Focused Assessments and Compliance Improvement Plans

Importers are chosen for a Focused Assessment (FA) audit by US Customs for any number of factors related to, inter alia (i.e., “among other things” in everyday language), the type of products imported, the gross dollar value of annual imports, or the way in which entry summary declarations have been prepared.

Where Customs finds that an “unacceptable risk” exists following the completion of the first part of an FA, known as the “Pre Assessment Survey” (PAS), it is not uncommon that it will recommend that the importer prepare a Compliance Improvement Plan (CIP). This plan is prepared by the importer and is supposed to address what types of corrective action the company will take in order to correct the deficiencies identified by Customs, as well as to ensure future compliance.

Examples of deficiencies that could be dubbed an “unacceptable risk,” include that of an incorrect classification, and hence, the issue regarding the payment of the correct amount of duties arises, the lack of inclusion in the dutiable value of something known as an “assist,” which could be the additional cost of a hanger provided to the foreign vendor by the importer, or a failure to have the requisite approvals in the entry packet for the usage of another company’s logo on a product.

The rule is that where an importer elects to implement a CIP, it has a conditional period of six months from the date of the audit report to implement the CIP. Be aware that although this is the rule, a CIP may be asked of an importer where only the draft conclusions to the PAS exists, and the importer is still awaiting the final results from the PAS.

Since Customs does not consider that unacceptable risks are necessarily eliminated until the CIP has been implemented and shown to be effective, preparing the CIP once deficiencies have been identified officially in the draft PAS, and more importantly, implementing internal control procedures once a “risk” area has been identified so as to resolve it, are both areas to promptly take action on.

For more information on customs audits generally, click here.

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

The African Fashion Industry and AGOA

“Africa is in the spotlight – African designers make bright colored clothes that reflects who Africans are. Designers from the West are noticing that and hopping into the cultural and tribal trends…”
-- Romula Sadiq, Fashion Editor-in-Chief, “HauTe Fashion Africa.com”

I just submitted a paper to a fashion conference about the African Fashion Industry and the African Growth and Opportunity Act (AGOA), which is preferential trade agreement between the United States (US) and multiple Sub-Saharan African countries (SSAs).

Africa’s fashion industry is growing exponentially thanks to the internet, which has not only extended its reach, but has also provided a lens for the outer world to look in to Africa and in particular, Sub-Saharan Africa.

This has become ever-increasingly possible with rise in African “Fashion Weeks” including, “Mali Fashion Week,” “Joburg Fashion Week,” “Capetown Fashion Week,” and “Africa Fashion International,” which, according to Ms. Sadiq, have sparked a curiosity amongst Western designers seeking African inspiration.

AGOA was enacted with the hope that it would not only change the trade relationship between the US and SSAs, but that new opportunities would be created for millions of SSA families to build prosperity. Following three (3) expansions, AGOA has evolved into its current version known as “AGOA IV,” and unless another extension is implemented, it will expire in 2015.

The benefit of AGOA, as it applies to the African fashion industry, relates to a unique section providing for duty-free entry (i.e., a 0% duty rate) of textiles and apparel (TAP) when imported directly into the US from an SSA. (HTSUS, 2011) This means e.g., that for a $100 importation of women’s knit cotton shirts, normally subject to a duty rate of 19.7%, rather than costing a total of $119.70 to import [$100 for the shirts + $19.70 in duties], it costs only $100 thereby making it a less expensive product to bring into the US market and therefore, more attractive to the consumer.

This is not however, simply available to an AGOA member SSA. Rather, the US only makes TAP benefits available to those SSAs who have an enforcement mechanism to prevent the illegal transshipment of merchandise, as well as a “Visa Arrangement,” which is a system in place to ensure compliance with all export requirements under AGOA.

The types of TAP products that qualify for AGOA benefits is not universal either, but rather is limited to nine (9) categories. Generally speaking, AGOA requires that TAP are either sewn or assembled from yarns, thread, fabric and/or knit-to-shape components wholly “originating” from the US or an SSA, meaning that the product in all of its entirety must derive from the growth or manufacture of the US or an SSA.

Flexibility from this origination rule however, is granted to those countries which have Least Developed Country (LDC) status which allows non-African components to be used in the manufacture of TAP and yet still be AGOA eligible.

A helpful resource at the U.S. Department of Commerce, Office of Textiles and Apparel, is Donald Niewiaroski, who is incredibly knowledgeable about the AGOA and in particular about the TAP provisions. (He may be contacted at Donald.Niewiaroski@trade.gov)

Don informed me that legislation was introduced recently to extend the LDC provisions through September 30, 2015. It also would make the new nation of South Sudan eligible for AGOA, whose President, Salva Kiir Mayardit, is in Washington this week for a special conference to promote development in South Sudan.

Similar legislation (HR 2493) has also been introduced in the House by Ways and Means trade subcommittee. According to Don, ranking Democrat Jim McDermott (Wash) and subcommittee chairman Kevin Brady (R-Texas) are hoping the legislation can be passed by Congress before lawmakers adjourn for the year.

Other senators co-sponsoring the bill are Foreign Relations Chairman John Kerry (D-Mass) and ranking member Richard Lugar (R-Ind) along with Sens. Ron Wyden (D-Ore), Roy Blunt (R-Mo), Dick Durbin (D-Ill), Scott Brown (R-Mass), Ben Cardin (D-Md), Johnny Isakson (R-Ga), Chris Coons (D-Del) and John Thune (R-SD).

Questions/comments? Feel free to post below or email me at clark.deanna@gmail.com

When is a Tote Bag a Wallet?

Never obviously, at least not under the Harmonized Tariff Schedule of the United States (HSTUS).

But what about when you have a make-up bag that could double as a wallet or snack bag? When does size matter when it comes to an HTSUS classification determination?

What about when you have a lunch bag that is made out of a textile? Will the classification turn on it being coated in a plastic coating? What about a rubber/plastic combo?

While I will pass on answering the question about when “size matters,” I can tell you that a duty rate can significantly jump when an article is considered to be coated with an outer surface of plastic versus that of a textile.

Take HTSUS subheading 4202.32 which classifies articles of a kind normally carried in the pocket or in the handbag. The rate of duty on this type of product, such as a make-up bag, when it has an outer surface of cotton is 6.3%.

Contrast this to the same article with an outer surface of a reinforced or laminated plastic, such as a resusable lunch bag. Now an importer is looking at paying a compound rate of duty of 12.1¢ per kilogram, along with an additional 4.6% on top of that.

The rate of duty on most products is typically an ad valorem rate, i.e., a percentage, of the invoice total. On occasion, a product will have a "compound" rate of duty which represents a per unit or per measure (e.g. 10¢/kg) price PLUS an additional ad valorem rate of duty for duty calculation purposes.

Moreover, where the same article is coated in a sheeting of plastic that is neither of reinforced or a laminated plastic, now that same article will have a 20% rate of duty, all because of the outer material of the product.

Nuances like these are rife throughout the tariff. I would recommend that importers take a periodic review of its imports to confirm that its use of HTSUS classifications are correct in order to identify any errors – as the HTSUS changes throughout the year – as well as to avoid future penalties due to stopped shipments or customs audits where inadvertent classifications may be discovered and outstanding duties across multiple entries may be sought.

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

CPSC Compliance and Consumer Products Not Intended for Children

Importers and the government can often take radically opposite positions when it comes to what is considered a children’s product. Given the myriad of extra regulations surrounding goods for children, it is no wonder that so many importers try to steer clear of having what they consider to not be children's product, identified as such.

The difficulty arises however, when dealing with an article that could be considered attractive to a child. A 3-inch sized colorfully painted object, intended to be merely a decorative household item, could ultimately be considered a toy or children’s product by a government agency. The same holds for a decorative plush good that had not been intended for sale to children but could easily double as a children’s plush toy.

While some imports are an obvious decorative housewares product, such as a large wall plaque with a beer logo on it, with such attachments for hanging already affixed to it, and is therefore, clearly identifiable as not being intended for a child, others simply do not hold water when it comes to the government’s determination as to it not being a children’s article.

With regards to compliance, any imported article with paint or some other surface coating would be subject to Consumer Product Safety Commission’s (CPSC) rules and require lead paint testing if it is considered a “children’s product” by the government.

In addition to the surface coating issue, when children’s products are involved, there are also lead testing (separate from the lead paint issue), tracking label and other possible rules, such as that regarding small parts which must be adhered to.

Once the testing is complete, then there is the general certificate of conformity requirement that must accompany the shipment attesting to its compliance with the various CPSC rules. This certificate would need to be retained in accordance with Customs record keeping rules and be furnished upon request by Customs and retailers and distributors here in the US.

