July 30 2012 Issue
Customs Fraud Scheme Cost $10 Million, Feds Say
The federal government filed in district court July 23 a lawsuit charging three companies and eight individuals with participating in a conspiracy to import foreign-made goods through the port of Long Beach without paying customs duties. The complaint alleges that the fraud scheme involved more than 90 shipments worth at least $100 million and resulted in more than $10 million in lost duties, taxes and other fees.
The violations asserted include the following.
- falsely stating and maintaining that Chinese-made textiles were to be transshipped in-bond to Mexico and that no duties were owed
- falsely stating that shipments of foreign-made cigarettes were made in the U.S. and were being returned to their manufacturer in the U.S. and that no duties were owed
- forging perforation marks and falsely asserting that shipments of Chinese-made textiles, foreign-made cigarettes and Mexican food products had been exported to Mexico when in fact they remained in the U.S.
- on one occasion, conspiring to cover up the importation of produce that was knowingly infected with salmonella
- conspiring to undervalue at least one shipment after suspecting that U.S. Customs and Border Protection might be conducting a fraud investigation
GSP Product and Country Practices Petitions, CNL Waiver Requests Being Accepted
The Office of the U.S. Trade Representative has initiated its 2012 Generalized System of Preferences product and country practices review. Petitions to modify the list of products eligible for duty-free treatment under GSP or to modify the GSP status of certain beneficiary developing countries because of country practices are due no later than Oct. 5. Petitions requesting waivers of the competitive need limitations must be submitted no later than Nov. 21.
Interested parties, including foreign governments, may submit petitions to (1) designate additional articles as eligible for GSP benefits, including only for countries designated as least-developed BDCs or countries designated as beneficiary sub-Saharan African countries under the African Growth and Opportunity Act; (2) withdraw, suspend or limit the application of GSP duty-free treatment with respect to any article, either for all BDCs, LDBDCs or beneficiary SSA countries or any of these countries individually; (3) waive the CNL for individual BDCs with respect to specific GSP-eligible articles; or (4) otherwise modify GSP coverage. Interested parties may also submit petitions to review the GSP eligibility of any BDC with respect to any of the eligibility criteria in 19 USC 2462(b) and (c). All product petitions must include a detailed description of the product and the eight-digit HTSUS subheading under which the product is classified.
USTR notes that before submitting petitions for CNL waivers prospective petitioners may wish to review the year-to-date import trade data for products of interest, which is available here.
$1.5 Million Penalty Highest Ever Imposed by CPSC for Drawstring Violations
The Consumer Product Safety Commission has provisionally accepted a settlement agreement under which a major retailer will pay a $1.5 million civil penalty to resolve alleged violations concerning drawstrings in children’s outerwear. A CPSC press release states that this is the highest penalty the agency has ever assessed for such violations.
CPSC staff charged that for seven years the company knowingly failed to report that it had sold many different children's sweatshirts and jackets with drawstrings at the neck. The company also knowingly sold or had in its store inventories for four years many of these garments after they had been recalled. Children's upper outerwear with drawstrings, including sweatshirts, sweaters and jackets, poses strangulation and entanglement hazards to children that can result in serious injury or death. In July 2011 the CPSC issued a federal regulation that designated as substantial product hazards children's upper outerwear in sizes 2T to 12 (or extra-small to large) with neck or hood drawstrings and children's upper outerwear in sizes 2T to 16 (or extra-small to extra-large) with certain waist or bottom drawstrings.
Federal law requires manufacturers, distributors and retailers to report to CPSC within 24 hours after obtaining information reasonably supporting the conclusion that a product contains a defect that could create a substantial product hazard, creates an unreasonable risk of serious injury or death, or fails to comply with any consumer product safety rule or any other rule, regulation, standard or ban enforced by CPSC. Federal law also bars selling products that have been recalled by a manufacturer.
