International Trade for Everyday People

Global Trade Careers and Compensation Trends

2012-02-07T13:13:00.000-08:00

Come join me and OWIT-NY Thursday night to learn more about international trade career and salary trends!

Date: February 9, 2012

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-NY members, students and government employees; $25 for non-members

The Organization of Women in International Trade – New York Chapter has invited Bill Conroy, Nicole Benker and Barbara Winter Stevens of Tyler Search (www.tylersearch.com) to share their knowledge about the job market and career trends for professionals in the international trade arena.

In addition, insight from international trade professionals who recently went through career transitions will be shared as well.

For more information and to register, go to www.owitny.org and click on the events tab.

Hope to see you there!

Origin Africa

2012-01-17T04:40:00.000-08:00

“Can we source from Africa? I didn’t know that we could buy fabric and products from Africa. Like most people, I just automatically thought to source from China.”

A young man from Brooklyn, NY based brand, Jerome Oliver Jones, shared this sentiment with me yesterday while I was at the “Origin Africa” booth (#236) exhibiting at the 2012 “TEXWORLD” show, an apparel and textiles trade show, taking place at New York City’s Javitts Center through this Wednesday, January 18, 2012.

He is right, at least he is in my experience, that most do think to automatically source from China simply because they are the “go to” country for so many products manufactured and imported into the U.S.

Origin Africa is here to spread the word about the ability of sourcing products from Africa in order to promote trade between Africa and the world. As simply stated by Daniel Wolf, of USAID’s "South African Trade Hub," whom I met at the Origin Africa booth, “Africa makes good products.”

From the sampling of apparel products available at the booth, my estimation is that Africans make great textile and apparel products. Labels including “Doreen Mashika,” “Indego Africa,” “ki2fashion,” and “Bonk,” had products available to view, together with a message about ending conflict on the continent and the problem of the abduction of children who are forced to fight as soldiers, through a movement known as “Invisible Children.”

At the helm of Origin Africa is Chad Schofield who has been in the sourcing business for decades and represents African manufacturers, works to get them “export ready,” and assists them so that their manufacturing capabilities are adaptable and dependable.

Origin Africa has a two-pronged formula that acts as both a sourcing and branding program. The former involves showing the benefits to US companies of sourcing from Africa, while the latter focuses on introducing African brands to the U.S.

One benefit I observed through discussions with Chad was the ability to have a small production run of say 200-300 shirts, as opposed to a requirement to have behemoth (i.e., enormous) volumes before a manufacturer would even listen to you.

Small batch runs allow for customized colors and collections, bringing greater creativity and recognition to the designer, as well as greater diversity to the consumer.

A second benefit is the ability to source organic cotton products which is not only good for the environment, but as I described to fashion designer “Aschobi” recently, it is “cool to be conscience,” and fashion has been trending in the "eco-fashion" direction which has been gaining momentum in recent years.

If you are interested in souring from Africa, Mr. Schofield may be reached via email at chad.schofield@threeglobal.com.

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

(The Many) Invoice Declarations Required for Imported Footwear

2012-01-11T16:37:00.000-08:00

Whereas most articles imported into the U.S. are not required to have declared on a commercial invoice (or attached to an invoice) many details beyond the quantity, price, and a limited number of other factors, certain categories of imports, such as bed linens and wearing apparel, require significantly more.

Footwear is a category that requires many more details as well, so much so, that often times there is an additional “boilerplate” form filled out with the information that is commonly known as an “Interim Footwear Invoice.”

---As an aside, an experienced importer of footwear will know about this rule. For new importers, be sure to do your “homework” on import requirements as the lack of this information can raise a red flag to US Customs as to both an importer’s reasonable care compliance obligations as well as to the truthfulness of the imports as declared on the entry and commercial invoice.

To give you an idea of what is required, as described in 19 CFR §141.89 and reprinted below, additional declarations for Footwear, classifiable in headings 6401 through 6405 of the HTSUS, include identifying the:

1. Manufacturer's style number.
2. Importer's style and/or stock number.
3. Percent by area of external surface area of upper (excluding reinforcements and accessories) which is:
Leather, composition leather, rubber and/or plastics, textile materials, or “other,” and requires specifying the percentage of each type of material.
4. Percent by area of the external surface area of the outersole (excluding reinforcements and accessories) that is:
Leather, composition leather, rubber and/or plastics, textile materials, or “other,” and requires specifying the percentage of each type of material.

Other footwear requirements under this same provision (19 CFR §141.89) may include answering questions “A” to “Z” (yes, all of them!) as follows:

A. The percent of external surface area of upper (including leather reinforcements and accessories)
Which is leather _____%
B. The percent by area of external surface area of upper ( including all reinforcements and accessories)
Which is rubber and/or plastics _____%
C. Percent by weight of rubber and/or plastics is _____%
D. Percent by weight of textile materials plus rubber and/or plastics is _____%
E. Is it waterproof?
F. Does it have a protective metal toe cap?
G. Will it cover the wearer's ankle bone?
H. Will it cover the wearer's knee cap?
I. [Reserved.] (i.e., unknown to the public...)
J. Is it designed to protect against water, oil, grease, or chemicals, or cold or inclement weather?
K. Is it a slip-on?
L. Is it a downhill or cross-country skiboot?
M. Is it serious sports footwear other than skiboots? (Chapter 64 subheading note defines sports footwear.)
N. Is it a tennis, basketball, gym, or training shoe or the like?
O. Is it made on a base or platform of wood?
P. Does it have open toes or open heels?
Q. Is it made by the (lipped insole) welt construction?
R. Is it made by the turned construction?
S. Is it worn exclusively by men, boys or youths?
T. Is it made by an exclusively adhesive construction?
U. Are the fibers of the upper, by weight, predominately vegetable fibers?
V. Is it disposable, i.e. , intended for one-time use?
W. Is it a “Zori”?
X. Is the leather in the upper pigskin?
Y. Are the sole and upper made of woolfelt?
Z. Is there a line of demarcation between the outer sole and upper?

The information requested above may be furnished on a US Customs form, CF 5523, or other appropriate format by the exporter, manufacturer or shipper.

Where footwear falls into a particular tariff classification, namely one in HTSUS subheading 6401.99.80, 6402.19.10, 6402.30.30, 6402.91.40, 6402.99.15, 6402.99.30, 6406.11.40, 6404.11.60, 6404.19.35, 6404.19.40, or 6404.19.60, the following information must also be provided:

1) Does the shoe have a foxing or foxing-like band? If so, state its materials(s).

2) Does the sole overlap the upper other than just at the front of the toe and/or at the back of the heel?

In order to help clarify the meaning of some of the terms in "A" to "Z" above, the regulations provide definitions as follows:

a. In an exclusively adhesive construction, all of the piece(s) of the bottom would separate from the upper or from each other if all adhesives, cements, and glues were dissolved. It includes shoes in which the pieces of the upper are stitched to each other, but not to any part of the bottom. Examples include:

1. Vulcanized construction footwear;
2. Simultaneous molded construction footwear;
3. Molded footwear in which the upper and the bottom are one piece of molded rubber or plastic, and
4. Footwear in which staples, rivets, stitching, or any of the methods above are either primary or just extra or auxiliary, even though adhesive is a major part of the reason the bottom will not separate from the upper.

b. Composition leather is made by binding together leather fibers or small pieces of natural leather. It does not include imitation leathers not based on natural leather.

c. Leather is the tanned skin of any animal from which the fur or hair has been removed. Tanned skins coated or laminated with rubber and/or plastics are “leather” only if the leather gives the material its essential character.

d. A line of demarcation exists if one can indicate where the sole ends and the upper begins. For example, knit booties do not normally have a line of demarcation.

e. Men's, boys' and youths' sizes cover footwear of American youths sizes 111/2and larger for males, and do not include footwear commonly worn by both sexes. If more than 4% of the shoes sold in a given size will be worn by females, that size is “commonly worn by both sexes.”

f. Footwear is designed to protect against water, oil or cold or inclement weather only if it is substantially more of a protection against those items than the usual shoes of that type. For example, leather oxfords will clearly keep one's feet warmer and drier than going barefoot, but they are not a protection in this sense. On the other hand the snow-jobber is the protective version of the nonprotective jogging shoe.

g. Rubber and/or plastics includes any textile material visibly coated (or covered) externally with one or both of those materials.

h. Slip-on includes:

1. A boot which must be pulled on.
2. Footwear with elastic cores which must be stretched to get it on, but not bootwear having a separate piece of elasticized fabric which forms a full circle around the foot or ankle.

i. Sports footwear includes only:
(1) Footwear which is designed for a sporting activity and has, or has provision for, the attachment of spikes, sprigs, cleats, stops, clips, bars or the like;
(2) Skating boots (without skates attached), ski boots and cross-country ski footwear, wrestling boots, boxing boots and cycling shoes.

j. Tennis shoes, basketball shoes, gym shoes, training shoes and the like covers athletic footwear other than sports footwear, whether or not principally used for such athletic games or purposes.

k. Textile materials are made from cotton, other vegetable fibers, wool, hair, silk or man-made fibers. Note: Cork, wood cardboard and leather are not textile materials.

l. In turned construction, the upper is stitched to the leather sole wrong side out and the shoe is then turned right side out.

m. Vegetable fibers include cotton, flax and ramie, but do not include either rayon or plaiting materials such as rattan or wood strips.

n. Waterproof footwear includes footwear designed to protect against penetration by water or other liquids, whether or not such footwear is primarily designed for such purposes.

o. Welt footwear means footwear constructed with a welt, which extends around the edge of the outer sole, and in which the welt and shoe upper are sewed to a lip on the surface of the insole, and the outer sole is sewed or cemented to the welt.

p. A zori has an upper consisting only of straps or thongs of molded rubber or plastic. This upper is assembled to a foamed rubber or plastic sole by means of plugs.

For more information about importing Footwear, US Customs has an “Informed Compliance Publication” which may be accessed here.

To see a sample of an “Interim Footwear Invoice,” click here.

