“Can I Get Caught Too?” Er… Yes You Can!

People ask me all the time, “Do you really think I could get caught selling a product that is in violation of a U.S. law?  I’m such a small company, could I really be on anyone’s radar?”

My answer inevitably is “Yes,” that you don’t need to be a “big fish” to get hit with big penalties resulting from multiple violations (they rarely hit you with one).

Moreover, if you are importing violative products, you could end up being penalized by not just one federal agency but two (think tens-of-thousands-of-dollars…)

Taking children’s wearing apparel as an example, in the last 30 days there have been 7 recalls by the U.S. Consumer Product Safety Commission, including 1 announced just yesterday! 

They were recalled for either: 

-  failing to meet the federal flammability standard,

-       - posing a choking hazard, or

-       - posing a strangulation hazard.

Specifically, the product recalls were as follows:

1) Children’s Pajamas, recalled by the Bailey Boys – Flammability (sold at children’s boutique stores nationwide)

2) Wearever Girl’s Hooded Jacket Sets, recalled by David’s Place – Strangulation (sold exclusively at Burlington Coat Factory stores)

3) Girls’ BCG Hooded Windsuits, recalled by Academy Sports + Outdoors – Strangulation (sold exclusively at Academy Sports + Outdoors stores and its website)

4) Girls’ Pink Leopard Jackets, recalled by Ram’s Imports – Strangulation (sold exclusively at Burlington Coat Factory stores)

5) Yoki Girls Faux Leather Jackets with Drawstrings, recalled by Mirage Fashions – Stangulation (sold exclusively at Burlington Coat Factory stores)

6) Infant Sandals, recalled by American Boy and Girl – Choking Hazard (sold exclusively at Meijer stores)

7) Hooded Sweatshirts, recalled by Little Willy’s – Strangulation (sold exclusively at Zullily.com and Gilt.com stores)

Consumers should immediately take the recalled product away from children and return them to the store they purchased it from for a full refund.

As for the seller, not only does getting caught typically mean heavy penalties, but a product recall is disruptive to business (stay tuned for a future article on this as changes to the rules are being considered), can hurt your business relationships, and can tarnish your reputation.

And who wants that to happen?  Not you, and not me either.

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

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Changes to the Rules Under the Wool Products Labeling Act of 1939?

You now have a few more days to send in your comments! New Deadline – 12/3/13   

 The Federal Trade Commission (FTC) published a Notice of Proposed Rulemaking on September 20, 2013 seeking comments on its proposed amendments to the rules and regulations under the Wool Products Labeling Act of 1939.  Comments were originally due on November 25, 2013.

Interestingly, an extended deadline of December 3, 2013 to submit comments has occurred due to a request from the Embassy of Australia to the FTC.

On November 20, 2013, the Embassy of Australia contacted the Commission on behalf of the Federation of Australian Wool Organisations (“FAWO”) to seek an eight (8) day extension since it was participating in a meeting of the International Wool Textile Organisation (“IWTO”) in Guangzhou, China, on November 25-26, 2013, to discuss the FTC's proposed amendments.

FAWO contended that the FTC’s record would benefit from comments collected at the meeting given the role of the IWTO in representing wool industry stakeholders at an international level.

The FTC likewise believes that the FAWO’s input would likely assist the Commission in evaluating the proposed amendments to the Wool Rules.

Since the requested short extension of the comment period would not substantially delay the rulemaking process and the FTC believed that extending the comment period to facilitate a more complete record outweighed any harm that might result from an eight (8) day delay, it agreed to the extend the comment period until December 3, 2013.

For more information, you can contact Robert M. Frisby, Attorney, (202) 326-2098, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

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Does Your New Pair of Shoes Have a Fuzzy Bottom? CBP’s New ISO 20871 Determination

Strange but true, in certain cases where a textile material covers the “outermost sole” of a rubber or plastic soled shoe, the duty rate on such imported shoe may be lower than if the sole were without the “fuzz.”

This results because such textile coating can move an importation of footwear from one category, i.e., classification, to another, and with such move can come an accompanying change in the rate of duty (and possibly one that is favorable to the importer – think cheaper).