Of Note: Bribery Sweep Considered, U.S. Port Talks, Wildlife Trade
Deemed Exports, Unlicensed Shipments Yield BIS Penalties
The Bureau of Industry and Security has entered into separate agreements penalizing the following companies for alleged violations of the Export Administration Regulations.
Deemed Exports. A Singapore company was charged with knowingly (a) selling certain edge-welded metal bellows used in semiconductor manufacturing equipment, which are controlled for national security reasons, to China without the required BIS license and (b) releasing manufacturing instructions for the bellows to two Chinese nationals in Singapore without the required BIS licenses. To settle these allegations the company will pay a $110,000 penalty and conduct an audit of its export controls compliance program. If either of these steps is not completed the BIS may suspend the company’s export privileges for one year.
Freight Forwarder. Two related New York companies acting as freight forwarders were alleged to have arranged for the export of scrap steel to a Pakistani company on the Entity List without the required BIS export license. These companies will pay a penalty of $28,000 and an officer and/or export controls manager of each company will be required to complete an export compliance training on the EAR within 12 months. If either of these steps is not completed the BIS may suspend one or both companies’ export privileges for one year.
U.S. Hopes to Facilitate Trade Through APEC Cross-Border Privacy Rules System
The Department of Commerce announced July 26 that the U.S. will participate in the Asia-Pacific Economic Cooperation Cross Border Privacy Rules system, which could be launched within the next six months. The Federal Trade Commission states that the CBPR system is a self-regulatory initiative to enhance the protection of consumer data that moves between the U.S. and other APEC members through a voluntary but enforceable code of conduct implemented by participating businesses. According to a DOC press release, the goal of this system is to enhance electronic commerce, facilitate trade and economic growth, and strengthen consumer privacy protections. Acting Commerce Secretary Rebecca Blank said this system “directly supports the President’s National Export Initiative of doubling U.S. exports by the end of 2014 by decreasing regulatory barriers to trade and commerce,” specifically by enabling participating companies “to more efficiently exchange data in a secure manner.”
The DOC is also inviting interested organizations to submit applications for recognition by APEC to act as an accountability agent for U.S.-based companies that are subject to FTC jurisdiction as part of the CBPR. The department explains that under this system organizations develop their own internal business rules on cross-border privacy procedures and that these rules must be assessed as compliant with minimum requirements by an independent public or private sector body called an accountability agent. A document detailing the application process as well as the recognition criteria is available here (www.export.gov/infotech). Interested parties can submit applications anytime.
AD/CV Notices: Tapered Roller Bearings, Lined Paper School Supplies
Agency: International Trade Commission.
Commodity: Tapered roller bearings.
Nature of Notice: July 31 open meeting for vote in sunset review of antidumping duty order.
Agency: International Trade Commission.
Commodity: Lined paper school supplies.
Country: China, India and Indonesia.
Nature of Notice: Aug. 2 open meeting for vote in sunset reviews of antidumping and countervailing duty orders.
IPR Enforcement Actions on Video Analytics Software, Consumer Electronics
New IPR Infringement Investigation of Video Analytics Software. The International Trade Commission has instituted investigation 337-TA-852 to determine whether imports of certain video analytics software, components thereof and products containing same are violating Section 337 of the 1930 Tariff Act by reason of patent infringement. The products at issue are systems containing hardware and/or software for analyzing information from a video source to detect, classify and track objects and generate outputs.
Complainant ObjectVideo Inc. requests that after this investigation the ITC issue an exclusion order, which would direct U.S. Customs and Border Protection to prohibit the entry of the infringing products into the U.S., and cease and desist orders, which would require the named respondent to cease actions that violate Section 337, including selling infringing imported articles out of U.S. inventory. The respondent in this investigation is located in the U.S.
