U.S. Customs and Border Protection continues to devote significant enforcement resources to reviewing apparel imports claiming preferential tariff treatment under the Dominican Republic-Central America-U.S. Free Trade Agreement. As discussed in STR’s April 2024 advisory regarding the Department of Homeland Security's strategy to combat customs fraud in textile and apparel supply chains, importers should continue to exercise heightened diligence when reviewing origin documentation and maintaining compliance procedures. Current enforcement trends suggest that CBP's efforts may be affecting a substantial number of apparel entries claiming CAFTA-DR benefits.
Extended Liquidation Periods May Signal CBP Review
Importers should regularly monitor their Automated Commercial Environment data and identify entries for which liquidation has been extended. While an extension of liquidation does not necessarily indicate a violation or enforcement action, it may signal that CBP is conducting additional review of the entry and its supporting claims. Companies that identify CAFTA-DR apparel entries with extended liquidation should therefore consider proactively reviewing the records associated with those entries, particularly documentation supporting compliance with the agreement's sewing thread requirements.
Focus on Sewing Thread Supply Chains
For entries receiving additional scrutiny, importers should closely examine records related to the production and sourcing of sewing thread. CBP's review may extend beyond simple certificates or affidavits of origin and encompass the underlying production activities necessary to establish origin.
Importers should therefore evaluate available documentation concerning fiber extrusion or filament production, spinning operations, doubling and twisting processes, dyeing and finishing activities, sales and resale transactions involving the thread, and the identities and capabilities of entities involved in the supply chain. The objective should be to ensure that the supporting documentation reflects a coherent and credible production history consistent with CAFTA-DR requirements.
Watch for Potential Red Flags in Origin Documentation
Importers should also carefully assess affidavits of origin and related records for indications that documents may be inaccurate, unreliable, or manipulated. Potential warning signs may include the following.
- different fonts or formatting styles or other inconsistencies within the same document
- incorrect, unusual, or invalid Harmonized Tariff Schedule classifications
- poor-quality reproductions or scanned documents that obscure key information
- missing production details or unexplained gaps in the supply chain
- documentation attributed to companies that do not appear to possess the capabilities typically associated with sewing thread production
The existence of any one of these factors does not necessarily establish non-compliance; however, such issues may warrant additional inquiry before relying on the documentation to support a CAFTA-DR claim.
Heightened Risk Where Documentation Passes Through Intermediaries
Importers may also wish to strengthen their review procedures for documentation received from entities with which neither they nor the garment manufacturer maintains a direct commercial relationship.
In our experience, the risk of document manipulation increases when origin records are transmitted through multiple intermediaries rather than obtained directly from the relevant producer. Importers should therefore exercise particular caution when reviewing affidavits, production records, and other origin documentation that have been passed through trading companies, brokers, resellers, or other third parties. Additional due diligence may be appropriate where the provenance of documents is unclear or where the producing entity has limited visibility within the overall supply chain.
Consider Consulting Counsel Before CBP Raises Questions
Importers that identify questionable documentation, inconsistencies within the supply chain, or other potential compliance issues should consider consulting experienced customs counsel promptly. Early review may help companies assess potential exposure, preserve relevant records, evaluate available corrective actions, and prepare for possible CBP inquiries.
STR’s customs and international trade team continues to assist importers, apparel brands, and supply chain participants with CAFTA-DR compliance reviews, origin verification, CBP audits and inquiries, supply chain due diligence, and enforcement matters involving textile and apparel imports. Companies with questions regarding any of the issues discussed above should contact a member of our team.
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