For anyone not well-versed in tariff-ease, all this really means is that a fuzzy bottom can cost less to import in to the US than one that is bare.

In case it is not obvious, the “outer sole” is that part of footwear (other than an attached heel) which, when in use, is in contact with the ground, i.e., the bottom of the shoe.

Since a more favorable duty rate may, at times, be obtained where footwear has an outer sole of textile, it’s not uncommon to find importers buying footwear that has a thin textile coating on the bottom (which can feel fuzzy) and then classifying the footwear under the tariff number for shoes having textile on its sole in order to take advantage of these duty savings.

Since US Customs is in the business of collecting as much money in duties (revenue) as possible, in an effort to curb inappropriate usage of such classifications, it routinely requests more information on imported shipments to confirm that the textile is actually there.

Starting this month (Nov. 2013), US Customs has decided that the ISO 20871 test method will be recognized in assessing the characteristics of the textile material attached to outer soles.

This means that when an importer is asked to provide more information (Customs Form 28) about a textile covered sole, an analysis performed by an independent lab using this test method (ISO 20871) should be presented.

 Also, keep in mind that US Customs can always conduct its own testing when circumstances warrant it.

To learn more about the impact of this, the newly branded US Fashion Industry Association (formerly USITA) is having a webinar on this.  More information on the event can be found here.

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NYC's Parsons School of Design Hosts Africa Fashion Event This Friday

Join me and fellow panelists for a vibrant discussion on the African fashion industry, international trade and fashion compliance this Friday at NYC's Parson's School of Design, Friday Nov. 1, 2013 at 6 p.m.

Order tickets via Eventbrite:
http://www.eventbrite.com/event/8974387635/efbevent

Project Africa and the Parsons MA Fashion Studies Program are proud to bring you an informative discussion on the intersections of African culture on fashion and design. Join us for an exciting program with experts and practitioners from a variety of fields, including design, culture, identity, and business.
...
Moderator - Carolou Goodridge

Carolou Goodridge was born and raised in New York to Liberian parents. She's always been interested in the fashion; however, her path changed when she studied Political Science in college and moved to Washington, DC to work in politics. She spent five successful years on Capitol Hill, earned a Master's degree in Public Policy/Peace Operations, and worked as a lobbyist for the next two years. Three years ago, Carolou made a life-changing decision to leave the political world and has since relocated back to New York to finally pursue her dream career in fashion with a global focus. In 2010, she established Image Forward Consulting, a luxury style and image consultancy for gentlemen which participated in African Fashion Week among other important fashion events. Check IFC out on Facebook.

Panelists

Deanna Clark, Esq. is a Senior International Trade and Fashion Compliance attorney at Shayne Schrier Shayne Koenig Sanburg & Ryne in New York, NY. She advises clients on how to follow the laws that relate to the products they sell within the U.S. whether for fashion designers, retailers, importers, start up e-commerce sellers, or otherwise. She also advises on labeling and marketing claims, such as using eco-friendly claims and Made in USA, as well as assists clients with responding to government inquiries and dealing with audits and other actions taken by them. Deanna is an adjunct professor at NYCs Fashion Institute of Technology (F.I.T.) in its International Trade and Marketing Dept. where she teaches International Business Law. She hosts Fashion Compliance Defined an educational program on fashion law, and writes a blog called International Trade for Everyday People. She serves as the International Representative to the NY Chapter of the Organization of Women in International Trade and as an advisory board member of Africa Fashion Week. Deanna received her JD from Tulane Law School, an MA in Diplomatic Studies from the University of Malta's Mediterranean Academy of Diplomatic Studies, and her BA in Peace & Conflict Studies from UC Berkeley. You can follow her on Twitter @fashcompliance or join the "Fashion Compliance" page on Facebook by "liking" it.


Busayo Michelle Olupona is the founder and creative director of Busayo, a Brooklyn-based apparel and accessories company. The clothing line is a celebration of African textiles and aims to brighten the contemporary American woman's wardrobe with its interpretation of the vivid colors and geometric patterns of traditional African fabrics (specifically hand dyed fabrics) into modern silhouettes. The line is available online and in several boutiques throughout the country. The line has been featured in Elle, Essence, Ebony, Runway Magazine and Huffington Post. Prior to starting the clothing line, Busayo practiced corporate finance law at Cleary Gottlieb Steen & Hamilton LLP. She is a graduate of the University of California, Berkeley and New York University School of Law.


