April 26 2012 issue
Mexico Using Reference Prices to Prevent Undervaluation of Imported Goods
The Mexican government has begun using reference prices to prevent the undervaluation of imported goods. This policy currently applies to textile, apparel and footwear items but within the next few months could also be extended to products such as toys, electronics, bicycles and steel. Shipments of affected goods not accompanied by documentation sufficient to confirm the correct value could be seized and/or subject to penalties. Although this mechanism was created in December 2011 after the elimination of transitional duties, the number of associated seizures has increased recently.
Mexico’s Tax Administration Service (SAT) determined that in 2011 68% of textile, apparel and footwear items imported from China, Hong Kong, Taiwan and other countries were entered at prices lower than the cost of raw materials used in their production. To discourage this practice, SAT has implemented a program called “Precios de Referencia” (reference prices) with respect to 413 tariff lines for textile items and 59 tariff lines for footwear. These reference prices are determined on a computed value basis but will not be published in the Diario Oficial (Official Gazette) and importers will not have access to them.
SAT officials have emphasized in several forums in Mexico that the reference prices are only used to analyze the risk of importers using lower values and are not used in deciding whether to reject or accept the value declared in entry summaries (pedimentos). However, if the merchandise is imported at a price lower than the reference price, Mexican Customs will require the importer to have a guarantee of import duties based on the reference price.
When an importer becomes aware that the price agreed with its supplier is low it must obtain the proper documents to support that price and notify the customs broker of this situation. The broker will then include in the pedimento the code “PV” (prueba de valor) indicating that it has the documentation to prove the transaction value and clear the shipment through customs. In this context Mexican Customs may require the commercial invoice as well as the following documents.
- customs value declaration
- title of credit related to payment
- proof of payment/transfer of funds
- lease agreement
- insurance payment
- export declaration
In light of this new practice and the fact that the reference prices will remain unpublished, foreign suppliers of affected goods are advised to provide Mexican importers proper documentation to demonstrate the accuracy of the value declared during the import transactions. Otherwise, the merchandise could be seized and penalties could apply. Moreover, when goods are seized the importer’s import license is temporarily suspended, preventing the importer from conducting import operations for up to four months.
For more information, please contact Evelyn Almaraz in Mexico City at +52 (55) 52 63 84 40.
U.S. Confirms Mad Cow Case; No Trade Impact Expected
The Department of Agriculture announced April 24 that it has confirmed the United States’ fourth case of bovine spongiform encephalopathy (BSE, or mad cow disease) in a dairy cow from central California.
USDA asserted that this case does not signal a failure in the “interlocking safeguards” the U.S. maintains to protect against BSE. For example, USDA maintains a ban on specified risk materials (parts of the animal most likely to contain the BSE agent) from the food supply, and the cow in question “was never presented for slaughter for human consumption.” In addition, the Food and Drug Administration bans ruminant material in cattle feed, and the cow at issue was diagnosed with a “very rare form” of BSE “not generally associated with an animal consuming infected feed.”
USDA also stated that this new case “in no way affects the United States’ BSE status” as determined by the World Organization for Animal Health (OIE) and therefore “should not affect U.S. trade.” The National Cattlemen’s Beef Association explained that in May 2007 the OIE formally classified the U.S. as a controlled risk country for BSE, which “recognizes that U.S. regulatory controls are effective and that U.S. fresh beef and beef products from cattle of all ages are safe and can be safely traded.” Press reports indicate that major U.S. trading partners such as the European Union, Mexico, Canada, Japan and Korea do not intend to impose any new import restrictions, although a Korean agriculture official said customs clearance could be delayed as more inspections are conducted.
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Court Classifies Pull-On Boots as Slip-On Footwear
The Court of International Trade ruled April 24 in Deckers Outdoor Corp. v. U.S. that the UGG Classic Crochet model boot is classifiable as other slip-on footwear under HTSUS 6404.19.35 (37.5% duty). Deckers had sought classification as footwear with outer soles of rubber or plastics valued at over $12 per pair under HTSUS 6404.19.90 (9% duty).
The boots at issue have a rubber sole and a knit upper that has no laces, buckles or other fasteners to hold it to the foot. To don the boots, a wearer must grip the top of the woven textile upper with two hands, insert the foot into the opening and pull the boot up forcefully while adjusting the foot until the foot and calf are securely ensconced in the boot with the heel properly set.
