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

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.




This question was addressed last week in the case of I.T.N. CONSOLIDATORS, INC. versus NORTHERN MARINE UNDERWRITERS LTD. [i]

A cargo loss was made known to the forwarder ITN which promptly notified the insurance company writing its open policy.   ITN subsequently issued a certificate of insurance to the cargo owner binding the insurer to cover the goods.  ITN paid the insurance company the premium called for by its open policy, but the insurance company later refused to honor the claim and attempted to refund the premium.  A lawsuit ensued, and the United States District Court for the Southern District of Florida granted the insurance company relief, stating that it could not be forced to insure a known loss.  ITN appealed, however, and the lower court’s ruling was overturned.

The 11th circuit Court of Appeals said,  “The question raised by the case of insurance coverage in this case rests on whether Northern in fact agreed to insure the lost shipment. That question in turn depends on whether Northern accepted ITN’s premium payment, thereby consummating the contract to insure it. The district court should determine whether Northern in fact accepted ITN’s premium payment such that a contract to insure the lost shipment was formed.”

The higher court suggested that the insurance premium may have been accepted initially by the insurance company to keep ITN’s business.  Although the appellate court agreed that the insurance company could not normally be forced to insure a loss after all parties knew one had occurred, it stated that under this policy it had the option to do so if it chose.  The language allowing binding of coverage after the fact of knowledge of the loss (common in insurance contracts) was discretionary on the insurance company’s part, and having taken the premium was an indication of its intent to cover the known loss according to the appellate court.  It ordered the lower court to reevaluate the claim in the above light and issue its new decision accordingly.   The lower court still can rule for the insurance company, but it must follow the higher court’s reasoning in its new opinion.

Generally, forwarders can cover shipments after a loss occurs if they have no knowledge of it.   Insurance companies, however, like everyone else deposit received funds immediately and apply them later.  They even allow payment by credit card, which is obviously automated. In fairness, they don’t always know what shipments the payments cover, so how can they be held to have “consummated the contract” by receipt of an automated payment?  We wait to see how the lower court resolves the matter.   More on this to come.

[i] No. 10-15152 UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT I.T.N. CONSOLIDATORS, INC., I.T.N. OF MIAMI, INC., Plaintiffs – Appellants, versus NORTHERN MARINE UNDERWRITERS LTD, individually and as agents for Lloyds of London, Watkins Syndicate (WTK/457), Defendant – Appellee.



Sometimes the best intended act can lead to unanticipated results.  In the case of informal docket no.  1916(I)   GUMTREEFABRICS, INC. v. EVER-LOGISTICS INTERNATIONAL FORWARDING LIMITED d/b/a EVEROK INTERNATIONAL FORWARDING CO., LTD, the FMC opened the door to conduct which would ordinarily be prohibited.  In that case an importer claimed that cargo was extortionately withheld from delivery to it by a Chinese NVOCC seeking to collect its agent’s debts on other cargo from the importer.  The NVOCC’s agent in the United States had gone bankrupt, leaving the Chinese and with some unpaid obligations.  According to the complaint, fully aware that Gum Tree had already paid the Chinese company’s bankrupt agent what it owed, the Chinese NVOCC nevertheless extortionately withheld other cargo until Gum Tree paid nearly $20,000 of the bankrupt OTI’s debts.

After paying the Chinese again what it had already paid to the bankrupt agent, Gum Tree filed a complaint with the FMC hoping to collect its duplicate payments from the Chinese OTI’s bond.  The Federal Maritime Commission ruled that it had no jurisdiction over the NVOCC’s conduct because the NVOCC used Canadian ports to first discharge the U.S.-bound cargo. In previous rulings the FMC had said that it could not require untariffed or unbonded OTIs using Mexican or Canadian ports to post bonds and tariffs, or obtain other FMC authority to operate between the United States and foreign nations if they avoided U.S. seaports.  But for the first time the agency said that licensed, bonded and tariffed NVOCC can divert cargo to avoid FMC jurisdiction as well.

Now FMC licensing of NVOCCs and the corresponding bonds and tariffs may, in certain circumstances, be reduced to a charade.  All the NVO has to do is divert the cargo via Mexican or Canadian ports.  It can extort or otherwise abuse U.S. shippers without fear of Mexican or Canadian intervention (since the extortion/abuse will be committed in United States), and it can take comfort in the FMC’s position that it has no authority over the NVOCC in those circumstances.  The harmed shipper/consignee cannot invoke the terms of the OTI’s tariff or bond or seek the agency’s assistance as long as the cargo is diverted.

If this ruling is to stand, OTI’s should be required to provide notice to American shippers and consignees when such cargo will not be arriving or departing by sea from a U.S. port and to advise the implications of that fact.  This would help the cargo owner to affirmatively select an OTI which is operating under FMC jurisdiction and has a tariff to abide with a bond at risk.   It would avoid the Gum Tree situation where a shipper unknowingly placed its trust in an OTI which presented only the facade of FMC jurisdiction.  Such a regulation could also strongly encourage the use of U.S. ports in place of cargo diversion to Mexican or Canadian seaports.


CBP Posts Updated Bond Policies and Procedures

CBP, at the URL below, has posted new guidance concerning customs bond policies and procedures. It notes that the Continuous Transaction Bond program has been centralized at CBP’s Revenue Division in Indianapolis, Indiana.

All continuous and term bond submissions, including continuous ISF bonds, along with requests for terminations and bond riders, must be submitted via email to Details concerning the items that must be included in a complete bond application package are set forth at page four of the policies and procedures document. Questions about bond processing can be submitted to the same email address. All email communications with CBP concerning bonds must be drafted according to the mandatory format prescribed in the policies and procedures document.

Currently, less than 10 percent of bond submissions are rejected by CBP. Notification of an approved bonds is provided by email to the applicant.

The new policies and procedures can be found at:


CBP Now Accepts Online Requests For Confidential Treatment of Manifest Data

Some may not realize that data on inbound cargo declarations, CF 1302, is made public by CBP.  Certain data contained on outbound manifest is also publicly available, such as the name and address of the shipper, general character of the cargo, number of packages and gross weight, name of vessel or carrier, port of exit, port of destination and country of destination.  However, pursuant to 19 C.F.R. Section 103.31, an importer, consignee or exporter may request that data contained in inward manifests be considered confidential, thereby prohibiting dissemination of this information.  An importer or consignee may file a blanket request that information concerning all its shippers be considered confidential.

Until recently, this request, called a “certification” in the Regulations, could only be filed by mail.  However, CBP recently added a form to its website,, whereby a request for confidential treatment may be submitted electronically.

Unlike a request for confidential treatment under the Freedom of Information Act or other administrative procedures, a party filing a certification concerning manifest data need not make a showing that disclosure of the data would harm their competitive position or is otherwise a trade secret.  Certifications are valid for two years from the time that CBP approves the request for confidential treatment.

One need not request confidentiality for entries and AES filings, as data contained therein are already considered confidential by the agency and is not made publicly available.