Customs Entry and Filing Procedures

Every importer knows that a lack of good entry procedures can lead to delayed, detained, or even seized shipments. Inadvertent classification declarations that lead to additional duty liability are common as well.

Action taken by Customs when this occurs may result in, for example, the issuance of a Notice of Action (Customs Form 29) whereby it applies what it believes is the correct HTSUS number and notifies the importer of the additional duties that must be paid.

The late payment of duties is another common occurrence, so much so that Customs has what I like to call a “parking ticket” approach to addressing the oversight of late payment. This is typically done through an assessment of liquidated damages whereby Customs demands a seemingly large amount of money, or alternatively, allows you to pay a much smaller amount, say $250, provided that it is paid within 60 days of the date of Customs’ notice to the importer. This is known in Customs-ease as the “Option 1” mitigation alternative to payment of the larger liquidated damage amount. This payment may be made through the customs broker or importer.

To give you an overview of Entry Filing, think about it as a two step process. (19 CFR Part 141).

Step 1: Filing an entry that seeks the Immediate Delivery/Release of the shipment (CF 3461), which is done with the shipment Waybill, commercial invoice (or a pro forma invoice when the commercial invoice cannot be produced), packing lists, and such other documentation as is necessary to determine merchandise admissibility.

Keep in mind that while required to produce certain documentation to the Customs Broker, and to Customs on request, most information is transmitted to Customs electronically through the Automated Broker Interface (ABI).

This must be done within 15 calendar days after the arrival of the importing carrier, but will usually be done earlier on vessel shipments (5 days before arrival) and on air shipments, “wheels up” from the foreign airport.

Step 2: Filing a ‘Follow Up’ Entry Summary (CF 7501) that provides greater detail about the shipment along with the duties preliminarily determined to be due (estimated duties.).

This must be filed within 10 working days after the time of entry/release of the goods for delivery under the CF 3461.

For more information on how to fill out the Entry Summary, click here for instructions published by Customs earlier this month.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Protecting Intellectual Property: US Customs and Gray Market Goods

Preventing the importation of merchandise that infringes on the intellectual property rights of a United States trademark or copyright owner is one of US Customs’ mandates that it takes very seriously.

Determining who is authorized to import products that have on it the design, labeling, words, or other “work” that belongs to a non-importing party can be tricky. This is because, under most licensing agreements, a party (known as the “licensee”) is only given a limited right to use the “work” of another (known as the “licensor”) on its merchandise. Limitations may include use within a limited timeframe, or on certain types of products only.

Another limitation arises from distribution rights. These provide for the sale and/or distribution of a product within a certain geographical area.

Making a determination as to who has the authority to import articles upon which a protected “work” has been used can therefore become all the more complex when you add to these facts the following additional circumstances:

The lawful production of an article in one location which is then subsequently
(a) sold, and
(b) exported to another location outside of the limited licensed-for zone.

To give you an example in everyday language, this means that if I have permission to sell a good that has party “AA’s” logo on it in the European Union (EU) only, then in theory, I am precluded from selling it in another territory.

Okay, easy enough. But what if that product is lawfully sold within the EU and then that buying party decides to sell it for export to the United States?

Now we’re entering the “gray market” zone… (“doo-do-do-dooo, doo-do-do-dooo…” anyone out there remember the “Twilight Zone”© theme song?)

While preventing the importation of an outright counterfeit article (see the definition below) is a relatively easy concept to grasp, a lesser known concept, known as “gray market goods,” are another type of import that US Customs is on the look out for to intercept and prevent its importation.

A counterfeit trademark is a spurious mark that is identical with, or substantially indistinguishable from, a federally registered trademark. Merchandise imported into the United States bearing marks that are “counterfeit” of a federally registered trademark recorded with CBP shall be seized pursuant to section 526(e) of the Tariff Act of 1930 (19 U.S.C. §1526(e)), as implemented by 19 CFR § 133.21.

An easy way to think about the definition of a “gray market good” is to think of it as a “parallel good,” that is, it is

1) A genuine product (i.e., not a fake or counterfeit)
2) Lawfully made (typically overseas)
3) With the permission of the owner of the “work”
4) Which bears a copyright, trademark, or trade name, and
5) Is imported into the United States
6) Without the authorization of the United States trademark or copyright owner.

US Customs will protect gray market goods of only those copyrights, trademarks, and trade names that are recorded with its agency. This protective status commences from the time of recordation with US Customs of the “work.”

Where US Customs has conferred gray market protection, imported merchandise bearing the protected “work” will be detained and is subject to potential seizure, forfeiture, and of course, penalties, so you want to be sure to have all of your paper work in order to prove that you have been given permission to import products of this kind into the U.S. so that your shipments do not get held up at the border.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Happy Holidays!

In case I have any regular readers, I wanted to both wish you all a happy holidays as well as explain where the heck I have been!

Last month I came down with three (3) consecutive colds, one of which included a bout of laryngitis, and all of which, left me out of work for multiple days. I am finally feeling 99% again, but it has been slow coming, and not helped at all with this below-freezing cold weather here on the east coast.

Between dealing with the illnesses, practicing law full time and teaching at F.I.T., I simply did not have much energy left over to dedicate to the blog. This will cease being the case however, come January 2011.

Next month I have a couple of exciting projects I’ll be involved in. One is with the CA State Bar Association as part of their “Cyber Institute,” where myself and two California based attorneys will be speaking in a 1 credit continuing legal education (CLE) program called “Avoiding Cultural Missteps” on January 13, 2011.

The second is with Lawline in New York City on January 14, 2011, also a 1 credit CLE program, where a panel of attorneys will be discussing the Supreme Court’s affirmation this week of the 9th Circuit’s decision in the Omega S.A. v. Costco Wholesale Corporation case dealing with gray goods and copyright protections. I will soon be posting an article describing what “gray goods” are, what the issues had been in the 9th Circuit Court of Appeals, and why it matters to importers. As of the time of this posting, the Supreme Court has yet to release a final revised decision.

Till then, I wish you all a wonderful rest of the year!

Questions/comments? Post below or email me at clark.deanna@gmail.com

Customs Brokers and Client Confidentiality

Customs brokers are the intermediary between the importer and the government. They report information about import transactions to US Customs on behalf of an importer, and treat such information as confidential in accordance with 19 CFR Part 111 and under the authority of 19 USC §1641.

Customs brokers have a fiduciary duty to protect client information and are subject to certain record keeping requirements in order to maintain client confidentiality, including:

• The maintenance of records of transactions (19 CFR 111.21)
• To retain records (19 CFR 111.23)
• To make records available for official Customs inspection (19 CFR 111.25)
• To exercise responsible supervision and control over the transaction of customs business (19 CFR 111.28(a)) (see also 19 U.S.C. 1641(b)(4))
• To exercise due diligence in handling customs business matters (19 CFR 111.29(a)); and
• Precluding a broker from entering into an agreement with an unlicensed person to transact customs business if the fees generated from the transaction would inure to the benefit of the unlicensed person (19 CFR 111.36(b))

The current general rule is that without the client’s consent, under 19 CFR §111.24, a broker may not disclose client information to third persons except when required to by a court.

Under the current customs regulations, a broker may not disclose client information to third persons except when given permission to do so by it’s client (by way of a written release), or when ordered to by a court. Should a broker release client information, it is subject to disciplinary action for violating the confidentiality requirements of 19 CFR Part 111.24.

US Customs is now proposing amendments that would allow a broker to engage in information sharing with affiliated third party business entities related to the broker that offer non-customs business services to the broker’s clients. This allowance would be subject to the condition that the client provides its express consent in a written authorization.

Any written authorization must specify exactly what information the broker is allowed to share outside of the brokerage with affiliated entities, or with a party bound by contract to the broker.

Approved services ancillary to “customs business” would include photocopying and scanning for the broker, and messenger/delivery services.

US Customs is accepting comments until December 27, 2010 regarding these proposed amendments. Interested parties must identify each submission by the Docket Number, which is USCBP-2010-0038.

Comments may be directed as follows:

- Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments via docket number USCBP–2010–0038

- Mail: Trade and Commercial Regulations Branch, U.S. Customs and Border Protection, 799 9th Street, NW (Mint Annex), Washington, DC 20229–1179.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Understanding the Working Relationship between Customs Brokers, Freight Forwarders, and NVOCCs

Come Join Me for the Next OWIT-NY Event Tonight Monday (22-Nov-2010) at 6 pm

This program will address the relationships that exist between importers/exporters and their Customs Brokers, Freight Forwarders & NVOCCs (non-vessel operating common carriers).

Featuring: William Shayne, Esq. of Shayne Law Group, P.C. (Hooray SLG!)

William Shayne has been working in the Customs Brokers, Freight Forwarders & NVOCC industries before transitioning to the practice of law. A major portion of his practice is representing each of these different entities as well as importers and exporters.

He will look at these relationships from both a practical and legal perspective and from both the service provider and consumer perspectives.

