Customs and Border Protection Meets the 21st Century: Highlighting U.S. Initiatives to Modernize International Trade at Our Borders

U.S. Customs and Border Protection has been in the process of transforming and modernizing its trade initiatives for the 21st century with stated goals of seeking “to improve cargo security while increasing trade competitiveness” by means of “fully aggregating risk management.”[1]  This goal seems vague, but essentially, CBP is making efforts to consolidate trade processing at our borders.  Some of its efforts include implementing the Automated Customs Environment, where master trade data for importer accounts will be stored and accessed across accounts; Customs-Trade Partnership Against Terrorism (C-TPAT); Centers of Excellence and Expertise; Importer Self-Assessment (“ISA”), among other programs.  CBP has provided a vast amount of information on its trade transformation initiatives on its website at http://www.cbp.gov/xp/cgov/trade/trade_transformation/, but the following will give some insight into some of the most recent developments currently underway at our borders:

Automated Customs Environment (“ACE”) and Simplified Entry

Almost eleven years ago, CBP established ACE as an on-line tool to modernize, automate, streamline, and consolidate commercial trade processes connected with border security.[2]  As ACE continues to expand, much like any government program tends to do, the trade community will hopefully see positive benefits from CBP’s consolidation efforts.

The most recent development in CBP’s rollout of the ACE system is its “Simplified Entry” program, which segregates filing of transportation information from that of entry information.  This program allows entry documents to be filed earlier, and the documents require much less data than the current requirements.[3]  Only 3 ports and 9 companies were chosen by CBP to participate in the pilot program; however, CBP announced last week that the pilot program has been a success.  CBP has stated it will continue to evaluate the current program in the next 60-90 days[4]; then it will inform the trade community of the program’s expansion via notice in the federal register[5].

Expanded Role of the Broker

 

Another discussion of change currently taking place in the trade community surrounds likely expansion of the role of Customs brokers. CBP is presenting webinars throughout this summer (June through September 2012) outlining some of the issues and suggested modifications to the broker regulations in an effort to inform as many members of the trade community as possible of the potential future of the role of Customs brokers.  CBP is also meeting with local and regional broker associations in hopes of learning more about the actual issues that should be addressed with regard to expanding the role of brokers.  The webinars cover topics such as the rewrite of the broker regulations (19 C.F.R. part 111); establishing “bona fides”; Broker continuing education, applications, licensing, apprenticeships, and permitting; Broker penalties, etc.[6]

CBP has highlighted five (5) major proposals regarding the Role of the Broker:

  1. Expanded Role
    1. Pre-certification of C-TPAT applicants
    2. Pre-application support for ISA applicants
    3. Broker Responsibilities
      1. Requirements for bona fides (Broker to obtain evidence)
      2. Importer POA must be sent directly to Broker
      3. Customs business conducted in U.S. territory
      4. Professionalism
        1. Apprenticeship experience for broker permitting
        2. Continuing education to maintain active license
        3. Modernization
          1. Automatic annual reporting (replacing the triennial)
          2. Employee data upload into ACE
          3. Continuing education reporting
          4. Penalty Regime
            1. Allow for immediate suspension of license pending review of the case with due process
            2. Focus on bad actor’s license rather than filer code remediation[7]

The trade transformation initiatives have been ongoing since 2001 and will continue to grow in the coming years.  As they do, we can only hope that these changes will result in CBP’s meeting the lofty goals it has set for itself and the trade community.

For more information on these and other trade initiatives visit www.cbp.gov.  You can also call our offices to discuss how your business might benefit from these changes and how to take advantage of the new programs.  We are available via phone at (800) 583-0250 or via email at nmooney@customscourt.com or smorrison@customscourt.com.

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CBP Recordkeeping Requirements: UPDATE!

A long-overdue modification of CBP’s recordkeeping requirements has been announced this week, with an anticipated effective date of January 11, 2013.  Current regulations require that all records are to be kept “within the broker district that covers the Customs port to which they relate,” a requirement which severely complicates the recordkeeping process for many companies. The new regulations will eliminate this requirement, allowing any licensed customs broker “to store records relating to his or her customs transactions at any locations within the customs territory of the United States.” CBP has also included plans, effective on the same date, to provide exemptions from the 120-day requirement for customs brokers not serving as the importer of record to retain certain records in their original format. These exemptions will clear the way for companies to embrace the less burdensome and more environmentally friendly methods of electronic recordkeeping.

