Monthly Archives

September 2012

Best PracticesCBP

Band-Aid or Stitches? What’s Your Compliance Approach?

posted by Jennifer Diaz September 27, 2012 4 Comments

When you get a deep cut, do you simply put on a band-aid or do you go to the hospital to get stitches that you really need? Stitches take time and are more costly – but, your bleeding will stop and your cut is less likely to re-open. With a band-aid – you’re likely to re-open your wound and/or get an infection. You get stitches if you know what’s good for you! 

Compliance is similar in that there may be a quick fix for the current issue; however, if you don’t stop the bleeding and get stitches, you will be in trouble in the long-run, and the bleeding won’t stop.

On a daily basis, different companies call me to discuss issues they are having with U.S. Customs and Border Protection (CBP). For instance, today, a company called me discussing a CBP 28 – Request for Information, and thereafter a CBP 29 – Notice of Action received from CBP. The issue was an underlying classification issue. Bottom line, they had never done any Pre-Compliance on the Harmonized Tariff Schedule’s (HTS) they were using for their imported merchandise. They said the infamous line – that’s why I hired a broker. Important to note that this just does not cut it with CBP.

CBP publishes really great Informed Compliance Publications for Importers – too few importers have read them, and too small a percentage of importers know they exist. For new importers, CBP has a great resource titled Basic Importing and Exporting. Included within these vast resources is a guide titled Importing into the U.S.: A Guide for Commercial Importers. This 211 page guide can save you hundreds of thousands of dollars if you review it, and/or hire the right expert to explain it to you and walk you through it. There is a "Reasonable Care Checklist" in this Guide, and I urge you to review it as soon as possible. If you do not know the answers, then it’s time to start asking the right questions and hiring the right experts to help you.

CBP expects importers to use "reasonable care" in reporting your HTS, value, country of origin, free trade agreement preference, etc. This is a subjective standard; however, all of the questions in the checklist provide a rough overview to get you started. You may still want to ask an expert to make sure you’re on the right track and have the right Pre-Compliance standards in place. Actually, Question #1 is whether or not you have retained an expert (lawyer, customs broker, accountant, or customs consultant) to assist you in complying with CBP requirements. If this answer is no, and you want to import, you need to get an expert, or the penalties for non-compliance can be severe. 19 U.S.C. 1592 is the statute CBP references when issuing penalties for negligence, gross negligence or fraud – depending on the degree of culpability CBP believes you had at the time of your non-compliance.

What’s the bottom line? You can try to put a band aid on your responses to CBP’s 28, and CBP’s 29, and thereafter file a Protest for your current issue; however, until you audit your current practices, the bleeding won’t stop. You can expect more CBP 28’s and 29’s until you have your Pre-Compliance plan in place, and that likely means duties or severe penalties will be owed to CBP by your company.

When you’re ready to spend the time and energy on the Pre-compliance you need, I can help you, so call me and I’ll make sure you are on the right track to protecting yourself and your company.

Best PracticesCBPChinaChina Trade WarCounterfeitsInternational TradeIPR, Trademarks and LogosTrade War

As U.S. Imports from China Intensify so does CBP Enforcement

posted by Jennifer Diaz September 18, 2012 0 comments

Co-authored by Michael De Biase

With the concentration of US imports from China increasing in parallel with intellectual property rights seizures, companies rely heavily on the government, specifically on US Customs and Border Protection (“CBP”) to help protect and enforce their intellectual property rights (“IPR”).

According to Global Sources, a leading business-to-business media company and a primary facilitator of trade with Greater China, “US imports from China [are] more concentrated than ever“.

Data from the U.S. Department of Commerce establishes that importation into the U.S. is a concentrated field, with the top 500 U.S. importers – 0.4 % of all importers – comprising roughly 68% of all imports by value in 2010. Imports from China, although somewhat less concentrated, are still dominated by larger enterprises, as companies with more than 500 employees – 4% of all importers from China – account for 60% of all imports from China. As concentration increases, the opportunity to trade in quantities that take advantage of China’s economies of scale decrease; thus, heightened concentration is not a good thing for Chinese manufacturers.

