May/June 2008 AFI Newsletter
; and more.
CBP DEVELOPS ONLINE TRADE
VIOLATION REPORTING SYSTEM
U.S. Customs and Border Protection (CBP) developed an online trade violation reporting system where concerned individuals can confidentially report suspected illegal import and export activity. CBP says it will confidentially research the submissions on eAllegations to determine the allegations’ validity and any actions based on its review.
To report a possible violation, the following information must be submitted: the type of trade violation, description of what has occurred, the products or goods involved and the alleged violator’s name and/or company. Other information may be included on a voluntary basis.
The agency notes that eAllegations is not intended for assertions of security issues such as terrorists or weapons of mass destruction. Violations that may be reported online through eAllegations include misclassification of merchandise, country of origin markings, health and safety violations, intellectual property rights violations, textile or other trade violations.
For example, eAllegations will provide a means to report a possible violator who is importing substandard steel, claiming that it is of a higher grade, therefore creating a potential safety issue. Other possible violations that can be reported include a company claiming a lower than actual value on a product they are importing to pay less duty or a company importing product from one country but stating the goods are from another country to avoid quota restrictions.
Information about eAllegations may be found at: https://apps.cbp.gov/eallegations/. CIT FINDS IMPORTER LIABLE FOR
MISCLASSIFYING MERCHANDISE
The Court of International Trade (CIT) found an importer of liquid crystal display (LCD) glass panels liable for civil penalties because it did not exercise reasonable care with respect to their classification. Counsel for the firm had advised it to seek a binding classification ruling from Customs in light of a court decision classifying other types of LCD glass panels under a certain HTS number. However, the company continued to classify its goods under another number which carries a lower duty rate.
Because the company never sought a ruling from Customs and failed to follow the advice of counsel, the CIT ruled it did not exercise reasonable care and, therefore, is subject to penalties. The court ruled the company’s counsel was its “only source of credible advice regarding the classification of LCDs” because it did not rely on its customs broker. Because it disregarded the formal legal advice of its attorneys and didn’t actively pursue the issues raised, the court ruled the continued misclassification that resulted constitutes negligence.
The court awarded CBP $913,572.79 in lost tariff revenue and assessed a civil penalty of about $1.4 million. 10 + 2 RULE TO BE
IMPLEMENTED SOON
U.S. Customs and Border Protection (CBP) issued proposed regulations entitled “Importer Security Filing and Additional Carrier Requirements” in which it outlined a program which requires the submission of additional data elements at least 24 hours before the goods are laden on board an ocean vessel.
CBP is in the process of revising its initial proposal in response to more than 200 comments received from interested parties. While there is no definitive date for CBP to issue final regulations, CBP recently issued programming guidelines to the trade signaling its intent to implement the requirement in the near future.
The ISF program will become effective 90 days after notice is published in the Federal Register. CBP has indicated enforcement of the new program will be phased in over a period of several months. While many of the legal and procedural details have yet to be finalized, it is clear the ISF will fundamentally alter both the timeline and manner in which import-related information is provided to CBP. An outline of the program’s basic requirements is below.
U.S., importers or their agents must transmit the following data elements to CBP through either the Automated Broker Interface (ABI) or Automated Manifest System (AMS) electronic data systems at least 24 hours before cargo is laden on board an ocean vessel bound for the U.S.: - Manufacturer (or supplier) name & address
- Seller name & address
- Buyer name & address
- Ship to name & address
- Container stuffing location
- Consolidator name & address
- Importer of record number
- Consignee number
- Country of origin of goods
- HTS number (6 digit)
This information must be provided on a “line item level” so that shipments which contain merchandise subject to multiple classifications will require multiple ISF submissions. In addition, the carrier must provide CBP with: (1) Vessel stow plan; and (2) Container status messages. Thus, the ISF requirement is often referred to as the “10+2 Rule.” Note: Although not stated in the proposal, Customs may also require master and house bills of lading numbers to coordinate the two data filings.
All freight intended to pass through the U.S. is subject to the new ISF requirement. Although the data elements are slightly reduced, foreign merchandise which is intended to move in-bond through the U.S. as well as freight which is intended to remain on board the vessel and merely transit the coastal waters of the U.S. are also subject to the ISF requirement 24 hours prior to lading. Break-bulk shipments and merchandise shipped in bulk are also subject to different ISF requirements.
The 10 data elements can be provided by the importer or its agent which could include a customs broker, forwarder, carrier or other properly authorized party. The party providing this data must have access to either the ABI or AMS data systems and there is no requirement that the party making the ISF reside within the U.S.
The proposal provides that the party who makes the ISF is responsible for the timeliness and correctness of the transmission. Moreover, the party who makes the filing is responsible to use its best efforts to verify the correctness of the data and to update the filing if there is any change in the data while the merchandise is in transit to the U.S.