The program will include discussions relating to each of their respective responsibilities and liabilities, and the practicalities of working with them.

Time: Networking and refreshments at 6:00pm. Program commences at 6:30pm.

Location: Law offices of Baker & McKenzie in the Grace Building
1114 Avenue of the Americas (the entrance is on 42nd Street directly across from Bryant Park.) New York, NY

*** Cost ***: $20 for OWIT members , students, and government employees
$25 for non-members

GO TO WWW.OWITNY.ORG TO SIGN UP! Hope to see you there!

Where Does This Glass of Wine Come From?

TTB proposes to change the rules on multi-state appellations and is seeking your comments!

As a native of northern California, it’s no wonder I am relatively well versed in wines from Napa Valley and Sonoma Valley (my favorite!). In particular, I seriously enjoy visiting the Buena Vista Carneros winery and am always happy to have a “taste of home” by way of a glass of their wine here in NYC.

There is a new discussion around the labeling of imported wine and its regional origin designation or “appellation of origin.”

The recent labeling discussion arises from a quasi-governmental authority from Australia that regulates the exportation of Australian wine. Known as the Australian Wine and Brandy Corporation (AWBC), it petitioned the US agency, the “Alcohol and Tobacco Tax and Trade Bureau” (TTB), which oversees wine regulations (both domestic and foreign imported wine), to permit the labeling of Australian wines with multi-state, i.e., regional, appellations.

As a result of this petition, TTB is proposing to require that all imported wine display on its label the percentage of the wine derived from fruit or other agricultural product(s) grown in each particular political subdivision.

The reason for this amendment would be to provide wine consumers with quality information about the identity and quality of the wine. In addition, TTB is also proposing to mandate that imported wine labeled with a multi-state appellation conforms to the requirements of the foreign laws and regulations governing the composition, method of production, and designation of wines available for consumption within the country of origin.

TTB is seeking comments from interested parties regarding the utility of these amendments to the consumer and to determine whether the amendments will result in comparable treatment between domestic and foreign imported wines. TTB further seeks comments regarding subdivisions of foreign political systems that might be considered equivalents of U.S. states.

Written comments can be submitted until on or before Jan. 3, 2011 and can be sent to:

•[Online] http://www.regulations.gov (via the online comment form for this notice as posted within Docket No. TTB–2010–0007 at ‘‘Regulations.gov,’’ the Federal erulemaking portal);

•[By Regular Mail] Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, P.O. Box 14412, Washington, DC 20044–4412; or

• [By hand delivery/courier in lieu of mail] Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street, NW., Suite 200–E, Washington, DC 20005.

TTB regulations regarding labeling and advertising of wine can be found at 27 CFR Part 4.

For more information on the proposed amendments, see the Federal Register notice at 75 FR 67663

Questions/comments? Post below or email me at clark.deanna@gmail.com

Voyage Charters and Charter Parties

Umm… did someone say “PARTY?” Yes, Halloween just passed but no, this does not have anything to do with a celebration or “partying” as we conventionally know it.

While it is probably ridiculously obvious, I will state it anyway: Without vessels, there would be no international trade. This is because a majority of cargo is “carried” to our shores via steamship lines, which in today’s world typically means by container ship with respect to dry cargo, and a tanker with respect to wet cargo.

A “Voyage Charter” is where a vessel owner agrees to perform a single (or series of) voyages in exchange for the payment of the lease rate of the vessel which is payable upon issuance of the bill of lading.

A "Charter Party" is the name of the actual agreement between the “Charterer,” which is the party that borrows the boat, and the vessel owner.

I found it curious to learn that the Charter Party is prepared by a “Charter Broker.” While this may not seem as if it would be surprising, given that customs brokers file entry records for importers, it nonetheless surprised me because of the length and detail of a Charter Party.

The terms of a Charter Party cover typical maritime issues, such as the freight weight, departure and arriving ports, and demurrage charges. In everyday language, demurrage is the cost for continued use of the vessel beyond the “lay time” (defined below). These agreements however, further contain provisions for cleaning the vessel, and concepts known as “dead freight” and General Average, among other clauses.

“Dead freight” I thought was an interesting one. Wet cargo is contracted to in terms of weight, that is, the freight charge is based on the weight of the cargo. As the Charterer is guaranteeing that the weight will meet a minimum amount of tonnage, irrespective of whether you have a fully loaded vessel with cargo, payment for that amount of tonnage is still required.

For example, crude oil that weighs less, i.e., is lighter, takes up a larger volume of space. Therefore, despite the hull being full with oil, the Charterer is still liable for the payment of the “dead freight,” which is the difference between the weight contracted to (i.e., the guaranteed tonnage) and the actual weight.

“General average,” another concept I find intriguing, deals with the idea of abandoning cargo in the event of say, rough seas, in order to save the remaining cargo onboard and complete the voyage. Due to the cargo being thrown over for the “benefit of the adventure,” a General Average clause then indicates that the cargo owners whose merchandise did safely make the journey, must all chip in to pay those parties whose cargo was essentially sacrificed for the “greater good.”

Coming back to the concept of “lay time,” this is the amount of free time the Charterer has to load the ship with cargo at the “load port,” and unload the vessel at the “discharge port.” Keep in mind that just because you are able to load the cargo in an amount of time shorter than that which is designated, does not automatically mean that an extension of time is available on the discharge end. In order to preserve this, the clause regarding Lay Time in the Charter Party must be contracted to be “reversible,” which will provide for an allowance of the time saved on the front end (load port), for the back end (discharge port).

Lay time may be spelled out as “Laydays” in the contract with a designation for when it commences and is canceled. The commencement date indicates when use of the ship will be available in the port designated in the Charter Party. Typically, the agreement will specify certain notice requirements, such as that to inform the Charterer as to what the estimated time of arrival is for the vessel. When a vessel does not arrive on the agreed upon date however, or when the vessel owner alerts the Charterer to a delay for which the boat will not arrive on the agreed upon date at the load port, then what is a Charterer left to do?

It turns out that the only remedy is to cancel the Charter Party within 48 hours. This can be a difficult remedy however, both for the vessel owner who is en route to the port to drop off the vessel, as well as for the Charterer who now has to scramble to find a vessel to meet its needs within 48 hours.

The long and the short of it is that chartering boats is not for amateurs.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Contracts and the International Sale of Goods

Between the office and teaching International Business Law at F.I.T., contracts have been a main topic on my mind recently. Just last week in class, I went over a Drawback Contract with my students to set out the pertinent areas of a contract while going over the duty refund concept of drawback.

This week, we are turning to contracts involving the international sale of goods and it reminds me of my law school days at Tulane when I first learned about contracts. The difference however, is that I get to expose my students to the UN Convention on Contracts for the International Sale of Goods, which was adopted by a diplomatic conference on April 11, 1980, and is commonly referred to as the “CISG.”

The CISG is an international set of commercial rules established to provide a framework for international sales contracts, that is, to govern commercial relationships between merchants of different countries. The rules are therefore, applicable to those countries who are “Members” that have ratified the CISG under the premise that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States.

The CISG is comprised of 101 Articles, with each Article providing a rule specific to a commercial transaction, such as Article 51 which states “The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention.”

Pace University’s Law School has the Institute of International Commercial Law and has a wealth of material on the CISG, including the CISG Treaty text and legislative history, cases on the CISG and other scholarly materials.

Unlike the CISG, the Uniform Commercial Code (UCC), which is our domestic law here in the U.S. that governs commercial transactions, has only 9 “Articles.” Within each Article however, are multiple sections, with each Article governing a particular area, such as Article 3, which deals with “negotiable instruments,” or Article 5, which deals with Letters of Credit.

Of course, for this week’s class, we will be focusing on Article 2 which deals with “Sales” as this is the section you would look to in order to understand how domestic merchants behave in a commercial setting. In fact, just perusing through Article 2, you see how it begins with contract formation and construction – after setting forth some definitions, of course – and then continuing on with the idea of acting in “good faith,” performing under the contract and alas, breach of contract.

It is not surprising that the “Remedy” section of the UCC is so lengthy, after all, it is not uncommon to find that it is not until a dispute arises that parties begin to pay attention to the laws governing their agreement.

Questions/comments? Post below or email me at clark.deanna@gmail.com

OWIT-NY Event Tonight on Trade Compliance

The Organization of Women in International Trade - NY Chapter is pleased to present

"Customs Compliance Software and the Bottom Line - Cutting Costs and Leveraging Time for Importers, Exporters, Brokers and Forwarders"

featuring

Jason L. O'Brien, Director of Sales and Marketing for MIC Customs Solutions

and Co-Panelist

John O'Shea, Director, Trade Compliance at Bloomberg L.P. (presenting the perspective on compliance systems from the user, manager and consultant side)

Topics of Discussion Include:

• License vs Hosted solutions
• Global Trade Compliance vs US Trade Compliance
• All in one Global Solutions vs Best of Breed
• Return on investment

Time: Networking and refreshments at 6:00pm. Program commences at 6:30pm.

