Customs Entry and Filing Procedures

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

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!

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

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

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?

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

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