Customs and International Trade Law Blog : International Trade Lawyer & Attorney : Becker & Poliakoff Law Firm : Customs Law, Border Protection

The U.S. Food and Drug Administration recently issued several warning letters to prominent food and drink companies regarding false claims displayed on their food and drink products, including those marketed to children.  Some food products brazenly claim to increase a person's immune system, reduce the chance of getting a cold, or even cure cancer.  Are they really believable?

The Obama Administration has taken a more aggressive posture to attempt to reduce the obesity of Americans, especially children.  There is a direct connection between what we eat and our health.  Remember the saying "You are what you eat"?   Dr. Margaret Hamburg, the new FDA Commissioner, announced in a March 3, 2010 letter to food companies:

I have made improving the scientific accuracy and usefulness of food labeling one of my priorities...It is clear to me as a working mother that the use of front of package nutrition symbols and other claims can be helpful to busy shoppers who are often pressed for time in making their food selections.

In a typical December 4, 2009 Warning Letter to one of the worlds' largest food companies, Nestle,  the FDA complained about Juicy Juice All Natural 100% Juice Grape products.  The FDA alleged that the product was misbranded because the labels were misleading in that the label was designed to imply that the producct was 100% grape juice when it truly was not.

The FDA regulations regarding food, including drinks, are complex.  True and accurate health claims are allowed on certain food products under specific circumstances, according to the FDA guidance.  Hopefully, the food industry will be more responsible, and if not, I encourage Commissioner Hamburg to pursue civil penalties against companies and the corporate officers of those companies who deceive the public. 

A seminar about health claims on food products and how to respond to FDA Warning Letters will take place on June 3, 2010 in Miami, at a seminar entitled "Importing Food Products in Compliance with FDA and U.S. Customs Rules". 

In solidarity with FDA Commissioner Hamburg, I am a working Dad, and I don't like to be lied to either!

Peter Quinter, Partner, Customs and International Trade Department.

pquinter@becker-poliakoff.com or (954) 270-1864

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Air and ocean carriers often unintentionally transport aliens into the United States who do not have a valid passport and/or an unexpired visa.  Carriers receive a fine from U.S. Customs and Border Protection of $3,000 for every such alien illegally transported.  Carriers get an automatic reduction of 50% of the fine by signing a Memorandum of Understanding (MOU) with U.S. Customs.  Carriers must obtain and submit a newly revised MOU to U.S. Customs on April 23, 2010. 

On February 22, 2010, U.S. Customs issued a General Notice that all air and ocean carriers which had signed an MOU with either the former U.S. Immigration and Naturalization Service or U.S. Customs will no longer be effective. Only by submitting a new Fines Mitigation MOU countersigned by U.S. Customs Headquarters may fines be automatically reduced.  Carriers need to prepare now to comply with the many new changes in the MOU.

The new MOU has many changes, but the essential paragraph 3.10 still provides:

The Carrier shall maintain a reasonable level of security designed to prevent passengers from circumventing any Carrier document checks.  The Carrier shall also maintin an adequate level of security designed to prevent stowaways from boarding the Carrier's aircraft or vessel.

Without the new MOU, fines will be issued against the carrier by U.S. Customs for violating the Immigration and Nationality Act, 8 U.S.C. 1323.   Reduction of the fine greater than 50% may be obtained by the carrier when a violation occurs by establishing that further mitigating or extenuating circumstances exited at the time of the violation that warrant the relief sought.  To do so, the carrier should carefully follow the guidelines set forth at 8 CFR Part 280.

In Florida , the U.S. Coast Guard has recently issued a directive notifying all carriers that every vessel arriving at port from Haiti will be subject to a boarding and examination.  As a result, the number of discovered stoways has increased dramatically, and fines are being issued to carriers.  

Carriers may contact me at pquinter@becker-poliakoff.com  or U.S. Customs Headquarters  to obtain a copy of the new MOU.

