September 5 2012 Issue
Hong Kong Jewelry Exporter Faces $2 Million in Penalties for Customs Fraud
A recent press release from U.S. Immigration and Customs Enforcement states that a Hong Kong-based jewelry exporter has been ordered to pay an $800,000 criminal fine and $1.02 million in restitution after pleading guilty to customs fraud charges. The company was also ordered to pay the cost of the investigation ($144,324) and placed on three years' probation, which will require it to appoint a responsible corporate officer to prepare and submit quarterly reports to ensure that no similar conduct occurs in the future.
According to ICE, the company admitted to intentionally submitting false invoices in connection with the importation of merchandise to avoid paying more than $1 million in customs duties. From early 2007 to late 2009 the company enclosed false invoices in its direct shipments to a U.S. purchaser while sending the actual full value invoice to the purchaser by email. The exporter advised the purchaser to ignore the invoice enclosed in the shipment because it was there only to avoid customs clearance issues. ICE notes that the purchaser paid the higher amount listed on the true invoice, was not aware of the exporter’s scheme and did not receive any benefit from it.
The press release states that the fraud was detected by U.S. Customs and Border Protection when an audit revealed a discrepancy between the actual value of a gold jewelry shipment and what was stated on the fraudulent invoices. Private sector customs practitioners commenting on the case said that jewelry is just one of many high-value categories where this type of fraud is known to occur and that government authorities seeking to focus limited resources on high-risk goods and behaviors “would do well” to give imports of such goods greater scrutiny. However, ST&R’s Len Rosenberg added that “the decision to prosecute may depend on the district in which the fraud occurs, the number of cases being handled and the ability of CBP to collect a sizable civil fine without consuming the hundreds of man hours needed to prepare a criminal prosecution.”
Trade Groups Press Senate to Raise De Minimis Level for Low Value Shipments
More than two dozen trade and transportation groups wrote to Senate Finance Committee leaders Aug. 31 asking for their support for drafting a bill that would increase the de minimis level for low value shipments for the first time in nearly 20 years. The groups told Chairman Max Baucus and Ranking Member Orrin Hatch that raising from $200 to $1,000 the aggregate retail value of articles that may be imported without entry documentation or payment of duties by one person on one day would “simplify and streamline the customs entry process and offer significant benefits for both trade and the government.”
Raising the de minimis amount “is not a security issue,” the trade groups asserted, but instead is “an issue of efficiency, job creation and economic stimulus.” The letter explained that all shipments are subject to the same security threat analysis and CBP risk assessment processes prior to arrival, regardless of whether they fall under the de minimis level or not, and that simplified entry and release of low value shipments could actually improve security by allowing CBP to focus its resources on larger and higher risk commercial shipments where enforcement is better justified. The letter added that the entry reforms would pose no increased risk of commercial violations because they would only apply to smaller and lower value shipments and that any decreases in government revenue that might be incurred would be “easily offset” by the savings associated with reallocating CBP resources from entry document processing and review to security, targeting and trade facilitation. Finally, the letter said, the proposed changes would reduce costs for customers and small businesses and encourage more companies to engage in international trade, which “would generate more business opportunities and economic growth.”
No Appeal of WTO Decision on Chinese Electronic Payment Services
The World Trade Organization adopted Aug. 31 a dispute settlement panel report regarding the United States’ complaint against China’s policies on electronic payment services after neither side appealed the panel’s decision. The Office of the U.S. Trade Representative calls the ruling a win and says the U.S. stands to gain 6,000 jobs if China complies. China’s Ministry of Commerce, however, has pointed out that the panel rejected several U.S. arguments and asserted that “China’s electronics payments market is already very open.”
USTR has explained that electronic payment services are what make possible payments using credit, debit, prepaid and other payment cards by enabling, facilitating and managing the flow of information and the transfer of funds from cardholders’ banks to merchants’ banks. Each year well over one $1 trillion worth of electronic payment card transactions are processed in China, but the U.S. alleged that the People’s Bank of China has issued a series of measures dating back to 2001 that discriminate against foreign suppliers of EPS at every stage of a payment card transaction.
According to the WTO, the dispute settlement panel ruled as follows.
- China’s commitments under the General Agreement on Trade in Services do not include allowing the cross-border supply of EPS into China by foreign EPS suppliers but do include allowing foreign EPS suppliers to supply their services through commercial presence in China so long as they meet certain qualification requirements related to local currency business.
- China made a full national treatment commitment for the cross-border supply of EPS as well as a national treatment commitment under mode 3 that is also subject to certain qualification requirements related to local currency business.
- There is insufficient evidence that China maintains China Union Pay as an across-the-board monopoly supplier for the processing of all domestic RMB payment card transactions.
- China does maintain CUP as a monopoly supplier for the clearing of certain types of RMB-denominated payment card transactions.
- China fails to provide national treatment to foreign EPS suppliers by modifying the conditions of competition in favor of CUP through a number of other measures.
China now has 30 days to indicate whether it intends to comply with these findings.