These policy changes were proposed by CBP as early as March of 2010, prompting discussion and commentary on the issue. After assessing that the response to the proposed changes was largely positive, and correcting a few minor errors noticed by the commentators, Customs has finally set a date by when the changes will be implemented. The altered language of 19 CFR parts 111 and 163 will read as follows:

PART 111 – CUSTOMS BROKERS
* * * * *
§ 111.23  Retention of records.
(a) Place of retention.  A licensed customs broker may retain records relating to its customs transactions at any location within the customs territory of the United States  in accordance with the provisions of this part and part 163 of this chapter.  Upon request by CBP to examine records, the designated recordkeeping contact identified in the broker’s applicable permit application, in accordance with § 111.19(b)(6) of this chapter, must make all records available to CBP within 30 calendar days, or such longer time as specified by CBP, at the broker district that covers the CBP port to which the records relate.
(b)  Period of retention.  The records described in this section, other than powers of attorney, must be retained for at least 5 years after the date of entry.  Powers of attorney must be retained until revoked, and revoked powers of attorney and letters of revocation must be retained for 5 years after the date of revocation or for 5 years after the date the client ceases to be an “active client” as defined in § 111.29(b)(2)(ii), whichever period is later.  When merchandise is withdrawn from a bonded warehouse, records relating to the withdrawal must be retained for 5 years from the date of withdrawal of the last merchandise withdrawn under the entry.
PART 163 — RECORDKEEPING   
The revisions read as follows:
§ 163.5  Methods for storage of records.
* * * * *
(b) * * *
(2) * * *
(iii)  Except in the case of packing lists (see § 163.4(b)(2)), entry records must be maintained by the importer in their original formats for a period of 120 calendar days from the end of the release or conditional release period, whichever is later, or, if a demand for return to CBP custody has been issued, for a period of 120 calendar days either from the date the goods are redelivered or from the date specified in the demand as the latest redelivery date if redelivery has not taken place.  Customs brokers who are not serving as the importer of record and who maintain separate electronic records are exempted from this requirement.  This exemption does not apply to any document that is required by law to be maintained as a paper record.
* * * * *
(5)  Failure to comply with alternative storage requirements.  If a person listed in § 163.2 uses an alternative storage method for records that is not in compliance with the conditions and requirements of this section, CBP may issue a written notice informing the person of the facts giving rise to the notice and directing that the alternative storage method must be discontinued in 30 calendar days unless the person provides written notice to the issuing CBP office within that time period that explains, to CBP’s satisfaction, how compliance has been achieved.  Failure to timely respond to CBP will result in CBP requiring discontinuance of the alternative storage method until a written statement explaining how compliance has been achieved has been received and accepted by CBP.

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FMC Simplifies Negotiated Rate Arrangements

The Federal Maritime Commission revised its Negotiated Rate Arrangement (NRA) regulations to reduce recordkeeping requirements.   With immediate effect, the FMC is

a) eliminating the requirement for the shipper’s title and address in their written assent to rates,

b) eliminating the requirement that the bill of lading include a notice that a shipment is moving pursuant to an NRA; and

c) eliminating the requirement that an NVOCC retain all associated records and written communications pertaining to an NRA. List of Subjects in 46 CFR Part 532

 

Accordingly, the Federal Maritime Commission amends 46 CFR Part 532 as follows:

PART 532 – NVOCC NEGOTIATED RATE ARRANGEMENTS

  1. The authority citation for Part 532 continues to read as follows:

AUTHORITY: 46 U.S.C. 40103.

  1. In § 532.5, revise paragraph (b) to read as follows:

§ 532.5 Requirements for NVOCC negotiated rate agreements.

* * * * *

(b) Contain the names of the parties and the names of the representatives agreeing to the NRA;

* * * * *

  1. Revise § 532.6 to read as follows:

§ 532.6 Notices.

An NVOCC wishing to invoke an exemption pursuant to this part must indicate that intention to the Commission and the public by a prominent notice in its rules tariff.

4. Revise § 532.7 to read as follows:

§ 532.7 Recordkeeping and audit.

(a)        An NVOCC invoking an exemption pursuant to this part must maintain original NRAs in an organized, readily accessible or retrievable manner for 5 years from the completion date of performance of the NRA by an NVOCC, in a format easily produced to the Commission.

(b)        NRAs are subject to inspection and reproduction requests under § 515.31(g) of this chapter. An NVOCC shall produce the requested NRAs promptly in response to a Commission request. All records produced must be in English or be accompanied by a certified English translation.