In addition, if you are planning to have goods shipped into California, or if you have reason to know that they might end up there, it should be noted that the state typically has more stringent rules than those at the national level.

For more information about importation of children’s products, go to www.cpsc.gov.

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

Are Your Imports Flammable?

Merchandise that is potentially flammable such as apparel, is subject to flammability testing in order to confirm its acceptability for importation. Wearing apparel that is determined to be flammable, or that for which has not been tested to gauge its ability to ignite, may not be imported into the U.S. nor offered for sale here.

Simply put, it is banned.

Banned from importation, banned from sale here in the U.S., and banned from even the offer of sale.

Articles such as sturdy textile costumes*, including those which would be tied on, whether of a bib style or a waist-to-knee variety, are typically treated as articles of apparel and clothing accessories by US Customs as well as under the Flammable Fabrics Act (FFA). (*This type of costume is not to be confused with a flimsy variety which would be classified under Chapter 95 HTSUS)

Since they are considered apparel, this merchandise is subject to the flammability regulations set forth in 16 CFR Part 1610.

All textile fabrics intended, or sold for use in, wearing apparel, and all such fabrics contained in articles of wearing apparel, are subject to the requirements of the FFA, which are enforced by the Consumer Product Safety Commission (“CPSC”). [1]

Under FFA, when a fabric (or any uncovered or exposed part of it) is so highly flammable as to be dangerous when worn by individuals, and where it exhibits a rapid and intense burning when tested under the testing conditions set forth in Subpart A of 16 CFR Part 1610, it is prohibited from importation, and banned for sale or offer for sale here in the U.S.

The purpose of the FFA testing requirements is to prohibit the use of any dangerously flammable clothing textiles in order to reduce the danger of injury and loss of life. [2] With regards to general labeling requirements for adult wearing apparel, information about the fiber content, country of origin and RN number information should be included.

While a label is not required to be sewn onto the apparel indicating CPSC compliance, or non-compliance,[3] a General Certificate of Conformity is required with importations of apparel that declares that compliance with CPSC enforced laws – including FFA - has been met. This certificate must also be kept for both recordkeeping purposes as well as to furnish to retailers and/or CPSC upon request.

CPSC is the enforcement agency for violations of the FFA and under the current regulations, the maximum penalty amount for a known violation is $100,000, with a maximum penalty for any related series of violations being $15,000,000.[4]

With penalties this extreme, it is imperative that importers obtain the requisite compliance advice pre-importation rather than to cut corners and be put out of business later.

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

[1] The requirements of 16 CFR §1610.1(e) state that “[t]he requirements of this part 1610 shall apply to textile fabric or related material in a form or state ready for use in an article of wearing apparel, including garments and costumes finished for consumer use.”
[2] 16 CFR §1610.1.
[3] While California’s Proposition 65, which deals with levels of chemicals, requires a label when a product is not in compliance, federal regulations do not require such labeling under the flammability rules as the product is merely banned from importation and/or sale.
[4] CPSIA Sec. 217(a)(4).

Duty Drawback Event This Wed. With OWIT-NY

Come join me Wednesday evening for an informative discussion exploring the benefits of using drawback for duty savings.

Date: Wednesday, November 16th, 2011
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-NY members, students and government employees, $25 for non-members

OWIT-NY guest speaker Brenda L. Sweetman has 25 + years experience in the field. She is the Vice President of C.J. Holt & Co., Inc. (CJH), a company that specializes in full service duty drawback assistance. She has managed drawback programs for companies in a wide variety of industries and now focuses on new account development. Brenda taught drawback courses for the World Trade Institute for many years and is now doing the same for World Academy. She is also a member of the teaching staff at Global Trade Academy and has also authored many articles on the topic of duty drawback.

About OWIT-NY:

The Organization of Women in International Trade - New York (OWIT-NY) is a non-profit organization that provides support, inspiration, information and networking opportunities to women and men who are active members of the international trade community.

Our members represent a diverse range of occupations, including banking, finance, communications, customs and trade law, education, government and diplomacy, import and export trade, insurance, technology, trade-related non-profits, transportation and international services.

OWIT-NY is an affiliate chapter of the Organization of Women in International Trade (OWIT).

To register for this event click here. Hope to see you there!

US Customs Perspective on Ambiguities in CAFC Decisions

The CAFC is the appeals court for cases that are heard at the U.S.C.I.T. for which appeal is sought by a party that is unhappy with the lower court’s decision. The U.S.C.I.T. hears cases that both relate to US Customs and Border Protection issues, such as those regarding the classification or valuation of merchandise, in addition to hearing what are known in the industry as “trade” cases which deal with anti-dumping duties (ADD) and/or countervailing duty (CVD) issues, whose duties and the rules are governed by the U.S. Dept. of Commerce (DOC).

Last week I had the pleasure of going to the Court of Appeals for the Federal Circuit (CAFC) in Washington D.C. to attend a seminar that dealt, in part, with court decisions and ambiguities therein. Among the speakers was Sandra Bell, Executive Director for the Office of Regulations and Rulings at U.S. Customs, who shared a few thoughts from her agency’s perspective.

US Customs primary interest in court decisions is their impact on the agency to have a clear mandate follow after the decision is made. That is, in her own words, she wanted to see a “bright line rule” so that US Customs could have clear guidance for setting regulatory policy that would be in accordance with court decisions.

Ms. Bell spoke about 2 cases in which US Customs “learned” a bright line rule. In the first case, the court had to consider whether or not US Customs had erred by not accepting certain information from an importer regarding ADD which had not been provided at the time of entry, but which had been later provided pre-liquidation.

When it comes to ADD, US Customs is merely supposed to follow instructions set by the DOC regarding the treatment of imported goods subject to an ADD. US Customs does not have the authority to make independent decisions or rules regarding the cargo when it comes to the application of ADD rules on imports.

Despite this, US Customs nonetheless denied the acceptance of the importer’s post-entry submission of information with respect to ADD, deeming it to be untimely as it had not been filed at the time of entry, and ultimately denied the Protest made by the importer (who claimed it had filed all of the requisite information) despite it having been timely filed.

The outcome of this case - or in other words, the Bright Line Rule - was that when applying DOC instructions, US Customs is required to consider additional information properly provided in a Protest and by not doing so, it’s actions had been wrong.

Another example of a case that had a “bright line” was CBB Group, Inc. v. United States, Slip Op. 11-75.

This case dealt with a detention by US Customs of plush toys with a protected trademark on the toys. Rather than seizing the goods, US Customs merely detained them without making a decision on the status of the goods. It detained them for so long that they were ultimately considered a “deemed exclusion.”

CBB Group filed a Protest which was denied by US Customs and the very next day CBB Group went to the U.S.C.I.T. and filed a Summons to begin the process of judicial review of the action taken by US Customs. Oddly enough, US Customs decided at virtually the same time, but not before the Summons had been filed, to seize the goods.

The question presented to the court was thus a jurisdictional one: Whether or not Customs was still able to control the cargo now that a court case had been commenced, or if instead, that jurisdiction was now with the court.

The outcome of this case was that once jurisdiction had already been attached by the U.S.C.I.T., it was no longer within the purview of US Customs to take further action with respect to the cargo.

Both of these cases reflected outcomes that were unfavorable to US Customs however, both provided guidance with respect to how to treat cargo under specific circumstances, and for this they were instructive and of value to the agency according to Ms. Bell.

Whether the case was favorable to the agency or not, what mattered was that there was clear guidance with respect to agency action that came out of the decision.

Contrasting these decisions to a different one, another speaker made reference to the Le Mans Corporation v. US, 2010-1295 case, in which sportswear for motorcross activity had not been considered as being properly classified under Chapter 95 as articles of sports equipment but were instead classified under Chapter 61 and 62 as apparel.

In this case, a long-established designation for what had been considered sportswear was prima facie challenged (however, upon further discussion it was pointed out by an audience member that a distinction had been made with respect to the padding within the garment itself, causing it to be categorically ineligible - something I am sure other members of the bar could have argued about in disagreement.)

As many other sports equipment cases had been decided under this long-established designation, the court’s decision to not treat these articles in a similar fashion was considered by many to have created an ambiguity within the classification of such products.

Ambiguities may make it harder to know how to classify a particular item, and some would argue that it does. On the flip side of this however, it is the flexible nature of an ambiguous decision itself that can provide for a broader application of a certain set of rules across a wider variety of imports.

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

Advantages of The Foreign Trade Zone

I received an invitation through the Long Island Importers and Exporters Association to take a tour of Long Island’s Foreign Trade Zone (FTZ), known as the “Town of Islip/Foreign Trade Zone 52.”

