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
Friday, December 30, 2011
Tuesday, December 20, 2011
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
-- 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
Monday, December 5, 2011
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.
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
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
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