Location: Law offices of Baker & McKenzie in the Grace Building,
1114 Avenue of the Americas (the entrance is on 42nd Street directly across from Bryant Park.) New York, NY

*** Cost ***: $20 for OWIT members , students, and government employees
$25 for non-members

About MIC-

MIC Customs Solutions is a worldwide leading provider of global customs solutions and is dedicated to the development, implementation and support of global customs software solutions. MIC specializes in integrated solutions while leveraging regional and national legal requirements. MIC software helps large and small companies grow, comply and compete globally. Currently, MIC customs software is used by more than 700 customers, in 40+ countries, on five continents.

Jason O’Brien is a 12 year veteran of the global trade customs compliance software space and will give an overview of the software industry as it relates to cross border trade and how it is being used in the Customs/compliance space globally to leverage time, energy and financial savings.

To register for this event go to www.owitny.org. You may also pay at the door. Hope to see you there!

Questions/comments? Post below or email me at clark.deanna@gmail.com

FedEx and the “Express Consignment Facility”

This week I had the pleasure of taking a field trip with some of my FIT students to Federal Express in Newark, New Jersey. Referred to as “ECO,” which stands for East Coast Overlay, this facility is one of six regional sort operations in the U.S., with the others being in Indianapolis, IN, Memphis, TN, Miami, FL, Oakland, CA, and Anchorage, AK.

It is through these centers that all foreign freight is “cleared” for US Customs and other federal agencies, such as US Fish and Wildlife (US F&W) and the Food and Drug Administration. Not only does US Customs have an office on-site at ECO but I likewise met a US F&W inspector while there who mentioned inspecting live animals and getting the typical declaration for items with mother of pearl.

US Customs designates these regional sort operations as “hubs,” which are bonded warehouses permitted to handle international cargo. The regulations overseeing hub operations are under the “Express Consignment Facility” regulations found at 19 CFR Part 128.

We were given a tour of both ECO’s domestic and foreign freight operations, as well as the offices of FedEx Trade Networks, its on-site customs clearance operation. Interestingly, they have licensed customs brokers and, individuals working under their direction, to prepare and file entry summaries, which by definition, is done on behalf of the importer. They have high-tech software that allows for a quick tariff determination by way of “clicking” your way through the subheadings, which is done based on the invoice and other shipping records which are scanned in at the point of sale overseas. The oddity with FedEx’s clearance operation, however, which admittedly, I forgot to ask about, is as follows.

The shipper, by virtue of going to FedEx in say, Germany, pays for the service and directs FedEx to provide the customs clearance services so that the end recipient, aka, the importer and/or consignee here in the US, can receive the package at its address, as delivered by FedEx' domestic carriers.

Customs brokers, however, must have a valid power of attorney to engage in “customs business,”which includes the filing of entry papers, on behalf of the importer. It therefore begs the question – how is it possible that FedEx clears these shipments when it does not have a valid power of attorney (authorizing the broker to clear the cargo on behalf of the importer) for every domestic recipient of foreign cargo? This is a question I did not get a chance to ask as mentioned above. Perhaps they do have one after all for every importer in accordance with the regulations, though I would be interested to know how that is obtained given the express nature of FedEx.

Express consignment facilities are recognized as hubs by US Customs because it is through these that foreign cargo destined for other foreign locations gets sorted through. That is, cargo arrives on the inbound flight from a foreign location, which in the case of ECO would likely be from Charles de Gaulle Airport in France, and is placed on an outbound flight to a different foreign location.

As all cargo is listed on the airplane’s manifest, it is at these hubs that US Customs comes through, examining the manifest in search of anything suspect – be it the cargo itself, the foreign destination, etc. - and despite the cargo not being “entered,” or attempted to be entered into the US, as it has a final destination with a foreign address and it is just passing through the U.S. for logistical purposes, all cargo at an express consignment facility is “fair game” for inspection, detention, or seizure, as it is on U.S. soil.

Typically, a “suspect” shipment is one where contraband may be found, or where an allegation of a counterfeit or trademark violation exists, such as with a shipment of cell phones or other electronic devices. Any hint of a violation, and the cargo gets detained. ECO even had a designated US Customs holding cage for cargo that US Customs flagged for further investigation.

According to our tour guide, one of three licensed customs brokers in the Regulatory Compliance and Clearance office of ECO, FedEx’ relationship with US Customs is very good and that they work very closely with US Customs to further its mandates with regards to imports.

Remember, US Customs has free reign to inspect all cargo at any hub, whether it is destined for importation into the US or not. As most foreign cargo is routed through a FedEx regional sort operation while en route to its ultimate foreign destination, this is something to keep in mind when choosing an express courier from a foreign country.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Consumer Product Safety and US Customs Cooperation

As the watchdog of our country’s borders, US Customs has the authority to enforce, and otherwise maintain the integrity of, other federal agency regulations with respect to imported merchandise.

While the Consumer Product Safety Commission (CPSC) is responsible for the oversight of some better known laws, including the Flammable Fabrics Act (addressing inter alia, sleepwear and mattresses) and the Consumer Product Safety Act (CPSA) (dealing with, inter alia, children’s products and lighters), it is likewise overseeing some lesser known laws which I find to be interesting, such as the Refrigerator Safety Act and the Children’s Gasoline Burn Prevention Act.

Like US Customs, CPSC has specific statutory authority under 15 USC §2066 and 15 USC §1273 for sampling imports in order to ensure compliance with consumer product safety rules. Where a violation of its regulations is suspected, it likewise may issue a notice of detention (if the circumstances so require) describing the alleged violation and its governing statute.

CPSC will issue this notice to the importer who then deals directly with CPSC. Copies are provided to the importer’s Customs broker and US Customs as well. Detained merchandise remains under US Customs custody whether US Customs has issued its own detention notice or not.

Typically, the recipient of a notice has 5 business days within which to provide the requested information to CPSC in order to resolve the detention. While extensions may be granted, CPSC makes an effort to resolve detentions within 30 days.

Of all of the laws that CPSC regulates, where a violation of the CPSA occurs (and only the CPSA), a hearing may be sought by the importer, owner, or consignee under the Administrative Procedures Act. During this time however, i.e., pending the completion of the hearing, the merchandise must remain under government custody at the expense of the importer, owner, or consignee, which in everyday language, typically amounts to fees for warehousing and other incidental charges, such as the use of a forklift, a forklift supervisor, etc. Charges will vary based on the quantity and type of merchandise at issue.

When requested, CPSC may grant a conditional release of the merchandise for examination and testing so long as it remains under the US Customs bond. While "conditionally released" the goods may not be distributed.

Of course, where the cargo is not returned prior to the termination of the conditional release period, there is always the risk that US Customs might issue a Redelivery Notice which could ultimately lead to seizure, destruction or exportation of the merchandise.

Or, in the event the goods are not redelivered, an importer would likely be facing an assessment of liquidated damages. US Customs must issue this notice however, within 30 days after the end of the conditional release period.

Lastly, an importer may request that the detained merchandise be exported or destroyed. Of course, destruction means that not only has the importer/owner forfeited the money for the cost of the merchandise, but it also has to pay out-of-pocket for its destruction, and carry out the operation under Government supervision.

Needless to say, when an alleged violation remains unresolved, big brother (i.e., some branch of the government) will be watching, until a resolution has been found, a penalty (or liquidated damages claim) has been paid, or the merchandise has been destroyed.

In my experience I have noticed that all too often, importers believe that “no news is good news.” As a practitioner, I recognize that no news can actually be a prelude to really bad news with expensive consequences.

It would therefore, be prudent to routinely review importation practices and protocols, and obtain periodic advice and counsel on existing practices to ensure compliance with existing laws or newly implemented regulations. As always with new endeavors, the prudent approach would be to obtain expert advice.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Hooray for Spanish Designers Toni Francesc and Jose Miro!

It is rare to find an intersection between my professional and personal interests, and my favorite country (aside from the U.S. of course!). Last week I had the opportunity to attend an event that brought it all together – the law, fashion, and Spain!

The NY Chapter of the Organization of Women in International Trade collaborated with the Spain-US Chamber of Commerce and the organization, Catalonia Trade & Investment, for a panel discussion on breaking into the U.S. market, which was hosted at SUNY’s Fashion Institute of Technology, the fourth collaborator of this event.

With the fashion momentum sweeping over the Big Apple thanks to Mercedes Benz Fashion Week, during the panel I had the pleasure of joining two world renowned designers from Spain to view the Spring/Summer 2011 collection of Toni Francesc and the Fall 2010 collection of Jose Miro as presented at Cibeles Madrid Fashion Week.

Toni’s collection “Urban Forest” was breathtaking. It was predicated on the earth elements, with wood being the primary symbol of the collection. There were actually multiple designs where the wood was incorporated into the dress itself making for some very innovative fashions. Toni sought to express the different moods that we as people have, likening them to elements, and used different fabrics and cuts to suggest for example, the flow and energy of water.

