade that other FTAs have had and will have on the U.S. trade community.

In last week’s entry we discussed the requirements for exporting goods to Mexico or Canada (“NAFTA Countries”).  Importing requirements are similar in some ways, but in order to ensure preferential duty, you should be aware of the significant differences.  In the U.S., the rules governing NAFTA importers are set forth in 19 C.F.R. 181 Subpart C* and 19 U.S.C. Chapter 21.

  • Declaration = A declaration must be made seeking duty free treatment for importing goods into the US. The declaration must include as a prefix the symbols “CA” if your product is from Canada, or “MX” if it is for Mexico.  Generally, this declaration will be based on the Certificate of Origin (this is the same document, CBP form 434, as that referenced in the exporter post last week. http://forms.cbp.gov/pdf/CBP_Form_434.pdf
  • Any errors on the declaration and/or Certificateof origin should be corrected in writing within 30 days of the mistake being discovered, and any change in duty must be paid.
  • Records and Submissions = Importers must maintain all importation documents pertaining to their product, including a copy of the Certificate of Origin, for five years after the entry of the goods.  Such documentation must be provided to the port director upon request (within 4 years of the date on the Certificate) and must include:
  1. CBP Form 434 signed by exporter or exporter’s authorized agent
  2. Be completed in English or have an English translation if prepared in the language of the actual Country of Origin
  • The Certificate and Declaration may be applicable to single or multiple importations occurring within a specific period of time set forth by the exporter or producer but not to exceed 12 months.
  • Acceptance = When the Certificate is accepted by the port director as valid, the acceptance will result in the imported goods being granted preferential treatment.
  • Certificate Not Required When=
    1. The port director is satisfied that the product is NAFTA qualified and waives the Certificate requirement
    2. The importation of the product is non-commercial
    3. The total value of the originating goods does not exceed US$ 2,500.  In this instance; however, your invoice must be included with the following signed and dated statement:

“I hereby certify that the good covered by this shipment qualifies as an originating good for purposes of preferential tariff treatment under the NAFTA.”

  1. The statement must indicate whether the signatory is the producer, exporter, importer, or agent.
  • Failure to comply with regulations may result in the cancelation or denial of preferential treatment for your product.

* http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=707af3099083c027393664c26eeb50ca&rgn=div6&view=text&node=19:2.0.1.1.25.3&idno=19

**http://www.law.cornell.edu/uscode/text/19/chapter-21

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Protecting Your U.S. Trademark Overseas

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In addition to 84 other countries, the United States is a party to the two treaties comprising the Madrid System for international registration of trademarks.  This system provides trademark owners a cost-effective, efficient way to protect their trademarks overseas.  While not all business need to take advantage of the Madrid System, those businesses and individuals seeking to do business or market their products internationally should consider the benefits to protecting their trademark since theft of intellectual property can pose a serious threat to businesses domestic and foreign.

In order to start the process of registering a trademark overseas, the trademark owner, either an individual or a business, must first register with the United States Patent and Trademark Office. The USPTO provides information via its website www.uspto.gov/trademarks to help trademark owners understand the process of obtaining a trademark.  Once a trademark owner receives his trademark, he must understand that it is not up to the USPTO to police the trademark for him.  In other words, it is the responsibility of the trademark holder to find ways of stopping theft of his trademark, otherwise known as “infringement.”

To protect the trademark in the U.S., owners should register their mark with as many entities as possible that have the ability to help protect the trademark.  For example, U.S. Customs and Border Protection has a electronic system that allows owners to record their U.S. trademarks.  This electronic system, known as the Intellectual Property Rights e-Recordation (IPRR), is in place to assist CBP in preventing importation of trademark infringing goods.

The Madrid system for international trademarks is another way trademark owners can protect their rights.  Assuming a trademark owner has registered his trademark with the U.S., the owner may then file an international application via the International Bureau through the Office of origin.  Offices of origin are located within a trademark owner’s country if that country is a party to the Madrid System’s treaties.

An international application via the Madrid System must include the following:

  • A reproduction of the mark with a list of services it covers (classified under the International Classification of Goods and Services)
  • Designate the countries in which protection is sought (these countries must be contracting parties)
    • Designation of a contracting party is made under the treaty which is common to the Contracting Party and the trademark owner’s country (i.e. If the designated country is only a party to the Madrid Agreement and not the Protocol and the trademark owner’s country is a party to both, then the designation is made under the Agreement.)
    • This allows for three kinds of international applications:
      • Governed exclusively by the Agreement
      • Governed exclusively by the Protocol
      • Governed by both
      • Be prepared in one of the three languages of the Madrid System:  English, French, or Spanish
      • Pay the required fees through the Office of origin:
        • Basic fee
        • Complementary fee for each designated Contracting Party for which there is no individual fee
        • Supplementary fee for each class of goods and services beyond the third
        • Include certification by the Office of origin of the date the international application was presented

After the application is made and approved by the International Bureau, each designated Contracting Party may examine the trademark and determine whether it will provide or refuse protection of the mark.  Once protection is approved, the rights protected are the same as if the trademark owner had made individual registrations in each designated Contracting Party.

The international registration is dependent on the registration of the mark in trademark owner’s country or where he submits through an Office of origin.  If the trademark ceases to be in effect in the original country during that 5 year time period, then the international trademark ceases to be in effect as well.  However, after the initial 5 year time period, the international registration becomes independent from the basic registration in the country of origin.

It is very important for a trademark owner to either become very familiar with the requirements of owning a trademark in both the United States and via the Madrid System or hire someone who is very familiar with the requirements because there are many specific dates, timelines, and nuanced requirements in order to both register and maintain a trademark.  While it may seem like a lot of work, it is certainly worth the time, money, and energy to ensure your product or service is trademark protected.  You want to ensure that when consumers associate your trademark with a certain product or service that it is YOUR product or service to which they are making the association.

More information can be found by visiting the U.S. Patent and Trademark Office website at www.uspto.gov and by visiting the World Intellectual Property Organization at www.wipo.int/madrid/en.  You may also contact our firm at smorrison@customscourt.com or nmooney@customscourt.com or by calling (850) 893-0670 to get more information on U.S. or international trademarks.

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