Created in 1934, the FTZ program was established to stimulate domestic economic growth and development through the promotion of American competitiveness by encouraging companies to maintain and expand their operations in the United States.

The FTZ program encourages U.S.-based operations by removing certain disincentives associated with domestic manufacturing.

What is an FTZ?

FTZs are secure areas under U.S. Customs and Border Protection supervision that are generally considered outside CBP territory upon activation. Located in or near US Customs ports of entry, they are the United States’ version of what are known internationally as free-trade zones.

Under zone procedures, the usual formal US Customs entry procedures and payments of duties are not required on the foreign merchandise unless and until it “enters” the territory of the U.S. for domestic consumption, at which point the importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product (in the event the original goods have now been assembled into a completed different product).

The duty on a product manufactured abroad and imported into the U.S. is assessed on the finished product rather than on its individual parts, materials, or components. The U.S. based manufacturer finds itself at a disadvantage compared with its foreign competitor when it must pay a higher rate on parts, materials, or components imported for use in a manufacturing process.

The FTZ program seeks to correct this imbalance by treating products made in the zone, for the purpose of tariff assessment, as if it were manufactured abroad. At the same time, the United States benefits because the zone manufacturer uses U.S. labor, services, and inputs.

Another benefit is that domestic goods moved into an FTZ for export may be considered exported upon admission to the zone for purposes of excise tax rebates and drawback. Goods may also be exported from the zone free of duty and excise tax after being reworked or merely being warehoused there temporarily.

US Customs is responsible for the transfer of merchandise into and out of the FTZ and for matters involving the collection of revenue. The local US Customs Port Director, in whose port a zone is located, is charged with the oversight of zone activity and enforcement as the local representative of the Foreign-Trade Zones Board. The Port Director controls the admission of merchandise into the zone, the handling and disposition of merchandise in the zone, and the removal of merchandise from the zone.
For more information, you can click here and/or contact these offices below directly:

U.S. Department of Commerce
Foreign-Trade Zones Board
1401 Constitution Avenue, NW, Room 2111
Washington, D.C. 20230
Main Phone: (202) 482-2862
(Foreign-Trade Zones Board )

CBP Regulations, 19 CFR Part 146, govern the transfer of merchandise to and from foreign-trade zones. For answers to specific questions contact the Port Director of the CBP port where the zone is located or CBP headquarters at:

U.S. Customs and Border Protection
Office of Field Operations
Cargo and Conveyance Security
1300 Pennsylvania Avenue, NW, Room 5.2C
Washington, D.C. 20229

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

Oct. 25, 2011, 6 PM: The Business Case for Foreign-Trade Zones

Come join me next Tuesday, Oct. 25, 2011 from 6 pm to 8 pm for an Organization of Women in International Trade (OWIT-NY) event about the benefits and uses of Foreign Trade Zones!

Date: Tuesday, October 25th, 2011
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-NY members, students and government employees, $25 for non-members

As companies turn to the supply chain in search of additional cost savings, one of the most untapped areas of value creation is that of Foreign Trade Zones (FTZs).

FTZs were established in 1934 to stimulate economic growth by allowing companies to operate in a specially designated area, outside the Customs territory of the United States. Now, seventy five years later, companies are still generating tremendous returns by reducing or eliminating duty payments, and minimizing transactional costs.

The agenda for this special evening will focus on FTZ’s noting the special privileges granted to U. S. companies to help them remain competitive and help keep American jobs at home. Your presenter for this special evening will be Trudy Huguet, Vice President of Foreign-Trade Zone Corporation.

What you will learn:

• FTZ Program Overview
• The expanded role and duties of U.S. Customs and Border Patrol under the Department of Homeland Security
• The many ways a company may benefit from operating its own FTZ
• The key business benefits to present to senior management for approval
• The overall process to apply for, certify, and operate an FTZ
• Best practices in the on-going administration of your FTZ

To register for the event click here.

Hope to see you there!

The Manufacturer’s I.D. – What Is It?

When merchandise is entered into the U.S., part of the declaration made to US Customs on the entry summary (CBP Form 7501) is that of the Manufacturer Identification Code (MID).

This code is intended to identify the manufacturer of the merchandise and together with the name and address of the invoicing party (whose invoice accompanies the Customs entry), an MID code is constructed.

Special attention should be paid to textile shipments, as the manufacturer should be construed to refer to the actual manufacturer in accordance with 19 CFR §102.23(a) and the Appendix to 19 CFR Part 102 – Textile and Apparel Manufacturer Identification.

This code is required for all entry and entry summaries, including informal entries, filed on CBP form 7501.

So how do we put this code together anyway? The following rules explain how to construct the MID.*

These instructions provide for the construction of an identifying code for a manufacturer or shipper from its name and address. The code can be up to 15 characters in length, with no inserted spaces.

To begin, for the first 2 characters, use the ISO code for the actual country of origin of the goods. The exception to this rule is Canada. “CA” is NOT a valid country for the manufacturer code; instead, show as one of the appropriate province codes listed below:

ALBERTA - XA
BRITISH COLUMBIA - XC
MANITOBA - XM
NEW BRUNSWICK - XB
NEWFOUNDLAND (LABRADOR) - XW
NORTHWEST TERRITORIES - XT
NOVA SCOTIA - XN
NUNAVUT - XV
ONTARIO - XO
PRINCE EDWARD ISLAND - XP
QUEBEC - XQ
SASKATCHEWAN - XS
YUKON TERRITORY - XY

Next, use the first three characters from the first two “words” of the name. If there is only one “word” in the name, then use only the first three characters from the first name. For example, Amalgamated Plastics Corp. would be “AMAPLA” and Bergstrom would be “BER.”

If there are two or more initials together, treat them as a single word. For example, A.B.C. Company or A B C Company would yield “ABCCOM.” O.A.S.I.S. Corp. would yield “OASCOR.” Dr. S.A. Smith yields “DRSA,” Shavings B L Inc. yields “SHABL.”

In the manufacturer name, ignore the English words a, an, and, of, and the. For example, “The Embassy of Spain” would yield “EMBSPA.”

Portions of a name separated by a hyphen are to be treated as a single word. For example, “Rawles-Aden Corp.” or “Rawles – Aden Corp.” would both yield “RAWCOR.” Some names will include numbers. For examples, “20th Century Fox” would yield “20TCEN” and “Concept 2000” yields “CON200.”

Some words in the title of the foreign manufacturer’s name should not be used for the purpose of constructing the MID. For example, most textile factories in Macau start with the same words, “Fabrica de Artigos de Vestuario” which means “Factory of Clothing.” For a factory named “Fabrica de Artigos de Vestuario JUMP HIGH Ltd,” the portion of the factory name that identifies it as a unique entity is “JUMP HIGH.” This is the portion of the name that should be used to construct the MID. Otherwise, all of the MIDs from Macau would be the same, using “FABDE,” which is incorrect.

Similarly, many factories in Indonesia begin with the prefix PT, such as “PT Morich Indo Fashion.” In Russia, other prefixes are used, such as “JSC,” “OAO,” “OOO,” and “ZAO.” These prefixes should be eliminated for the purpose of constructing the MID.

Next, find the largest number on the street address line and use up to the first four numbers. For example, “11455 Main Street Suite 9999” would yield “1145.” A suite number or a post office box should be used if it contains the largest number. For example, “232 Main Street Suite 1234” would yield “1234.” If the numbers in the street address are spelled out, such as “One Thousand Century Plaza,” there will be no numbers in this section of the MID. However, if the address is “One Thousand Century Plaza Suite 345,” this would yield “345.”

When commas or hyphens separate numbers, ignore all punctuation and use the number that remains. For examples, “12,34,56 Alaska Road” and “12-34-56 Alaska Road” would yield “1234.” When numbers are separated by a space, the space is a delimiter and the larger of the two numbers should be selected. For example, “Apt. 509 2727 Cleveland St.” yields “2727.”

Finally, use the first three alpha characters from the city name. “Tokyo” would be “TOK,” “St. Michel” would be “STM,” “18-Mile High” would be “MIL,” and “The Hague” would be “HAG.” Notice that numerals in the city line are to be ignored.

For city-states, use the country name to compose the first three alpha characters. For examples, Hong Kong would be “HON,” Singapore would be “SIN,” and Macau would be “MAC.”

General Rules:

Ignore all punctuation, such as commas, periods, apostrophes and ampersands. Ignore all single character initials, such as the “S” in “Thomas S. Delvaux Company.” Ignore leading spaces in front of any name or address.