Belts as shoulder straps or as a non-functioning decorative accessory, soothing colors, flowing fabrics and beautiful textures, some of which reminded me of stones, were all a part of this dynamic collection.

Jose Miro’s equally gorgeous and impressive Spring/Summer 2010 collection was likewise very feminine, with beautiful combinations of sheer and gathered fabric, many of which evoked an image of a flower or a large bow, accessorized with color coordinated shoes and butterfly hairclips. I loved it!

Jose described his company’s development of a line of high end shoes – a business move that would complement his thriving apparel line – as well as further expanding the manufacturing of his merchandise using organic materials, with a focus on preserving the environment.

He also talked about e-commerce and the benefits of having an online store so that new designs can be ordered and made in real time, in addition to the ability to circumvent the use of a middleman as it is a transaction directly between the buyer and seller.

Not only is that good for business, but it is also good in terms of dealing with US Customs and avoiding “first sale” and middlemen issues.

As for breaking in to the U.S. market, both designers believed that entry into the NYC market was the entry point into expansion across the country. Hence their participation in the events of NYC’s 2010 Fashion Week!

Questions/comments? Post below or email me at clark.deanna@gmail.com

International Trade, Bananas and Costa Rica

Riding along the carreteras in Costa Rica gives the impression that this country has a thriving economy. Its tourism industry is well organized, has no shortage of nature activities to offer, and even when the weather isn’t the sunniest, there are still many of us eager to take on the class 3 and 4 rapids of the Rio Pacuare (a journey I highly recommend!)

Tourism aside, one ubiquitous feature on the Costa Rican highways is all of the containers. It seems that every time I look up, a container truck is rolling past me. Hamburg Sud, Maersk, tex, Genstar, Crowley, Triton, Florens, and so on and so forth. According to my driver, highway 32 takes us directly to Puerto Limon, one of the main ports on the Carribbean Sea side of the country.

Across the landscape I have seen coffee, sugar cane, rice, pineapples, and of course, bananas (pronounced “bananos” in Costa Rica), growing. Del Monte trucks are abundant on the roads too, and I had the pleasure of visiting one of its banana plantations and witnessing the harvest and processing of bananas for export. While labor intensive, it was otherwise a relatively simple operation.

The first thing to notice was that all of the banana trees had large blue bags on them. Turns out these bags cover the bananas to protect them from birds. While the birds do not eat the fruit, should they land on them, the skin would be compromised due to their claws. Pests were not an issue as they sprayed the plantation with pesticides (and coincidentally, even the airplane that did the spraying was also yellow!).

The processing itself entailed a worker cutting the entire branch of bananas off of the tree which was then placed on a hook on a portable cable. When enough had been hung on the cable, a man would wrap a harness around his waist and then walk briskly towards the processing center along a designated path, with the bananas whizzing along behind him.

Upon arrival, the banana branches were lined up until they got to another man who quickly cut off bunches of hard green bananas with a giant machete, and placed them on a turn belt. The bananas then went into a water bin where they were rinsed and sorted through by women. After traveling through this water system, a man then retrieved the bananas and placed them onto a drying belt, where they were ultimately packaged by women.

Bananas that are “blemish-free” make the cut to be exported. Those not quite so cosmetically perfect get sent to a secondary plant for processing into products such as baby food (at least this is what my guide told me).

Hearing this got me thinking about how we (as a population) in America prefer to have in-store products look as if they have been airbrushed, that is, unless it is picture perfect and dirt free, we question its quality, seemingly forgetting that food is grown in soil (and therefore, in contact with dirt).

I remember my days in Malta where the produce truck would pass through the neighborhood for a couple of hours, a few days a week, and I had to go and track it down if I wanted to eat. There were plenty of wonderful fruits and vegetables that I consumed that did not look “perfect” and which required me to wash the dirt off of them.

I recognize there are legitimate reasons for the United States importing “bird claw-free” bananas, but it begs the question - Why is it that we are so easily swayed in our opinion based on appearances?

Questions/comments? Post below or email me at clark.deanna@gmail.com

Join Me for a Panel Discussion With Apparel Designers From Spain During Fashion Week

“Panel on Spanish Apparel Designers in New York City” featuring
Toni Francesc, Designer of Toni Francesc brand; Jose Miro, Designer of Jose Miro brand; and other industry experts.

Register now for the September 16th meeting of the Organization of Women in International Trade, New York Chapter (OWIT-NY)

IN COLLABORATION WITH

The Spain-US Chamber of Commerce, The Catalonia Trade & Investment Agency (Acc1o), and the Fashion Institute of Technology (FIT)

This event will provide case studies on how Spanish apparel companies have successfully entered the New York City market, and illuminate the significant economic impact of the global apparel trade in New York City.

Discussion topics may include, but are not limited to: strategies for New York market entry, perspectives on the New York apparel marketplace, and Spanish fashion trends.

Time: Networking and refreshments at 6:00pm.
Program commences at 6:30pm.

Location: Fashion Institute of Technology, Seventh Avenue at 27th Street, New York, New York. Event being held in the "Boardroom" C-building 9th floor.

*** Cost ***:$20 for OWIT/Spain-US Chamber of Commerce members, students, and government employees; $25 for non-members.

To attend, please register on-line Click Here. Online registration is available up to 24 hours before the event. If you miss the on-line registration, you can choose to pay by cash or check at the door provided there is still space available. Please note that the event is limited to 60 people.

For the latest copy of the OWIT International newsletter, where OWIT-NY is prominently featured please go to www.owit.org and login to the member area.

Great new membership benefits:
20% discount off all of World Academy Seminars and consulting services.
20% discount off membership to the Manhattan Chamber of Commerce - this offer is only valid until September 30th.

Finally, don't forget to follow us on Twitter.com/OWITNY.

I will be there and look forward to seeing you at the next OWIT-NY event!

Questions/comments? Post below or email me at clark.deanna@gmail.com

Red Hook and Containers

There is an area of Brooklyn called Red Hook that historically, was one of New York City’s main waterfronts and ship servicing areas. Today it remains an area of activity more incidental to shipping, for example, warehousing, than that of berthing activity, though there is some, albeit, on a much smaller scale than before.

I was recently in Red Hook sitting on a small fishing pier that has a great view of the New York Harbor with all of its tugboats, container ships, and of course, Lady Liberty. While walking there, my friend and I passed a 40 ft. container sitting on a chassis, and being the “trade nerd” I am (as described by a commenter to a post I wrote last month), I began describing the differences in containers - the metal boxes cargo is transported in whether by steamship, train or truck – the nuances between them, e.g., refrigerated, insulated, etc., a 40 ft. versus a 20 ft. container, and containerization generally. I also shared other tidbits of information such as the concept of “free time,” which is a certain number of days following the arrival of a container for the purchaser/consignee of the shipment to unload the cargo and return the container to the carrier’s marine terminal.

This particular container had numerous structural deficiencies including small holes and lots of dents. Notably, the wheels of the chassis looked so old I wondered how they could be operable, which caused me to think that this container could be used for temporary storage and raised a host of warehouseman liability issues in my mind.

I described the risk to cargo during an ocean carriage situation if the moisture in a container became too high, citing examples I have dealt with in cargo claim cases, including that of rusty machinery and rotten mung beans.

As I pointed out the container number, my friend asked what some of the other words and numbers on the exterior of the container meant, and we went through what some of the terms meant, including “tare weight,” payload and cubic capacity. To see this information on some common cargo shipping container sizes, click here.

Questions/comments? Post below or email me at clark.deanna@gmail.com

“Common Cultivars,” “Common Food Crops,” the Lacey Act and a Proposed Rule to Define These Terms

As amended, the Lacey Act now makes it unlawful to

1) Import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce any plant, taken in violation of any federal, state, tribal, or foreign law that protects plants (with some limited exceptions), and

2) Make or submit any false record, account, or label for, or any false identification of, any plant covered by the Act, and

3) Import certain plants and plant products without an import declaration.

I remember when the 2008 amendments to the Lacey Act first went into effect and the conversations that came up around importer compliance:

“Will a declaration be required for my importation of cotton t-shirts?”

“Is the enclosed paper packing that cushions my merchandise going to require a Lacey Act declaration upon importation?”

The importing community really did not know how to make heads or tails out of these new laws, in large part, because there was little to no regulatory guidance as to their application. Let me rewind and explain what the Lacey Act is.

The Lacey Act, circa 1900, is the oldest wildlife statute in the U.S. Its mandate is to combat the illegal trafficking of plants, fish and wildlife.

As detailed above (in bold), with the new amendments, beginning in 2008, it became illegal to do certain acts involving plants and plant products. Part of this mandate therefore, included a requirement to make an import declaration stating

1) the scientific name of the plant
2) the value of the importation, and
3) the name of country from which the plant was harvested.