Aster Thomas is co-founder of fashion blog Pradagee.com, a communication expert, and fierce African fashion advocate. Aster’s passion for fashion began at an early age as a model in both the United States and Ethiopia. She has a B.A. in Communications and a Certificate in Project Management from New York University. She works for a digital media company as a Business Development Manager for the Emerging Markets division, where she helps develop business strategies and connections for AFKInsider.com (an African business news website). Aster was invited to speak on Aljazeera's popular show The Stream ito speak on the issue of cultural-appropriation by large retailers, specifically Urban Outfitters. You can visit her website here: www.pradagee.com

 
 

Increased Scrutiny by FTC on the Blurring Lines of Digital Ads With Digital Content

The fashion industry and many others are blending advertisements with news, entertainment, and other content in digital media, referred to as “native advertising” or “sponsored content.”

 

For e-commerce vendors selling domestically or for export to destinations outside of the U.S., you should take note of this increase in scrutiny as it could ultimately correlate to the way you are thinking about advertising.

This is because if the government is paying attention, as is in this case, it is trying to ascertain where the bright line is (for this type of advertising) as it relates to non-deceptive marketing claims so that it can decide where enforcement measures (think monetary penalties) can be assessed.

According to the Federal Trade Commission (“FTC”) there is an increase in advertisements that more closely resemble the content in which they are embedded, which are graphical images, typically rectangular in shape, placed on publishers’ websites and mobile applications.

For this reason, the FTC is hosting a workshop on December 4, 2013 in Washington DC to explore the blurring lines of digital ads with digital content.  The purpose is to build on previous Commission initiatives to help ensure that consumers can identify advertisements as advertising wherever they appear.

The workshop will bring together publishing and advertising industry representatives, consumer advocates, academics, and government regulators to explore changes in how paid messages are presented to consumers and consumers’ recognition and understanding of these messages.

The general public is invited to make submissions and may do so online here.

Paper submissions may also be submitted and should reference "Native Advertising Workshop" both in the text and on the envelope, and should be mailed or delivered to: 

Federal Trade Commission, Office of the Secretary, Room H-113 (Annex X), 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. 

The FTC requests that any paper submissions be sent by courier or overnight service, if possible, because postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. 

Requests to participate should include a statement detailing any relevant expertise in digital advertising and should be submitted by October 29, 2013 via email to nativeads@ftc.gov.  Panelists selected to participate will be notified by November 6, 2013.

The workshop is free and open to the public.  It will be held at the FTC’s satellite building conference center, located at 601 New Jersey Avenue, N.W., Washington, D.C.  The Commission will publish a more detailed agenda at a later date.

For more information, click here.

 

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Bringing a Product to Market with Fashion Compliance

Earlier this week I had the privilege of addressing members of the Pan African Women’s Entrepreneurship Program, commonly known as "AWEP," together with fellow OWIT International (Organization of Women in International Trade) members who joined me as panelists.

Evident from the products in the conference hall and the silence that fell across the room as I began my discussion, many in attendance were involved in the African textiles and wearing apparel industry.

My presentation on Fashion Compliance with respect to proper labeling in order to bring products in to the United States (US) lawfully, and hence, bring a product “to market,” therefore turned out to be of particular interest.

"Why does proper labeling matter?" you may be wondering?

It is important for a few critical reasons.

First, without it, the products you plan to sell in the US may never be authorized for entry into the country for consumption since US federal laws regulate the clothing sold here.

Second, if you want the parties that buy from you to consider you a trusted vendor, your products need to be certified for compliance with US law so that your retail customers can buy from you with confidence.

Last but certainly not least, consumers actually need some of the information, such as how to care for the garment, and with the ultimate purchaser as the end user, every producer of a good wants to keep that final user’s best interests in mind.

The presentation also included some points and "quick math" around the AGOA (African Growth and Opportunity) and how it is actually used, as the US Government - which is currently *shut down* - has done little to educate users on how it can be best taken advantage of.