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

OWIT-NY Event – Preparing for the Customs Brokers Exam - Jan. 12th 6 PM

2012-01-05T05:00:00.000-08:00

Kenvic Professional Training to provide overview of Customs Brokers Exam

Date: Thursday, January 12th, 2012
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

When merchandise is imported in to the United States certain information regarding the product together with the payment of customs duties is required. While an importer may do this paper work itself, it is the more typical case that it hires a Customs Brokers to file this information with the government.

As customs brokers are the intermediary between the importer and the government it has a dual set of obligations. One is to the importer, as the broker is working as its agent under a power of attorney, and the second is to the government through whom it is licensed.

Customs brokers receive their licenses after passing a lengthy exam and successfully passing a background check. This upcoming program will provide an overview of how to prepare for the Spring exam.

Examination topics cover the followings:

• Classification
• Types of entries, entry requirements and procedures
• Bonds
• Free Trade Agreement
• Customs Valuation
• Examination of merchandise, prohibited and restricted merchandise
• Temporary importation under bond, marking of imported merchandise
• Bond entries and procedures
• Fine, Penalty and Forfeitures, and protests
• Customs Brokers Compliance
• Drawback Power of attorney
• Antidumping and Countervailing

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

For more information, go to www.owitny.org and click on the Events tab.

Hope to see you there!

CPSC Signals That Flammability and Lead Risks Related to Children’s Sleepwear a Priority Issue for 2012

2012-01-03T05:04:00.000-08:00

In a letter to importers, manufacturers, retailers and distributors of children’s sleepwear and loungewear late last year, the Consumer Products Safety Commission (CPSC) sent a reminder of its enforcement policy as it relates to risks of burn injuries and chemical contamination.

Children’s sleepwear standards were developed to prevent children’s sleepwear from igniting due to exposure to ignition sources, such as candles, ranges, stoves, matches/lighters, space heaters and fireplaces. Most of the ignition incidents were found to occur while children were wearing sleepwear or sleep-related items during the evening before bedtime or in the morning around breakfast time.

In addition to burn prevention, contamination by way of lead exposure was also signaled as a priority issue as this letter included a summary of the Consumer Product Safety Improvement Act of 2008 (CPSIA) requirements which include the usage of tracking labels, a certificate of compliance and testing requirements for phthalates, lead content and lead in surface coatings on snaps, zipper pulls and elsewhere on the product.

CPSC is charged with protecting the public from unreasonable risks of injury or death associated with the use of the thousands of consumer products under the agency's jurisdiction.

Included in its jurisdiction is the oversight and enforcement of the Flammable Fabrics Act, which includes protecting the public from the hazards of flammable fabrics, interior furnishings and wearing apparel, including children’s sleepwear.

“Children’s sleepwear” includes any product of wearing apparel (in sizes 0–14), such as nightgowns, pajamas, or similar or related items, such as robes, intended to be worn primarily for sleeping or activities related to sleeping. Exemptions to this definition include: (1) diapers and underwear; (2) “infant garments,” sized for a child nine months of age or younger; and (3) “tight-fitting garments” that meet specific maximum dimensions.

Children’s sleepwear includes “loungewear” as a type of children’s sleepwear which was introduced to the children’s market in the 1990s. CPSC considers children’s “loungewear,” or other similar garments marketed as comfort wear, as garments worn primarily for sleep-related activities. Therefore, “loungewear” must comply with the children’s sleepwear standards as well.

For more information on some of the related regulations, click here.

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

Focused Assessments and Compliance Improvement Plans

2011-12-30T10:07:00.000-08:00

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

2011-12-20T14:25:00.000-08:00

“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?

2011-12-05T12:28:00.000-08:00

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

2011-11-21T12:23:00.000-08:00

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?

2011-11-16T06:00:00.000-08:00

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

2011-11-14T07:06:00.000-08:00

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

2011-10-31T17:50:00.000-07:00

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

2011-10-24T04:06:00.000-07:00

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

2011-10-19T18:39:00.000-07:00

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?

2011-10-06T14:40:00.000-07:00

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 Par 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

2011-09-30T19:37:00.000-07:00

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

2011-09-24T07:12:00.000-07:00

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…

2011-09-20T06:35:00.000-07:00

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

2011-09-12T14:32:00.000-07:00

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

2011-09-08T13:24:00.000-07:00

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

2011-08-25T16:12:00.000-07:00

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

2011-07-19T14:17:00.000-07:00

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?

2011-07-08T12:18:00.000-07:00

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

2011-07-01T12:04:00.000-07:00

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

2011-06-22T08:31:00.000-07:00

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

2011-06-13T14:29:00.000-07:00

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

2011-06-07T19:13:00.000-07:00

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

2011-05-27T11:37:00.000-07:00

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

2011-05-21T19:14:00.000-07:00

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

2011-05-15T07:13:00.000-07:00

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!

2011-05-07T22:03:00.000-07:00

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

2011-04-22T20:12:00.000-07:00

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)

2011-04-14T04:47:00.000-07:00

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

2011-04-07T15:29:00.000-07:00

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?

2011-03-29T01:49:00.000-07:00

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

2011-03-15T04:33:00.000-07:00

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

Importing Gray Market Goods – The Omega v. Costco Case

2011-03-06T07:29:00.000-08:00

"Critical Implications of Costco v. Omega on the Gray Goods and the First Sale Doctrine" CLE Program is now available at lawline.com here

Lawline.com now has available a continuing legal education (CLE) course that I served as faculty on regarding a case that dealt with an importation of “gray market goods.” Specifically, it had to do with the Supreme Court’s December 2010 affirmance of the case heard in the 9th Circuit Court of Appeals entitled, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 962 (9th Cir. 2008). (For more information on gray market goods, see my Dec. 20, 2010 post)

To give a little background, Omega, a popular high end watch company, is the owner of a “Globe” watch design that is registered with the US Copyright Office. It also has its trademark registered with the US Patent and Trademark Office.

Omega had a production of watches manufactured overseas that bore the Omega trademark and the copyprighted Globe design.

Costco thereafter purchased the foreign manufactured Omega watches bearing the copyright and trademark, and imported them into the United States for sale in its US stores at a price of $1,299, which was significantly less than Omega's US retail sales price of $1,995.

Costco did so however, without the authorization of Omega, which according to Omega, was in violation of the Copyright Act’s prohibition on unauthorized importations.

In its defense, Costco raised what is known under Copyright law (and not Customs law) as the “First Sale Doctrine.” This doctrine places a limitation on the exclusive rights of a copyright owner (19 USC §109a) which in this case is Omega.

Ultimately, the 9th Circuit Court of Appeals position was that using this defense was permissible only where the disputed copies of a copyrighted work were either made or previously sold in the US with the authority of the copyright owner. That is, Costco could not use it as a defense in this instance.

The Supreme Court agreed.

For an in-depth discussion on some possible implications of this decision on imports, check out our program on lawline.com by clicking here.

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

The Complexity of Fabric Classification

2011-02-25T18:25:00.000-08:00

I picked up an Emilio Pucci scarf recently and have been enjoying learning about all of the different ways of wearing it. Its size is approximately 3 ft x 3 ft and while I bought it to wear as a cover up on the beach, I’ve been discovering its many variations as a shawl and scarf.

While wearing it the other day in my office, I found myself researching fabric issues and I couldn’t help but think about how appropriate it was given that I was wearing a large (and gorgeous) piece of cloth!

The issue I was looking into had nothing to do with the material of my new accessory but rather that of bonded fabrics and the identification of where nuances arose as between the general rule on bonded fabrics and “pile” fabrics. I was also trying to determine if there were any differences when the fabric was knit versus crocheted.

Finding this answer required an analysis of the Textile Section Notes of the tariff (Harmonized Tariff Schedule of the United States, “HTSUS”) and in particular, Chapters 59, 60 and 61. Let me explain how the tariff is organized.

The tariff is arranged by Section which generally categorizes similar merchandise. It has titles such as “Vegetable Products,” (Section II), “Plastics and Articles Thereof, Rubber and Articles Thereof” (Section VII), and “Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking Sticks, Seatsticks, Whips, Riding-Crops and Parts Thereof; Prepared Feathers and Articles Made Therewith; Artificial Flowers; Articles of Human Hair” (Section XII).

At the beginning of each Section are “Notes” unique to all of those Chapters within the Section. Similarly, in the first part of each Chapter are Notes specific to the tariff provisions within that Chapter, along with Additional U.S. Notes that are unique to imports coming into the United States.

With regards to “Textile and Textile Articles,” the tariff provisions for these types of imports are found in Section XI, Chapters 50 through 63.

Making determinations on fabrics can be tricky due to reasons such as the type of combination of fibers, if such fibers had been brushed or cut during the processing thereby creating a “pile,” if fabric is adhered to another type of fabric, or if fabric has been coated or impregnated with a medium that contains varying percentages of a rubber and plastic combination.

The methodology for the classification of goods under the HTSUS is governed by what are known as the General Rules of Interpretation (GRI). The first GRI provides that classification determinations are made in accordance with the terms of the headings of the tariff schedule and any relevant Section or Chapter Notes.

Coming back to bonded fabrics, Note 2 to HTSUS Chapter 59 (entitled, “Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use”) provides a general rule for bonded fabrics, stating that where a knitted or crocheted fabric is coated, impregnated, laminated or covered, then it would be classified in HTSUS Chapter 59.

Despite this general rule however, Note 1(c) to HTSUS Chapter 60 (entitled, “Knitted or crocheted fabrics”) sets forth an exception to this rule where the imported merchandise involves a knit pile fabric that is coated, impregnated, laminated or covered. Under this circumstance, these fabrics are classifiable within Chapter 60, under Heading 6001, and not under Chapter 59.

Moreover, Additional Legal U.S. Note one (1) to HTSUS Chapter 60 provides a specific definition for the term “long pile fabrics.” As defined, these are “fabrics made by inserting fibers from card silver into the loops of the ground fabric during knitting.” In everyday language, this simply means that a certain manufacturing process must have been utilized in order to qualify under this provision.

Needless to say, making classification determinations can sometimes seem like solving a puzzle as multiple Chapters and Notes need to be analyzed before any conclusions can be drawn.

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

The Fashion Industry and Accountability for the Basic Human Rights of Foreign Laborers

2011-02-21T06:22:00.000-08:00

Fall 2011 New York Fashion Week which has just wrapped up here in NYC, has increasingly brought more issues to the forefront, including the currently trendy dialogue around “sustainable fashion” along with the well known - yet still undealt with - issue of eating disorders that many models struggle with.

