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