Listed below are examples of manufacturer names and addresses and their MID codes:

LA VIE DE FRANCE
243 Rue de la Payees
62591 Bremond, France
MID: FRLAVIE243BRE

20TH CENTURY TECHNOLOGIES
5 Ricardo Munoz, Suite 5880
Caracas, Venezuela
MID: VE20TCEN5880CAR

THE E.K. RODGERS COMPANIES
One Hawthorne Lane
London, England SW1Y5HO
MID: GBEKRODLON

CARDUCCIO AND JONES
88 Canberra Avenue
Sidney, Australia
MID: AUCARJON88SID

N. MINAMI & CO., LTD.
2-6, 8-Chome Isogami-Dori
Fukiai-Ku
Kobe, Japan
MID: JPMINCO26KOB

*These rules are taken from Appendix 2 of DHS’ CBP Form 7501 Instructions, updated March 17, 2011, a copy of which may be obtained here.

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

Oct. 3, 2011 6:30 PM - FASHION, BEAUTY AND STATUS

Come join me this Monday, Oct. 3, 2011 from 6:30 to 8:00 pm for

FASHION, BEAUTY AND STATUS: 1 YEAR ON THE FRONT LINES IN CHINA’S LUXURY AND APPAREL MARKETS

When: Monday, October 3, 2011
Time: 6:30 p.m. - 8:00 p.m.
Location: Katie Murphy Amphitheater, Fred Pomerantz “D” Building, Fashion Institute of Technology, Seventh Avenue at 27th Street, New York City

China is now the number one market in the world for apparel and accessories and is also the world's largest market for a wide-array of other luxury and premium products. Renowned China expert Michael Zakkour, Principal of Technomic Asia, a consulting firm, will take you on a fascinating journey into the world of Chinese fashion, apparel, accessories and luxury products, detailing a year-long study of what the consumers want, who is selling it to them, and how they do it.

Topics will include:

* The China apparel and accessory market (market size and scope, current trends, business opportunities and hurdles, case studies, how to get started or expand in China)
* China’s appetite for fragrances and body care products not made in China
* A comprehensive look at the Chinese consumer (demographics, spending habits, what they want and what companies can deliver)
* What the next 1-5 years will bring to China and why winning there is crucial for the survival of commercial pursuits

Also speaking will be Professor Mark Greiz, Fashion Institute of Technology, and Chief Consultant, MG Consulting.

Prof. Lawrence Delson, Fashion Institute of Technology and New York University and President, Delson International Inc., will be moderating the session.

For more information click here.

Hope to see you there!

OWIT-NY’s Annual Membership Appreciation and Networking Night This Monday

Organization of Women in International Trade - New York Chapter

Come join me for OWIT-NY’s Annual Membership Appreciation and Networking Night!

You will receive a FREE drink if you sign up or renew your OWIT-NY membership on or before the big event!

Date: Monday, September 26, 2011
Time: Networking and refreshments at 6:00pm
Location: This event will be held at the Bryant Park Grill roof terrace located on 42nd street between 5th and 6th Avenues.

Walk in the main entrance, go straight to the back of the bar and proceed up the stairs. In case of inclement weather, we will move inside.

Look for the OWIT membership table with the turquoise, white and silver colored balloons!

Cost: FREE, with a cash bar

For more information, click here.

Hope to see you there!

It’s Exam Time – Cargo Exam Time That Is…

CES is a privately operated facility at which imported merchandise - identified by Customs for physical examination - is made available to Customs inspectors for that purpose.

I recently attended a program put on by the Long Island Import Export Association that had to do with Central Exam Sites (CES) and US Customs inspections.

The speakers, which included those from US Customs as well as those from local CES facilities, gave an overview of the CES exam process here at our local New York/Newark area ports. Non-intrusive inspections (NII – think VACIS* Exam), are currently done at the marine terminal, e.g., on-site at APM, PNCT, Maher, Red Hook, Global and NYCT terminals.

For intrusive exams however, Customs has consolidated its ports for examination by type of exam so that there are 2 ports each for Enforcement (Salson and East Coast) and Commercial (H&M and Railhead) related activity, 2 for Agricultural related activity, 1 for Outbound Cargo related activity, and an additional port at Perth Amboy in New Jersey.

Customs’ goal is to have all exams performed in as few as possible locations. It claims that the advantage of this is that it will improve the efficiency of the exam process. In addition, it intends to make CES facilities designated Automated Manifest System (AMS) service centers. In so doing, it would allow for the real-time release of cargo, essentially providing for the “electronic” movement of cargo so that it can be released immediately after the conclusion of the exam without the lag in time for the inspecting officer to return to Customs offices to input the release in the system.

Starting January 1, 2012, Customs anticipates that AMS capabilities will be up and running at CES facilities. Therefore, contacting the customer service line at the CES itself to check on the status of the exam is recommended for the quickest possible update about the cargo.

CES notifies Customs ahead of time about the location and exam-preparedness of cargoes within its facility, and Customs uses this data to determine what manpower will be needed for the inspection(s).

From the CES perspective, their goal, with respect to Customs, is to arrange the merchandise for the most expeditious exam possible. This means that where a “tailgate” exam is involved, the CES has the truck open at the back and ready for inspection when Customs is available to conduct the exam. Where a “full strip” exam is necessitated, the CES will unload and stage the goods for Customs to examine it.

As for the importer, CES facilities have a goal for the exam to be as expeditious as possible so that the cargo can be released for entry.

Where an agricultural or contraband exam is being conducted, Customs notifies the CES directly, who arranges to pick up the cargo from the terminal to its facility. The CES custodial bond covers cargo moving from the terminal to the CES.

For a compliance exam (i.e., random invoice/packing list check), the broker is contacted by Customs about the commercial exam and it is the broker that contacts the CES. Once notification has been received about the exam, CES has 24-48 hours to pick up the container.

Good news for CTPAT members – members get “front of the line” privileges in the case of CES exams, meaning their containers are examined first.

Why was the CES program developed in the first place?

Well, back in the early 1990s, there was a significant increase in the volume of merchandise imported into the United States stimulating an increase in the number of Container Freight Stations (CFS), bonded warehouses, truck and rail terminals, and other facilities which receive and hold imported cargo for purposes of examination and clearance by Customs. As a result of this increase, some examination facilities had become antiquated, unable to support the quantity of exams, or technological advances in equipment available for Customs examinations.

Often times, multiple facilities were not in close proximity to each other within a given port of entry, requiring Customs inspectors to spend a greater proportion of their time traveling from one location to another in order to perform cargo examinations necessary to ensure compliance with the law.

These factors had a negative effect on Customs productivity, complicated Customs efforts to properly allocate personnel to meet its workload, and had a corresponding negative effect on Customs ability to render efficient clearance and related services to the importing community.

For more information on the history of CES, click here.

* VACIS Exam: Vehicle and Cargo Inspection Systems (VACIS) is a gamma ray imaging system, that uses radiographic images to help Customs inspectors examine the contents of trucks, containers, cargo, and passenger vehicles for hidden compartments containing contraband. The system was developed as a joint project between the U.S. Customs Service, the Office of National Drug Control Policy, and the Department of Defense.

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

Import Restraints and Their Economic Impact

Today the U.S. International Trade Commission (USITC) released its Publication #4253 entitled, “The Economic Effects of Significant U.S. Import Restraints.”

The USITC is self-described as “an independent, quasi-judicial Federal agency with broad investigative responsibilities on matters of trade. The agency investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The Commission also adjudicates cases involving imports that allegedly infringe intellectual property rights. Through such proceedings, the agency facilitates a rules-based international trading system. The Commission also serves as a Federal resource where trade data and other trade policy-related information are gathered and analyzed. The information and analysis are provided to the President, the Office of the United States Trade Representative (USTR), and Congress to facilitate the development of sound and informed U.S. trade policy.”

In this publication, USITC shares its findings regarding the economic effect on sectors subject to weighty restraints, such as, not surprisingly, that of textiles and apparel, canned tuna, and, to my surprise (call me naïve), ethanol.

Here are some of its findings:

Textiles and apparel
The Commission estimates that liberalizing import restraints in textiles and apparel would increase welfare by $514 million. Liberalization would reduce output and employment in this sector by 9–10 percent, which would magnify the already substantial declines projected to occur without liberalization. Import liberalization would also eliminate exports of U.S. goods that are stimulated by preferential rules of origin. This change would lead to large declines in exports of U.S. products such as thread, yarn, fabric, and cut pieces of fabric to be sewn into clothing.

Canned tuna
Ending import restraints in canned tuna would increase welfare by $16 million. Imports of canned tuna would increase by 20 percent, and output would decline by 8 percent. Employment in the broader canned fish industry would fall by 7 percent.