One lesser known and far less glamorous issue has to do with foreign labor in the fashion industries. Textiles, and hence apparel, are made primarily overseas using labor that is less expensive than could be found in the United States. That obviously is no secret, however, disproportionately high working hours, wages that barely cover the rent let alone providing an adequate standard of living, hazardous working conditions, child labor and forced labor are all realities that exist in the industry as well.

Designers or license holders who rely on foreign labor to manufacture products with their logos on it (see my previous post for an explanation about licenses, license holders and royalties) have, in my view, a duty of accountability to ensure basic human rights towards laborers all the way down the line back to the factory.

This concept of importer oversight “down the line” is not unusual within the international trade community. An example of this is US Customs C-TPAT (Customs-Trade Partnership Against Terrorism) program, which causes importers to “vet” their supply chain for security purposes all the way back to the factory in exchange for a more expeditious customs clearance. As a result of this program, changes to factories such as adequate ventilation, locks on doors and basic sanitation upgrades have been implemented due to an importer’s demands that such changes be put into place.

While industry standards grossly lack foreign labor accountability, I am pleased to report that some licensor’s do in fact, require not just those licensee’s who import products with their logos to maintain certain labor standards, but they likewise require that those importers have their manufacturers agree to these terms as well.

To give you an idea of some of these contract terms that protect laborer rights and attempt to provide an “ethical code of conduct” if you will, here are some sample clauses below:

* Child Labor: Licensee and its Suppliers will not purchase products or components thereof manufactured by persons younger than fourteen (14) years of age or younger than the age of completing compulsory education in the country of manufacture where such age is higher than fourteen (14). Licensee and its Suppliers further acknowledge and agree that they will not use any child labor in the manufacturing, packaging or distribution of Licensor merchandise. In no case shall any child younger than fourteen (14) years of age or younger than the age of completing compulsory education in the country of manufacture where such age is higher than fourteen (14) be employed in the manufacturing, packaging, sales or distribution of Licensor merchandise.

* Forced Labor: Licensee and its Suppliers will not purchase products or components thereof from suppliers that use forced labor, prison labor, indentured labor or exploited bonded labor, or permit their suppliers to do so. Licensee and its Suppliers acknowledge and agree that they will only employ persons whose presence is voluntary and that they will not utilize any forced or involuntary labor, whether prison, bonded, indentured or otherwise.

* Contract Labor: Licensee and its Suppliers shall not use workers obligated under contracts which exploit them, which deny them the basic legal rights available to people and to workers within the countries in which they work or which are inconsistent with the principles set forth in this Code of Conduct Legal and Ethical Business Practices: Licensee and its Suppliers must fully comply with all applicable local, state, federal, national and international laws, rules and regulations including, but not limited to, those relating to wages, hours, labor, health and safety, and immigration.

* Work Hours: Licensee and its Suppliers shall not require their employees to work more than the limits on regular and overtime hours allowed by the law of the country of manufacture. Except under extraordinary business circumstances, Licensee's and its Suppliers' employees shall be entitled to one (1) day off in every seven (7) - day period. Licensee and its Suppliers must inform their workers at the time of their hiring if mandatory overtime is a condition of their employment. Licensee and its Suppliers shall not compel their workers to work excessive overtime hours.

* Wages and Benefits: Licensee and its Suppliers recognize that wages are essential to meeting employees' basic needs. Licensee and its Suppliers shall pay employees at least the minimum wage required by local law regardless of whether they pay by the piece or by the hour and shall provide legally mandated benefits.

* Overtime Compensation: Licensee and its Suppliers' employees shall be compensated for overtime hours at such premium rate as is legally required in the country of manufacture or, in countries where such laws do not exist, at a rate at least equal to their regular hourly compensation rate.

* Freedom of Association: Licensee and its Suppliers shall recognize and respect the right of employees to freely associate in accordance with the laws of the countries in which they are employed.

* Nondiscrimination: Licensee and its Suppliers shall not subject any person to discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin.

* Harassment or Abuse: Licensee and its Suppliers must treat their employees with respect and dignity. No employee shall be subject to physical, sexual or psychological harassment or abuse.
Licensee and its Suppliers acknowledge and agree not to use corporal punishment or threats of violence.

* Health and Safety: Licensee and its Suppliers shall provide a safe and healthy working environment to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. Licensee and its Suppliers further acknowledge and agree that they will comply with all applicable workplace conditions, safety and environmental laws.

Clauses like these are an illustration of a movement in the right direction, however, much more can be done to prevent incidents of child labor, such as by providing the parents with livable wages.

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

Royalties or Royalty?

2011-02-10T04:53:00.000-08:00

Who is royalty? In the eyes of US Customs, no one is royalty.

And, despite the upcoming marriage of Prince William and Kate Middleton for which I recently saw had no “price tag” despite England’s weakened economy, this blog post is not about royalty, but royalties. (Ah, shucks… I know)

What are royalties? Generically speaking, a royalty is a fee paid by a party (known as a “licensee”) for usage of another’s (licensor’s) right. An example of this would be a payment made by an apparel importer (the licensee) for use of the recording artist “Justin Bieber’s” image on a t-shirt it imports. For those of you who don’t know, Bieber is a young Canadian R&B pop singer who is very popular with “tweens” – at least that’s what I’ve been told!

In this example, either Bieber, who is presumably the exclusive license holder, or the company that has merchandising rights relating to the use of his name or “likeness,” (which in everyday language essentially means, his image) would be entitled to payment – normally a percentage of the sales price of the good – upon the sale of the t-shirt. The terms setting forth what amount will be paid varies, and can run the gamut from 2% to 16% or much more.

So what do royalties have to do with international trade?

When it comes to figuring out how much to pay in duties, “transaction value” is one method (the preferred one actually) to use for determining an amount. As provided in 19 USC 1401a(b)(1),

“The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States, plus amounts equal to -. . . Any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States . . . .”

Therefore, under certain circumstances (not all – it depends on the nature of the licensing agreement and the relationship of the buyer, seller, and license holder), royalty amounts should be added to the transaction value. To determine the dutiable status of royalties, two (2) factors should be examined:

(1) Whether the buyer was required to pay them as a condition of sale of the merchandise for exportation to the United States, and

(2) To whom and under what circumstances they were paid.

Payments made by the buyer to a third party (i.e., not the seller or a company related to the seller either usually) for the right to distribute or resell the imported merchandise will not be added to the "price actually paid or payable" for the imported merchandise if the payments are not a condition of the sale of the merchandise for exportation to the United States.

And just what is a “condition of sale?”

To figure this out, the initial questions to answer this inquiry should be:

1) Whether the imported merchandise was manufactured under patent;

2) Whether the royalty was involved in the production or sale of the imported merchandise, and;

3) Whether the importer could buy the product without paying the fee.

Given that licensing agreements are all written differently and can involve multiple related and unrelated parties using various payment structures, figuring out the dutiability of royalty payments is not necessarily a “cut and dry” issue. In fact, it can be quite complicated.

For more reading on US Customs rules regarding transaction value, check out their Value publication.

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

Stay of Enforcement Lifted on CPSC Flammability Standards

2011-01-27T14:31:00.000-08:00

Following a unanimous vote by the U.S. Consumer Product Safety Commission (CPSC), the stay of enforcement on certification for compliance with the flammability standards for non-children's products has been lifted in the following categories:

• Clothing textiles
• Carpets and rugs
• Vinyl plastic film

This means in everyday language, that an importer who fails to certify that CPSC flammability standards have been met on imported merchandise will now be subject to penalties which can exceed well over $100,000 USD.

Starting yesterday (January 26, 2011), an importer will no longer be “forgiven” when it fails to certify that an importation is compliant with CPSCs flammability rules. The compliance certificate indicating this is known as a General Conformity Certificate or “GCC.”

CPSC concluded in 2009 that when certain fabrics have not been treated with the inclusion of substances that could result in the addition of lead into the fabric, lead content testing was no longer required where it was 100% of, or any blend of, the following textiles.

1. Natural fibers, whether dyed or undyed, including cotton, ramie, linen, silk, alpaca, among others; and,

2. Manufactured fibers, whether dyed or undyed, including polyester, spandex, nylon, acrylic and rayon, among others.

Keep in mind that a GCC is still mandatory even where the underlying textile is exempted from CPSC requirements.

While the underlying testing of these fabrics is no longer required, manufacturers and importers still remain responsible for

(a) Providing a GCC with each shipment,
(b) Verifying that the product or material has not been altered or modified so as to cause lead to enter the material or product, and
(c) Assuring for themselves that the fabric is indeed exempt.

GCCs and copies of the test results upon which certification is based must be kept for 3 years. It also must be provided in a timely manner upon request by CPSC, or an importer can find itself subject to a penalty under the premise of having made a false guaranty. As the certifier that merchandise is compliant with CPSC rules, an importer must:

1. Be in possession of the original, or a copy of, the test certificate upon which the GCC is based, and

2. Retain the test certificate together with the original GCC for a minimum of 3 years after the production date.

A GCC must accompany the product whether imported or manufactured in the United States and be furnished to the product's distributors and/or retailers as these companies must also supply GCCs for their products to CPSC upon request.

CPSC requires that the GCC “accompany” a shipment [73 FR 68328, 11/24/08], and it permits a number of methods for doing so, including electronic “accompaniment.”

While the GCC may be made available online, given the reality of facilitating the movement of cargo and U.S. Customs’ physical handling of it, the agency looks for certain records as being included with a shipment. Therefore, its physical inclusion within the shipment is recommended.

Needless to say, it is critical that CPSC flammability rules and regulations are complied with now that enforcement activity will commence and penalty amounts have so tremendously increased. More information about factors CPSC may consider in assessing a penalty can be found at 16 CFR Part 1119, published in 74 FR 45101.

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

OWIT-NY Wine Tasting Event This Thursday!

2011-01-25T11:18:00.000-08:00

As Vice President to the OWIT-NY Board, I’d like to invite you to kick off 2011 with the New York Chapter of the Organization of Women in International Trade as we host a private wine tasting at the popular Morrell Wine, a premier wine and spirits store in Rockefeller plaza.