More articles on the AGOA agreement can be found at the links below:

http://internationaltradeforeverydaypeople.blogspot.com/2011/12/african-fashion-industry-and-agoa.html

http://internationaltradeforeverydaypeople.blogspot.com/2012/08/agoa-third-country-fabric-provision.html

http://internationaltradeforeverydaypeople.blogspot.com/2012/09/agoa-renewal-recommendations-sought-by.html

http://internationaltradeforeverydaypeople.blogspot.com/2012/07/africa-sourcing-and-agoa-extension.html

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

 

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Do You Make Men’s or Boy’s Suits of Imported Worsted Wool?

Submit Your Application by 5 pm on Oct. 15, 2013

 to Obtain a Tariff Rate Quota!

 

 

A “Tariff Rate Quota” (TRQ) is a temporary reduction on import duties, and in this particular case, it would mean a duty savings of 25%, or $25 on every $100, imported through Dec. 31, 2014.

Title V of the Trade and Development Act of 2000, which created this TRQ, requires that they be allocated to persons who

1) Cut and sew men’s and boy’s worsted wool suits, suit-type jackets and trousers in the United States, and/or

2) Weave worsted wool fabrics with an average fiber diameter of either 18.5 microns or less, OR that which is greater than 18.5 microns, for making men’s and boy’s suits.

Right now, applications to obtain this reduction are being accepted from “persons,” i.e., firms, corporations, or other legal entities, who either fall under either of the two above categories.

In order to be eligible for this TRQ, an application must be submitted on the form provided at http://otexa.ita.doc.gov/wooltrq/wool_app.htm

and be submitted by 5 pm on October 15, 2013 to the

Office of Textiles and Apparel, Room 30003

U.S. Dept. of Commerce

1401 Constitution Ave. NW

Washington, DC  20230

If you have any problems with the link above, you may also call (202) 482-3400.

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

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Come Join Me in NYC Tonight!

WHERE: Bryant Park Grill Rooftop Bar / 25 W 40th St, New York, NY 10018

WHEN: 6 to 8 pm

 

 

 

Tonight OWIT New York (Organization for Women in International Trade) would like to invite you and your colleagues to join us for an evening of networking with active members of the international trade community and help us kick off our 2013-2014 calendar year!

 

OWIT New York will offer one complimentary drink ticket for each new and returning OWIT New York member with proof of registration for the 2013-2014 year!

 

We hope to see you there!

 

Importing Products That You Want to Sell to the US Government? Is That Even Possible?

Sure you want to be a vendor of the U.S. Government, but in order to sell to government agencies, you must have a product that is a
 “U.S. –Made End Product.”

 

As defined in the Federal Procurement Regulations, a U.S. – Made End Product is

"An article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed.”

Given the breadth of international trade, it is not uncommon to find that a product sold to the US government is not actually 100% of U.S. origin, but rather has some foreign components that were substantially transformed - as the above definition references - here in the U.S.

As a result of this international trade reality, a waiver may be granted on certain “Buy American” restrictions for purposes of selling to the U.S. government.  U.S. Customs offers advisory rulings and final country of origin determinations as to whether an article is or would be a product of a designated country or instrumentality for the purpose of granting such a waiver.

The rule of origin set forth in the U.S. Customs law at 19 USC §2518(4)(B) (see also 19 CFR §177.22) provides that:

An article is a product of a country or instrumentality only if

     i) it is wholly the growth, product, or manufacture of that country or instrumentality, or

     ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.

In determining whether a substantial transformation occurred, US Customs considers the totality of the circumstances in its analysis of the assembly of components of various origins into completed products.  It further does so on a case-by-case basis.

Such analyzed factors include the origin of the components themselves, resources expended on product design and development, the extent of the processing that occurs within a country, and whether such processing rendered a product with a new name, character and use.

Other considerations include the nature and extent of post-assembly inspection and testing procedures, and the worker skill required during the actual manufacturing process.

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Promoting Trade and Investment Opportunities in the African Apparel and Textiles Industry

Last month, fashion forward and culturally relevant designs were showcased at the 2013 runway shows of Africa Fashion Week here in New York City. 