(c)        Failure to keep or timely produce original NRAs will disqualify an NVOCC from the operation of the exemption provided pursuant to this part, regardless of whether it has been invoked by notice as set forth above, and may result in a Commission finding of a violation of 46 U.S.C. 41104(1), 41104(2)(A) or other acts prohibited by the Shipping Act.

* * * * *

For more information on NRA’s you can contact us via email at nmooney@customscourt.com or smorrison@customscourt.com or by phone at (850) 893-0670 or toll free at (800) 583-0250.

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Importer Tips to Avoid Misclassification of Goods

            When importing goods into the United States the importer of record (the owner, purchaser, or a licensed Customs broker) must file entry documents with Customs at the port of entry.  Among the information contained in the entry documents are the merchandise descriptions and tariff classification information. Many importers rely on their suppliers or Customs brokers to accurately classify their goods, but sometimes the importers don’t supply enough information for Customs brokers to accurately classify.  What’s more, importers are often not aware that it is they, not the Customs broker, who are responsible for any errors or omissions in entry documents.

           When mistakes occur on entry documents, for example, misclassified goods, Customs will require importers to pay any difference in duty and will likely assess fines and penalties. Here are a few measures you can take to help you avoid any errors in misclassifying goods on your entry documents and avoid supplemental duty payments as well as fines and penalties:

  • KNOW YOUR PRODUCT!
    • This is probably one of the most common oversights of importers. If the importer does not know all the details pertaining to their product then those acting on their behalf cannot be expected to know them either.  Importers should obtain photographs of the product where possible, specific details such as whether (for example) an auto part is a bearing or a wheel hub assembly that includes a bearing, the manufacturer (not just the seller), etc.  We have found certain trading companies involved in heavily regulated articles without being aware of mulitple agency jurisdiction at the time of entry, to the importer later dismay.
  • Retain an expert
    • Seek out the help of a licensed Customs’ broker with experience in entering your particular product or an attorney knowledgeable in Custom’s regulations.  This does not mean rely on the expert to tell you about your product. #1 is always to know your product thoroughly yourself.  This way you can provide the expert with a full, complete, and accurate description of it so he or she can then help you with compliance.  An expert can provide you with the correct questions to ask your seller or manufacturer so you ensure either that the product is correctly classified or with proof that you have taken reasonable care in performing due diligence to correctly classify your product.
  • Due Diligence and Reasonable Care
    • Clients often come to us saying they have never been asked for certain information. The fact is that transactions and merchandise may be handled differently at different ports, and Customs may not ask the exact same questions in every situation.  The general information will likely be the same, i.e. documents to prove origin of your product, production documents, transport/sale documents, etc.; however, your particular product may present a unique situation for Customs that may require it to seek alternate or differing information.  Even within the same port, an officer may request information that another officer doesn’t. Always discuss your importations with an expert or a Customs’ import specialist in advance so you know what to expect. 
  •  Informed Compliance
    • This responsibility is shared between CBP and the importer where CBP provides effective communication of its requirements to the trade community and importers are required to conduct their business in compliance with U.S. laws and regulations.   The Tariff schedules are available to the public, as well as many other publications discussing specific products and topics. You can also request an opinion on classification or a binding ruling on classification from Customs.  An import specialist in the port of entry can provide you with more information, as can your retained expert.
    • The following are questions (verbatim) posed by Customs’ in its informed compliance guide “Importing into the United States:  A Guide for Commercial Importers” to assist importers in using reasonable care[1]  to ensure proper merchandise classification:

Questions by Topic:

Merchandise Description & Tariff Classification[2]

Basic Question: Do you know what you ordered, where it was made, and what it is made of?

  1. Have you provided a complete, accurate description of your merchandise to CBP in accordance with 19 U.S.C. 1481? (Also, see 19 CFR 141.87 and 19 CFR 141.89 for special merchandise description requirements.)
  2. Have you provided CBP with the correct tariff classification of your merchandise in accordance with 19 U.S.C. 1484?
  3. Have you obtained a CBP ruling regarding the description of your merchandise or its tariff classification (see 19 CFR Part 177)? If so, have you followed the ruling and apprised appropriate CBP officials of those facts (i.e., of the ruling and your 28 compliance with it)?
  4. Where merchandise description or tariff classification information is not immediately available, have you established a reliable procedure for obtaining it and providing it to CBP?
  5. Have you participated in a CBP classification of your merchandise in order to get it properly described and classified?
  6. Have you consulted the tariff schedules, CBP informed compliance publications, court cases or CBP rulings to help you properly describe and classify the merchandise?
  7. Have you consulted with an expert (e.g., lawyer, customs broker, accountant, customs consultant) to assist in the description and/or classification of the merchandise?
  8. If you are claiming a conditionally free or special tariff classification or provision for your merchandise (e.g., GSP, HTS Item 9802, NAFTA), how have you verified that the merchandise qualifies for such status? Do you have the documentation necessary to support the claim? If making a NAFTA preference claim, do you have a NAFTA certificate of origin in your possession?
  9. Is the nature of your merchandise such that a laboratory analysis or other specialized procedure is advised for proper description and classification?
  10. Have you developed reliable procedures to maintain and produce the required entry documentation and supporting information?