The party filing the ISF must secure either a continuous entry bond or an international carrier’s bond. The proposed regulations do not provide for the use of single-entry bonds and do not include bond amount guidelines. However, the proposal does provide that both the importer and the party submitting the ISF can be held liable for liquidated damages equal to the value of the merchandise if the filing is found to be incomplete, untimely or inaccurate. Although the proposal is silent on this point, it is anticipated that the failure to make a complete Importer Security Filing 24 hours prior to lading will result in a “do not load” message to the carrier which will prevent the cargo from being shipped to the U.S.
Importers can opt to file the ISF 24 hours before the goods are laden on board the vessel and submit a formal entry for the merchandise in the normal course of events upon its arrival in the U.S. Alternatively, the importer can make a combined customs entry/security filing 24 hours before the goods are laden on board the vessel for shipment to the U.S.
Certain additional data elements will be required to complete the combined entry/security filing (i.e., value, 10-digit HTS classification). Only an importer self-filer or a licensed customs broker can make a combined entry/security filing. This combined filing option would appear to be the most efficient option for many types of freight due to the overlapping data required in each filing.
Unlike manifest data which can be retrieved from CBP under the Freedom of Information Act (FOIA), the proposed regulations include a provision which would characterize the ISF as confidential business information which would be exempt from public disclosure by the government under the FOIA.
The Import Security Filing will dramatically alter the supply chain information requirements. Although some of the required data elements can be obtained from existing purchase order systems, most companies will be required to coordinate information from several different sources to satisfy the ISF requirements.
Importers, brokers, forwarders, sureties and carriers are urged to study the current proposal and consider what changes will be required in current processes to comply with this new regulatory requirement. While CBP has indicated they will phase-in the ISF requirement, significant decisions must be made well in advance of this new requirement in order to avoid supply chain disruption.
REPORT OUTLINES
AD/CVD COLLECTION PROBLEMS
The Government Accountability Office released a study showing that more than $600 million in AD/CV duties dating back to 2001 remain uncollected. The unpaid duties are highly concentrated among a few products, countries of origin and importers. Four products, all from China, (crawfish tail meat - $354 million, garlic - $75 million, honey - $43 million, and mushrooms - $41 million) account for about 84 percent of the total amount of uncollected duties. Also, a relatively small number of importers owe the vast majority of these uncollected duties.
According to Customs and Border Protection officials, prospects for collecting a sizeable portion of these bills are slim because many of the importers have disappeared, have no assets or have declared bankruptcy.
The GAO report said four key factors contribute to uncollected AD/CV duties, a few of which the U.S. government has partially addressed. First, because the U.S. AD/CV duty system involves the retrospective assessment of duties, the final amount of AD/CV duties an importer owes can significantly exceed the initial amount paid when the goods entered the country. Second, companies that did not previously export products subject to AD/CV duties, i.e., “new shippers,” pose two types of risks for collections. For example, new shippers can be assigned an AD/CV duty rate based on as few as one shipment, which can significantly underestimate the final duty rate. Also, importers purchasing from new shippers were able to provide a bond in lieu of a cash payment to cover the initial AD/CV duties assessed. Congress addressed this risk by temporarily requiring all importers to pay initial AD/CV duties in cash. Third, all importers must provide a general bond to secure the payment of all types of duties, but, the report says, CBP’s standard practice for setting the amount of this bond inadequately protects AD/CV duty revenue. CBP addressed this by revising its bonding formula for products subject to AD/CV duties but the revision has been tested on only one product and faces domestic and international legal challenges.
Fourth, CBP collects minimal information regarding importers and does not conduct background or financial checks, which creates challenges to locating importers and collecting AD/CV duties.
The report offered two sets of options for improving AD/CV duty collection, noting that each has advantages and disadvantages. One set of options involves revising U.S. law to eliminate the retrospective component of the U.S. AD/CV duty system by assessing final duties when the product arrives in the United States (i.e., a prospective system). But there would be trade-offs. For example, under a retrospective system, the amount of duties finally assessed reflects the actual amount of dumping by the exporter for the period of review. Under a prospective system, the amount of duties assessed may not match the amount of actual dumping or subsidization. However, in practice, a substantial amount of AD/CV duty bills are not collected under the U.S. retrospective system. The second set of options involves making adjustments within the existing system. For example, Congress could revise the standards for new shipper reviews and CBP could examine the option of revising bonding requirements to protect additional AD/CV duty revenue. -
It continues to look unlikely that any food safety legislation will be passed this year. What’s taking place instead are many behind-the-scenes meetings with discussions on how to word legislation that would be introduced next year.