Fortunately, there were exceptions to this requirement, namely, if your merchandise was considered either a (1) “Common Cultivar” or, (2) “Common Food Crop.”

The problem has been however, that there has been no definition to describe what these two terms actually mean. (An administrative law issue not unlike that discussed in my previous article dated August 5, 2010.)

The obvious dilemma for the importing community has been one involving the judgment call made in deciding whether a declaration was necessary or not. After all, determining what a plant is may be relatively simple, but how many folks have ever heard if the term “common cultivar?”

To (finally) address this problem, both the U.S. Dept. of Interior’s Fish and Wildlife Service, together with the U.S. Dept. of Agriculture’s Animal and Plant Health Inspection Service (APHIS) set forth a proposed definition last week for these terms.

The proposed definitions, found in the Federal Register notice 75 FR 46859, are as follows:

Common cultivar. A plant (except a tree) that:
(a) Has been developed through selective breeding or other means for specific morphological or physiological characteristics; and
(b) Is a species or hybrid that is cultivated on a commercial scale; and
(c) Is not listed:
(1) In an appendix to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (27 UST 1087; TIAS 8249);
(2) As an endangered or threatened species under the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.); or
(3) Pursuant to any State law that provides for the conservation of species that are indigenous to the State and are threatened with extinction.

Common food crop. A plant that:
(a) Has been raised, grown, or cultivated for human or animal consumption, and
(b) Is a species or hybrid that is cultivated on a commercial scale; and
(c) Is not listed:
(1) In an appendix to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (27 UST 1087; TIAS 8249);
(2) As an endangered or threatened species under the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.); or
(3) Pursuant to any State law that provides for the conservation of species that are indigenous to the State and are threatened with extinction.

If you would like to make comments on these proposed definitions, here is your chance to participate in the creation of administrative law. You may do so electronically at the Federal eRulemaking Portal or

send two copies by regular mail of your comment to Docket No. APHIS-2009-0018, Regulatory Analysis and Development, PPD, APHIS, Station 3A-03.8, 4700 River Road Unit 118, Riverdale, MD 20737-1238, stating that your comment refers to Docket No. APHIS-2009-0018.


Questions/comments? Post below or email me at clark.deanna@gmail.com

Consumer Safety Product Commission (CPSC) and Children's Products

Last week I received an inquiry from a self-described “rookie” apparel importer regarding the use of a bonded warehouse for certain importations. Along with the inquiry came links to a couple of websites that showcased the women’s wear (very cute btw) at issue.

I thought about the myriad of U.S. Customs issues raised by his inquiry alone, and since it dealt with apparel, my mind wandered over to the Flammable Fabrics Act (and Consumer Product Safety Commission (CPSC) oversight of compliance with that statute), and I wondered to what extent he was familiar with other government agency laws.

The relevance of this awareness as an importer, is that since U.S. Customs enforces U.S. laws at the border on behalf of other federal agencies, importers must be knowledgeable about - and in compliance with - these laws.

While there are numerous CPSC regulations covering many specific products, from baby bouncers and walkers, to felt-tip marking devices, to mattresses, there are certain CPSC rules that cover broad product categories, such as those regarding children’s products, including the regulation of lead paint, lead content, small parts, and children’s metal jewelry. Some currently applicable details behind each of these rules are as follows:

Lead paint on children’s products (16 CFR Part 1303)
Maximum Allowable Limit: 90 ppm
Must be Certified as Compliant if Product Made on/after This Date: 8/14/09
What Needs to be Tested: Any type of surface coating
Current Stay of Enforcement of Testing and Certification Requirement?
NO - SUBJECT TO ENFORCEMENT

Small parts (16 CFR Part 1501)
(only pertains to products intended for use by children under 3 y.o.)
Maximum Allowable Limit: n/a
Must be Certified as Compliant if Product Made on/after This Date: 2/15/09
What Needs to be Tested: Size of small components
Current Stay of Enforcement of Testing and Certification Requirement?
NO - SUBJECT TO ENFORCEMENT

Lead in metal components of children’s metal jewelry (CPSIA §101)
Maximum Allowable Limit: 300 ppm
Must be Certified as Compliant if Product Made on/after This Date: 8/14/09
What Needs to be Tested: Testing of accessible parts
Current Stay of Enforcement of Testing and Certification Requirement?
NO – SUBJECT TO ENFORCEMENT

Total lead content in metal children’s products and in non-metal children’s products (CPSIA §101)
Maximum Allowable Limit: 300 ppm [scheduled for reduction to 100 ppm on Aug. 14, 2011]
Must be Certified as Compliant if Product Made on/after This Date: Feb. 10, 2011
What Needs to be Tested: Testing of accessible components (RULE SUBJECT TO CHANGE)
Current Stay of Enforcement of Testing and Certification Requirement?
YES – THROUGH FEB. 9, 2011

One oddball aspect to administrative law, i.e., where a federal agency promulgates (i.e., creates) regulations interpreting a statute (law), is that in order to get a final regulation, the proposed rule must undergo a “notice and comment” period. As these new children’s product rules came out of a 2008 law – the Consumer Product Safety Improvement Act of 2008 (CPSIA) – the creation of regulations is still ongoing, causing confusion in the trade community as to what ought to be followed.

For example, the CPSC is in the process of coming up with an “interpretive rule” on the meaning of the term “children’s product.” In other words, compliance is being sought across products for which no finalized definition exists, which begs the question – how can importers know how to be compliant? And how does U.S. Customs actually know what to enforce?

Lastly, if it weren’t confusing enough, the rules keep changing as we await a final rule. For example, this last category of each section above, “Stay of Enforcement of Testing and Certification Requirement” refers to the following.

There is a “stay” with regards to lead content in children’s metal consumer products (with the exception of metal jewelry) and non-metal consumer products. This means that while children’s products must be in compliance with CPSC lead content rules, the enforcement against non-compliance with the lead content rule for children’s consumer products is not currently in effect because it is “stayed.”

To keep track of CPSIA updates, click here.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Citations:

74 FR 68593, (12/28/09).

“The Commission plans to keep the stay in effect for total lead content in metal children’s products and in nonmetal children’s products tested pursuant to CPSC–CH–E1001–08, Standard Operating Procedure for Determining Total Lead (Pb) in Children’s Metal Products or CPSC–CH– E1002–08, Standard Operating Procedure for Determining Total Lead (Pb) in Non-Metal Children’s Products, (section 101 of the CPSIA) until February 10, 2011. With regard to lead content, the Commission has determined that testing of children’s products for lead content by a recognized third party testing laboratory and certification based upon that testing should begin on products manufactured after February 10, 2011 to allow component testing to form the basis for certifications for lead content and permit the staff to complete an interpretative rule on the meaning of the term ‘‘children’s product.’’ 74 FR 68588, pg. 68591 (12/28/09).

Teaching International Business Law at SUNY’s Fashion Institute of Technology – Fall 2010

As a young attorney, I remember the thrill of being addressed as “Counselor” while walking through the courthouse or litigating at the bench.

Now I have an additional title – “Professor.” It’s got a nice ring to it, n’est-ce pas?

I was recently asked to the teach the International Business Law class as an adjunct professor in the International Trade and Marketing Dept. at F.I.T. Having sketched my own clothing collection at the age of 10, and having considered a path in fashion or interior design after graduating from U.C. Berkeley, it truly feels like I have come “full circle” in terms of personal and professional pursuits.

Provoking thought, exploring novel ideas, and analyzing diverse perspectives are all components that will make up a regular part of this course.

Substantively, students will learn about the multi-faceted legal and ethical framework of international business

- from basic contract formation, to
- international financing mechanisms, to
- the international sale and transportation of goods, to
- the global bodies regulating these transactions, to
- the multilateral agreements that affect business relationships, to
- the identification of liabilities, and risk reduction, and
- intellectual property and other emerging international business issues, such as e-commerce.

Using an action based learning method I created will allow for greater student retention of the material while simultaneously teaching “real world’ business skills, such as negotiating and “thinking-on-one’s-feet” in a business setting.

Challenging assumptions and broadening perspectives is also a part of what I hope to achieve in this dynamic class. See you in the Fall!

Questions/comments? Post below or email me at clark.deanna@gmail.com

NYC "City Catwalk" with DVF, Norma Kamali and Prabal Gurung

“Good Things Happen Out of Authenticity” – Diane Von Furstenberg

Last night I had the pleasure of going to the New York Times Center for a talk called “City Catwalk” with designers Diane Von Furstenberg (DVF), Norma Kamali and Prabal Gurung, together with Fern Mallis – widely credited as the creator of NYC Fashion Week – and NY Times fashion reporter, Eric Wilson, who served as the moderator.

Every now and again, a really fun occasion will come along that is beneficial both personally and professionally. This was definitely an event that falls into both categories, and I brought along with me a student I mentor who is in the International Trade and Marketing baccalaureate program at SUNY’s Fashion Institute of Technology. Needless to say, she was thrilled to accompany me!