Having attended the show, I was dazzled and impressed with the creativity and detail of pieces by designers like Aliakim, Demstiks by Reuben Reul, Moroccan Caftan NY, and Ms. Ray Couture, all of whose designs are shown in the images below.

Cotton was present in many of the pieces shown on the runway, and turning to comments made by Rajeev Arora, Executive Director of the African Cotton and Textile Industries Federation (ACTIF), in the recent article “Changing Perceptions Toward Modern Africa,” published in Cotton Africa and found here, offers some perspective into the current state of the African market.

“Currently, the demand for fabric in the Sub-Sahara African market far exceeds the present production and supply. Considering the economic cost in sending African cotton to Asia for processing into fabric before shipping it back to Africa to be cut and sewn into garments, ACTIF is playing a key role in cutting this cost by ensuring that the fabric is fully produced adequately in Africa.

This calls for urgency in exploring the opportunities for investing in weaving, spinning, dyeing, and finishing in the region.  In line with this achievement, African governments should be taking initiatives in creating investment-friendly regimes as currently being witnessed in the case of Ethiopia. Also there has been a remarkable increase in support by international organizations such as Business Advocacy Fund that approved its support to ACTIF in carrying out AGOA [African Growth and Opportunity Act] outreach programs.

 Other international organizations, such as Innovations for Poverty Action (IPA) are also actively conducting studies on how to improve various industrial sectors including the Textile and Garment sector across Africa. 

Given the current stake, I would like to urge all stakeholders in the cotton value chain as well as supporting partners in Africa to support ACTIF’s initiatives as it represents the interests of the CTA value chain of Africa to the international market, as a viable competitor.”

And indeed, rumor has it that already here in the U.S., behind-the-scenes activities are taking place in an effort to have the AGOA agreement extended well before its 2015 expiration.

Have you heard anything about this as well?

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Corporate Officer of Men’s Suit Importer Avoids Joint Payment of $2,392,307 in U.S. Customs Penalties

On July 30, 2013, in Slip. Op. 11-527, U.S. v. Trek Leather, Inc. and Harish Shadadpuri, the Court of Appeals for the Federal Circuit (CAFC) reversed a U.S. Court of International Trade decision to impose penalties on the corporate officer of an “Importer of Record.”

“Trek Leather” (Trek), whose President and sole shareholder is Mr. Shadadpuri, was the Importer of Record for seventy-two (72) entries of men’s suits.  Mr. Shadadpuri is also a 40% shareholder to “Mercantile Electronics,” which was the consignee of these shipments.

Both Trek and Mercantile Electronics provided “assists” (in the form of fabric) to their suit manufacturers and failed to declare their value to US Customs.  Mr. Shadadpuri even admitted that he knew Trek (the Importer of Record) should have included the value of fabric assists in its duties but did not bother to do so.

 US Customs therefore brought a lawsuit claiming that under 19 USC §1592, both Trek and Mr. Shadadpuri, in his personal capacity, were liable for a penalty of $2,393,307 for fraudulently, knowingly, and intentionally understating the dutiable value of the imported men’s suits. 

Since Trek, a corporation, was the Importer of Record, Mr. Shadadpuri argued he could only be personally liable if the government established that he had pierced Trek’s “corporate veil” or established that he had either committed fraud, or aided and abetted Trek’s fraud, making him liable under 19 USC §1592.

 As Trek had conceded during the course of the litigation however, that its activity rose to a level of gross negligence, the government abandoned its fraud claim against Trek and instead proceeded alternatively on a claim of gross negligence.

 

Mr. Shadadpuri in his defense, argued that corporate officers of an Importer of Record are not directly liable for penalties under 19 USC §1592 – and the court agreed. 

 The CAFC’s 1999 decision in United States v. Hitachi America, Ltd., 172 F.3d 1319 (Fed. Cir. 1999), held that because one cannot “aid and abet” negligent conduct, Mr. Shadadpuri could not be liable for Trek’s admitted negligence unless the government could prove he was acting as Trek’s alter ego rather than as an officer of the corporation acting in his capacity as such.