Peter Quinter, Partner, Customs and International Trade Department (954) 270-1864

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In one of the most important recent decisions, the U.S. Court of International Trade dismissed a case filed against the CEO of his importing company that had made false statements to U.S. Customs and Border Protection in the entry documents.  This Court decision has significant implications for every owner, officer, and manager of any company involved in importing merchandise into the United States.

The chronology of the case is somewhat familiar.  In 2002, Tip Top Pants, Inc., imported from Mexico 954 dozen men's pants, and claimed NAFTA duty free treatment.  Customs issued a Request for Information (CBP form 28), and then a Notice of Action (CBP Form 29) denying the NAFTA claim.  Customs then issued a Pre-Penalty Notice against both Tip Top Pants and its CEO, Mr. Nigri, alleging negligence, and assessing a penalty of $55,000.  Tip Top filed a response to the Pre-Penalty Notice.  Customs then issued a final Penalty Notice. Tip Top Pants filed with Customs another petition seeking cancellation or mitigation of the penalty.  Customs never responded to that Petition filed by Tip Top Pant's attorney. 

Even though the disputed customs duties were subsequently paid by Tip Top Pants, Customs sued both Tip Top Pants, Inc. and its Chairman and CEO, Mr. Saad Nigri, for violating 19 U.S.C. 1592, by allegedly making material false statements or acts, or material omissions, in connection with the entry of the men's pants from Mexico.

The Court took the unusual action of dismissing Mr. Nigri as a defendant in the case for two reasons.  The first reason is that Customs failed to respond to Tip Top Pant's Petition, as required by 19 U.S.C. 1592(b)(2).  The second reason is that the Complaint filed with the Court by Customs did not specifically allege that Mr. Nigri personally committed any act or omission in violation of 19 U.S.C. 1592. As the Court stated, "[T]he complaint does not allege that Nigri did, or failed to do, anything whatsoever." So, even if Tip Top Pants was negligent, its negligence could not be imputed to Mr. Nigri just because he was CEO of the company when the negligence occurred. 

In a sentence that is certain to be cited by customs attorneys in petitions and court briefs, Judge Stanceu stated: 

The [Priority Products] case does not hold that a party's serving as an officer of a corporation at the time the corporation imports merchandise is, by itself, sufficient to establish that officer's liability for acts committed by the corporation that are found to be in violation of Section 592.

The Court then issued an Order dismissing all claims by Customs against Mr. Nigri, personally. 

A future blog post will let you know what happened with the negligence penalty case against Tip Top Pants, Inc.

Peter Quinter, Partner, Customs and International Trade Department.

pquinter@becker-poliakoff.com or (954) 270-1864

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I attended the Advisory Committee on Commercial Operations of Customs and Border Protection (COAC) meeting on February 25, 2010 in Miami.  The 20 private sector members of COAC are jointly selected by the Department of Homeland Security and the Department of the Treasury, and include knowledgeable customs compliance and logistics personnel from such prominent companies as DHL, APL, Hasbro, and GE.  The COAC meets four times a year to discuss creating or changing the policies and procedures of U.S. Customs and Border Protection (CBP) as they affect the international trade community. 

The Miami meeting included an introduction by Acting Deputy Commissioner David Aguilar, referred to as "Chief" which is his title with the CBP component U.S. Border Patrol.  Chief Aguilar spoke about "security," "resilience," and "protecting customs and exchange" which apparently is the new terminology for the former "facilitating international trade".  His introduction focused on assessing and mitigating risks of people and cargo entering the United States.

Substantive presentations were made by, among others, Therese Randazzo, Director, IPR Policy and Programs, Office of International Trade on behalf of the IPR Subcommittee.  Therese discussed the new IPR sample bond form for trademark and copyright owners to use to get samples of detained or seized merchandise from CBP. 

Rich DiNucci, Director, Secure Freight Initiative, Office of Field Operations on the topic of Importer Security Filing, stated there were 2,300 ISF filers with 141,000 unique importer record numbers. Rich stated that the timeliness of the ISF or "10+2" filing has increased to 75%.  No penalties would be issued by CBP for ISF filing errors or failure to file...for now.