City Cat Walk is an on-the-street public display of designer creations on mannequins throughout the garment district. These 3 designers, along with 29 others, are participating in the City Cat Walk event which runs until early September.

The designers began by describing their inspiration for their mannequins. Starting with Belgian born DVF, she described the leopard print as being “timeless” and mentioned that women like to feel “feline.” The audience loved that comment! For this reason, she opted to have her mannequin covered in a purple leopard print.

American born Norma Kamali described her inspiration as being that of technology and traced back across the years to the beginning of her career after graduating from SUNY’s Fashion Institute of Technology. Her mannequin has various bar codes on it that can be scanned by mobile phones for a chance to win prizes, and to see other designs of hers, which I thought was a pretty technologically savvy concept.

Nepalese born Prabal Gurung described the inspiration for his mannequin as being derived from the late Steve McQueen, to whom he wanted to pay tribute to, as McQueen had been someone whose styles had inspired the development of Prabal’s own sense of fashion design. His mannequin has multiple white butterflies around its head with one red butterfly on the side.

Each of the designers then described their own approach to fashion. DVF explained that by making the “wrap dress” out of a jersey fabric back in the 1970s, which is a dress with no buttons or zippers, it made a stylish dress even sexier for women, both in that era and to this day. The dress has transcended multiple generations and as she described it, it is a “first.” That is, a first sign of success (which I whole heartedly agree with), and she likened it to the emotional equivalent of a first job, as well as – and I quote – the “first time you get laid.”

Norma shared a story about camping as a young adult and how at that time she realized she wanted to make a coat out of a sleeping bag. From that incident, arose her infamous “sleeping bag coat” which has been a hit since 1975. As DVF described this coat, it is utilitarian and emotional, and for these reasons women love it.

Prabal, being the newest designer of the bunch, shared his belief that “a job well done is when you find an audience who loves what you do, and you do it with passion.” He was clear about how much he enjoys what he does, namely, being able to live his thoughts and dreams, and to make them a reality.

Lastly, there was a discussion around “Made in the USA” and maintaining some semblance of a garment industry here. 95% of Prabal’s merchandise is made right here in NYC, with the remaining 5% being an importation of cashmere from his home country of Nepal. Norma, likewise, manufactures in the USA, and DVF participates in endeavors to help maintain the integrity of the systems in place, including infrastructure, and the development of new ventures, such as the Vogue Fashion Fund.

As for my lasting impression of the three of them, in word or two, I would describe each in the following way:

Norma Kamali – the philanthropist

Prabal Gurung – a rising star

Diane Von Furstenberg – a humorous inspiration

Questions/comments? Post below or email me at clark.deanna@gmail.com

US Customs Report Shows Importing Community Doing a Good Job

US Customs recently published its 2010 mid-year fiscal report entitled, “Import Trade Trends.” Not surprisingly, after the IRS and Social Security Administration, money collected through US Customs is the third largest source of revenue for the US government.

What may be surprising however, is that only 29% of imported goods are dutiable! The remaining 71% are either duty-free or free under a preferential tariff program.

In case you think this sounds charitable on the part of the U.S., think again. Just as benefits to some foreign imports exist at our borders, the same goes for U.S. products entering those other countries. It is not so much that the U.S. wants to give another country a “hand” (though it may be framed that way in the media), but the idea behind preferential trade agreements is to help facilitate greater U.S. exports by causing more favorable conditions of our products in to foreign lands.

Of interest in the report is that starting last year, China – a country the U.S. does not have a preferential trade agreement with – surpassed Canada – a country the U.S. has NAFTA (North American Free Trade Agreement) with – as the top source of imports for America. China is further projected to maintain this lead into 2011.

So far, the first 6 months of the 2010 fiscal year has resulted in $15 billion in revenue for the federal government. Not only that, but a random sampling by US Customs showed that 98.6% of these 2010 imports were materially compliant with the regulations and trade laws of the U.S.

Not only is this rate higher than in recent years, but it demonstrates that importers, and those of us who help importers be compliant, are doing a pretty good job.

Priority trade issues include those involving:

-Textiles - Penalties

- Intellectual Property Rights

- Antidumping and Countervailing Duties

-Import Safety - Agriculture

-Revenue Collection

Lastly, in the spirit of increased partnering with the public, US Customs has a new online reporting system called “e-Allegations” to report suspected illegal import/export activity as well as the US Customs Freedom of Information Act (FOIA) Electronic Reading Room.

For importers specifically, the new phase of ACE was rolled out and is now capable of processing 98% of the entry summaries received by US Customs.

To read the full report, click here.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Minding Your T's&C's (Terms and Conditions)

For better or worse, there is no escaping my international trade legal life - not even on vacation. The liabilities and implications about “you-name-it” run through my head as scenarios present themselves.

I am currently sitting on a train in DC without air conditioning with a temperature of 93 degrees Fahrenheit outside. The engine needs to be replaced for our journey, and well, Amtrak figures it’s better to do that now than endure a long train ride to NYC without A/C. In an effort to keep my thoughts elsewhere, I am observing everything around.

One thing that caught my eye was a guy driving a United Tractor with cargo stacked on a pallet. Around the cargo was plastic wrap which is intended to keep the boxes on top of the pallet secure. What I specifically noticed was that the lowest layer of the plastic wrap had come undone and not only that, but the operator drove right over the plastic wrap until it snapped off. I thought at some point there might be a box or two that would fall off but it didn’t happen. Not yet anyway…

Now, one type of transit that I rarely think about is that of moving cargo by train. While in certain jurisdictions, incidents involving the rails could come in under COGSA (Carriage of Goods by Sea Act) as an extension of the waterborne shipment, representation of railroads is not a typical part of my practice.

Observing this about-to-be-damaged-cargo scene got me thinking about liabilities and causation.

The question is always the same in cargo loss cases – where did the damage happen? Right now, the cargo was probably delivered in “good condition” and can possibly be placed on the train as well in good condition. But what about when it comes off the train? What if a box falls off and then something inside gets damaged? Or what if it gets picked up by a trucker which makes no notation of the missing plastic – i.e., potential liability – because it never saw that piece of plastic wrap and doesn’t know that it was even missing? Then, what if when it gets delivered, something is found to be damaged? I could go through a bunch of “what if” scenarios – trust me. But I will spare you.

The point of all of this is that since cargo can be damaged during any part of the journey and for any reason, be it oversight or otherwise, intentional or unintentional, it is important that as a participant in the movement of cargo, that the terms and conditions under which it's transit is to take place must be (a) clear and (b) have real limits to liability, such as a $50 limitation per shipment unless the shipper declares a specific amount and pays a premium for having coverage that would cover the cost of the shipment in the event of an accident.

The terms and conditions should also have specific provisions regarding making claims, such as timeframes from the date of the incident for filing, as well as a protocol for making such claims.

Lastly, there needs to be something indicating the assent of the shipper to the terms and conditions under which the transit is to occur.

At the end of the day, any prudent shipper of cargo will have purchased insurance on the shipment, so that merely filing an insurance claim is all to be done. These terms and conditions therefore become important in terms of defending a claim for monetary damages when the insurance company turns around and sues the transit parties in subrogation.

Rather than being faced with payment of a proportional share of the overall cost of damages to the cargo, the ceiling becomes your limitation – at least in theory anyway. Sometimes it is just cheaper to kick in $1K or $2K to get rid of a case than to hold out to test the theory, given the high cost of litigation and all.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Prior Disclosure - To Make or Not to Make...

“US Customs is moving in the direction of aggressive penalties for non-compliance.  When US Customs conducts a compliance assessment, an importer must be 99% compliant (i.e., US Customs only allows a 1% error rate) in order to be considered compliant.” -- Assistant Field Director, US Customs Field Office - NYC

Every importer is aware – or should be aware – of the imposition of penalties for the failure to follow US Customs regulations.
 
Even if an importer believes it has been compliant, an internal audit or other self-assessment, can reveal areas where errors have been made, and some of these may have resulted in a loss of revenue to US Customs whether of liquidated, or unliquidated, entries.
 
So what is an importer to do?  Is it better to present the issue(s) to US Customs?  And if so, how does an importer go about doing that without opening up “Pandora's Box” in terms of auditing, or the delay of shipments, on the part of US Customs now that you have put yourself on its radar? Is it better to stay under the radar?
 
Clearly, if a post-entry amendment can be done to rectify the mishap, that is an easy way to resolve the issue. 
 
But what if the impact of a seemingly small discrepancy actually extends across years of entries?  Or perhaps, the discrepancy is narrow in terms of the volume of entries, but nonetheless resulted in a gross underdeclaration of duties?
 
Well, now there is a serious problem to deal with.  Unfortunately, the problem can be a much much (yes, I wrote the word twice) bigger one.  Let me explain why.
 
First of all, 19 USC §1592 sets forth the penalty assessments for failing to pay lawful duties.  The penalties differ based upon a range of culpability, ranging from fraud (the most serious), to gross negligence, to negligence (least serious offensive).
 