Potential IPR Probe of Consumer Electronics Evaluated for Public Interest Issues. The International Trade Commission is requesting comments no later than Aug. 7 on any public interest issues raised by a Section 337 intellectual property rights infringement complaint filed on behalf of Technology Properties Limited LLC, Phoenix Digital Solutions LLC and Patriot Scientific Corporation against certain wireless consumer electronics devices and components thereof. Comments should address whether the issuance of exclusion orders and/or cease and desist orders pursuant to this complaint would affect the public health and welfare in the U.S., competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., or U.S. consumers. In particular, the ITC is interested in comments that:
- explain how the articles potentially subject to the orders are used in the U.S.;
- identify any public health, safety or welfare concerns in the U.S. relating to the potential orders;
- identify like or directly competitive articles that the complainant, its licensees or third parties make in the U.S. that could replace the subject articles if they were to be excluded;
- indicate whether the complainant, the complainant’s licensees and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to the requested orders within a commercially reasonable time; and
- explain how the requested orders would impact U.S. consumers.
USTR Gathering Further Input in WTO Case Against Chinese Export Measures on Rare Earths
The Office of the U.S. Trade Representative is accepting comments through Aug. 27 on the issues raised in a World Trade Organization complaint the U.S. filed against China’s measures on exports of various forms of rare earths, tungsten and molybdenum. These measures include export duties, quantitative restrictions such as quotas, and additional requirements that impose restrictions on the trading rights of enterprises seeking to export, such as prior export performance and minimum registered capital requirements. The U.S. also alleges that China administers these export quotas in a manner that is not uniform, impartial or reasonable, such as by the use of criteria in the application and allocation process that lack definition or do not contain sufficient guidelines or standards in how they should be applied. The WTO recently established a dispute settlement panel to hear this case.
Foreign Regulatory Changes Could Affect Exports of Used Goods, Foods, Concrete, Lamps
According to the National Institute of Standards and Technology, the World Trade Organization has been notified of regulatory changes that may affect exports of specific products to the following countries. For information on how these restrictions may affect your business, contact ST&R.
Colombia – draft technical regulation on imperfect, used, repaired, remanufactured, reconditioned or discontinued products (comments due by Sept. 19)
Costa Rica – type approval for mobile telecommunications terminals
Dominican Republic – standards on coffee, concrete, edible fats and oils, instrument transformers and plastics (comments due by Aug. 20)
Mexico – June 22 publication (effective 60 days later) of official standard on integrated LED lamps for general lighting services
Mexico – draft amended official standard on glazed pottery, glazed ceramics and porcelain (comments due by Aug. 20)
Mexico – draft official standard on alcoholic beverages made from agave (comments due by Sept. 3)
Paraguay – draft technical regulation on establishing the identity of onions (comments due by Sept. 17)
Uganda – draft standard on faba beans, paddy rice and brown rice (comments due by Sept. 23)
Ex-Im Bank Considers Financing Exports of Petrochemical Equipment to India
The Export-Import Bank of the United States has received an application to support the export of approximately $2.3 billion in U.S. petrochemical equipment and services to expand petrochemical production at an existing facility in India. These exports would enable the foreign buyer to increase its annual production of the following products.
- 550,000 metric tons of linear low density polyethylene, the majority of which will be consumed in India with the balance exported to China, Europe and Africa
- 400,000 metric tons of low density polyethylene, about half of which will be consumed in India with the remainder going to China, Europe and Africa
- 733,000 metric tons of monoethylene glycol, all of which will be consumed in India
- 1,800,000 metric tons of paraxylene, which will be exported to South and North East Asia
- 152,000 metric tons of polypropylene, the majority of which will be consumed in India with the balance exported to China, Africa and Europe
Interested parties may submit comments on this application no later than Aug. 13.
Texas Foreign-Trade Zone Reorganized, Expanded Under Alternative Site Framework
The Foreign-Trade Zones Board has approved the reorganization of FTZ 183, which will now have a service area of Bastrop, Caldwell, Hays, Travis and Williamson counties in Texas, within and adjacent to the Austin U.S. Customs and Border Protection port of entry. FTZ 183’s existing sites 1 through 24 will be categorized as magnet sites, and authority for these sites will terminate on July 31, 2017, if they are not activated by then.