 

The CAFC, agreeing with Mr. Shadadpuri, stated that under the basic principles of corporate law, Mr. Shadadpuri could not be personally charged with a claim of negligence for the actions he took on behalf of the corporation.

In CAFC’s own words:

 
“[T]he government [US Customs] has asked us to adopt a broad legal principle that would expose all corporate officers and shareholders to personal liability for negligent acts they undertake on behalf of their corporation.  Absent an explicit statutory basis for doing so, we decline to believe Congress intended to supplant the common law so completely…”

 To read the full decision, click here.

 

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AFL-CIO Sought Removal of GSP Benefits on Bangladesh Five (5) Years Ago Due to Worker’s Rights Deficiencies

Five (5) years and several high-profiled tragedies later, GSP treatment of all goods of Bangladesh origin will be suspended, effective September 3, 2013.

GSP stands for the Generalized System of Preferences which allows for the duty-free entry of roughly 3,500 GSP eligible products.

The AFL-CIO exists to represent people who work.  Read their mission statement below.

In 2007, the GSP Subcommittee accepted for review a GSP country practice petition submitted by the AFL-CIO seeking the removal of GSP benefits for Bangladesh based on the country's non-compliance with the GSP statutory eligibility criteria related to worker rights.

The GSP Subcommittee held public hearings on the petition in October 2007, April 2009, and January 2012, and also invited public comments on the petition on several occasions.

In 2011, U.S. imports from Bangladesh under GSP totaled $26.3 million. A full list of U.S. imports from Bangladesh under GSP may be found in the www.regulations.gov in docket number  USTR-2012-0036-0001.

While the leading GSP imports from Bangladesh included tobacco products, sports equipment, china kitchenware, and plastic articles, by being a GSP beneficiary country, it also had duty-free treatment on a number of textile accessories and some women’s or girls wearing apparel.

After reviewing the most recently available information, including updated reports from the AFL-CIO, the GSP Subcommittee believed that the lack of progress by the government of Bangladesh in addressing worker rights issues in the country warranted consideration of possible withdrawal, suspension, or limitation of Bangladesh's trade benefits under GSP. 

By statute, i.e., law, however, such change in Bangladesh's trade benefits under GSP required the President to make a determination, which he finally did.

On June 27, 2013, by Proclamation, President Obama revoked Bangladesh’s privilege of receiving treatment as a beneficiary developing country GSP.

As stated in his Proclamation, the reason for the revocation was because Bangladesh “has not taken or is not taking steps to afford internationally recognized worker rights to workers in [its] country."

The original petition and other information related to the review of Bangladesh are available for public viewing on www.regulations.gov in docket USTR-2012-0036.

For more information on GSP and GSP Eligible Products, click here.

AFL-CIO MISSION STATEMENT (as per its website)

The American Federation of Labor and Congress of Industrial Organizations is an expression of the hopes and aspirations of the working people of America.

We resolve to fulfill the yearning of the human spirit for liberty, justice and community; to advance individual and associational freedom; to vanquish ­oppression, privation and cruelty in all their forms; and to join with all persons, of whatever nationality or faith, who cherish the cause of democracy and the call of solidarity, to grace the planet with these achievements.

We dedicate ourselves to improving the lives of working families, bringing fairness and dignity to the workplace and securing social equity in the Nation.

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Retailers and Importers May be Subject to More CPSC Certificate Requirements?

Ever Heard of a “Finished Product Certificate?”   Or a “Component Part Certificate?”

 

These are but two (2) of a list of new definitions that the Consumer Product Safety Commission (CPSC) is proposing to implement, and with newly defined terms of course, come new requirements.

Certification by a private labeler for products manufactured in the US is one of the proposed new rules, as well as the requirement by an importer of regulated finished products manufactured outside of the US to file its mandatory certificate at the time of filing the entry (and entry summary, if filed together).

Last Weekend To Get Your Comments in to CPSC on Certificates of Compliance

It is your last weekend to prepare and submit your comments related to these proposed rules as written comments must be received by  Monday, July 29, 2013.

To read more about this and for the links on where to electronically submit your comments, check out the Federal Register notice announcing this proposed rule which may be found at 78 FR 28080 or by clicking here.

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