 For more information on correct classification or if you are currently facing an issue with CBP regarding misclassified goods, you can reach us via email at smorrison@customscourt.com or nmooney@customscourt.com or by phone at (850) 893-0670 or toll free at (800) 583-0250.


[1] Reasonable Care is not easily definable since each import transaction has different facts and circumstances.  Visit CBP’s Importing Guide for more in depth information as to how you can ensure you are meeting your responsibility to import using “reasonable care.”

[2] U.S. Customs and Border Protection, “Importing into the United States:  A guide for Commercial Importers”, CBP Publication No. 0000-0504, revised November 2006, http://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf, last accessed May 30, 2012.

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When Is C-TPAT Right For You?

The Customs-Trade Partnership Against Terrorism (C-TPAT) was established to ensure the safety and security of cargo arriving in the United States. Although being C-TPAT certified is not required by any governmental agency, many private companies only partner with C-TPAT compliant businesses. Thus, Third Party Logistics Providers (3PLs) are strongly motivated to obtain certification.

However, in order for a 3PL to be eligible for C-TPAT certification it must meet some minimum requirements. For example, it MUST do all of the following:

1. Be directly involved in the handling and management of the cargo from point of stuffing overseas up to the first U.S. port of arrival. (Entities which only provide domestic services and are not engaged in cross border activities are not eligible.)

2. Manage and execute these particular logistics functions using its own transportation, consolidation and/or warehousing assets and resources.

3. Be licensed and/or bonded by one of the following: the Federal Maritime Commission, the Transportation Security Administration, U.S. Customs and Border Protection, or the Department of Transportation, and

4. Maintain a staffed office within the United States.

And in order to participate in the C-TPAT program a 3PL may NOT:

1. Subcontract any service beyond a second party other than to other CTPAT members (This means that CBP does not allow the practice of “double brokering”, the 3PL may contract with a service provider, but it may not allow that contractor to further subcontract the actual provision of this service to an unknown third party).

2. Be a non asset-based 3PL which only performs duties such as quoting, booking, routing, and auditing (these type of 3PL may possess only desks, computers, and freight industry expertise) without its own warehousing facilities, vehicles, aircraft, or any other transportation assets. These non-asset based entities are excluded from C-TPAT as they are unable to enhance supply chain security throughout the international supply chain.

If your business is not otherwise eligible for C-TPAT certification but desires to obtain it, it might consider obtaining one of the necessary agency licenses. If you have questions on doing so, we are able to help.

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A Proper Receipt Creates A Warehouse Lien

We are constantly being asked by NVOCCs, forwarders and warehousemen whether they have a legitimate lien on the cargo in their possession, such that that they can hold the freight until being paid.  The answers are not simple: you only have a lien on freight if it was  a)given to you by the cargo owner; or b) given to you by statute.  

Warehousemen have a statutory lien, which is generally the same throughout the country under the Uniform Commercial Code.  We will discuss Florida’s implementation of the UCC provision.  This is a simple outline of how to make certain that your warehouse receipt is compliant with Florida Statutes, and thus obtains for a warehouseman the full privileges the law can provide. Following the guidelines below should ensure that you obtain the full statutory warehouseman’s lien.

The general form that a warehouse receipt takes is in accordance with the following (Florida Statutes 677.202):

(1) A warehouse receipt need not be in any particular form.

(2) Unless a warehouse receipt embodies within its written or printed terms each of the following, the warehouseman is liable for damages caused by the omission to a person injured thereby (i.e., if you fail to include the following, you can be subject to loss of lien rights):

(a) The location of the warehouse where the goods are stored;

(b) The date of issue of the receipt;

(c) The consecutive number of the receipt;

(d) A statement whether the goods received will be delivered to the bearer, to a specified person, or to a specified person or his or her order;

(e) The rate of storage and handling charges, except that where goods are stored under a field warehousing arrangement a statement of that fact is sufficient on a nonnegotiable receipt;

(f) A description of the goods or of the packages containing them;

(g) The signature of the warehouseman, which may be made by his or her authorized agent;

(h) If the receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership; and

(i) A statement of the amount of advances made and of liabilities incurred for which the warehouseman claims a lien or security interest (Florida Statutes 677.209). If the precise amount of such advances made or of such liabilities incurred is, at the time of the issue of the receipt, unknown to the warehouseman or to his or her agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient.