While the import concentration from China is growing, CBP is reporting a record number of IPR seizures. From 2010-2011 alone, IPR seizures increase by 24%, and have nearly doubled since 2009. Considering that China is the number one source company of imports, it should come as no surprise that it also accounts for the largest number of IPR seizures, with 62% of all IPR seizures being sourced from China.

Intellectual property rights are some of the most valuable assets of the largest importers, and they must protect these rights. Here are some of our top tips to use when seeking to protect your IPR.

  1. Perform a search to see if there are other companies exploiting your IPR. You cannot protect something to which you don’t own the rights.
  2. Register your IPR with the appropriate U.S. federal entity; whether the Copyright Office or U.S. Patent and Trademark Office, registration is an important security measure.
  3. Record your IPR with CBP. CBP will provide its protective services for a minimal fee of $190 for 10 years of protection at all ports of entry.  There are numerous other benefits to recordation.
  4. Know your manufacturer or the company from which you source your products. Find out who else sources from this manufacturer, and determine whether they have had any IPR issues.
  5. Execute thorough distribution agreements or purchase and sale agreements, and try to use letters of credit or escrow accounts.

DR-CAFTA: Si o No? ( Yes or No?)

posted by Jennifer Diaz September 12, 2012 0 comments

Co-authored by Carlos Gimenez.

Just because you are importing a product from a party to the DR-CAFTA Free Trade Agreement, does not necessarily mean that the product will be granted DR-CAFTA treatment by U.S. Customs & Border Protection ("CBP"). Even if 95% of the product is made from components that all originate from DR-CAFTA party nations, that still may not be enough.

If the product has one component that originates outside of DR-CAFTA parties, whether or not the product will receive DR-CAFTA treatment will rely heavily on General Note 29(n), Chapter 61, Chapter rule 2, which states:

For purposes of determining whether a good of this chapter is originating, the rule applicable to that good shall only apply to the component that determines the tariff classification of the good and such component must satisfy the tariff change requirements set out in the rule for that good. If the rule requires that the good must also satisfy the tariff change requirements for visible lining fabrics listed in chapter rule 1 to this chapter, such requirement shall only apply to the visible lining fabric in the main body of the garment, excluding sleeves, which covers the largest surface area, and shall not apply to removable linings.

Case in point, a client requested an alaysis of whether DR-CAFTA would apply to a garment produced of components that all originated in DR-CAFTA party countries, with one exception, the lace that was used to create a decorative front panel. The lace portion of the garment originated in Korea and it only accounted for roughly 17% of the material used overall. In this case, the analysis hinged upon whether or not the lace was the "component that determines the tariff classification", and whether the lace provided the "essential character" of the garment.  In this case, the determination was that the lace was in fact the essential character, DR-CAFTA treatment was precluded, and a tariff of 16.5% was applied. If the garment was subject to DR-CAFTA treatment, rate of duty would have been FREE.

The moral of this story, if you want to ensure that the product imported is entitled to DR-CAFTA treatment, do not add any components that would jeopardize that treatment without seeking and receiving an expert opinion and/or a Binding Ruling from CBP. The worst thing that could happen is to work so hard to avail yourself of DR-CAFTA treatment, only to have to pay a double digit tariff for not doing your homework.


South Florida’s Unsung Heroes Gain Recognition on November 15, 2012

posted by Jennifer Diaz September 6, 2012 0 comments

For over a decade, the South Florida Chapter of the Organization of Women in International Trade (OWIT-South Florida), part of a worldwide organization dedicated to advancing global trade opportunities for women, has hosted the International Business Woman of the Year (IBWOY) Awards.

On November 15, 2012, the OWIT-South Florida will host the 11th annual IBWOY Awards at the Intercontinental Hotel in Doral. The annual IBWOY Awards recognize outstanding women for their significant contributions to enhancing international trade and business in South Florida through their professional and community activities, as well as their mentoring of other women in South Florida. More than 200 members of the South-Florida International Business Community, including past IBWOY Award winners, gather to pay tribute to honorees in three categories which include Large Company, Small to Medium sized Company and Service awards.

I look forward to seeing you on November 15th!  Check out these links to more about OWIT’s IBWOY Awards and the benefits of sponsorshipContact me with any questions about OWIT, or IBWOY.