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.

Join us to taste these international wines and cheeses and combine the satisfaction of working in international trade and the educational experience of understanding emerging wine markets.

Date: Thursday January 27, 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 Store
One Rockefeller Plaza (49th Street between 5th and 6th Avenues)
New York, NY
Cost: $50 for members and $55 for non-members

Space is limited, to ensure a seat please register online Click Here.

Unfortunately, I will not be able to make what is sure to be a really fun event, but I wanted to at least pass the message along in case you can!

Don't forget to follow us on Twitter.com/OWITNY for the latest news and events in international trade.

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

Welcome to a New Year of Customs Audits!

2011-01-20T14:29:00.000-08:00

While just a few weeks into the new year, I can’t help but notice that US Customs is off to the races with its auditing programs, one of which I will write about here known as a “Focused Assessment.”

The Focused Assessment program is a systematic risk-based approach to auditing in which the auditing team evaluates a company’s Customs and Border Protection (CBP) related internal controls to determine the likelihood of non-compliance and assess “risk.”

As shown by the definition above, and probably presumed by most importers when it receives the phone call indicating that an audit will be occurring in the (near) future, when US Customs comes in to do one, it already suspects some wrong doing on the part of the importer.

This does not mean, however, that an importer was knowingly or intentionally engaged in “risky behavior,” which can take many possible forms, such as classifying merchandise with an erroneous tariff number, or failing to add into the dutiable value of a product an item supplied by the importer (to its manufacturer) for incorporation into the merchandise ultimately imported, which is commonly referred to as an “assist.”

An example of this would be a women's sleepwear importer supplying bows to its vendor for attachment to robes or night gowns that it imports. Under US Customs regulations pertaining to “valuation” (which in everyday language, is the methodology for determining the dutiable value of imported merchandise), both the cost of the article supplied by the importer AND the cost of the freight to ship it to the vendor must be added to the invoice value of the imported merchandise. This of course, can be a tricky thing to calculate but alas, it is not the subject of this blog post so I will continue with my discussion on focused assessments. (If you have a valuation question, feel free to email me).

There are three (3) distinct phases to a focused assessment.

1. Pre-Assessment Survey: An evaluation of a company’s internal controls over US Customs related operations
2. Assessment Compliance Testing: “Transaction testing” used to measure compliance and/or to determine a loss of revenue (i.e., an amount of duties that the government believes should have been paid on certain importations), and
3. Follow-up Review: Verification of a company’s corrected action

The primary areas US Customs focuses on during an assessment are valuation, classification, anti-dumping/countervailing duties, transshipment and intellectual property rights. Secondary areas for assessment include, foreign trade zone activity, special trade programs, such as NAFTA (North American Free Trade Agreement) and special duty provisions, which are those found in Chapter 98 of the HTSUS (Harmonized Tariff Schedule of the United States).

Key features of a focused assessment include:

a) The identification of imports that represent the greatest risk of trade noncompliance
b) The evaluation of the adequacy of a company’s internal control system, and
c) Methods for improving future compliance by identifying risk and reducing it.

But how does US Customs go about evaluating the adequacy of a company’s internal control system? It does so by looking at the following five (5) specific components of a company.

The first is what US Customs refers to in its focused assessment literature as a company’s “Control Environment,” as this apparently “sets the tone of an organization, influencing the control consciousness of its people.” I must admit, even though US Customs attempts to keep importers informed, language such as this “control environment” definition leave little to be understood.

What it is really getting at however, is the question of “What procedures are in place to maintain checks and balances within a company across company activities?” And, given that US Customs is making this inquiry, this question is focused on a company’s import activities.

The second is “Risk Assessment,” that is, Customs recognizes that multiple external and internal risks are faced by each company, and that these risks must be identified and analyzed. It therefore wants to see that a company has made this identification of potential risks across company activities.

The third is known as, “Control Activities,” which are the policies and procedures in place to ensure that management directives are implemented.

The fourth area US Customs is looking at is categorized as “Information and Communication” wherein the identification and summation of information that supports all other control components is communicated throughout a company’s personnel and those entities it works with (that have reason to be communicated to, with respect to “controls.”)

The fifth and final area, is that of “Monitoring,” which evaluates a company’s internal systems.

An evaluation of these five components occurs in the pre-Assessment Survey portion of the focused assessment. Depending on the results of this survey, determines where US Customs goes next with its auditing actions.

In my experience, these audits are time consuming, disruptive to regular business, and may leave an importer in a sleep deprived state. All the more reason to stay both informed and on top of US Customs compliance guidelines.

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

Footwear is Fun!

2011-01-14T05:32:00.000-08:00

Having made a classification determination regarding the extent of textile fiber on the sole of a client’s shoe recently, I found myself trying on the example the company had sent me. As I admired this shoe on my small foot, I remembered why this case was particularly interesting.

I was exploring the proper classification of footwear which had a sole made out of a rubber and plastic combination. In making this determination, regard is to be given to the material of both the upper sole and the “outer sole,” which, in case it isn’t already obvious, means that part of the footwear (other than an attached heel) which, when in use, is in contact with the ground. [General EN (C) to Ch. 64, HTSUS]

The “outermost sole” of the shoe is the part directly exposed to abrasion and wear. It can consist of any of a variety of materials, inc. leather, rubber, plastic, cork, rope, crepe, wood, etc., have differences in thickness or degrees of flexibility, and have an infinite variety of surface designs. After reading this definition, I took a look at the winter boots I had worn to work and it turned out there was a felt covering on the bottom of the shoe. What a surprise!

Why cover an outermost sole with a textile anyway? Duty savings of course!

A favorable duty rate may be obtained where footwear has an outer sole of textile. In this example of a shoe with a rubber and plastic sole, upon importation it would be dutiable at a rate of 37.5% under HTSUS 6404.19.35. That is, for every $100 worth of shoes imported, $37.50 in taxes, i.e., duties must be paid to US Customs.

Contrast that to a shoe which, upon importation, has a textile material covering the outer sole. This would be dutiable at a rate of 12.5% under HTSUS 6405.20.90, and hence, only $12.50 would need to be paid in duties for every $100 worth of shoes imported. This rule also applies irrespective of the duration for which the textile material will continue to be in contact with the ground.

What matters to US Customs is that the product is introduced into the “stream of commerce” as “entered” (which in everyday language, means brought into the U.S. for consumption, i.e., sale, purchase, use, as opposed to temporarily coming in for say, a trade show), and is a commercial reality in its condition as entered. That is, it is not “entered” as one article in an effort to evade a higher duty rate, only to be modified into something else that will be “consumed.”

For some funny examples, check out Customs ruling HQ 965751 (11/18/02), which is where you will also find some greater detail into the definitions I’ve provided above.

In addition, US Customs is looking at which constituent covers the majority of the outer sole. In Customs ruling HQ 089600 (9/11/91), citing HQ 084713 (8/3/89), US Customs found that the outer sole which had the greatest external surface area in contact with the ground is what should predominate as the outer sole. In the ruling it dealt with plastic "dots" scattered across the sole, which nonetheless comprised the predominant material of the outer sole for tariff purposes due to their ubiquity. The shoe was therefore considered to have a sole made up of a rubber and plastic combination.

I enjoy analyzing footwear. Footwear is fun!

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

"Avoiding Cultural Missteps"

2011-01-13T10:57:00.000-08:00

Please join me this afternoon for a presentation on how to avoid "cultural missteps" presented by the California State Bar Association.

This program will address avoiding cultural missteps when working with clients and lawyers in the Middle East, Asia, including China and India, and Europe. The speakers will address their experiences and describe how cross-cultural differences affect the practice of law and business relationships. Drawing on their experiences in international trade, in a Fortune 500 company, and with Sharia law, the speakers will illustrate some of the cultural differences practitioners may come across when working with international clients, partners, and opposing counsel. From this, participants will learn to recognize some potential cultural pitfalls.

Panelists include:

Deanna Clark
Leel Peesapati
Todd Gallinger

For more information and to register, please click here.

Customs Entry and Filing Procedures

2010-12-30T13:53:00.000-08:00

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

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

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

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

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

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

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

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

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

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

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

Protecting Intellectual Property: US Customs and Gray Market Goods

2010-12-20T15:01:00.000-08:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Happy Holidays!

2010-12-16T03:41:00.000-08:00

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

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

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

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

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

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

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

Customs Brokers and Client Confidentiality

2010-12-07T16:47:00.000-08:00

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

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

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

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

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

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

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

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

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

Comments may be directed as follows:

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

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

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

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

2010-11-22T06:26:00.000-08:00

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

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

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

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

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

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

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

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

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

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

Where Does This Glass of Wine Come From?

2010-11-14T17:27:00.000-08:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Voyage Charters and Charter Parties

2010-11-05T14:08:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Contracts and the International Sale of Goods

2010-10-18T11:28:00.000-07:00

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

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

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

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

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

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

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

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

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

OWIT-NY Event Tonight on Trade Compliance

2010-10-13T08:03:00.000-07:00

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

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

featuring

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

and Co-Panelist

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

Topics of Discussion Include:

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

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

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

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

About MIC-

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

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

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

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

FedEx and the “Express Consignment Facility”

2010-10-10T07:31:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

Consumer Product Safety and US Customs Cooperation

2010-10-01T13:06:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hooray for Spanish Designers Toni Francesc and Jose Miro!

2010-09-24T15:04:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

International Trade, Bananas and Costa Rica

2010-09-17T07:43:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

2010-09-01T09:44:00.000-07:00

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

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

IN COLLABORATION WITH

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

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

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

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

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

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

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

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

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

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

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

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

Red Hook and Containers

2010-08-24T11:53:00.000-07:00

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

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

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

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

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

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

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

2010-08-12T18:33:00.000-07:00

As amended, the Lacey Act now makes it unlawful to

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2010-08-05T14:05:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

To keep track of CPSIA updates, click here.