-For the purposes of this section, you will want to include a statement saying that you retain a lien on all goods stored by you for the bailor (customer), regardless of whether or not they are those goods listed on this particular warehouse receipt.

In addition to the above listed provisions, it is advisable that you include a provision that advises your customers that they have the option to purchase additional insurance or to obtain insurance through a provider of their own choice.   Note that nothing in the above addresses limitation of liability, an entirely different topic.

For more information on this topic please contact our offices at 800-583-0250.

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Resources for Exporting: A Visit to the Mississippi Gulf Coast

Last week I visited the beautiful Mississippi Gulf Coast to attend the Gulf States Trade Alliance’s 2012 Annual Export conference from April 10-12 at the Beau Rivage Resort.  The theme for the event was “Export Resources and New Market Opportunities for Small Business”, and the markets focused on during the conference were Central America, the Caribbean, and Canada.  First, a little background on the trade alliance.

The Gulf Coast Trade Alliance consists of economic development agencies from Louisiana, Mississippi, Alabama, and Florida who come together in organizing a regional conference each year focused on international trade and exporting.  The conference highlights tools and resources available to small businesses in each of these four states that enable small business to enter into the world of international trade or grow their existing international business.

After a warm welcome, the conference started out with a discussion of Caribbean market opportunities with discussions by Robert Jones, Counselor for Commercial Affairs for the Caribbean Region (U.S. Commercial Service, American Embassy, Santo Domingo, DR) and Gandy Thomas, Consul General of Haiti Atlanta.  Mr. Jones discussed the benefits of doing business in the Dominican Republic and other Caribbean nations and noted that among  the best prospects for exporting to the region are:  construction in support of tourism, medical equipment and supplies, and renewable energy.  As many businesses engaged in export already know, the United States also has a free trade agreement that encompasses the Dominican Republic making trade with that Caribbean country even more inviting for U.S. businesses.  Mr. Thomas spoke to the fact that demands in Haiti for energy and manufacturing is huge, and the plethora of languages spoken in the region suggests that Haiti is a prime location for businesses to locate call centers.  Each speaker identified that one of the most important aspects of doing business in the Caribbean is establishing relationships face to face and keeping up those relationships even after your visit to their sunny islands.

Later in the conference we heard from Leroy Sheffer, Managing Partner, ITAS Group (Specialized Services Firm, American Chamber of Commerce & Industry in Panama) and Bryan Smith (Counselor, Commercial Affiars for the U.S. Commercial Service at the U.S. Embassy in San Jose, Costa Rica regarding opportunities in Central America, specifically Panama and Costa Rica.

Rounding out the afternoon was Jennifer Rosebrugh, the Senior Trade Commissioner for the Consulate General of Canada located in Atlanta, Georgia.  Ms. Rosebrugh extolled the virtues of doing business with Canada, the United States largest trading partner.  Similar to Mr. Jones and Mr. Thomas, Ms. Rosebrugh said that a key to international trading is to do business with honesty, reliability, kindness, friendliness, compassion, civility, forgiveness, and generosity, and these actions are much more easily undertaken with someone who you’ve met face to face than with someone solely interacted with over email and phone.

Other conference speakers discussed services that will help a small business engage in international trade.  These services are provided by agencies such as the U.S. Commercial Service, the Small Business Administration, the Southern U.S. Trade Association, the Mississippi Development Authority (or other state development boards), banks with international departments, law firms with expertise in international trade issues, customs brokers, etc.  If you are considering entering into international trade business or looking to expand the business you already have, there are many resources available.  Using these resources from the outset to ensure you are making the right choices for your company will help you succeed in both the short and long term.  Understanding both the advantages and pitfalls of international trade will allow your company to make wise decisions that will help ensure your success.

Our firm provides not only legal services for those who have already encountered issues related to international trade, but we also provide business services for those seeking to engage in or expand their trade operations in a way that helps them avoid legal problems down the line.  With over three decades of experience in international trade from both the logistics and the legal sides, we can help you ensure your company is on the right track.  For more information, please visit our website at www.customscourt.com , email us at either nmooney@customscourt.com or smorrison@customscourt.com, or call us at (850) 893-0670 or (800) 583-0250.

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