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January 9 2013 Issue

Wednesday, January 09, 2013
Sandler, Travis & Rosenberg Trade Report

CBP Tightens Time Limit, Alters Calculations for Late Petitions Seeking Relief from Liquidated Damages

U.S. Customs and Border Protection plans to publish in the next Customs Bulletin and Decisions a notice limiting the time period and circumstances in which late petitions for the cancellation and mitigation of claims for liquidated damages will be considered or accepted. CBP is also changing the formula through which late petition mitigation is calculated. These new guidelines, which will be applicable to all liquidated damages claims for which a late petition is filed on or after Jan. 9, are applicable only to petitions for relief and do not apply to offers in compromise submitted pursuant to 19 USC 1617 and 19 CFR 161.53.

“It is critical that all parties to customs bonds understand and assert their rights, as necessary, consistent with these changes,” said ST&R attorney Lenny Feldman. “Some CBP ports already have rejected late petitions outright and others have not accepted or recognized certain submissions, or parts of them, as submitted timely via facsimile or due to CBP’s own processing glitches.”

New Limits for Accepting Untimely Petitions. Under existing regulatory authority, to be considered timely petitions for relief in response to claims for liquidated damages must be filed (a) by bond principals within 60 days from the date of mailing of the notice of liquidated damages or any lawful extension thereof or (b) by sureties within 60 days of the demand for payment by CBP or any lawful extension thereof. No petition for relief is considered on a claim filed after (a) the commencement of sanctioning action against the bond principal or (b) the issuance of a notice to show cause against the surety. If a petition is submitted late the CBP Fines, Penalties and Forfeiture officer first considers the petition as though it had been filed on time and then determines the amount of mitigation that would have been afforded had the petition been filed timely. Once this base amount is determined the FPF officer charges an additional amount calculated by determining the number of calendar days that the petition was late and adding an additional 0.1% for each day, with a minimum additional amount of $400.

CBP is now announcing new guidelines in an attempt to encourage the timely filing of petitions for relief and promote the timely resolution of liquidated damages claims. Under these guidelines untimely petitions will be accepted or considered only if the petitioner is able to demonstrate the existence of extraordinary circumstances that prevented it from filing a timely petition or timely seeking a lawful extension of time in which to file a petition. Extraordinary circumstances may include some intervening event beyond the petitioner's control resulting in a justifiable inability to timely address or respond to the claim. According to ST&R attorney Lenny Feldman, CBP officials have said that not receiving notice of a liquidated damages claim will be considered an extraordinary circumstance. FPF officers will exercise their discretion in determining whether circumstances existed so as to warrant CBP' s consideration or acceptance of a late petition.

Subject to the exception noted below, no untimely petition will be accepted in any circumstance if it is filed:

a. more than 180 days after the date of mailing of the notice of claim to the bond principal or, in the case of a surety, the date of mailing of the first demand on the surety;

b. after the petitioner has previously submitted a petition in the same case and/or been offered mitigation in the same case and such mitigation amount was not paid within the prescribed period;

c. after the claim has been referred to CBP’s Office of Chief Counsel for collection action;

d. after the commencement of sanctioning action against the bond principal; or

e. after the issuance of a notice to show cause against a surety.

However, untimely petitions for relief of liquidated damages claims issued for the late filing of an entry summary, the late payment of estimated duties (including under the periodic monthly statement test), the late payment of passenger processing fees or the late filing or late payment of reconciliation entries may be accepted without regard to the limitations expressed in paragraphs a and b above at any time prior to the circumstances described in paragraphs c through e.

CBP notes that (a) an untimely petition is not a supplemental petition described in 19 CFR 172.41, (b) a supplemental petition must be timely filed following a decision on an original petition filed in accordance with the established regulatory time frames, (c) the rejection of an untimely petition does not constitute a “decision” for purposes of 19 CFR 172.41, and (d) petitions that are filed untimely and not accepted for consideration will be rejected. A party responsible for a liquidated damages claim may submit an offer in compromise to CBP pursuant to 19 USC § 1617 and 19 CFR 161.5.