U.S. to Consider Bilateral Investment Treaty with Cambodia
The Office of the U.S. Trade Representative announced Aug. 31 that the U.S. and Cambodia have agreed to begin discussions on a potential bilateral investment treaty. USTR Ron Kirk said the “decision to explore this possibility highlights progress made by Cambodia in fostering a policy environment that treats private investment in an open, transparent, and non-discriminatory way.”
A USTR press release states that experts from the two sides will now discuss their respective investment policies and agreements to determine key similarities and differences with an eye to sharing approaches and opening further discussions based on the U.S. model BIT. This text “provides investors with improved market access, protections from discriminatory, expropriatory, or otherwise harmful government treatment, and a mechanism to pursue binding international arbitration for breaches of the treaty.” The U.S. has more than 40 BITs in force with countries around the world – a full list is available here.
The announcement of a possible BIT with Cambodia came as USTR Kirk visited that country to hold talks with ministers and business leaders during a meeting of the Association of Southeast Asian Nations. A separate press release noted that these talks focused on objectives for upcoming work under the U.S.-ASEAN Trade and Investment Framework Arrangement, including with regard to the digital economy, small business development and cooperation on trade facilitation, as well as on promoting economic engagement with ASEAN countries in the U.S.
CITA Reviewing Procedures for Korea Textile and Apparel Safeguard Requests
The Committee for the Implementation of Textile Agreements is accepting through Nov. 5 public comments on its procedures for considering requests for and comments on safeguard actions against textile and apparel imports from Korea. This safeguard mechanism under the U.S.-Korea Free Trade Agreement applies when, as a result of the reduction or elimination of a customs duty under the FTA, a Korean textile or apparel article is being imported into the U.S. in such increased quantities, in absolute terms or relative to the domestic market for that article, and under such conditions as to cause serious damage or actual threat thereof to a U.S. industry producing a like or directly competitive article. In these circumstances, the U.S. may (a) suspend any further duty reduction prescribed by the FTA for the article at issue or (b) increase duties on that article to a level that does not exceed the lesser of the prevailing U.S. normal trade relations/most-favored-nation duty rate for that article or the U.S. NTR/MFN duty rate in effect on the day before the FTA entered into force.
An interested party in the U.S. textile and apparel industry may file a request for a textile and apparel safeguard action with CITA. An interested party is an entity (a trade association, firm, certified or recognized union, or group of workers) that is representative of either (a) a domestic producer or producers of an article that is like or directly competitive with the subject Korean textile or apparel article or (b) a domestic producer or producers of a component used in the production of an article that is like or directly competitive with the subject Korean textile or apparel article.
For a safeguard request to be considered, the following information must be provided. To the extent that such information is not available, the requester should provide best estimates and the basis therefor.
- name and description of the imported article concerned
- import data demonstrating that imports of a Korea origin textile or apparel article that are like or directly competitive with the articles produced by the domestic industry concerned are increasing in absolute terms or relative to the domestic market for that article
- U.S. domestic production of the like or directly competitive articles of U.S. origin indicating the nature and extent of the serious damage or actual threat thereof along with an affirmation that to the best of the requester’s knowledge the data represent substantially all of the domestic production of the like or directly competitive article(s) of U.S. origin
- imports from Korea as a percentage of the domestic market of the like or directly competitive article
- all data available to the requester showing changes in productivity, utilization of capacity, inventories, exports, wages, employment, domestic prices, profits and investment, as well as any other information, relating to the existence of serious damage or actual threat thereof caused by imports from Korea to the industry producing the like or directly competitive article that is the subject of the request
AD Notices: Polyester Staple Fiber, Silicon Metal
Agency: International Trade Administration.
Commodity: Polyester staple fiber.
Nature of Notice: Final results of administrative review of antidumping duty order for the period May 1, 2010, through April 30, 2011.
Details: Weighted average dumping margin of zero for reviewed company. AD duties based on this rate will be assessed on entries of subject merchandise made during the period of review, and no AD cash deposits will be required for shipments of subject merchandise entered or withdrawn from warehouse for consumption on or after Sept. 5.
Agency: International Trade Administration.
Commodity: Silicon metal.
Nature of Notice: Final results of administrative review of antidumping duty order for the period June 1, 2010, through May 31, 2011.
Details: Weighted average dumping margin of 14.36% for reviewed exporter. AD duties based on this rate will be assessed on entries of subject merchandise made during the period of review, and AD cash deposits at this rate will be required for shipments of subject merchandise entered or withdrawn from warehouse for consumption on or after Sept. 5.
Agency: International Trade Administration.
Commodity: Polyester staple fiber.
Nature of Notice: Rescission of administrative review of antidumping duty order for the period May 1, 2011, through April 30, 2012, due to the withdrawal of the requests for review.
Details: AD duties on entries of subject merchandise during this period will be assessed at rates equal to the AD cash deposits required at the time of entry or withdrawal from warehouse for consumption.
Michigan Foreign-Trade Zone Reorganized
The Foreign-Trade Zones Board has approved the reorganization of FTZ 189 under the alternative site framework. This zone will have a service area of Kent, Ottawa and Muskegon counties in Michigan, within and adjacent to the Grand Rapids U.S. Customs and Border Protection port of entry.