Ethanol (ethyl alcohol)
Because of rapidly increasing quantities of ethanol mandated by the U.S. Renewable Fuel Standard, both U.S. ethanol production and U.S. imports of ethanol are projected to rise markedly by 2015. The projected higher import quantities and the continued moderate restrictiveness of ethanol restraints combine to make these restraints the most costly (in welfare terms) among all sectors considered. The Commission estimates that liberalizing ethanol import restraints would increase welfare by $1.5 billion and increase imports by 45 percent in 2015. Although liberalization would reduce the domestic industry’s output and employment from their projected 2015 levels by 4–5 percent, these changes are minor considering that the ethanol industry employment and output are both projected to more than double between 2005 and 2015, with or without liberalization.

The USITC report goes on to discuss U.S. and global supply chains, and more specifically about how the global restructuring of production has led to faster growth in trade, new benefits from trade, and new patterns of trade.

It further gives an in-depth analysis of the key elements of global supply chains, together with the major economic forces driving their development, which include improved international logistics, lower trade and transport costs, technological change, and international cost differences.

For a copy of the publication, click here.

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

Toxic Purses II – A Response to Those Who Have Written to Me With Questions

First of all, I would like to say, hello! Many of you have written making reference to a particular designer’s handbag/luggage products, and I have to admit that I not only share your interest in her designs but that she is actually my favorite designer.

That being said, I am pleased to report that these same warning labels have not been on my apparel purchases because they were not applicable to apparel. I mention this because I want you to understand that labels about products are specific to that type of article and are not necessarily a reflection across all product lines of a brand.

A warning label on a product also does not mean that all types of that product pose some “risk” and in the case of handbags, that will largely not be the situation. In terms of whether or not you want to keep or return your bag, that is an individual question that I cannot answer for you. After all, if the warning label is going to cause you to worry about an impending illness – whether or not it is true that one would result – then you probably don’t want to be preoccupied about something when you could just return it to the store.

On the other hand, when you know more about why the bag was subject to the label in the first place and factor in the frequency of your usage of the bag, you may not be worried about keeping it at all.

As I mentioned in my Toxic Purses? article, the label is a result of a law out of the State of California (CA) called Proposition 65.

California’s Prop 65 in its simplest terms requires a label where a product contains a chemical compound that exceeds what CA calls the “Safe Harbor Level.” Safe Harbor determinations are based on a person’s exposure to a chemical, assuming daily exposure at that level (not that CA has explained what type of daily usage would equate to the level of exposure that would warrant the label). In the case of a purse, that is likely to be daily exposure as compared to a piece of luggage which more typically has sporadic use.

Prop 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.”

Here in the U.S. we have both federal, i.e., nationwide, laws as well as state law. I can tell you from counseling importer clients that ship products to retail stores located CA that it can seem like one is “importing” into CA due to all of the state-specific consumer product laws governing products sold within the state.

CA has a complex set of consumer product safety laws which, in large part, simply do not exist in other states. It’s arguable however, that without guidelines on product usage and exposure levels, they are useless.

So why is this label which is only required in CA ending up on products sold in the UK? Pure economics.

It is more cost effective to label merchandise at the production level, i.e., at the factory, so that it is compliant across all potential retail markets than to either forego a sale due to a lack of labeling, or cause a lag in sales time due to a need to relabel.

Therefore, some importers prefer to undergo testing and labeling overseas at the outset to both save money and deter potential future barriers to international trade.

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

Caring for Your Clothes and the Care Labeling Rule

I just returned from southern Italy where I’ve had the pleasure of being in since the end of July. Not surprisingly, when I was not touring around Naples on my trusted vintage Vespa with my favorite tour guide, enjoying the mineral baths of Ischia, or swimming under the stars in Sorrento, I was out shopping.

In true (International Trade attorney) form, I found myself examining the apparel labels for its country of origin - typically stamped “MADE IN ITALY” and not, “CHINA” like I often see here in the US – and for information on how to care for the garment.

Technically known as the “care label,” it is the tag on your clothes which you will recognize as having care symbols that instruct how a consumer textile product ought to be cared for, e.g., indicating a desired water temperature or, that it should be dry cleaned only.

Oversight of this label here in the US is provided by the Federal Trade Commission (FTC) in accordance with its “Rule on Care Labeling of Textile Wearing Apparel and Certain Piece Goods as Amended.”

Oddly enough, it just so happens that the agency is seeking comments on the benefits of the Rule to consumers purchasing products covered by it.

The solicitation of comments include:

- What benefits has the Rule provided to, or what significant costs has the Rule imposed on, consumers? Provide any evidence supporting your position.

- What impact has the Rule had on the flow of truthful information to consumers and on the flow of deceptive information to consumers?

- What benefits, if any, has the Rule provided to, or what significant costs, including costs of compliance, has the Rule imposed on businesses, particularly small businesses?

- Provide any evidence concerning whether any of the Rule’s provisions are no longer necessary. Explain why these provisions are unnecessary.

- Should the FTC modify the Rule to address the use of professional wetcleaning? If so, why and how? If not, why not?

The FTC is asking these questions and others as part of a systematic review of its rules and now you have an opportunity to impact its decision making.

Interested in submitting a comment? You may do so online by writing ‘‘Care Labeling Rule, 16 CFR Part 423, Project No. R511915’’ on your comment, and filing your comment online here. Follow the instructions on the web-based form.

Prefer to send it on paper? Mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H–113 (Annex A), 600 Pennsylvania Avenue, NW., Washington, DC 20580.

To read the full text of the solicitation of comments click here.

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

New CPSIA Lead Content Limits Announced

Effective Date: August 14, 2011

Starting next month, importers, manufacturers, retailers and distributors of children’s products will be required to certify that their products conform to the Consumer Product Safety Improvement Act’s (CPSIA) requirement that children’s products contain no more than 100 ppm of total lead content.

Testing must be undertaken by a third party test lab which is certified by the Consumer Product Safety Commission, and lists of approved testing companies is available on its website here.

Both the testing of, and compliance with, these federal guidelines with respect to inaccessible internal parts of children’s products and certain component parts of children’s electronic devices are not mandated under this new rule.

This requirement is not to be confused however, with the levels set for lead paint or other surface coatings placed on children’s products. That limit of a total lead level of .009% remains the same as it has been the case since August 14, 2009.

Through the CPSIA, Congress seeks to reduce the exposure to lead on children 12 years of age and under, as lead is a heavy metal that is especially toxic to children. It has been associated with causing brain damage, hearing impairment, lowered learning levels, and at high levels can be fatal.

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

Determining the Value on an Importation Between Related Parties – Was There a Bonafide Sale?

US Customs collects duties on all imports that enter the U.S. As a general rule, Customs presumes that the price paid by the importer, which is typically the invoice total, is the appropriate basis for determining the import’s “transaction value” which in everyday language, essentially means, the amount upon which the duty to be paid will be calculated.

Customs generally presumes that a transaction between unrelated parties is conducted at “arm’s length.” This means that the price offered by a seller of goods is a “fair” price and not one offered under more favorable terms, i.e., a lower price, which would cause the amount of duty paid on an importation to be less than what would otherwise be under a “fair” price.

Questions arise however, in the case of related party transactions, as from US Customs point of view, it would not be unusual to give a related company what it would consider a preferred, i.e., cheaper price on goods.

There are 2 ways Customs determines if a bonafide sale took place –

(a) the sales transaction was conducted at arm’s length, or

(b) transaction details show that there were no non-market influences that affected the legitimacy of the sales price.

As the term “sale” has not been defined by Customs, it has relied upon the definition as articulated in J.L. Wood v. United States, 62 CCPA 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974) which defines it as the transfer of property taken from one party to another for consideration.

In general, for all sales whether between related or unrelated parties, Customs will look at a number of factors in its determination of a legitimate sales price, in addition to looking at the circumstances of a transaction as a whole. Specifically, Customs looks to the documents related to the sales transaction, including the shipping terms, in order to determine the following factors:

a. Whether the potential buyer has assumed the risk of loss

b. Whether the potential buyer acquired title to the imported merchandise

c. Whether the alleged buyer paid for the goods

d. Whether such payments are linked to specific importations of merchandise

e. Whether the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller.

Even where the parties are related, Customs Regulations provide a series of scenarios in which it can be shown that the price has not been influenced by the relationship of the parties. These include:

a) If it is shown that the buyer and seller buy and sell from each another as if they are not related, this indicates that the price is not influenced by the relationship between the parties and appraisement pursuant to transaction value is valid.

b) Where the price has been settled in a manner consistent with the normal pricing practice of the industry, or with the way the seller settles prices for sales to unrelated buyers, then it is considered not to have been influenced by the relationship between the parties.

c) If it is shown that the price is adequate to ensure recovery of all costs plus a profit which is equivalent to the firm’s overall profit realized over a representative period of time in sales of merchandise of the same class or kind, this would demonstrate that the price has not been influenced.