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

Citations:

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

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

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

2010-07-31T08:07:00.000-07:00

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

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

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

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

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

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

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

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

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

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

2010-07-21T14:59:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

Norma Kamali – the philanthropist

Prabal Gurung – a rising star

Diane Von Furstenberg – a humorous inspiration

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

US Customs Report Shows Importing Community Doing a Good Job

2010-07-13T05:05:00.000-07:00

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

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

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

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

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

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

Priority trade issues include those involving:

-Textiles - Penalties

- Intellectual Property Rights

- Antidumping and Countervailing Duties

-Import Safety - Agriculture

-Revenue Collection

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

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

To read the full report, click here.

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

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

2010-07-07T05:16:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

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

2010-06-28T16:32:00.000-07:00

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

Every importer is aware – or should be aware – of the imposition of penalties for the failure to follow US Customs regulations.

Even if an importer believes it has been compliant, an internal audit or other self-assessment, can reveal areas where errors have been made, and some of these may have resulted in a loss of revenue to US Customs whether of liquidated, or unliquidated, entries.

So what is an importer to do? Is it better to present the issue(s) to US Customs? And if so, how does an importer go about doing that without opening up “Pandora's Box” in terms of auditing, or the delay of shipments, on the part of US Customs now that you have put yourself on its radar? Is it better to stay under the radar?

Clearly, if a post-entry amendment can be done to rectify the mishap, that is an easy way to resolve the issue.

But what if the impact of a seemingly small discrepancy actually extends across years of entries? Or perhaps, the discrepancy is narrow in terms of the volume of entries, but nonetheless resulted in a gross underdeclaration of duties?

Well, now there is a serious problem to deal with. Unfortunately, the problem can be a much much (yes, I wrote the word twice) bigger one. Let me explain why.

First of all, 19 USC §1592 sets forth the penalty assessments for failing to pay lawful duties. The penalties differ based upon a range of culpability, ranging from fraud (the most serious), to gross negligence, to negligence (least serious offensive).

They are as follows:

Fraud violations = the domestic value of the merchandise.

Gross negligence violations =
(A) The lesser of
(i) four times (4x) the loss of lawful duties, taxes, and fees deprived the government, or,
(ii) the domestic value, or,
(B) 40% of the dutiable value, but in no case to exceed the domestic value of the merchandise, if the violation did not affect the assessment of duties.

Negligence violations =
(A) The lesser of:
(i)two times (2x) the loss of lawful duties, taxes, and fees deprived the government or,
(ii)the domestic value, or,

(B) 20% of the dutiable value, but in no case to exceed the domestic value of the merchandise, if the violation did not affect the assessment of duties.

Of course, there is always the option to try and mitigate the above duties, which would reduce the penalties as follows:

• Fraud – from a minimum of 5 times (5x) to a maximum of 8 times (8x) the total duty loss, or 50% to 80% of the dutiable value in non-revenue loss cases, but never to exceed the domestic value of the merchandise;

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

• Negligence – from a minimum of 0.5 times (0.5x) to a maximum of 2 times (2x) the total duty loss or 5% to 20% of the dutiable value in non-revenue loss cases, but never to exceed the domestic value of the merchandise.

Contrast these penalties, including the possibility of mitigation, to that of when an importer does make a prior disclosure.

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

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

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

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

A prior disclosure must be submitted prior to the commencement of a “formal investigation” by US Customs. There are many rules regarding how to make the prior disclosure and what must be included within it in order to be considered valid, including, the circumstances of a violation of 19 USC §1592, and a tender of any duty loss.

US Customs regulations for Prior Disclosure are found in 19 CFR §162.74 and more information about it can be found in Customs informed compliance publication entitled “The ABCs of Prior Disclosure.”

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

Heartbreaking Oil Spill in the Gulf of Mexico

2010-06-19T13:55:00.000-07:00

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

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

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

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

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

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

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

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

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

Toxic Purses?

2010-06-13T14:07:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

5 Listed Phthalates:

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

4 Types of Lead:

Lead
Lead acetate
Lead phosphate
Lead subacetate

1 Type of Cadmium

Cadmium

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

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

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

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

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

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

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

2010-06-06T17:32:00.000-07:00

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

THIS WEDNESDAY JUNE 9, 2010

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

Officer McCabe plans to speak on subjects including:

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

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

Hope to see you there!

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

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

2010-05-24T15:19:00.000-07:00

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

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

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

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

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

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

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

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

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

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

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

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

Some important upcoming time frames are:

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

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

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

2010 World Trade Week NYC

2010-05-16T05:42:00.000-07:00

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

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

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

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

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

Hope to see you there!

Fashion Law 101

2010-05-09T18:31:00.000-07:00

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

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

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

-- Feedback from various students

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

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

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

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

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

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

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

U.S. Customs Audits/Focused Assessment – Insight from 2 US Customs Assistant Field Directors

2010-04-26T15:52:00.000-07:00

“We bring out the facts”
“We're skeptical”
“If it's not documented it's a problem.”

– Alan Brosnick, US Customs Assistant Field Director, US Customs Office of Regulatory Audit

I recently went to a CLE (continuing legal education) seminar at the US Court of International Trade entitled, “The Do's and Don'ts of Customs Audits: A Practical Guide From Inside and Outside.” The comments by the auditors, Alan Brosnick and William Lynch, both Assistant Field Directors of US Customs Office of Regulatory Audit, shed some light on what US Customs is interested in finding out during an audit, and more importantly, it revealed their skeptical attitude towards importer compliance and disclosures.

A brief discussion was had on the array of audits that make up one half of US Customs audits, which includes (1) broker assessment audits, (2) agricultural audits (e.g., re FDA and USDA product recalls), and (3) compliance issue audits, such as an “inability to pay” audit (which is where an importer states that it does not have enough money to pay, e.g., a penalty, and Customs, not believing them, goes ahead and audits their financial records – which had likely already been provided to Customs when asserting an inability to pay claim...), and lastly, some upcoming audits not currently in effect, including the bonded warehouse and foreign trade zones audits dealing with inventory audits.

The majority of the discussion however, centered on “Focused Assessments,” an importer auditing procedure, that singularly comprises the other 50%.

US Customs began by explaining that it has roughly 400 auditors and 1000 attorneys, and the auditors are subject to what are known as “generally accepted government auditing standards.”

Prior to the commencement of an audit (i.e. prior to visiting an importer's premises), US Customs does a review of the last 3 years of an importer's activities, talks to the Import Specialist at the port(s) where the merchandise is typically entered, checks for prior penalty cases, and generally researches where any other problems may have been identified. This, together with the importer's operational history, is known as the “control environment,” and it sets the initial tone for the focused assessment.

One of the first steps involved is that an importer must fill out an auditing questionnaire. “Red flags” that may trigger concern on the part of an auditor is if an importer answers questions with responses such as, “Oh, my broker handles it,” especially if there are multiple brokers, or if Customs observes that the level of expertise on the part of the Import Manager is lacking. After all, as stated by Mr. Brosnick, US Customs is asking what type of knowledge does the Import Manager have? Does the company request binding rulings? Consult with legal counsel? Have monitoring activities?

US Customs wants to see that the design of an importer's internal control structure is adequate for its particular business.

A major area of importance regarding the control environment, is the way that an importer conducts its risk assessment and how it acknowledges those risks to US Customs. US Customs wants to see that an importer is aware of not just its identified risks, but also those which may be coming up due to a change, such as the use of a free trade agreement, an upcoming antidumping or countervailing duty rate increase on the imported product, or a new licensing issue. The identification of risks also involves health and safety issues. At the end of the day, US Customs expects that the risk control activities established by an importer are equal to the identified risks.

That being said, US Customs does not want to see in a company’s compliance manual a mere recitation of US Customs regulations and publications. A manual can be kept short, but it must be on point in terms of the company’s business and import activities.

Internal communications were also an important aspect highlighted by the US Customs auditors. The Import Department must communicate with the Logistics, Licensing and Legal departments, and especially so when considering a new product.

In terms of entries to audit, Customs chooses what are called “sample selections.” Customs tries to pick out shipments based on volume and, if possible, at least one shipment from each factory an importer purchases from. There is also a “matrix” Customs uses to identify risk areas and compares an importer's internal accounting against that of US Customs own importation records.

In addition, the auditors ask the Import Specialist where there have been importation issues in the past as Customs is concerned about any error it finds, especially where an importer claims to be monitoring its internal controls. This is because since US Customs views the sample selection as a “snapshot” of an importer's importing practices, it raises the question as to whether an error is a repetitive and systemic problem, or just an isolated incident.

If there is a misunderstanding between the auditors and the importer, it is recommended that the importer reach out to the Assistant Field Director.

The auditors made no bones about being skeptical of an importer generally, and even more so when errors were found. The auditors recommended that when one is found, to provide US Customs with a quick response. In addition, if the error is an old one which had been repetitive, they want to see that an importer took corrective action and that in implementing this course of action, the error either subsided or ceased altogether. When corrective is not taken, then Customs may consider doing a “statistical sample,” which is an audit of 50-200 samples where US Customs goes through all records (note – this is majorly invasive), as opposed to 15 to 20 samples like in a Focused Assessment.

In terms of time frames, the auditors claimed that while they try to get the audit done in a year, the time for completing an audit is based upon receiving a “quick response” from the importer. Of course, no mention was made of auditing time frames for a small importer versus a larger one…

Contrary to what the auditors said however, other speakers on the panel pointed out that focused assessments can go on for multiple years, with one being aware of a focused assessment going on its 6th year, with some issues still remaining outstanding - zoiks! I can tell you from my own experience with focused assessments, that a 1 year time frame is more of a fantasy than a reality.

A warning sign, according to another panelist (that assists importers through this process), was that a call from US Customs confirming the name and address of your location was a tip-off that a Customs audit would be commencing within a year. This panelist also suggested that in reference to the auditing questionnaire that must be completed, to expand the questionnaire into a broader format so that it can be passed around to different in-house departments, like Accounting, Production, Licensing, etc., so that problems can be identified prior to meeting with Customs, and coordination as between the departments can be made.

Additional advice was that at the opening conference with US Customs, you set out the framework for communications, time frames, and request that all responses be treated confidentially. Be sure to also insist that any questions US Customs has for you are provided in writing.

Want to avoid being the subject of a focused assessment? Check out US Customs Importer Self Assessment Program.

