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Customs Bill Addresses Duty Evasion, Drawback, Returned Goods, Import Safety, IPR, Etc.

Thursday, April 23, 2015
Sandler, Travis & Rosenberg Trade Report

Importers, customs brokers and others are following closely a wide-ranging customs reauthorization bill that looks ready to advance through both the House and Senate in conjunction with trade promotion authority legislation. A description of the measure from the Senate Finance Committee states that it seeks to enhance a proper balance between U.S. Customs and Border Protection’s trade facilitation and trade enforcement responsibilities and functions, ensure import health and safety and import-related protection of intellectual property rights, and increase enforcement of antidumping and countervailing duties.

Both the Senate Finance and House Ways and Means committees are expected to mark up their respective customs reauthorization measures this week, with numerous amendments likely to be offered.

Highlights of the Senate bill, which differs slightly from the House version on some points, include the following.

ACE/ITDS. Appropriations of not less than $153.7 million for each of fiscal years 2016 through 2018 would be authorized to complete the development and implementation of the Automated Commercial Environment.

The Treasury Department would have to work with the head of each agency participating in the International Trade Data System and the Interagency Steering Committee to ensure that each such agency (1) develops and maintains the necessary information technology infrastructure to support the operation of ITDS and to submit all data to ITDS electronically, (2) enters into a memorandum of understanding, or takes such other action as is necessary, to provide for the sharing between it and CBP of information necessary for the operation and maintenance of ITDS, (3) no later than June 30, 2016, identifies and transmits to CBP the admissibility criteria and data elements it requires to authorize the release of cargo by CBP for incorporation into the operational functionality of ACE, and (4) not later than Dec. 31, 2016, utilizes ITDS as the primary means of receiving from users the standard set of data and other relevant documentation, exclusive of applications for permits, licenses or certificates required for the release of imported cargo and clearance of cargo for export.

AD/CV Duty Evasion. CBP would be required to investigate allegations of evasion of antidumping and countervailing duty orders according to the following procedures.

- CBP would have to initiate an investigation within 10 business days of receiving a proper allegation or referral that reasonably suggests that merchandise covered by an AD and/or CV duty order is entering the U.S. through evasion. A final determination would be due no later than 270 days after initiation.

- CBP could request information from the U.S. producer making the allegation as well as the importer, foreign producer, foreign exporter and foreign government and could make an adverse inference if any of those parties (other than the foreign government) do not act to the best of their ability to provide the information requested.

- If CBP makes an affirmative determination of evasion it would (1) suspend liquidation of any unliquidated entries of covered merchandise that is entered between the date of initiation and the date of determination, (2) extend the period for liquidating any unliquidated entries of merchandise that entered before initiation, (3) notify the Department of Commerce of the determination and request that Commerce determine the appropriate duty rates, (4) require importers of covered merchandise to post cash deposits and assess duties on covered merchandise as directed by Commerce, and (5) take such additional enforcement measures as deemed appropriate, including modifying procedures for identifying future evasion, requiring a deposit of estimated duties on future entries and referring the matter to U.S. Immigration and Customs Enforcement for civil or criminal investigation.

- An “interim measures” mechanism would require CBP to make a preliminary determination within 90 days and take specified actions if that determination is affirmative, which could include requiring a single transaction bond or posting of cash deposits with respect to entries of covered merchandise.

Articles Exported and Returned. Duty-free treatment would be granted to (a) any exported product returned to the U.S. within three years of being exported and (b) certain U.S. government property returned to the U.S.

U.S. Note 3 (relating to articles repaired, altered, processed or otherwise changed in condition abroad) to subchapter II of chapter 98 of the Harmonized Tariff Schedule of the U.S. would be amended to specify that for the purposes of subheadings 9802.00.40 and 9802.00.50 fungible articles exported from the U.S. may be commingled and the origin, value and classification of such articles may be accounted for using an inventory management method.

Broker Penalties. Conviction of committing or conspiring to commit an act of terrorism would be added to the list of violations for which CBP could issue penalties against customs brokers.

Cargo Residue. Residue of bulk cargo (not more than seven percent by weight or volume and with no or de minimis value) contained in instruments of international traffic previously exported from the United States would be exempt from duty.

Centers of Excellence and Expertise. CBP would be required to develop CEEs that (1) enhance U.S. economic competiveness by consistently enforcing U.S. laws and regulations at all ports of entry and facilitating the flow of legitimate trade through increasing industry-based knowledge, (2) improve enforcement efforts, including priority trade issues, (3) build upon the expertise of CBP in particular industry operations, supply chains and compliance requirements, (4) promote the uniform implementation at each port of entry of policies and regulations relating to imports, (5) centralize CBP’s trade enforcement and trade facilitation efforts, (6) formalize an account-based approach to the importation of merchandise, as CBP deems appropriate, (7) foster partnerships through the expansion of trade programs and other trusted partner programs, (8) develop applicable performance measurements to meet internal efficiency and effectiveness goals, and (9) whenever feasible, facilitate a more efficient flow of information between federal agencies.