There are further conditions as well, such as whether or not the potential buyer has assumed risk of loss for the cargo, which play a persuasive role in US Customs reasoning as to whether a bonafide sale took place.

Needless to say, the valuation of merchandise, especially when it comes to related party transactions can be tricky.

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

Shoes and Pricing - A Factor You Probably Never Thought About

Ever wonder why a plain looking pair of shoes cost more than the fancier looking one? Is it that the “no-frills” sandal offers a more “classic” and “elegant” look than the decorative one?

Well… not necessarily… Oddly enough, depending on the classification, i.e., the tariff number, of the shoe in question, the duty rate can go from a mere six percent (6%) to that of thirty-seven point five percent (37.5%) (and this is the rate for imports from countries that we have good trade relations with - it is 66% if being imported from others – ouch!)

On a $100 pair of shoes, that is the difference in the shoe costing $106 versus $137, which as an aside, can really add up given that here in NYC, we used to have a provision on apparel that it was tax-free so long as it was under $110.

That means that a pair of shoes for $106 really did cost that much, so just escaping having to pay tax made a difference. While a $25 difference in price may not break the bank however, the shoe at $137 really translates into a total cost of nearly $149 once you add on the tax.

Simply put, importing a shoe with a lower duty rate is better for both the importer (greater chance of selling the shoe) and the consumer (cheaper price – you hope anyway!)

So why would a plain sandal cost less anyway?

This is because while the material of a shoe, i.e., of leather, versus plastic, or a rubber/plastic combination, etc., plays a role in determining its tariff classification and the rate of duty, so does the amount of this material across the surface area of the “upper” part of the shoe, which in everyday language means, the top part of the shoe, for all intents and purposes.

US Customs measures the external surface area of the upper as the surface you see covering the foot when the shoe is worn. [US Customs Treasury Decision (T.D. 93-88)]

In general, the external surface area of the upper (ESAU) for footwear classification is taken to be the constituent material having the greatest external surface area, no account being taken of accessories or reinforcements such as ankle patches, edging, ornamentation, buckles, tabs, eyelet stays or similar attachments. [Chapter 64, Note 4(a) of HTSUS]

Many factors are considered when making an ESAU determination for footwear with uppers consisting of different materials. [NY J81564, 3/26/03] For example, the type and construction of the shoe, the completeness and visibility of the materials, its plausibility, and the manner in which ornaments are attached, are among the considerations to be weighed. [NY J81564, 3/26/03]

Customs has found that in the case of footwear for which the upper consists of two or more materials, where a material clearly constitutes a significant portion of the ESAU, then it is considered more than a mere accessory or reinforcement. [HQ 085381, 11/21/89]

Customs has further found that when material in the upper is neither an accessory nor reinforcement, it is considered a part of the constituent material of the upper external area. [HQ 081646, 3/27/89]

All of these factors can lead Customs to conclude that footwear is correctly classified under the tariff number that corresponds to a high rate of duty.

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

OWIT-NY Annual Reception with Elizabeth Daly, Director, Division for International Business for NYC Mayor's Office

Come join me tonight for an enjoyable summer evening with the New York Chapter of the Organization of Women in International Trade as we mark the end of our 2010 - 2011 year with drinks, dinner, and dessert at the popular Terrace Club conveniently located in mid-town Manhattan across from Rockefeller Center.

Date: June 22, 2011
Time: Registration: 6-6:30 pm. Dinner: 6:30-7:30. Program: 7:30 – 8:30 pm, followed by networking reception
Location: The Terrace Club 25 West 51st Street (off Fifth Avenue) New York, NY 10019
Cost: $50 for members* and $75 for non-members. Price includes one hour open wine and beer bar, a light dinner and dessert.

We are honored to announce that the evening's program will
include remarks from our very special guest, Ms. Elizabeth Daly, who holds the prestigious position of Director, International Business in Mayor Bloomberg’s administration.

Ms. Daly will discuss New York City’s efforts to attract and
retain international businesses. She will also provide commentary and insights on future prospects for foreign direct investment in New York City. A networking reception will immediately follow the program and Q&A.

Learn more about New York City's efforts to remain a global trading center in a collegiate environment, and connect with other international trade professionals from the Tri-state area.

For more information and to register, go to www.owitny.org or click here.

Hope to see you there!

U.S. Customs Brokers Beware – Nike May be Coming After You Next

For over a year now, Nike has been approaching licensed U.S. Customshouse brokers and requesting the broker’s assistance to provide it with information regarding a specific (or multiple shipments). In an effort to assist Nike, brokers (naively) have been handing over information, only to be later “thanked” by Nike in the form of a lawsuit whose allegations are “supported” by the very papers the broker provided it with. These lawsuits seek millions of dollars as provided for by U.S. intellectual property law, which are some (of the many) statutes under which these cases are being brought.

In an effort to crack down on imports of counterfeit merchandise, Nike has been commencing lawsuits against licensed U.S. Customs brokers across the country.

You may be asking yourself, “Why the broker and not the importer of record?” After all, not only does it not make much sense to sue an agent rather than a principal, but brokers never see or touch the cargo. I know. I get that.

Due to the increase in identity theft however, Nike claims to be without knowledge of who the actual importer of record/consignee is. It is therefore creating an allegation that the broker is in cahoots with the importer of the counterfeit merchandise, thereby creating a conspiracy if you will.

Based on this theory, it is going after the smallest and most defenseless target out there – the customs broker – in an effort to get brokers to agree to specific terms and to perform certain so- called "safe guarding" activities, which Nike believes will cut back on incidents of attempted importations of counterfeits.

Naturally, where a broker has been engaged in no (as in Z-E-R-O) wrongdoing, it will attempt to assist with any investigation as it is able to. The problem is, doing so without the advice of counsel and, certainly moving forward in a lawsuit without counsel, might only end up hurting the broker's position as inadvertent admissions will have been made on the broker’s part in an attempt to "do the right thing" and clear its reputation.

Unfortunately, due to the Court’s preference of attorneys representing litigants, representation ultimately winds up being retained and the attorney is left to deal with untimely, or unnecessary, exposure initially caused by the unrepresented litigant (i.e., the customs broker).

To find out where and against whom Nike has brought cases against, you can search publicly on the Justia Dockets & Filings website [http://dockets.justia.com] and type in Nike, Inc. in the “Party Name” box, and click “Intellectual Property” in the drop down menu called “Type.”

Given the nature of Nike’s “bait and switch” tactic, should a customs broker be contacted by Nike wherein it requests that records be provided to it, trade counsel should immediately be contacted and any response to Nike would be to "contact your attorney."

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

Navigating the Importation Process - Tips for the New Importer

I remember one of my best friends telling me in college that she thought it would be fun to have an import business where of course, she got to do the traveling to find all of the wonderful treasures that she would sell in her shop.

I know that back then, we never could have imagined that there would be so many obscure rules, such as that articles made of wood might require a declaration from the USDA, or that beaded jewelry made of seeds from exotic forests might be subject to FDA regulations.

After all, how does an importing entrepreneur even know where to begin in terms of compliance with the law when most have little idea about the complexities of importing?

Nowadays, thanks to search engines like Google – which did not exist when we were in college (zoiks!) – getting information about importing is a much simpler endeavor. This of course, is both good and bad.

It is good in that basic importing information may be found online, but of course, not all information out there is equally correct.

The down side however, is that there is a presumption that a responsible importer would have been able to seek out information that pertained to their type of import and therefore ought to have dotted all of their proverbial “I’s” and crossed their “T’s.”

A failure to do so can lead to an accusation of negligence in the event of an importing “hiccup” or even worse, an allegation of fraudulent activity.

So where does a new importer begin?

Like people entering the country, the border is the front line of imported merchandise, and US Customs and Border Protection has jurisdiction over what is permitted to enter – and remain – in the country.

A few helpful links include the web pages on US Customs’ website (www.cbp.gov) under the “Trade” tab. Within this section is a link called "Basic Importing and Exporting" which further leads to information on US Customs import requirements as well as other federal agency requirements.

There is also a rather lengthy US Customs guide entitled “Importing into the United States – A Guide for Commercial Importers” as well as numerous “Informed Compliance” publications which offer both general importing information such as on the “Entry” of merchandise, and Tariff Classification, as well as more import specific information, such as on Eyewear, Textile and Apparel Rules of Origin, and Footwear.