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

Duty-Free Shopping and the Bonded Warehouse

2010-04-15T04:30:00.000-07:00

Duty-free shopping is something I have indulged in around the world, including in Holland, Egypt, Russia, and more than a dozen other countries. It's not that I am a shop-a-holic, in fact I am far from such a person. The reason I like it is because of the savings I incur by making these purchases, such as I had done with the Burberry socks I happen to be wearing right now.

It turns out that a Duty-Free Store (DFS) is a bonded warehouse, which means that I have had some familiarity with a bonded warehouse long before I was aware of its technical term. A DFS is used for selling conditionally duty-free merchandise for use outside of the Customs territory, that is sold or owned by a proprietor, and delivered to an airport for exportation by individuals departing from the Customs territory or foreign destinations. The same holds true when departing a country by boat as well, which I experienced when I left Estonia for Finland.

Conceptually a bonded warehouse is similar to that of a Foreign Trade Zone, albeit, on a different scale and with certain differences, such as a time limitation of 5 years, unlike that of goods placed in an FTZ, which may remain there indefinitely.

A Customs bonded warehouse is a building or other secured area in which imported dutiable merchandise may be stored, manipulated, or undergo manufacturing operations without payment of duty for up to 5 years from the date of importation.

I had not been aware of the multitude of different classes of bonded warehouses until recently. It turns out that there are 11 different classes which include:

1. A premises owned by the Government for the placement of imports subject to examination or seizure, or those pending final release from Customs custody;

2. An importer's private warehouse whose exclusive use is for the storage of goods belonging, or consigned to, the proprietor;

3. A public bonded warehouse whose exclusive use is for the storage of imported merchandise;

4. Bonded tanks for the storage of imported bulk liquids, bonded sheds or yards for keeping bulky or heavy goods, or corrals/stables that provide limited enclosure of imported animals;

5. Warehouses for the smelting and refining of metal-bearing materials for domestic consumption or exportation;

6. Warehouses for the repacking, sorting, or otherwise changing the condition (but not manufacturing) of imported goods, done at the expense of the proprietor under Customs supervision;

7. Bonded bins, elevators or sections of a building for purposes of storing grain;

8. Warehouses for the manufacture of articles made up of imported materials (in whole or in part) subject to internal revenue tax, and those for the manufacture of cigars, whether for exportation or domestic consumption, made in whole of tobacco imported from one country.

9. Duty Free Stores;

10. Bonded warehouses for merchandise sold conditionally duty-free on board an aircraft (like those cute toy commercial airline models), otherwise known as international travel merchandise; and,

11. Those bonded warehouses established for the storage of merchandise not claimed or entered for 15 days after the arrival in the U.S., which are otherwise known as “General Order” goods.

Since duty is not collected on merchandise in bonded warehouses until withdrawn for consumption, an importer may have better control over its money until the duty is paid upon its withdrawal. In addition, if no domestic buyer can be found, the merchandise can be exported without any obligation by the importer to pay duties.

In order to establish a bonded warehouse, a written application must be made to the local Customs port that describes the premises, the class of warehouse to be established, and its location. An application must be accompanied by a blueprint of the space to be bonded, along with a certificate verifying that it is a suitable warehouse for fire insurance purposes, signed by the President or a Secretary of a board of fire underwriters.

Authority for establishing a Customs bonded warehouse is set forth in 19 USC §1555 with the corresponding regulations in 19 CFR Part 19.

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

Vessels Arriving at U.S. Ports to Face New Laws Mandating the Use of Cleaner Fuels

2010-04-07T04:11:00.000-07:00

As an avid environmentalist, I thought it would be interesting to share what I learned about vessel emissions and upcoming changes to air pollution regulations to address the threat of increasingly toxic ports and worsening coastal conditions.

I attended this program which was led by Laurie Sands, Esq., of Wolff & Samson P.C., fellow member of the Maritime and Admiralty Law Committee at the New York County Lawyers Association.

Laurie explained that thanks to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL), countries that are members of the International Maritime Organization (IMO) can choose to designate Emission Control Areas (ECA) in an effort to reduce the impact of air pollution on its coastal areas.

ECA designation means that countries have direct control to regulate nitrogen oxide (NOx) and sulfur oxide (SOx) air pollution emissions from vessels that come into its territorial waters and pull into its ports.

The U.S. and Canada made a joint application last year, which has been approved, and has a tentative effective date in August 2012.

Operation of the ECA (for the U.S.) means that vessels will have to switch from the lower grade fuel used for the long journey across the high seas to a cleaner fuel when 200 miles off of the territorial sea baseline in waters adjacent to the Pacific, Atlantic, Gulf Coast and Hawaiian Islands. I was curious to know if switching fuels via this pumping method that Laurie described might raise new water pollution issues, but it did not seem to be an area of concern (yet).

What was, and is, at issue however, are the increased costs of doing business on the part of the vessel operators and the parties that use them. Other issues such as adequate time to switch fuels, given the exigencies of trans-ocean carriage and delivery deadlines on shore, not to mention the potential need to purchase additional engines or equipment, were also causes for concern.

I inquired as to whether there had been any discussion regarding enforcement of the fuel change at the line of demarcation, as I know that US Customs together with the US Coast Guard conduct this type of activity (for other enforcement reasons) on vessels out on the territorial seas of the U.S. No one at the event had as yet heard of any such dialogue, however, it would not surprise me if it did become an enforcement activity as the ECA regulations develop more fully (which are likely to be promulgated under the Clean Air Act).

As for other ECA designated territories, the Baltic Sea and North Sea are the only others. While not an official ECA, the EU likewise has standards in place for reduced sulfur fuels at its ports.

Not surprisingly, California already has state regulations that require ships to change to cleaner fuels off the California coast - go Cali! (it’s my home state). I’ll be looking forward to developments as summer of 2012 approaches on this both interesting and important topic.

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

OWIT-NY Event This Monday: Climate Change & Trade

2010-04-02T08:30:00.000-07:00

As Vice President to the Board of the NY Chapter, I'd like to invite you to attend the Organization of Women in International Trade's upcoming event entitled, "CLIMATE CHANGE: PICKING UP THE PIECES AFTER COPENHAGEN."

Come listen to a panel discussion featuring international environmental policy makers and conservation experts:

Norine Kennedy
VP, Energy and Environmental Affairs for the
U.S. Council for International Business in New York

and

Duncan Marsh
Dr of International Climate Policy for the
Nature Conservancy in Washington, DC.

(As detailed in our published flyer about the event):

Two years of U.N. negotiations to develop comprehensive international action on climate change after 2012 hit a brick wall in Copenhagen last December, with Heads of State managing to salvage a political agreement in the desperate final hours. Climate change remains a pressing issue, and the business community continues to seek predictability for its long term investments in cleaner technologies and energy sources in developed and developing countries. Making the transition to more climate friendly and efficient forms of energy clearly depends on the right market signals, policies and engagement on the part of all sectors of society.

How will the international community resume the difficult task of finding a workable and adequately resourced framework for post 2012 initiatives to reduce GHGs, adapt to climate change impacts and boost innovation and funding, particularly for large developing countries?

What roles can the U.S. and other major economies play in pushing a “reset” button in the international negotiations, or through alternate channels?

Where can environmental organizations and the business community add the most value in designing and supporting an ambitious and workable framework for international action in the years ahead?

Date: Monday April 5th, 2010

Time: Networking and refreshments at 6:00pm

Program commences at 6:30 pm and concludes by 8:00pm.

Location: Law offices of Baker & McKenzie at the Grace Building, 1114 Avenue of the Americas (between Fifth and Sixth Avenues), New York, New York. The entrance is on 42nd Street directly across from Bryant Park.

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

$25 non-members

*MEMBERS PLEASE NOTE: Any OWIT-NY member accompanied by an importer, exporter, or freight forwarder will be awarded a free pass (valued up to $25) to a future OWIT-NY event.

To register for this event please CLICK HERE.
Online registration is available up to 24 hours before the event. If you miss the on-line registration, you can choose to pay by cash or a check at the door provided there is still space available. Please note that the event is limited to 45 people.

Stay tuned for more OWIT-NY event invites:

May 17 - 21 World Trade Week NYC

June 9th: "Processing Cargo at the Port of New York/Newark" featuring U.S. Customs and Border Protection Chief Kevin H. McCabe.

Don't forget to keep up to date with OWIT-NY activities and international trade news onTwitter.com/OWITNY

OWIT-NY takes photographs at its events and may post those photographs on its website and publish the photographs in its newsletter. If you do not want your image used in this fashion, please send an email to me at owitnysecretary@gmail.com with Photo Exclusion in the subject line.

What is a Foreign Trade Zone?

2010-03-30T16:35:00.000-07:00

The question of placing certain imports or exports into a foreign trade zone (FTZ) occasionally arises in my international trade practice. While conceptually I understand its purpose, I decided to explore the “ins and outs” of it to better understand why they exist.

An FTZ is a customs supervised zone that is considered outside the Customs territory. Therefore, requirements that would normally be applied to imports are suspended as long as the goods remain in the zone. In an FTZ duty payment is deferred on imports which are later entered and sold in the U.S. market, and for those that are re-exported, duty-free treatment is allowed.

It is also a zone for which an export may be placed in while certain legal requirements are met. An example of this would be where military jeeps are delivered to the port for exportation to the army of a foreign government, but is still in need of a verification by Customs of the requisite export licenses.

Other advantages of using an FTZ include what is known as “inverted tariff relief,” which occurs when imported parts with a higher duty rate are incorporated into a final product which has a lower duty rate than the parts themselves and is ultimately imported. Likewise, merchandise imported and held in an FTZ for repacking, assembly, storage, exhibition, sorting, grading, mixing, manufacturing, cleaning or processing can be held in a zone for exportation, either in its original state or after undergoing one of these processes and is exempt from State and local ad valorem taxes.

There are 2 types of FTZs: (1) A “General Purpose” zone whose facilities are available for use by the general public and are typically located in a port complex, raw land or an industrial park, and (2) a “Subzone,” which is a single purpose site that allows for operations that cannot be feasibly moved to, or accommodated in, a general purpose zone, such as automobile manufacturing or oil refineries.