Commercial Targeting. A Commercial Targeting Division would be established within CBP’s Office of Trade and would include individual National Targeting and Analysis Groups responsible for targeting imports that may violate customs and trade laws, with particular focus on laws and regulations related to agriculture programs, AD/CV duties, import safety, intellectual property rights,  revenue, textiles and wearing apparel, and trade agreements and preference programs. Each N-TAG would direct the CBP trade enforcement and compliance assessment activities that relate to its priority trade issue; facilitate, promote and coordinate cooperation and the exchange of information between CBP, ICE and other relevant federal departments and agencies regarding its priority trade issue; and serve as the primary liaison between CBP and the public regarding U.S. government activities regarding its priority trade issue.

The CTD would be required to establish methodologies for assessing the risk that imports may violate customs and trade laws and for issuing trade alerts when it determines that cargo may violate such laws. The trade alert may direct further inspection or physical examination or testing of merchandise by port personnel if certain risk assessment thresholds are met. Port directors would have authority to not carry out the direction of a trade alert if he/she finds such a determination to be justified by security interests.

Customs law would be amended to indicate that information collected pursuant to the regulations would be used exclusively for ensuring cargo safety and security, preventing smuggling and commercial risk assessment targeting and could not be used for any commercial enforcement purposes, including for determining merchandise entry.

Consultation with Business. CBP would have to consult with the business community at least 30 days after proposing and 30 days before finalizing any policies, initiatives or actions that will have an impact on CBP trade and customs revenue functions. CBP would also have to notify the appropriate congressional committees at least 60 days before proposing and 60 days before finalizing any policies, initiatives, negotiating positions or actions that will have an impact on CBP’s trade and customs revenue functions or negotiating positions.

De Minimis Value. The value of goods that could be imported by one person on one day free of duty and tax would be increased from $200 to $800.

Drawback. The following changes would be made to simplify drawback law.

- Imported goods of one eight-digit HTSUS subheading would be permitted to qualify for duty drawback when goods of the same subheading are exported.

- The time frames for filing drawback would be standardized and the claimant recordkeeping requirements would be modernized.

- The bill would remove the requirement to file a certificate of delivery to evidence the transfer of merchandise, which could instead be accomplished by maintaining records kept in the normal course of business.

- Drawback claimants would have to retain records for five years after liquidation.

- The importer and the party claiming drawback would be jointly and severally liable for the full amount of the drawback claim made.

- Drawback claims would have to be filed electronically and no later than five years after the date on which the merchandise is imported or, if the claim is based on merchandise imported on more than one date, the earliest date.

- If drawback is claimed on merchandise that is exported, the record of exportation must be contained in a record kept by the exporter in the normal course of business or be entered into the Automated Export System once it is determined to be a system of record.

Foreign Trade Barriers. Trade enforcement priorities would be defined as the acts, policies or practices of a foreign government that raise concerns with respect to its obligations under a U.S. trade agreement or otherwise create barriers to U.S. trade. Criteria for determining trade enforcement priorities would include the trade barrier’s economic significance and effect on U.S. jobs and the significance of the effect removal of the barrier would have for U.S. economic growth. The Office of the U.S. Trade Representative would have to take action within a specified period of time in the case of any acts, policies or practices identified as a trade enforcement priority.

Honey Transshipment. CBP would be required to direct appropriate personnel and resources to address concerns that honey is being imported in violation of customs and trade laws, including by compiling a database of the individual characteristics of foreign honey to facilitate the verification of country of origin markings. The Food and Drug Administration would be encouraged to promptly establish a honey national identification standard to ensure that honey imports are classified appropriately for duty assessment and are denied entry if they pose a threat to consumer health or safety.

Import Safety. The bill calls for the development no later than Dec. 31, 2016, of a joint import safety rapid response plan that sets forth protocols and defines practices for CBP to use in taking action in response to, and coordinating federal responses to, an incident in which cargo destined for, or merchandise entering, the U.S. poses a threat to the health or safety of U.S. consumers. This plan would also include guidance on recovering from or mitigating the effects of actions and responses to an import safety incident.

A new interagency Import Safety Working Group would consult on the development of this plan; periodically evaluate the adequacy of federal plans, practices and resources dedicated to ensuring the safety of imported merchandise; review the engagement and cooperation of foreign governments and foreign manufacturers; and identify best practices to assist U.S. importers in taking all appropriate steps to ensure the safety of imported merchandise.