More tips for new importers and exporters can be found here.

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

Classification and Marking of Watches

Earlier this week I found myself describing to my summer law clerk the difference between specific duty rates, such as a “per piece” rate like $0.40 cents per piece, and “ad valorem” duty rates, i.e. a percentage rate of duty, such as 6% of the invoiced value of the merchandise.

When it came to explaining that there are certain imports that are a combination of the two types of duty, I turned to watches whose classifications within HTSUS Ch. 91 can be made up of a combination of duty rates.

Watches are unique in the tariff for not only this reason but because they are subject to all kinds of different types of additional rules that other commodities are not subject to.

Take the marking requirements for a watch for example.

The “marking statute,” codified in 19 USC 1304, mandates the marking of every article of foreign origin of its country of origin.

Under Customs interpretation of the Marking Statute, the country of origin of a watch is based upon the country of origin of the movement of the watch, irrespective of whether the case, band, or other parts were produced in another country.

HTSUS Additional U.S. Note 4 to Chapter 91 of the tariff, provides for special marking requirements for watches as described in bold below.

There is an exception to these special marking requirements however, for those watches with movements with “opto-electronic displays” and cases designed for use with “opto-electronic movements.”

As liquid crystal display (LCD) and light emitting diode (LED) display watches are categorized as watches with an opto-electronic display, they are excepted from these special marking requirements.

Watch Movement: Must be marked on one (1) or more of the bridges or top plates to show the name of the country of manufacture; the name of the manufacturer or purchaser; and in words, the number of jewels, if any, serving a mechanical purpose as frictional bearings

Watch Case: Must be marked on the inside or outside of the back to show the name of the country of manufacture and the name of the manufacturer or purchaser

For more information on the classification and marking of watches, check out US Customs updated publication entitled “Classification and Marking of Watches and Clocks.”

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

OWIT International – A Supportive Network That Promotes the Growth of Women in International Trade

Recently, I had the pleasure of being a part of the annual global meeting for the Organization of Women in International Trade. My chapter (New York) had been intending to host this year's annual meeting and we purposely chose the date to have it during World Trade Week NYC.

As it turned out, May was a month of graduations, soccer and other sports playoffs, and weddings, among other activities. Being a network that is supportive of women (which does not mean only made up of women, as we also have male members), it was decided instead to have a video conference. While it was not as fun as a weekend in NYC, it was a great conference!

Representatives from chapters around the country participated, and other international branches joined in on the call as well, including representatives from Canada, Peru, Switzerland, Kenya and Mexico.

Serving as the Vice President to the New York chapter, and having been a member for about 4 years now – 3 of which have been on the Board of Directors - I have seen the rapid development that has occurred with OWIT-NY thanks to technology. A focus on using technology to further promote the organization and to advance its agenda to, for example, educate its members and friends in the trade community via webinars, was a large part of the discussion during the video conference.

We acknowledged the success of the webinars for both developing our members as well as the organization, and the benefits of collaborating with entities providing technology-based services, such as the trade data provider, Import Genius, with whom OWIT members will get a discount on the cost of services from.

In addition, it was recognized that the development of OWIT-International’s Facebook and LinkedIn profiles, which serve to advance our marketing efforts as well as to promote awareness about the organization, have been valuable tools worth putting further resources towards.

The collaboration and caliber of women was impressive and I feel lucky to be a part of such a dynamic and talented group of women.

For more information on OWIT International, click here.

For more information on OWIT-NY click here.

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

2011 World Trade Week and OWIT-NY Wine Tasting Event This Tuesday

World Trade Week kicks off tomorrow at 8:30 a.m. in Room 14-220, on the 14th Floor at Baruch College, which is located at 55 Lexington Ave. in Manhattan.

Every year, the New York region’s trade and transportation community comes together in May to celebrate World Trade Week with a full agenda of educational seminars, global business networking events, and an awards breakfast that recognizes exemplary contributions in the field.

The Awards Breakfast, scheduled for May 16th, recognizes outstanding companies that have grown through global expansion. The Organization of Women in International Trade (OWIT-NY) will be exhibiting at the breakfast as this is one of the best market places to meet fellow international traders and to learn the latest trends in our industry.

I will be at the OWIT-NY exhibit booth from 8:30 a.m. and encourage you to stop by and say ‘hello!’

As part of World Trade Week, OWIT-NY is having an event this Tuesday, May 17th entitled, “Emerging Markets Wine Tasting.” The evening will consist of a presentation and wine tasting of 6 wines (a mixture of red, white and dessert) from 6 different emerging wine-producing countries. During the tasting presentation there will be a selection of Murray’s cheeses and breads to complement the wines.

If you’re interested in attending, be sure to register soon as there are only a few spots remaining. You can register at www.owitny.org and click on the “Events” tab.

I will be there this Tuesday and I hope you can make it out too!

Date: May 17, 2011
Time: Wine presentation 7:30 pm – 8:30 pm followed by networking and personalized wine shopping with Morrell's wine expert
Location: Morrell Wine and Spirits Store
One Rockefeller Plaza (49th Street between 5th and 6th Avenues)
New York, NY
Cost: $50 for members and $55 for non-members

For more information on other World Trade Week events, click here.

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

U.S. Customs Newly Updated Valuation Encyclopedia!

I’m pleased to announce that US Customs recently made available the latest version of its Valuation Encyclopedia! This sort of news is fantastic (and exciting - I know that sounds nerdy…) because us members of the international trade community depend on updates from US Customs to maintain certain standards which the agency expects of us under our informed compliance responsibilities.

While a prior version of the Encyclopedia existed, it only went up to 2003 and there has not been an updated manual available for nearly 7 years.

Let me give you a little bit of background about importing.

Pursuant to the Customs Modernization Act, it is now the responsibility of the importer of record to use “reasonable care” to “enter,” “classify,” and “value” the goods and provide any other information necessary to enable US Customs to properly assess duties, collect accurate statistics, and determine whether all other applicable legal requirements are met.

When goods are imported into the Customs Territory of the United States (the fifty states, the District of Columbia and Puerto Rico), they are subject to certain formalities involving US Customs. In almost all cases, the goods are required to be “entered,” that is, declared to US Customs, and are subject to detention and examination by Customs officers to insure compliance with all laws and regulations enforced or administered by US Customs. As part of the entry process, goods must be “classified” (determined where in the U.S. tariff system they fall) and their value must be determined.

The Encyclopedia is therefore, a compilation of US Customs rulings on different valuation topics, such as the method for determining valuation, e.g., the "transaction value" or "deductive value" methods, as well as detailing which factors might make up the value of an importation.

In addition to this, there is a collection of US Customs rulings, grouped by category of a particular valuation issue, which may serve as a reference to one looking for guidance on how US Customs would treat a particular valuation matter.

The Encyclopedia is only for information purposes of course, and any binding determination sought by an importer can only be accomplished though a request for a ruling.

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

Revised CPSC Rule on the Retesting of Compliant Clothing Textiles

In response to multiple requests from the clothing textile industry to reduce the need to retest clothing textiles already tested and found to be in compliance with CPSC regulations, it has amended its rule with respect to flammability testing.

Effective today, April 22, 2011, the Consumer Product Safety Commission (CPSC) has revised its terms under which the agency will accept flammability test certifications for children’s products based on third party accredited test labs.

Specifically, it will accept, for children’s product certification purposes, tests conducted by accredited third party labs since August 18, 2009 (pursuant to 16 CFR Part 1610).

CPSCs rationale was based simply upon the nature of the wearing apparel industry, in that it recognized there could be a significant time lapse between fabric testing and the actual making of a garment.

At issue, was the acceptance of tests undertaken by a now-CPSC-accredited test lab, prior to its accreditation, but after August 18, 2009. Testing under these circumstances has been referred to by the CPSC as “restrospective” testing.

Rather than causing these already tested fabrics to undergo subsequent tests, however, CPSC has instead revised its position on “retrospective” testing in order to reduce the need for redundant testing.

In order to avoid the retest and issuance of new certifications, the following conditions* must apply:

• At the time of product testing, the product was tested by a third party conformity assessment body that was ISO/IEC 17025 accredited by an accreditation body that is a signatory to the ILAC–MRA;

• The third party conformity assessment body’s application for testing using the test methods in 16 CFR Part 1610 is accepted by the CPSC on or before November 16, 2010;

• The product was tested under 16 CFR Part 1610 on or after August 18, 2009;

• The accreditation scope in effect for the third party conformity assessment body at the time of testing expressly included testing to 16 CFR Part 1610;

• The test results show compliance with the applicable current standards and/or regulations; and

• The third party conformity assessment body’s accreditation, including inclusion in its scope of 16 CFR Part 1610, remains in effect through the effective date for mandatory third party testing and manufacturer certification for conformity with 16 CFR Part 1610.