Deckers had argued that the phrase “footwear of the slip-on type” only denotes footwear that does not extend above the ankle. The U.S. countered that given the lack of a definition of the term “footwear” in the HTSUS the court should rely on Footwear Definitions, a document used by U.S. Customs and Border Protection import specialists in classifying footwear that is consistent with the language of HTSUS 6404.19.35 and comports with industry usage. That document states that slip-on footwear includes boots that must be pulled on and does not include any boot with any laces, buckles, straps, snaps or other closure.
The CIT agreed, stating that that the definition of “slip-on” in Footwear Definitions is persuasive and warrants deference because it is centered on the characterization of slip-ons as footwear that lacks functional fasteners, which corresponds with the construal of the term suggested by law and in dictionaries. The court also rejected Deckers’ argument that “slip-on” can only refer to shoes, noting that this term can apply to various types of apparel and footwear, is commonly used to refer to both shoes and boots in advertising, and has nothing to do with whether or not the wearer uses his or her hands to assist in donning or doffing the boot.
Click here for CIT decision
AD Duty Orders on Brass Sheet and Strip from Four Countries Continued
The International Trade Administration has continued the antidumping duty orders on brass sheet and strip from France, Italy, Germany and Japan as a result of determinations that the revocation of these orders would likely lead to continuation or recurrence of dumping and associated material injury to a domestic industry. U.S. Customs and Border Protection will continue to collect AD duty cash deposits at the rates in effect at the time of entry for all imports of subject merchandise.
The product covered by these orders is brass sheet and strip, other than leaded and tinned brass sheet and strip. The chemical composition of the covered product is currently defined in the Copper Development Association 200 Series or the Unified Numbering System C2000, and the orders do not cover products the chemical compositions of which are defined by other CDA or UNS series. In physical dimensions, the covered product has a solid rectangular cross section over 0.006 inches (0.15 millimeters) through 0.188 inches (4.8 millimeters) in finished thickness or gauge, regardless of width. Coiled, wound-on-reels (traverse wound) and cut-to-length products are included. The merchandise is currently classified under HTSUS 7409.21.00 and 7409.29.00.
Patent Infringement Probe of Wireless Communication Devices Terminated
The International Trade Commission has terminated patent infringement investigation 337-TA-775 of certain wireless communication devices and systems, components thereof and products containing same based on the withdrawal of the complaint by Linex Technologies Inc. The products at issue in this investigation were items such as laptops and wireless access points.
DOT Proposes to Update and Clarify Hazardous Materials Regulations
The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration is proposing to make miscellaneous amendments to the Hazardous Materials Regulations to update and clarify certain requirements. Comments on this proposed rule are due no later than June 25.
Among other things, this rule would:
- update various entries in the Hazardous Materials Table and corresponding special provisions;
- clarify the lab pack requirements for temperature-controlled materials;
- require hazmat employers to make hazmat employee training records available upon request to an authorized official of the Department of Transportation or the Department of Homeland Security;
- permit the phrase “residue last contained” to be placed before or after the basic shipping description sequence or, for rail shipments, directly preceding the proper shipping name in the basic shipping description sequence;
- incorporate into the HMR a special permit concerning regulated medical wastes; and
- facilitate international commerce by harmonizing the requirements for air cargo transport of alcoholic beverages with the International Civil Aviation Organization’s Technical Instructions.
PHMSA states that these proposed amendments are designed to promote safer transportation practices, eliminate unnecessary regulatory requirements, address a petition for rulemaking and simplify the regulations.
Click here for proposed rule
Additional In-Quota Quantity of Sugar TRQ Allocated to Exporting Countries
The Office of the U.S. Trade Representative has amended the country-by-country allocations of the in-quota quantity of the fiscal year 2012 tariff-rate quota for imported raw cane sugar. The amended amounts reflect a recent 381,018 metric ton raw value increase and the reallocation of 73,446 MTRV from countries unable to fill previously allocated quantities. The total quantity of 454,463 MTRV is being allocated as follows.
Argentina - 24,061
Australia - 46,443
Barbados - 3,917
Belize - 6,155
Bolivia - 4,476
Brazil - 81,136
Colombia - 13,430
Costa Rica - 8,393
Dominican Republic - 30,000
Ecuador - 6,155
El Salvador - 14,548
Guatemala - 26,858
Guyana - 6,714
Honduras - 5,596
India - 4,476
Mauritius - 2,000
Mozambique - 7,275
Nicaragua - 11,751
Panama - 16,227
Peru - 22,942
Philippines - 75,540
South Africa - 12,869
Swaziland - 8,953
Thailand - 7,834
Zimbabwe - 6,714
USTR notes that allocations to countries that are net importers of sugar are conditioned on receipt of the appropriate verifications of origin and that certificates for quota eligibility must accompany imports from any country for which an allocation has been provided.