New Calculation of Mitigated Amounts. In calculating the mitigated amount on a late petition CBP will first determine the base amount (i.e., the amount of mitigation that would have been afforded on a timely petition or the previously available option one amount) and then determine the additional mitigation amount by multiplying the full assessed amount of the claim by 0.1% and then multiplying by the number of days the petition is late. The result will be the additional amount added to the base amount to produce the mitigated amount applied to the untimely filed petition. In no case will the additional mitigated amount be less than $400.

However, for untimely petitions submitted in response to a claim for liquidated damages for the late filing of an entry summary, the late payment of estimated duties (including under the periodic monthly statement test), the late payment of passenger processing fees or the late filing or late payment of reconciliation entries, the additional mitigated amount calculation will not use the actual liquidated damages assessed amount as described above. Instead, CBP will multiply two times the duties, taxes and due in payment fees (or $1,000, whichever is greater) by 0.1% and then multiply by the number of days the petition is late. Here too the minimum additional mitigated amount will be $400. 

FDA Proposes Significant New Food Safety Rules for Foreign and Domestic Facilities

The Food and Drug Administration is accepting comments through May 16 on two proposed rules issued under the FDA Food Safety Modernization Act that are part of a broader effort to prevent foodborne illness and ensure the safety of imported and domestically produced foods. Additional rules are expected to be published shortly.

Preventive Controls. The first rule would require foreign and domestic facilities that manufacture, process, pack or hold human food to be sold in the U.S. to develop written plans to identify potential food safety hazards and put in place risk-based controls to mitigate those hazards, similar to the hazard analysis and critical control point systems already required for juice and seafood. Facilities would also be required to monitor their controls, verify that they are effective, take appropriate actions to correct any problems that arise, and maintain records documenting these actions. The FDA does not expect that all possible preventive measures and verification procedures would be applied to all foods at all facilities.

In general these requirements would apply to facilities currently required to register with the FDA under the food facility registration regulations, although there are a number of exemptions and modified requirements.

Compliance with this rule would be required one year after a final rule is published, although small businesses (those employing fewer than 500 persons) would get two years and very small businesses (which have yet to be specifically defined) would be given three years.

Produce Safety. The second rule proposes enforceable science- and risk-based safety standards for growing, harvesting, packing and holding fruits and vegetables on foreign and domestic farms. This rule would cover all fruits and vegetables except those rarely consumed raw, produced for personal consumption or (with certain documentation) destined for commercial processing that will reduce microorganisms of public health concern. The rule focuses on areas of risk such as agricultural water, biological soil amendments, health and hygiene, domesticated and wild animals, and equipment, tools and buildings.

Larger farms would have to be in compliance with most of the produce safety requirements two years after a final rule is published. Small farms (sales averaging less than $500,000 per year during the past three years) would have three years, very small businesses would get four years, and all farms would have four years to comply with certain requirements related to water quality. Farms whose average annual value of food sold during the previous three-year period is $25,000 or less would be exempt, although they would still be responsible for the safety of their produce.

States and foreign countries would be able to request a variance from some or all provisions of this proposed rule if they determine it is necessary in light of local growing conditions and practices under the proposed variance provide the same level of public health protection as the requirements of the proposed rule without increasing the risk of adulteration.

Additional Rules. The FDA notes that additional FSMA rules to follow soon include new responsibilities for importers to verify that food products grown or processed overseas are as safe as domestically produced food as well as accreditation standards to strengthen the quality of third-party food safety audits overseas. The FDA will also propose a preventive controls rule for animal food facilities that is similar to the above proposal for human food. 

U.S. Proposing New Short Supply Concept for Textiles and Apparel in TPP Talks

The Office of the U.S. Trade Representative has made available materials describing the short supply concept the U.S. has proposed as part of the ongoing Trans-Pacific Partnership Agreement negotiations.