* CPSC Docket No. CPSC-2010-0086, 76 FR 22608 (4/22/11)

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

Advance Filing of Cargo Data (AMS)

I attended a conference recently on international law at St. John’s University Law School. Actually, it was nice to get out there as I had yet to visit the campus despite having considered going there for law school back in the 1990s.

One of the panelists, specifically referencing the DOHA Development Agenda, spoke about how, in his estimation, international trade law was designed as a counter-terrorist measure. For more on DOHA, click here.

Counter-terrorism activity is the number one initiative of US Customs and in furtherance of this, it has a requirement (one of many) that it must receive, by way of it’s Automated Manifest System (AMS), information pertaining to a shipment before the cargo is either brought into or sent from the US by any mode of commercial transportation (sea, air, rail or truck).

According to US Customs, the cargo information required is that which is reasonably necessary to enable high-risk shipments to be identified for purposes of ensuring cargo safety, security, and the prevention of smuggling, pursuant to the laws enforced and administered by the agency. The specific inward foreign manifest (advance filing of cargo declaration - AMS) requirements are contained in 19 CFR 4.7 and 19 CFR 4.7a.

In true US Customs form, a failure to do this will lead to a penalty which is called a “liquidated damage.” Of course, through the mitigation process a party assessed a penalty may seek a reduction, which can be mitigated to as little as 10% of the claim, though from correspondence from US Customs on a case I recently handled, mitigation to this level is unlikely unless that party is a member of C-TPAT.

Does C-TPAT membership, or the lack thereof, sound like a reasonable basis for deciding on a penalty mitigation?

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

The "Food Crisis" and International Trade

Date: April 13, 2011
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, New York, NY
(the entrance is on 42nd Street directly across from Bryant Park)
Cost: $20 for OWIT members, students, and government employees, $25 for non-members

Please join me next week for a lively presentation on food together with a beer and cheese tasting thereafter - yum!

Speaker Jessica Wurwarg will address the causes of the food “crisis” linking them to international trade through a discussion around issues such as export bans and agricultural subsidies.

Jessica, together with fellow OWIT-NY Board Member, Carolyn Avery, will then introduce us to a selection of local cheeses paired with various beers.

Jessica Wurwarg is a food policy specialist, an adjunct instructor at both NYU and the New School, and is a former World Bank staffer.

Jessica currently works full time for the City of New York, and also teaches classes about cheese and pairings with wine and beer.

This promises to be an intellectually and gastronomically stimulating evening! And, of course, I will be there – what more could you ask for?

To register please click here.

You can follow OWIT-NY on Twitter.com/OWITNY for the latest news and events in international trade.

Hope to see you there!

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

The Panama Canal - What Would International Trade be Without It?

I just returned from scuba diving in the beautiful reefs of Little Corn Island in Nicaragua. Since I was heading to Central America, I decided to stop in Panama to take a ride through the Panama Canal. It was awesome!

As I enjoy looking at large ships, seeing the multitude of vessels everywhere was fascinating to me. For a live view of the canal, click here.

SEA VICTORY VALLETTA - NYK DEMETER - MAERSK HONOUR SINGAPORE - NCC SUDAIR PANAMA - AS JUTLANDIA - these are just a few of the ships I saw while going through the canal!

Starting from the Pacific Ocean in order to cross to the Atlantic Ocean, we approached the canal and waited with many other boats for our turn to enter the canal at the Flamenco Station.

During this time, a Panama Canal Officer comes on board to both direct where to drop the anchor and to advise how long the wait will be. This is because on average, the wait can be up to 24 hours unless a reservation is made in advance for a specific date and time for entry in to the canal, which can be done up to a year and a half in advance.

Of course, a hefty premium must be paid for booking ahead of time, and in the event the ship arrives late – which is always a possibility with ocean transit - the toll is forfeited, payment to cross through the canal must be made again, and a ship must wait for its turn in the line up anyway. According to the tour guide, the average cost to transit through the canal for a commercial vessel is $120,000, with the most expensive crossing being $437,000 in 2009.

The cost of crossing the canal depends on a ship's weight and size, as well as the type of cargo it is carrying, and a captain must show the ship's manifest to a Panama Canal Officer to verify what type of cargo is on board. Dangerous cargoes, such as fertilizers or other chemicals, cost more as do cruise ships carrying people (since “people are the most valuable cargo” the tour guide explained).

For vessels who only have partial cargoes that need to cross through the canal, they have the option to dock at the port of Panama Ports Co. to unload only that portion of cargo and thereby save the cost and time of crossing.

For ships making the transit, once clearance to enter has been granted, a Panama Canal Pilot boards the vessel and takes over its control in order to navigate it safely though the canal’s locks. Every ship must have a pilot on it during the entire duration of the transit, and large vessels such as container ships or oil tankers must also hire a tug boat at a cost of $3,000 per hour. A tug boat is not optional but rather is a safety measure required by the canal operators.

The “locks” are steel gated chambers which fill with water in order to raise ships up 80 meters to a man made lake called Lake Gatun. It is roughly a 50 mile distance between the Pacific and Atlantic oceans and ships must ascend up 3 “steps” in order to get to the Lake, which is 0.5 miles wide and made from excavated land.

The first two (2) steps take you to the Miraflores Lock, with a third lock, the Pedro Miguel Lock, being the final third step before arriving at Lake Gatun. The journey requires three (3) steps up on the Pacific side, and three (3) back down on the Atlantic side.

It takes roughly 8 minutes to fill the chamber and unload it. For the average container ship, there is only 24 inches (that is, 12 in. on either side of the ship) for the vessel to fit in the chamber. To ensure that the ship remains safely in the chamber, electric “mules” (which sort of look like a modern day mini-version of a locomotive) are connected to either side of the boat for this purpose.

Ships are to use their own power to travel through the canal, so it is just a matter of maintaining a position where movement through the locks can be done without hitting the sides of the chambers, and thereby avoid causing damage to either itself or the canal locks themselves.

There are 46 boat transits that happen every 24 hours and 52 million gallons of water are required to fill the lock’s chamber each time a vessel goes into it. Water for the chambers is supplied by Lake Gatun and this water is thereafter released into the Pacific Ocean. As Panama has roughly 60 ft. of rainfall each year, it depends on this rain to provide water into Lake Gatun.

Interested in traveling there? Check out the company I went with called Panama Marine Adventures.

For more information on the history of the Panama Canal click here.

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

New Requirements for Wine and Other Alcohol Importers and Wholesalers

I was doing some research on a wine region I particularly like called Rias Baixas which derives from both Spanish and Portuguese wine regions.

While red wine had traditionally been my preferred type of wine, the juicy white wines from this region have become my all time favorite. In so doing this research, I came across the following new regulation.

A new requirement for wine and other alcohol importers and wholesalers went into effect last month regarding the inclusion of certain corporate records when submitting an application to the government to operate as one of these entities.

Irrespective of the type of legal entity formed, i.e., corporation, partnership, etc., the submission of the following records is now mandatory:

1. Source of Funds Documentation
2. Trade Name Registration (if required by State or local government)

Also obligatory is the submission of additional organizational records, the requirements for which, vary depending on the entity’s type as follows:

Corporations:

* Articles of Incorporation and Certificate of Incorporation/Formation
* By-Laws
* Certificate to Operate in a Foreign State (if organized in a different state)

Partnerships:

* Partnership Agreement

Limited Liability Corporations (LLCs)

* Operating Agreement
* Articles of Incorporation and Certificate of Incorporation/Formation

While these rules went into effect on February 14, 2011, the federal agency, the Alcohol and Tobacco Tax and Trade Bureau (TTB) who enforces these rules, has granted a grace period through April 15, 2011 in order to allow businesses an opportunity to adapt to the new requirements.

For those who have submitted applications without the above documentation, TTB will grant the submission of such records through April 15, 2011. After this time, applications without these documents will be considered "incomplete."

To give a little background on TTB, it is the federal agency responsible for the labeling, advertising, and marketing of alcoholic beverages. TTB is also mandated to enforce the laws and write the regulations on the collection of alcohol, tobacco, firearms and ammunition excise taxes.

For more information on TTB regulatory compliance specific to wine click here and for those specific to importing or exporting wine click here.

For some nice images and to learn more about visiting this area, click here. (This is not an endorsement, though it is a nice website!) - Have I mentioned the Iberian peninsula is my favorite part of the world to spend time in?

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