CBP would also be required to ensure that agency personnel assigned to U.S. ports of entry are trained to effectively administer import health and safety provisions and to assist in ensuring the safety and expedited entry of imported merchandise.

Import Surges. For purposes of monitoring and responding to import surges that could injure domestic industry, the International Trade Commission would have to make available on its website an import monitoring tool to allow the public access to data on the volume and value of imported goods. The DOC would have to publish on its website a monitoring report on changes in the volume and value of trade with respect to imports and exports of goods categorized based on the six-digit HTSUS number during the most recent quarter for which such data are available and previous quarters as may be considered practicable.

Importer of Record Program. CBP would be required to establish an importer of record program that includes criteria and a process for assigning IOR numbers, to ensure that duplicate IOR numbers are not assigned to the same importer, and to maintain and evaluate the accuracy of a database of IOR numbers.

Intellectual Property Rights. CBP would be required to share unredacted images and samples of suspected infringing merchandise with right holders prior to seizure if it determines that testing or examination by a right holder would assist in determining if the merchandise violates an intellectual property right. However, CBP could not provide this information if doing so would compromise an ongoing law enforcement investigation or national security.

CBP would be explicitly authorized to seize or forfeit unlawful devices used to circumvent federal law and would have to disclose certain information about the seized merchandise to injured persons.

Within 180 days, CBP would have to establish a process to enforce copyrights that are pending before the U.S. Copyright Office to the same extent and in the same manner as those that are already registered.

CBP would have to ensure that its officers are trained to effectively detect and identify infringing merchandise destined for the U.S., including through the use of technologies with the cost-effective capability to detect and identify such merchandise at U.S. ports of entry. Within 180 days CBP would be required to issue regulations enabling it to accept donations of technology and training and other support services from private sector entities for the purpose of enforcing intellectual property rights.

A chief innovation and IPR negotiator would be established within USTR to conduct trade negotiations and enforce trade agreements relating to U.S. intellectual property and to take appropriate actions to address acts, policies and practices of foreign governments that have a significant adverse impact on the value of U.S. innovation.

USTR would have to identify foreign countries that deny adequate and effective protection of trade secrets as part of its annual Special 301 report. USTR would also be required to develop an action plan for foreign countries that have spent at least one year on the Special 301 priority watch list. The action plan would call for such countries to meet specified benchmarks and the president would be able to take appropriate action with respect to countries that fail to meet those benchmarks.

New Importer Program. CBP would have to establish a new importer program that requires the agency to adjust bond amounts for new importers based on the level of risk posed to federal revenue. CBP would be required to develop risk-based criteria for determining which importers are considered new importers, risk assessment guidelines for new importers to adjust bond amounts and increase screening of imported products, procedures to ensure increased oversight of imported products of new importers related to enforcement of priority trade issues, and procedures to ensure increased oversight of imported products of new importers by CEEs. Further, CBP would establish a centralized database of new importers to ensure the accuracy of information they are required to provide.

Origin Marking. Lampposts, lamppost bases and cast utility poles would be added to the list of products that must always have a country of origin marking, and such marking would have to be in a location such that it will remain visible after installation.

Partnership Programs. CBP would have to consult with the private sector, the public and other federal agencies to ensure that participants in agency partnership programs receive commercially significant and measurable trade benefits in all such programs and to ensure an integrated and transparent system of trade benefits and compliance requirements. CBP would also have to coordinate with other federal agencies with authority to detain and release merchandise regarding the development of their respective partnership programs and to work with them on criteria to provide expedited release to compliant partnership program participants.

Staff Education. CBP would have to establish a process to solicit, evaluate and select interested private sector parties to assist in providing educational seminars to CBP and ICE personnel that would improve CBP’s ability to classify and appraise imported merchandise, improve trade enforcement efforts of CBP and ICE personnel, and improve the facilitation of legitimate international trade.

Strategic Plan. CBP and ICE would have to create (in consultation with COAC, other federal agencies and others) and submit to the relevant congressional committees a biennial joint strategic plan on trade enforcement and trade facilitation that includes, among other things, the designation of priority trade issues and the strategies and plans for addressing each one as well as legislative recommendations. This plan would also have to include a description of IPR enforcement efforts, a list of the 10 U.S. ports of entry at which CBP has seized the most IPR infringing merchandise during the most recent two-year period for which data are available, and a recommendation for the optimal allocation of personnel, resources and technology to ensure that CBP and ICE are adequately enforcing intellectual property rights.

Suspending Trade Concessions. If an action to suspend concessions (i.e., impose sanctions) under World Trade Organization rules has been terminated and a petitioner or any representative of domestic industry that would benefit from a reinstatement of such action has submitted to USTR a written request for reinstatement, and USTR has completed certain requirements, USTR could at any time determine to take action to exercise a WTO authorization to suspend concessions or other obligations.

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