Interestingly, despite the ability to undergo the above activities on goods placed in the zone, certain other operations may not be done in an FTZ. These include, the manufacture of watch and clock movements, as well as the manufacture of products subject to internal revenue tax including sugar, tobacco, alcoholic beverages and perfumes containing alcohol, to name a handful of them.

In order for products to be admitted into a zone, Customs Form 214, or its electronic equivalent, must be completed and a permit granting admission is issued by the Port Director. Only a person with a right to make entry of the goods is allowed to make an application for zone admission, however, with a proper power of attorney on file, a Customs broker or zone operator may prepare and/or file the application on that party's behalf.

Along with Form 214, a filer must submit evidence of a right to made entry, the commercial invoice(s), a Release Order (executed by the carrier which brought the goods to the port), an application to unlade (Customs form 317), and any other documentation required by the Port Director.

Customs approves most low-risk shipments without an examination of the cargo, however it may conduct an exam to ensure full compliance with all applicable rules and regulations or to reduce the need for further examination at the time when the goods are entered into the US Customs territory for consumption or into a warehouse.

In certain cases direct delivery of the goods into an FTZ without a prior application (Form 214) may be done provided a written application is made with the appropriate port director at least 30 days before it is to be effective, and provided a description of the merchandise and the type(s) of processing that will be undertaken in the zone are explained.

Merchandise cannot be subject to Customs examination or documentation review prior to its arrival at the zone nor be of the type that is restricted. The FTZ operator must be the owner of purchaser of the goods, and the operations to be conducted must not only be known in advance, but also should be stable and predictable over the long term.

When the merchandise is ready to leave the zone for U.S. consumption, normal entry, classification and appraisement procedures covering foreign merchandise are used. For answers to specific questions, you should contact the local Port Director where the zone is located. US Customs has more than 300 ports of entry in the US, Puerto Rico and the US Virgin Islands.

Authority for establishing an FTZ is found in the Foreign Trade Zone Act of 1934, as amended (19 USC 81a-81u). The regulations governing the Foreign Trade Zones Board are published in 15 CFR Part 400, and US Customs regulations governing zone operations may be found in 19 CFR Part 146.

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

CPSC Issues Final Rule Interpreting the Civil Penalty Factors in CPSA

2010-03-24T14:17:00.000-07:00

When it comes to certain imports, aside from US Customs there are other federal agencies whose regulations must be met for an importation to be in compliance. Due to a myriad of concerns including, for example, children's lead safety and clothing flammability issues, compliance with Consumer Safety Product Commission (CPSC) regulations must be met.

With CPSC's issuance of a new final rule of its interpretation of the civil penalty factors found in the Consumer Safety Product Act (CPSA), the Federal Hazardous Substances Act (FFA), and the Flammable Fabrics Act (FFA), as amended by section 217 of the Consumer Product Safety Improvement Act of 2008 (CPSIA), the importing community is now aware of what CPSC considers when making civil penalty determinations.

A civil penalty may be sought against any person who knowingly violates a prohibited act under the CPSA, FHSA or FFA, or who has presumed knowledge of such act as being a violation.

The CPSA, FHSA, and FFA define “knowingly” as the having of actual knowledge, or the presumed having of knowledge deemed to be possessed by a “reasonable man” who acts in the circumstances, including knowledge obtainable upon the exercise of due care to ascertain the truth of representations.

The rule, in its own wordy way, further describes a list of new and expanded prohibited acts which include:

1. the importation, distribution in commerce, sale (or offer for sale) of a non-compliant consumer product (or other product or substance) that is regulated by the CPSC;

2. the failure to furnish a certificate required by any other act enforced by CPSC, inc. a tracking label;

3. the importation, distribution in commerce, sale (or offer for sale) of a consumer product containing an unauthorized third party certification mark;

4. the exercise (or attempted exercise) of undue influence on a third-party conformity assessment body that tests products for CPSC compliance;

5. the importation, distribution in commerce, manufacture or sale of products subject to voluntary corrective action, for which none has been taken;

6. the importation, distribution in commerce, manufacture or sale of a product subject to a mandatory recall;

7. the exportation (for purposes of a sale) of any consumer product or substance that is subject to a court ordered recall, voluntary CPSC announced recall, or banned under the FHSA;

8. the importation, distribution in commerce, manufacture or sale of a banned hazardous substance under FHSA ;

9. any misrepresentation about the scope of a consumer product subject to a recall or a material misrepresentation during an investigation to a CPSC employee or officer; and,

10. the exportation (for purposes of a sale) of a consumer product not in conformity with an applicable CPSC rule.

There are statutory factors the CPSC must consider when making a determination of the assessment of a civil penalty following the undertaking of a prohibited act. Considerations enumerated by the CPSC include:

1. the nature, circumstances, extent and gravity of the violation, including, the nature of the product defect or of the substance;

2. the severity of the risk of injury;

3. the occurrence or absence of injury;

4. the number of defective products distributed or the amount of substance distributed;

5. the appropriateness of the penalty in relation to the size of the business of the person charged, including, how to mitigate undue adverse economic impacts on small business; and,

6. such other factors as appropriate.

For more information on this new rule go to CPSC's website. This final rule goes into effect upon publication in the Federal Register.

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

International Trade and Marketing for the Fashion Industries at FIT

2010-03-20T18:25:00.000-07:00

The mission of ITM is to prepare students for entry-level managerial positions in international operations of fashion and related businesses, including import/export, legal and finance documentation, customs compliance, trade policies, management, marketing, sourcing, logistics, and international business ethics.

Last week I had the pleasure of meeting with Christine Pomeranz, the Chair of the International Trade and Marketing Program (ITM) at SUNY’s Fashion Institute of Technology. This is by far one of the coolest programs I have ever come across and given the volume of imports of textiles and apparel into the U.S., it makes perfect sense that this kind of program would be included in a school focused on fashion.

As soon as I walked onto the campus I instantly felt at home. The student body was lively, diverse and dynamic, and with student elections pending, I noticed creative fashion-focused “vote-for-me” signs, some of which were even inspired by famous designer logos. Seeing these surroundings completely put me at ease to discuss potential future adjunct faculty positions in the areas of International Trade Law or International Trade and Fashion Law with Chairwoman Pomeranz.

During our conversation I became evermore impressed with the ITM program’s focus and caliber. There are four (4) different “tracks” that students can follow. They are:

1. International Trade Law and Fashion Law
2. International Business Management
3. International Trade and Policy Management
4. International Marketing Management

Whichever track is chosen, all students in the ITM program must take core courses in international trade, international business transactions, global marketing, import/export regulations, and global sourcing, as well as taking a practicum in international trade or a senior internship. All of these are integral to a well rounded education in international trade if you ask me!

I truly enjoyed learning about the ITM program and look forward to the opportunity to be included as an adjunct faculty member. To learn more about the program click here. Check it out!

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

OWIT-NY Event on March 16, 2010 6 pm: "Transcendental Security"

2010-03-14T17:29:00.000-07:00

Featuring Ken Wheatley MA, CPP, Sr. Vice President, Sony Electronics, Inc.

The Industrial Revolution, Quality Circles, and Product Design. Is "Security" or Enterprise Risk Management the next business transformation? Do you know what The Great Barrier Reef, Hair Growth, and Bad Supply Chain Security all have in common?

Do you know how to stop “The Drip” that could up-end your trade operations?

There are eight leadership skills. How might two of them be holding you, or your clients, back from having a world-class strategic security program?

Join us for a lively discussion and multimedia presentation on these and other aspects of transforming your business operations and transcending perceived obstacles. For starters, there are two questions Ken would like you to think about and send him your thoughts before the meeting:

Why does your company exist? Why do you (and your employees/co-workers) get up every day to go to work?

Please send your answers to him at: ken.wheatley@am.sony.com as soon as possible.

Date: Tuesday March 16, 2010.

Time: Networking and refreshments at 6:00pm. Program commences at 6:30 pm and concludes by 8:00pm.

Location: Law offices of Baker & McKenzie at the Grace Building, 1114 Avenue of the Americas (between Fifth and Sixth Avenues), New York, New York. The entrance is on 42nd Street directly across from Bryant Park.

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

*MEMBERS PLEASE NOTE: Any OWIT-NY member accompanied by an importer, exporter, or freight forwarder will be awarded a free pass (valued up to $25) to a future OWIT-NY event.

To attend, register on-line by clicking on the “Events" section at www.owitny.org. Online registration is available up to 24 hours before the event. If you miss the on-line registration, you can choose to pay by cash or a check at the door provided there is still space available. Please note that the event is limited to 45 people.

Hope to see you there!

USITC Investigates Proposed Modifications to the HTSUS Regarding Chemical Weapons

2010-03-11T04:52:00.000-08:00

April 9, 2010: Publication of preliminary report on the USITC website
May 21, 2010: Deadline for public comments on preliminary report
June 25, 2010: Submission of final report to the President

The U.S. International Trade Commission (USITC) has proposed modifications to the Harmonized Tariff Schedule of the United States (HTSUS) to address the control and monitoring of materials in international trade that are capable of being used as chemical weapons or for the production of chemical weapons.

The US tariff system is based on the World Customs Organization's Harmonized Convention System. Like many countries around the globe, being a signatory to this Convention means that when the WCO directs a change, member countries - of which the US is one - must implement the changes into their nation's tariff. In this case, the WCO's recommendations are scheduled to become effective on January 1, 2012.

The USITC is preparing and making available a preliminary report and a final report setting forth the proposed changes to the HTSUS that will be needed to maintain conformity between the tariff and the WCO's Harmonized System, including appropriate explanatory information on the proposed changes. The public is invited to submit any comments until May 21, 2010.

The preliminary report will be forwarded to the President via the United States Trade Representative's office on or about April 9, 2010, and it will be made available for public inspection through the USITC's electronic docket (EDIS) and posted on the USITC website.

As described by the USITC, “the Harmonized System nomenclature provides a uniform structural basis for the customs tariffs and statistical nomenclatures of all major trading countries of the world, including the United States. The Harmonized System comprises the broadest principles of classification and levels of categories in the HTS, that is, the General Rules of Interpretation, Section and Chapter titles, Section and Chapter legal notes, and heading and subheading texts to the 6-digit level of detail. Additional U.S. notes, further subdivisions (8-digit subheadings and 10-digit statistical annotations) and statistical notes, as well as the entirety of chapters 98 and 99 and several appendixes, are national legal and statistical detail added for the administration of the U.S. tariff and statistical programs, and are not part of the international Harmonized System. The proposed changes included in this investigation are set out in a Recommendation promulgated by the World Customs Organization (WCO) on June 26, 2009, in order to update and clarify the international Harmonized System nomenclature.”