According to USTR, the TPP rule of origin for textiles proposed by the U.S. is based on the yarn-forward concept, where a good qualifies for duty preferences if production occurs in one or more TPP parties from the yarn manufacturing stage forward to the end product. While the U.S. believes that a yarn-forward rule is the best way to promote regional integration, encourage investment and create sustainable supply chains, it also realizes that some materials may not be available from TPP partners. The U.S. is therefore proposing separate short supply designations structured on a permanent and temporary (three-year) basis.

Under the United States’ existing free trade agreements, changes to the rules of origin may be made after the FTA is implemented if a material is in short supply. Some FTAs require that the parties negotiate short supply designations and some have an expedited process of U.S. government review. Short supply requests may seek a rule of origin change for a specific end product that allows the sourcing of fiber, yarn or fabrics from outside the region (NAFTA-style) or the placement of a specific fiber, yarn or fabric on a list that can be used in any textile product (CAFTA-style). Under the TPP, however, the U.S. is proposing to establish all short supply designations as of the date negotiations are concluded; i.e., there would be no short supply request process after the TPP takes effect.

The U.S. proposal provides that the permanent short supply designations would be limited to fibers, yarns and fabrics for which production is limited to certain geographic regions outside the TPP area and is unlikely to develop within that area. Once the TPP enters into force textile and apparel goods containing fibers, yarns or fabrics that are designated to be in permanent short supply and meet all other requirements would qualify for preferential tariff treatment. If a fabric is designated in permanent short supply for a particular apparel products, that product could qualify for TPP preferences if it is cut and sewn in a TPP countries and meets any other additional requirements, such as assembly with TPP-origin sewing thread.

The temporary short supply designations would include fibers, yarns and fabrics that are determined to be unavailable in the TPP region at the start of the agreement but for which capabilities to produce in the region could be encouraged and developed. These designations would remain in effect for three years after the TPP enters into force. 

AD/CV Notices: Hand Trucks, Magnesium Metal

Agency: International Trade Administration.
Commodity: Hand trucks and certain parts thereof.
Country: China.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period Dec. 1, 2010, through Nov. 30, 2011.
Details: Weighted average dumping margin of 9.84% for New-Tec Integration (Xiamen) Co. Ltd.

Agency: International Trade Administration.
Commodity: Magnesium metal.
Country: China.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period April 1, 2011, through March 31, 2012.
Details: Preliminary determination that Tianjin Magnesium International Co. Ltd. did not have reviewable transactions during the period of review.

CBP Reviewing Information Collections on Rulings, Goods Transfers, IPR Recordation

U.S. Customs and Border Protection is extending through Feb. 7 the period for public comments on the proposed extension of the following information collections.

Administrative rulings: This information collection is necessary to enable CBP to respond to requests by importers and other interested persons for the issuance of administrative rulings, which pertain to the interpretation of applicable laws related to prospective and current transactions involving classification, marking and country of origin. This collection is also necessary to enable CBP to make proper decisions regarding the issuance of binding rulings that modify or revoke prior binding rulings.

CBP Form 6043, Delivery Ticket: This form is used to document transfers of imported merchandise between parties and collects information such as the name and address of the consignee, the name of the importing carrier, lien information, where the goods originated and where they were delivered, and information about the imported merchandise. This form is filled out by warehouse proprietors, carriers, foreign-trade zone operators and others involved in transfers of imported merchandise.

Recordation and Enforcement of Trademarks and Copyrights: Trademark and trade name owners and those claiming copyright protection may submit information to enable CBP officers to identify violating articles at the border. Parties seeking to have merchandise excluded from entry must provide proof of the validity of the rights they seek to protect. The information collected is used to identify infringing goods at the border and determine if such goods infringe on intellectual property rights for which federal law provides import protection. 

