I’m a Small Business. Does This Law Apply to Me Too?

My startups and smaller clients love to ask me this question. 

The answer to “Does size matter?” is for the most part pretty consistent, which is, “It depends!”

 It depends because even though there may be definitions of what a small business is, when the government puts out a new regulation, or an amendment to one, it may reason that because such new changes will have a limited impact on small businesses, that providing an exception for small businesses to compliance with the new rules is unnecessary.

Let’s take the recent amendments to the regulations for the Textile Fiber Products Identification Act (“the Rules”) as an example.

Under the Small Business Size Standards issued by the Small Business Administration, textile apparel manufacturers qualify as small businesses if they have 500 or fewer employees. 

Clothing wholesalers qualify as small businesses if they have 100 or fewer employees.

 The Federal Trade Commission’s (FTC) staff estimated that approximately 22,218 textile fiber product manufacturers and importers are covered by the disclosure requirements of these amended Rules.

While the FTC figured that a substantial number of these entities likely qualify as small businesses, it concluded that the amendments would not have a significant impact on small businesses because they do not impose any significant new obligations on them.

The FTC therefore, did not propose any specific small entity exception or other significant alternatives as it did not find it necessary to minimize the compliance burden, if any, on small entities while achieving the intended purposes of the amendments.

What do you think? Should smaller businesses be subject to less rigorous compliance requirements?

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

Keep up with me at www.fashioncompliance.com or:

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On Twitter @fashcompliance

How Many Times Do I Have to Pay Duties?

The first time you import merchandise into the U.S., you would expect to pay customs duties, and under the Harmonized Tariff Schedule of the U.S. (HTSUS), unless the goods are exempted from such payment, that money will have to be paid.

But what about if the merchandise had

a. Already been imported,

b. Duties Paid,

c. Subsequently Exported, and

d. Now being reimported again?

 Is paying again required?

Well, depending on the circumstances, there can be ways of either recouping some of the initial duty payment, or qualifying for an exception to avoid paying the duty such as the exemption where articles exported from the U.S. are

1. Returned within 45 days of such exportation,

2. Were “undeliverable”, and

3. Which had not left the custody of the carrier or foreign customs service.

As a general rule however, 19 CFR 141.2 of the Customs regulations provides that dutiable merchandise imported and afterwards exported, even though the duty had been paid on the first importation, is liable for duty payment on every subsequent importation into the Customs territory of the US (unless exempt by law).

This rule does not however, apply to imports of:

(a) Personal and household effects taken abroad by a resident of the United States and brought back on his return to this country (see §148.31);

(b) Professional books, implements, instruments, and tools of trade, occupation, or employment taken abroad by an individual and brought back on his return to this country (see §148.53);

(c) Automobiles and other vehicles taken abroad for noncommercial use (see §148.32);

(d) Metal boxes, casks, barrels, carboys, bags, quicksilver flasks or bottles, metal drums, or other substantial outer containers exported from the United States empty and returned as usual containers or coverings of merchandise, or exported filled with products of the United States and returned empty or as the usual containers or coverings of merchandise (see §10.7(b), (c), (d), and (e));

(e) Articles exported from the United States for repairs or alterations, which may be returned upon the payment of duty on the value of repairs or alterations at the rate or rates which would otherwise apply to the articles in their repaired or altered conditions (see §10.8);

(f) Articles exported for exhibition under certain conditions (see §§10.66 and 10.67);

(g) Domestic animals taken abroad for temporary pasturage purposes and returned within 8 months (see §10.74);

(h) Articles exported under lease to a foreign manufacturer (see §10.108); or

(i) Any other reimported articles for which free entry is specifically provided.

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

Keep up with me at www.fashioncompliance.com or:

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On Twitter @fashcompliance

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

 

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U.S. Customs Proposes to Mandate Broker Continuing Education – Good Idea or Bad?

U.S. Customs has proposed the creation of regulations that would mandate continuing education for customs brokers that are individual license holders.  It hopes to start putting something in writing before the end of the month and a Final Rule out by 2015.

Elena Ryan, Acting Director of Trade Facilitation and Administration at US Customs, explained this in a “Role of the Broker” webinar last week, for which a follow up event (link below) on June 6th was announced today. 

Does 40 hours of continuing education over 3 years and  reportable on the

soon-to-be electronic tri-ennial report even make sense?  Send your questions

and comments to Elena Ryan at roleofthebroker.cbp.dhs.gov

Customs aspires to find “low cost” providers that will offer classes, in conjunction with those no cost classes offered by Customs itself, so that brokers can take 40, yes F-O-R-T-Y, hours of education over 3 years. 

The logic behind this number was that a broker can do 1 hour a month in continuing education and, as explained by Ms. Ryan, “since the number was close to 40 hours, they just decided to round it up.”

Currently, there are about 15,000 licenses issued and about 9000

 active brokers according to Ms. Ryan.

 The initial idea is to have a small pool of authorized providers, i.e., 5 to 10, that offer “low cost” classes which are accredited by Customs.  (Anything sound weird yet?)

And of course, this creates a new recordkeeping requirement for brokers adding more paper work for brokers to keep track of.  Joy! 

Of course, a failure to present such kept records upon request could result in a Customs penalty, or, yep, you guessed it, having the license revoked.

Ideas for meeting this requirement included attending webinars and in-person training.  Webinars considered acceptable would also be those offered by other government agencies, for which presumably, Customs would get to issue a certificate or other proof that such broker had attended…

Other acceptable formats would include activities such as trade symposia, conferences and association meetings.

Customs has recorded the webinar last week (May 2, 2013) and the link to that is here:

 http://www.cbp.gov/xp/cgov/trade/trade_transformation/broker_role/br_webinars/proposed_framework/  

As for the upcoming webinar, that link can be found here and there is no registration required, you simply click on the link a few minutes before the start time on June 6th to join. http://cbp.gov/xp/cgov/trade/trade_transformation/broker_role/brokerregs.xml

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

Building an Effective Internal Compliance Program

Whether it’s spelled out on a single page or makes up an entire manual, a basic compliance program is one where there are internal controls and procedures that implement compliance measures for those laws and regulations an entity must abide by in the day-to-day operation of the business.

Having an effective program is strengthened when there is a culture of accountability in which individuals understand the concept of compliance and their part within the compliance chain.

To be an effective compliance program internal controls and procedures need to be actively implemented and revised with key personnel updated on changes in practices.

 Not only is US Customs interested in seeing an importer’s compliance procedures when being audited or upon application to a voluntary program such as C-TPAT (Customs Trade Partnership Against Terrorism) or ISA (Importer Self Assessment), but it can also play a role in the mitigation of penalties when incidents occur that give rise to such assessments.

Be sure to put together a compliance program that fits your organization, implement it and update it regularly throughout the year.

Top compliance risks should be identified with resources allocated to address them accordingly. A common area of risk for an importer is that within its supply chain. Mitigation of risk can occur by an importer actually knowing where it’s cargo is coming from, who the actual supplier is and where the imported merchandise is going to.

Sounds simple (I know…) but these transactions are not always as clear cut as they would seem at face value.

 Some factors that can make a compliance program appear to be a failure include

·         A failure to tailor and update the program

·         Insufficient training and follow through of personnel

·         Inconsistent enforcement of internal procedures, and

·         An inadequate compliance culture

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

 

International Trade and Marketing for the Fashion Industries at FIT

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