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Look soon for product bearing the North American Olive Oil Association Seal. Two members have received approval to use the Seal and others are expected to receive approval shortly. For information on the NAOOA Seal, visit www.naooa.org.
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As this newsletter was going to press, we were told by two members to expect membership applications from companies they referred to AFI. That means those two members will be the first to receive entries in AFI’s Member Rewards program. Every referral wins a prize and makes you eligible for the grand prize.
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Members importing processed artichokes, capers, pepperoncini and boiled oysters are reminded to take advantage of the duty reductions secured by AFI by using the new HTS numbers for these products. The duty reductions have been in place for more than a year, so the amount of money involved could be quite substantial. Contact the AFI office to have the information re-sent to you.
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Exhibiting at SIAL or another trade show? Don’t forget to display your AFI or NAOOA member sign. It’ll help you get noticed.
FOOD SAFETY TEST CENTER
OPENS IN CHINA A Sino-U.S. food safety testing center began operations in Zhuhai, Guangdon province, reported China Daily.
The new facility is said to be the first of its kind in the country and adopts food safety standards accepted by the Chinese authorities as well as FDA.
Results of the facility’s tests of food samples will be sent to the General Administration of Quality Supervision, Inspection and Quarantine of China. Foods that have been tested and qualified by the center will be directly exported to the U.S. and will be exempt from further testing by the FDA.
The facilities and technologies of the new testing center are provided by the Oregon Department of Agriculture. FDA has dispatched three experts to work for the center and supervise testing procedures.
The center, located on the site of the newly built Peace Synthesis Market of Logistics, will focus on testing subsidiary agricultural products such as fruits, vegetables, meat, seafood and canned food. Thirteen U.S. states will also set up booths in the market to showcase their agricultural products. FDA AIMS TO ESTABLISH
OVERSEAS STAFF POSTS FDA aims to establish operations in India by the end of the year to better police the growing volume of food, medicines, medical devices and animal feed exported to the U.S., according to FDA Deputy Commissioner Murray Lumpkin.
Lumpkin said India was the next priority for the agency after it sets up offices in China to boost inspections and improve oversight. FDA has a limited budget for inspections and checks few foreign manufacturing plants now. But after criticism for lax oversight, officials requested additional money from Congress and announced plans to build a presence around the globe with inspectors and other staff.
The initial priority is setting up three offices in China this year, followed by stationing staff in New Delhi and Mumbai, according to Lumpkin. FDA also would like to place staff in Amman, Jordan, to serve as a Middle East base, as well as in Central or South America and Europe. The agency was preparing to launch the other new offices as soon as funds were made available, Lumpkin said. REFER A MEMBER &
YOU’RE GUARANTEED A PRIZE
The AFI Member Rewards Program is under way and is generating much enthusiasm and excitement. Members are encouraged to start recruiting new members now to be guaranteed a prize and be eligible for the mid-term and grand prize drawings. Don’t miss this opportunity to be rewarded with cash and valuable prizes for simply sharing information about the value and benefits of AFI membership with friends and colleagues.
Simply recruit a new member and ensure that you receive credit by having your name listed as the AFI member responsible for encouragement on the application submitted. Complete details are available on the AFI web site or by contacting the AFI office. 2009 AFI CONVENTION
PLANS UNDER WAY
The Convention Committee is working on putting together the convention program for the 2009 AFI Convention. Suggestions for topics, speakers, etc. are welcomed and should be directed to the AFI office. Mark your calendars for April 30-May 2 to be held at The Naples Beach Hotel & Golf Club in Naples, Florida.
MEMBER NEWS
East Coast Olive Oil, founded in 1991 in Utica, N.Y., is now known as Sovena USA, Inc. “The new name and group image allows us to more easily communicate our global reach and resources, as well as how those benefits support our local efforts and abilities,” Steve Mandia, Sovena USA chief executive, said in a press release. “The company has the same people, the same shareholders, the same philosophy and the same address. All that has changed is the name.” UPCOMING MEETINGS AFI will host a reception at SIAL in Paris, October 19-23.
2009 AFI Convention: April 30-May 2, Naples Beach Hotel and Golf Club, Naples, Fla. TAKE ADVANTAGE OF
AFI IMPORT REPORTS ONLINE Online subscribers of AFI’s Import Reports are provided with a link to a downloadable .CSV file for each report they receive. CSV files can be opened with many of today’s popular spreadsheet programs, such as Microsoft Excel. Members can combine multiple .CSV files to sort, search and perform functions such as adding a range of shipments in order to obtain cumulative totals. To learn more about AFI’s Import Reports, visit the AFI website, located at www.afius.org or contact Ed Spader in the AFI office at 732-922-3008 or espader@afius.org.
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