IPR Enforcement Actions on Robotic Toys, Food Waste Disposers

New IPR Infringement Petition on Robotic Toys. The International Trade Commission received Jan. 4 on behalf of Innovation First International Inc., Innovation First Inc. and Innovation First Labs Inc. a petition requesting that it institute a Section 337 investigation regarding certain robotic toys and components thereof. The proposed respondent is located in the U.S.

Section 337 investigations primarily involve claims regarding intellectual property rights violations by imported goods, including the infringement of patents, trademarks and copyrights. Other forms of unfair competition involving imported products, such as misappropriation of trade secrets or trade dress and false advertising, may also be asserted. The primary remedy available in Section 337 investigations is an exclusion order that directs U.S. Customs and Border Protection to stop infringing imports from entering the U.S. In addition, the ITC may issue cease and desist orders against named importers and other persons engaged in unfair acts that violate Section 337, including selling infringing imported articles out of U.S. inventory.

No Import Restrictions on Food Waste Disposers. The International Trade Commission has terminated without the imposition of import restrictions investigation 337-TA-838 of certain food waste disposers and components and packaging thereof. Complainant Emerson Electric Co.’s had alleged Section 337 violations by reason of patent infringement, trademark infringement and dilution, unfair competition by passing off, and trade dress infringement. Emerson had moved for partial termination of this investigation with respect to certain claims and then later withdrew its remaining allegations. 

U.S. Packaging Operations Insufficient to Convey Origin, CBP Says

U.S. Customs and Border Protection has issued a final determination concerning the country of origin of certain Ponstel® (mefenamic acid) capsules that may be offered to the U.S. government under an undesignated government procurement contract. Based on the facts presented, mefenamic acid imported in bulk form from India that was blended with excipients and packaged into dosage form in the U.S. was not substantially transformed in the U.S. because its chemical character remained the same. CBP notes that it has generally held that the processing of pharmaceutical products from bulk form into measured doses does not result in a substantial transformation of the product. India is therefore the country of origin of the finished capsules for purposes of U.S. government procurement.

CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. government.

CBP’s final determination was issued Dec. 26, 2012. Any party-at-interest may seek judicial review of this determination by Feb. 7. 

Ocean Transportation Intermediary License Applicants

The Federal Maritime Commission has provided notice that the following applicants have filed applications for licenses as non-vessel-operating common carrier and/or ocean freight forwarder ocean transportation intermediaries. Persons knowing of any reason why any of these applicants should not receive a license are requested to contact the FMC.

- Best Global Logistics USA Inc. d/b/a Siam Intercargo Services, Compton, Calif.
- Carmichael International Service d/b/a C.I. Container Line, Los Angeles, Calif.
- OTA America Inc., Brea, Calif.
- Salmad Ocean Line & Logistics Inc., College Park, Ga.
- Watercraft Mix Inc., Hialeah, Fla.

USDA Planning to Allow Imports of Dates from Israel

The Department of Agriculture’s Animal and Plant Health Inspection Service is soliciting comments through March 11 on an analysis of the pest risks associated with the importation of fresh Barhi dates from Israel. Based on that analysis APHIS has concluded that the application of one or more of the following phytosanitary measures will be sufficient to mitigate the applicable risk.

- the dates are imported in commercial consignments only

- the dates are treated in accordance with 7 CFR part 305 for the Mediterranean fruit fly

- the dates are accompanied by a phytosanitary certificate issued by the national plant protection organization of Israel stating that the consignment has begun or has undergone cold treatment T107-i (which is being added to the PPQ Treatment Manual), with the additional declaration stating that the dates in the consignment were inspected and found free of the plant pathogen Mauginiella scaettae

If the overall conclusions of APHIS’ analysis and its determination of risk remain unchanged following its consideration of any comments received, the importation of fresh Barhi dates from Israel will be authorized subject to the requirements specified in the risk management document. 

Amended Maritime Agreement Filed

The Federal Maritime Commission has issued notice that the following amended agreement has been filed. Interested parties may submit comments by Jan. 22.

The Maritime Credit Agreement – The amendment removes Hoegh Autoliners A/S as party to the agreement. 

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