They are as follows:
 
Fraud violations = the domestic value of the merchandise.
 
Gross negligence violations =
(A) The lesser of
(i) four times (4x) the loss of lawful duties, taxes, and fees deprived the government, or,
(ii) the domestic value, or,
(B) 40% of the dutiable value, but in no case to exceed the domestic value of the merchandise, if the violation did not affect the assessment of duties.
 
Negligence violations =
(A) The lesser of:
(i)two times (2x) the loss of lawful duties, taxes, and fees deprived the government or,
(ii)the domestic value, or,

(B) 20% of the dutiable value, but in no case to exceed the domestic value of the merchandise, if the violation did not affect the assessment of duties.
 
Of course, there is always the option to try and mitigate the above duties, which would reduce the penalties as follows:
 
• Fraud – from a minimum of 5 times (5x) to a maximum of 8 times (8x) the total duty loss, or 50% to 80% of the dutiable value in non-revenue loss cases, but never to exceed the domestic value of the merchandise;

• Gross negligence – from a minimum of 2.5 times (2.5x) to a maximum of 4 times (4x) the total duty loss, or 25% to 40% of the dutiable value in non-revenue loss cases, but never to exceed the domestic value of the merchandise; or

• Negligence – from a minimum of 0.5 times (0.5x) to a maximum of 2 times (2x) the total duty loss or 5% to 20% of the dutiable value in non-revenue loss cases, but never to exceed the domestic value of the merchandise.
 
Contrast these penalties, including the possibility of mitigation, to that of when an importer does make a prior disclosure.

The penalty is zero (0) if the importations involve unliquidated (i.e., open) Customs entries and no fraud is involved.

If the entries are liquidated (i.e., closed or finalized) and no fraud is involved, the penalty is the interest on the loss of duties.

If a fraudulent violation is disclosed, the penalty is reduced from the regular assessment of the domestic value of the goods to 1 times (1x) the duty loss, or if the violation involves no duty loss, the penalty is reduced to 10% of the dutiable value of the merchandise.

Based on these figures, at face value, making a prior disclosure (codified in 19 USC §1592(c)(4)) would appear to be the prudent path to take. After all, by doing so, penalties are substantially reduced.

A prior disclosure must be submitted prior to the commencement of a “formal investigation” by US Customs. There are many rules regarding how to make the prior disclosure and what must be included within it in order to be considered valid, including, the circumstances of a violation of 19 USC §1592, and a tender of any duty loss.
 
US Customs regulations for Prior Disclosure are found in 19 CFR §162.74 and more information about it can be found in Customs informed compliance publication entitled “The ABCs of Prior Disclosure.” 
 
Questions/comments?  Email me at clark.deanna@gmail.com or post below.

Heartbreaking Oil Spill in the Gulf of Mexico

"The NOAA Ship Pisces reported a dead 25-foot sperm whale was located 150 miles due south of Pascagoula, Mississippi and approximately 77 miles due south of the spill site earlier this week. The whale was decomposed and heavily scavenged. Samples of skin and blubber will be analyzed. Sperm whales are the only endangered resident cetacean in the Upper Gulf of Mexico.

A total of 461 sea turtles have been verified from April 30 to June 16 within the designated spill area from the Texas/Louisiana border to Apalachicola, Florida. Of the 461 turtles verified from April 30 to June 16, a total of 355 stranded turtles were found dead, 34 stranded alive. Four of those subsequently died."

-as reported on June 16, 2010 by the Dept. of Commerce’s National Oceanic and Atmospheric Administration. Click here to go directly to this webpage.


Having gone to Tulane Law School down in New Orleans, LA and personally traveled to both the Louisiana wetlands and Gulf Shores of Mississippi, this seemingly endless oil spill is breaking my heart.

Known as the “Deep Water Horizon Oil Spill,” this could-have-been-avoided “accident” has yet to be contained despite a month having passed since its commencement. Given that this literally growing problem must be affecting vessel operators and others involved with international trade, I decided to take a look at the Federal Maritime Commission’s (FMC) website to see what it had to say.

The FMC has an entire section of its website dedicated to this incident. It is monitoring the spill's potential effects on shipping lines, rates, schedules, ports, and terminals and offers a number of resources. In addition, it is providing expedited review for agreements to facilitate adjustments that may be required as a result of the spill or response activities. Through the link above, the FMC further directs interested parties as to where they need to go for relief.

The FMC has incident sheets, response updates from various government agencies and interestingly, the NOAA’s website allows you to see trajectories (scroll down the page until you see the section entitled “Current Trajectory Maps”) which are updated once a day and include trajections based in part, on weather patterns, of the spill’s growth and direction.

Let’s hope that the hole on the ocean floor gets plugged soon. With hurricane season here, it's only a matter of time before the siphoning project will have to be put on hold.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Toxic Purses?

Earlier this week I saw a news piece on Headline News about toxics in handbags. It mentioned how over time as you get to love your handbag, i.e., the more it is worn, the greater the risk of releasing chemicals which were not on its surface thereby exposing yourself to them.

In an effort to reduce shopper concerns, retailers including Saks Fifth Ave., Target, TJMAXX, and many others, all agreed (according to Headline News) to not sell products with contaminants in them.

But how does a retailer actually prevent this? And given the nature of manufacturing in today’s modern world, how can exposure to toxics (which lie beneath the surface) over a certain amount of time be avoided?

At the federal level, the Consumer Product Safety Commission (CPSC) has regulations regarding maximum levels of certain chemicals, such as Lead and Pthalates in consumer products. CPSC has also found lead to not be naturally occurring in certain articles, like cotton.

On top of federal regulations, however, some states, like CA, have taken matters into their own hands when it comes to the protection of consumers. It has done this through a law that came out in the 1980s (and is gaining renewed momentum) called Proposition 65.

Proposition 65 requires businesses to warn people about significant amounts of chemicals in the products they make where that chemical is both (1) known to cause cancer, birth defects or other reproductive harm, and (2) is listed on the “Prop 65 List.”

California’s Prop 65 in its simplest terms, requires a label where a product contains a chemical compound that exceeds the Safe Harbor Level. Safe Harbor determinations are based on a person’s exposure to a chemical, assuming daily exposure at that level.

The warning to consumers is typically done via the placement of a “warning label” directly onto the merchandise itself.

Retailers and importers therefore, need to test their products (typically done at the production level) for the existence of these chemicals and, if found, are subject to the label requirement.

As for which parts to test, merchandise is subject to testing for all parts to which a user may come into contact with, or otherwise be exposed to. Therefore, all outer and inner surface materials require testing.

With all of the recent buzz around the existence of chemicals in consumer products, namely with lead, phthalates and cadmium, I decided to look into the Proposition 65 rules regarding these 3 chemicals.

While stated in simple terms, there are technically several subdivisions of each of these chemicals, only a handful of which are on the Prop 65 List and therefore, subject to testing. They are:

5 Listed Phthalates:

Di(2-ethylhexyl)phthalate) (DEHP)
Di-n-butyl phthalate (DBP)
Di-n-hexyl phthalate (DnHP)
Butyl benzyl phthalate (BBP)
Di-isodecyl phthalate (DIDP)

4 Types of Lead:

Lead
Lead acetate
Lead phosphate
Lead subacetate

1 Type of Cadmium

Cadmium

California’s Office of Environmental Health Hazard Assessment (OEHHA) provides a list of “Safe Harbor Levels,” of which there are 2 types (NSRLs and MADLs (defined below)). These levels are intended to assist in determining whether warnings are required on products for exposures to the listed chemicals because if those levels are exceeded, a label is required.

According to Susan Luong of the Prop 65 Office, however, they are not intended to provide a “maximum acceptable amount” of a chemical in a product (like how CPSCs regulations provide) because there is no established allowable concentration level for listed chemicals.

In my experience working with importers who want to be compliant with state and federal laws, having limits but declaring that they are not maximums is confusing. This is because in order to be compliant, there need to be straightforward rules so that those entities subject to penalties for not following them, understand what needs to be done and can add measures to their compliance programs as appropriate.

With more companies being the target of these laws due to greater consumer awareness, it is imperative that federal and state agencies give manufacturers, importers and retailers the information they need to be compliant.

NSRL ("No Significant Risk Levels" (NSRLs) for carcinogens)
MADL ("Maximum Allowable Dose Levels" (MADLs) for chemicals that cause reproductive toxicity)

Questions/comments? Post below or email me at clark.deanna@gmail.com

OWIT-NY Event - Seaport Enforcement at New York/Newark Port

"Processing Cargo at the Port of New York/Newark," featuring U.S. Customs and Border Protection Chief Kevin H. McCabe, Seaport Enforcement Branch

THIS WEDNESDAY JUNE 9, 2010

This week OWIT-NY is having its final program of the Spring season with Officer Kevin McCabe from our local port. Having met the very friendly and knowledgeable Mr. McCabe last fall while taking a tour of, and on, his turf, namely, the Port of New York/Newark, I found his wealth of knowledge and easy going nature a welcoming personality at US Customs.