Written submissions should be addressed to the Secretary, United States International Trade Commission, 500 E Street SW, Washington, DC 20436. The USITC's electronic docket (EDIS) is where the public record for this collection of proposals may be viewed.

For more information, contact David Beck, Director, Office of Tariff Affairs and Trade Agreements (202-205-2603, fax 202-205-2616, david.beck@usitc.gov).

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

FMC to Initiate Rulemaking Relieving NVOCCs From Publishing Rates in Tariff

2010-03-04T04:39:00.000-08:00

“Under the current economic conditions, the commission must use its expanded exemption authority to simplify the business processes of American companies, put cash back into businesses, and generate additional American jobs.” – Commissioner Rebecca F. Dye

In a 3 to 1 vote, the Commissioners of the the Federal Maritime Commission (FMC) voted last month to initiate a proposed rulemaking that would excuse Non-Vessel Operating Common Carriers (NVOCCs) from the requirement to publish in its tariff the rate it charges for shipping cargo.

"Tariff means a publication containing the actual rates, charges, classifications, rules, regulations and practices of a common carrier or a conference of common carriers. The term “practices” refers to those usages, customs or modes of operation which in any way affect, determine or change the transportation rates, charges or services provided by a common carrier or conference and, in the case of conferences, must be restricted to activities authorized by the basic conference agreement."
--46 CFR Part 520.2

As described by the FMC in its announcement about the vote, NVOCCs are “common carriers that act as intermediaries between their shipper customers and steamship lines.” In other words, they are not vessel operating common carriers, i.e., the ship operator themselves, but rather they work to coordinate the movement of the cargo in relation to the transportation needs of the shipper, while to the average person, often appears to be the carrier themselves.

NVOCCs also come under the designation of an Ocean Transportation Intermediary (OTI). Along with freight forwarders, these two parties make up the two intermediary cargo coordinating bodies available for use in overseas waterborne shipping. You can learn more about them in a prior blog post here.

Under the current federal maritime regulations, found in 46 CFR Part 500, NVOCCs must publish their rates in their tariff which is filed with the FMC. While the proposed rulemaking is intended to relieve NVOCCs from filing this information, it doesn't come without any strings attached – several other conditions will be imposed such as:

1. A continued requirement to “publish standard rules tariffs” that would contain the Terms and Conditions under which the carriage is governed
2. A requirement to provide these tariff rules for free to the public
3. A requirement that the rate charged for carriage be agreed to and “memorialized in writing” by the date upon which the cargo is received for carriage, and
4. A requirement that NVOCCs hold for a period of five (5) years documentary proof of the agreed upon rates and terms for each shipment, and upon request by the FMC, to make such records promptly available.

Keep in mind that while the FMC has voted to begin the process of creating a new rule, the practice of “notice and hearing” must still take place and this process takes time. In other words, just because the FMC is announcing this proposed change, there may be no changes for many months, and the final version, while close, may ultimately have slight variations. The FMC addressed this in a subsequent press release which can be read here.

The petition requesting this relief from filing was brought by the National Customs Brokers and Freight Forwarders Association and the FMC decision is widely supported by the shipping and intermediary, i.e., OTI, community.

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

Discrimination in the Tariff (HTSUS)? The Legality of the Tariff's Alleged “Disparate Impact” is Challenged in Court

2010-02-21T17:32:00.000-08:00

This case immediately caught my attention as it is not often that I hear about constitutional protections in the context of international trade let alone “equal protection” under the tariff.

According to the majority decision by the U.S. Court of Appeals for the Federal Circuit in the case of Totes-Isotoner Corp. v. U.S., (Slip. Op. 09-1113) on February 5, 2010, the government has broad power to discriminate when it comes to tariffs, similar to that in taxation. [p. 17]

Totes unsuccessfully attempted to pursue and prevail on an Equal Protection claim, asserting that because different tariff rates were imposed on “men's” gloves versus “other” gloves, the Harmonized Tariff Schedule of the U.S. (HTSUS) unconstitutionally and unlawfully discriminated on the basis of age or gender.

The Court first discussed the “Article III standing” requirements, which are set forth in Article III of the U.S. Constitution, and whether Totes had a viable “case or controversy” for which the Court could provide a remedy. If no finding of standing were found, the Court would not have been able to hear the case.

To est. Art. III standing, a plaintiff must demonstrate that

1. It has suffered an injury-in-fact
2. There is a causal connection between the government's conduct and it's injury-in-fact
3. Its injury is redressable by the court

The court did find Art. III standing by way of “jus tertii (Latin, for “third party rights”) standing,” which is found when a third party, such as Totes, can demonstrate:

1. a close relationship to the party whose right it (Totes) is asserting;
2. that an injury-in-fact has been suffered by the jus tertii; and,
3. that the “first party” is hindered from filing its own claim.

In addition to standing, Totes needed to demonstrate it also had “prudential” standing, which was defined by the Court as meaning that the “interests of the affected parties must also arguably be within the zone of interests to be protected or regulated by the statue or constitutional guarantee in question.” Totes-Isotoner Corp., supra, at p. 7 (citing, Clarke v. Sec. Indus. Ass'n, 479 U.S. 388, 396 (1987).

After a long discussion regarding the development of today's HTSUS and how it is the result of multilateral agreements, negotiations, and trade concessions, the Court stated that it could not assume there was an intent to impose gender based discrimination between one article (men's gloves) versus another (“other” gloves, which women's gloves would fall into) from the mere fact of a disparate impact, as opposed to a showing of a Congressional intent to discriminate.

To support this claim, the Court reflected on how variations in duty rates may come from the product type and country of origin, the impact on the domestic industry of the place where it is manufactured, or the result of concessions made for other unrelated trade advantages.

In addition to this, the Court eluded to not wanting to open up a “Pandora's Box” of tax claims ranging from sales, income, and property taxes, the last of which may have been placed on “items which are discriminately consumed by any identifiable group,” such as in the case of Bray v. Alexandria Women's Health Clinic, 506 U.S. 263, 270 (1993), wherein it was discussed that “a tax on wearing yarmulkes is a tax on Jews...[and that] some activities may be such an irrational object of disfavor that if they are targeted, and if they also happen to be engaged in exclusively or predominantly by a particular class of people, an intent to disfavor that class can be readily presumed.” Id. at 18.

Unlike the Bray case, the provisions challenged by Totes in this case were found not to be facially discriminatory and that Totes failed to make a sufficient allegation of the government's intent to discriminate between male and female users. By merely claiming that there was a disparate impact, Totes' complaint had failed to state an equal protection claim.

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

Understanding the Harmonized Tariff Schedule of the United States (HTSUS) – Part I

2010-02-18T16:50:00.000-08:00

The Harmonized Tariff Schedule of the United States (HTSUS) is used for determining the classification and duty rate of an import into the U.S. Sometimes an item is specifically stated in the tariff, such as frozen waffles, which come in under HTSUS Subheading 1905.32.0029. Other sweets that are imported frozen, such as “crème brûlées,” discussed in Customs Ruling HQ H023498 (3/9/09) and described as a “baked custard” upon cooking, are not so readily classifiable.

Classification is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of a good shall be “determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require,” the remaining GRIs 2 through 6 may then be applied in sequential order.

Using the example of the crème brûlées, we look at HTSUS Heading 1905 which provides:

1905 Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not
containing cocoa; communion wafers, empty capsules of a kind suitable
for pharmaceutical use, sealing wafers, rice paper and similar products:

Under the specific HTSUS subheading for the crème brûlées, subheading 1905.90.9090 provides:

1905.90.90 Other:
1905.90.9090 Other …

When an import cannot be easily classified, looking at the terms of the headings, section or chapter notes as per the GRIs, and/or utilizing the the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) will help interpret the headings of the tariff so as to find an appropriate classification.

The ENs, “although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level.” See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

As explained in Customs Ruling HQ H023498 (3/9/09), the ENs to heading 1905, HTSUS, state, in relevant part:

“This heading covers all bakers’ wares. The most common ingredients of such wares are cereal flours, leavens and salt but they may also contain other ingredients such as: gluten, starch, flour of leguminous vegetables, malt extract or milk, seeds such as poppy, caraway or anise, sugar, honey, eggs, fats, cheese, fruit, cocoa in any proportion, meat, fish, bakery “improvers”, etc. Bakery “improvers” serve mainly to facilitate the working of the dough, hasten fermentation, improve the characteristics and appearance of the products and give them better keeping qualities. The products of this heading may also be obtained from dough based on flour, meal or powder of potatoes.

This heading includes the following products:
* * * *
(11) Certain bakery products made without flour (e.g., meringues made of white of egg and sugar).”

Using the ENs for guidance, Customs explained that in a recent prior ruling (HQ W968393, 7/16/08), it had concluded that

“The text of heading 1905, HTSUS, provides for “other bakers’ wares” which, when read in the context of the entire clause of which this expression is a part, leads us to now find that the term “other bakers’ wares” refers to baked goods (or wares) other than the “bread, pastry, cakes, [and] biscuits” specified in the heading. In addition, based on the heading text and the examples provided by the ENs, it appears that goods of heading 1905, HTSUS, are consumed “as is” and are not incorporated into other food items.“

Taken in conjunction with the marketing literature submitted by the importer, Customs concluded that the crème brûlées were manufactured goods offered for sale by one who specializes in the making of pastries, akin to bakery products made without flour, such as meringues made of sugar and egg whites, as described in EN 19.05 (A)(11)). In addition, the crème brûlées being fully baked upon importation were thus, ready for consumption “as is,” as opposed to being incorporated into other food items. Customs therefore concluded that they constituted bakers’ wares and were classifiable in HTSUS heading 1905.

In a future post I will explore the rule of “Ejusdem Generis,” another means for interpreting the tariff, and its application for making a HTSUS determination.

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