Officer McCabe plans to speak on subjects including:

Advanced Targeting Information
Container Security Initiative (CSI)
Customs Trade Partnership Against Terrorism (C-TPAT)
Radiation Screening, Detection and Mitigation
Non-Intrusive Inspections (container x-ray)
Physical Examination of Cargo
Internal Conspiracy Threats
Cargo Examinations
Special and Joint Operations

and he will be available to answer any questions we in the audience may have. You won't be disappointed if you come and join me there this week. Click here for more information and to register.

Hope to see you there!

Questions/comments? Post below or email me at clark.deanna@gmail.com

Anti-dumping and Countervailing Duties – What the Heck Are They?

I remember hearing in the news earlier this year that China wanted to retaliate against the U.S. for an anti-dumping duty imposed on tire imports from China. I also remember seeing a Customs entry with the duty amount included on the Entry Summary for an importation of certain tires, and the conference call wherein the client was, well, freaked out as the hefty amount of the anti-dumping duty was more than double the invoice price of the tires themselves.

In case what I've written above doesn't make any sense, in everyday language, this means that once this antidumping duty was added onto the cost of the merchandise plus freight, etc., the tires would have (presumably) been cheaper to have just bought them from a manufacturer here in the U.S.

“Combating” this type of commercial behavior on the part of foreign markets is precisely what these anti-dumping duties (ADD) and countervailing duties (CVD) are intended to prevent. They're essentially a tax that makes an imported product more expensive.

Let me provide some definitions. Anti-dumping occurs when a foreign company sells a product in the U.S. at less than fair value. Hence, ADD are intended to offset the lower prices.

Countervailing duties address the receipt of government subsidies that benefit those parties involved in the production of, manufacture, or exportation of goods.

When a domestic producer believes that its market here in the U.S. is being harmed by a flood of lower priced imports of the same product from other countries, it can petition the Dept. of Commerce (DOC) to impose an ADD, a CVD, or both.

DOC makes an ADD or CVD determination after a lengthy investigatory process that includes collecting data, by way of questionnaires, from domestic and foreign manufacturers, and foreign exporters of the product. Foreign manufacturers or foreign exporters may request a “separate rate,” in order to receive a lower ADD or CVD rate. For those who do not make this request, imports by these foreign manufacturers or foreign exporters are subject to the “All Others” rate.

I had an interesting conversation with Sam Zengotitabengoa (love his last name) from the DOC's International Trade Administration office recently regarding the preliminary determinations made for an ADD and CVD on ribbon. Specifically, it was on “Narrow Woven Ribbons with Woven Selvedge from the People's Republic of China and Taiwan” affecting HTSUS subheadings 5806.32.1020, 5806.32.1030, 5806.32.1050, and 5806.32.1060, with other “catch all” language to bring in other types of ribbon.

Preliminary Determination:
ADD “All Others” Cash Deposit Rate: 231.40%
CVD “All Others” Cash Deposit Rate: 59.49%

When a preliminary determination is made, DOC notifies US Customs with instructions on what “cash deposit” to collect. It can either be made in the form of a cash deposit or a bond in the amount of the ADD or CVD owed. (As an aside, from what I've heard, it sounds like surety companies are not really on board with issuing a bond for ADD or CVD cash deposits, which has been demonstrated in part by all the hoops that need to be jumped through in order to obtain one for ADD/CVD purposes.)

Since no notice with respect to the ADD case was made regarding the cash deposit despite publication in the Federal Register that it would be instructing US Customs about it (at least none had been at the time I started writing this post), I had no choice but to put a call in to the DOC (Sam). After all, how can I advise clients as to cash deposits if there are no public instructions explaining what to do? And, how does the importing community know how to be compliant – and US Customs for that matter – if the DOC never instructed us on what to do?

US Customs has a web page that is supposed to inform the importing community what DOC instructions are. Sam and I looked together to confirm that no public notice had been published by Customs on its website even though DOC had issued the “message” (message no. 0070303) on March 11, 2010. He therefore, emailed me the message which I thought was quite kind of him.

Some important upcoming time frames are:

24-Jun-10
To file entry of appearance with the Secretary of the Commission [USITC Rules § 201.11(b)(3)]
7-Jul-10
To file pre-hearing brief (mandatory ) [USITC Rules § 207.23]
8-Jul-10
Requests to appear at hearing in connection with the Final Phase
9-Jul-10
9:30 a.m. Prehearing conference for those desiring to appear at hearing and make oral presentation
11-Jul-10
To file written testimony in connection with your presentation at the hearing [ USITC Rules § 207.24]
15-Jul-10
Hearing in connection with the Final Phase
22-Jul-10
To file post-hearing briefs [USITC Rules § 207.25]
22-Jul-10
For a non-party to file a written statement in support or opposition to the petition
6-Aug-10
USITC to provide parties all info. on which no opportunity to comment had been given
10-Aug-10
Final comments due - must not contain new factual info.

FYI - Message no. 0070303 is on the Customs ADD/CVD website.

Questions/comments? Email me at clark.deanna@gmail.com or post below.

2010 World Trade Week NYC

Join me and other OWIT-NY members this Tuesday for a networking cocktail hour to celebrate World Trade Week. You will connect with business owners and professionals, all active in the global arena.

Date: Tuesday May 18, 2010.
Time: 6:00 pm to 8:00 pm
Venue: Public House Restaurant, 140 East 41 Street b/w Lexington and Third Avenue, NYC

The mission of World Trade Week NYC is to underscore and promote the importance of international trade to the New York City metropolitan area economy. New Yorkers depend heavily on international commerce for their jobs, standard of living, and the myriad goods and services available to its diverse population. World Trade Week NYC is part of an annual nationwide celebration of international trade observed by business, and trade-related organizations across the United States during the third week of May. For more information on World Trade Week 2010 events, please click here.

The Awards Breakfast, scheduled for May 17th, recognizes outstanding companies that have grown through global expansion. OWIT-NY will be exhibiting at the breakfast for the first time, as this is the great market place to meet fellow international traders and learn the latest trends in our industry. I will be at the OWIT-NY booth and the Awards Breakfast. Here is the address:

Baruch College
55 Lexington Ave., 14th Floor
New York, New York

Hope to see you there!

Fashion Law 101

"Very interesting and informative. Especially her real life experience stories."

"She was great and I loved how she connected actively with all of us!"

"I liked best how well Deanna explained the terms and ideas of international trade law."

-- Feedback from various students

Last month I gave a lecture on International Trade Law with a focus on the apparel and textile industries at the Fashion Institute of Technology. In preparing for it I realized that an hour and a half was only going to be enough time to skim the surface of international trade topics as they related to apparel and textiles. In addition, since the course I was guest lecturing in is entitled “Global Marketing of Luxury Goods,” I wanted to tie in marketing issues as they related to the agencies for whose regulations US Customs enforces at the border.

Recognizing that these students would be working in areas involving sourcing, marketing, logistics, buying, and dozens of other areas, in my attempt to provide a broad overview, I started with what the main legal issues are for fashion and luxury imports and I did this by talking about those agencies which are heavily regulatory of apparel. Some examples include the Consumer Safety Product Safety Commission (CPSC) which requires, inter alia, certificates for certain imports of apparel for lead content, lead paint, and flammability issues. The Federal Trade Commission is another agency dealing with issues such as care label requirements (for washing/dry cleaning/ironing) and fiber content.

I further had a number of props that I passed around to students so that they could take a closer look at articles that dealt with the compliance issues I had raised. One frilly women's underwear that I passed around to demonstrate the FTC and CPSC issues, further provided an example regarding loose threads on a garment, as this panty had a lot of loose strings hanging from it. I wanted the students to know that some U.S. companies have inspectors in the foreign country from which the product is being exported. They inspect the merchandise to ensure that it is of a quality that the buyer approves of, and that some large buyers reject goods overseas leaving the importer to find a secondary buyer, such as a Marshall's or T.J. MAXX.

I also talked about US Customs issues (big surprise) such as proper country of origin determinations, the marking of products, and I led a discussion around how to classify articles and in particular a woman's bridesmaid dress.

Lastly, I wrapped up the lecture with a number of images that I took while in China in December. I wanted students to think about challenging assumptions, an example of this being an image I had of a sweatshop in Macau that took up a floor in a non-descript building. I figured it was important that the students recognize that other countries do not operate like the U.S., and when working with foreign companies, to recognize that our assumptions as to what something may look like, or how it might operate, is not necessarily that for which we have some familiarity with.

All in all, between my presentation and the contributions from the professor, Henry Welt, based on the student feedback I received after the presentation, the lecture was a success. Of course, I enjoyed giving the lecture immensely and look forward to an opportunity when I may do it again.

Questions/comments? Email me at clark.deanna@gmail.com or post below.