Bradd Skinner,  Director, Industry Partnership Programs, Office of Field Operations, spoke about C-TPAT (Customs-Trade Partnership Against Terrorism). Bradd announced that CBP now had 9,710 certified C-TPAT members, a dramatic increase from the original 7 members in 2001.  1,200 new members were added in 2009.  CBP Security Supply Chain Specialists conducted 14,000 validations so far in 87 countries.  297 companies were suspended or removed from C-TPAT in 2009.

The COAC is an excellent way for private sector persons and companies to interact with top level CBP and Treasury personnel regarding the critically important, and sometime competing, objectives of security and trade. Now more than ever, our Government needs to listen closely how to improve the daily lives of its citizens. Chief Aguilar, thanks for listening.

Peter Quinter, Partner, Customs and International Trade Department.

pquinter@becker-poliakoff.com or (954) 270-1864

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On February 1, 2010, Department of Homeland Security Secretary Janet Napolitano announced that the Department's budget for fiscal year 2011 would be $56 billion.  This was the first time for the Democratic Obama Administration to formally unveil its budget priorities after taking over from the Republican Bush Administration.  Guess what - it's more of the same.

The Federal Government's fiscal year runs from October 1 to September 30, so the Fiscal Year 2011 budget begins on October 1, 2010. Examples of more of the same include more Federal Air Marshals on international flights, 500 more machines at airport checkpoints to detect dangerous materials, 275 more explosive detection canine teams, and more machines to scan 40 foot ocean containers entering the country for weapons of mass destruction, explosives, contraband, and illegal aliens. Compare this with prior budgets or the 2008 Five Year Plan for DHS, and you too may conclude that this is more of the same.

The Department of Homeland Security includes U.S. Customs and Border Protection, the U.S. Secret Service, the U.S. Coast Guard, the Transportation Security Administration (TSA), Immigration and Customs Enforcement, FEMA, and the U.S. Citizenship and Immigration Services.  There are 230,000 employees in this mega-Department.

There are 3 items I especially like in the proposed budget. 

(1) raising the journeyman level for uniformed Customs Inspectors, Border Patrol Agents and Agricultural Specialists from the GS-11 to GS-12 level (a $10,000 base salary increase to $60,000);

(2)  a substantial increase in funding for stopping counterfeit merchandise from entering the United States, something which is very serious when we are talking about medicines, car and aviation parts; and

(3)  dual immigration priorities of (a) making it easier for legal immigrants to become citizens, and (b) removing from the United States illegal aliens who have been convicted of a crime, and are serving time in state and local jails.

If people voted for Obama with the expectation of drastic changes in homeland security policies, they will be sorely disappointed.  If people who did not vote for Obama were anxious that he would change the course of national security and counter-terrorism efforts of the prior Bush Administration, they will be pleased. 

For me, my desires are much simpler. If and when Secretary Napolitano announces that TSA no longer requires us to take off our shoes at the airport, then I'll know there is progress.  When my local police department gets rid of the huge barriers in its parking lot around the police department building, I'll be pleased. Unfortunately, the hundreds of billions of dollars spent on homeland security efforts since 9/11 will probably not result in my local library soon re-opening the after-hours book return slot.

Peter Quinter, Partner, Customs and International Trade Department.

pquinter@becker-poliakoff.com or (954) 270-1864

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With all of the complexities involved in the import process, even customs brokers can make mistakes such as by providing the wrong tariff classification of the imported item to U.S. Customs and Border Protection .  A customs broker who makes such a mistake may become the subject of an investigation by U.S. Customs which ultimately results in a $30,000 penalty against the broker.

Customs brokers are often the best choice for importers to take care of all the formalities in clearing imported cargo through U.S. Customs, however, a customs broker who makes a mistake when declaring certain information to U.S. Customs may put  the importer at risk of being accused  of  fraud by U.S. Customs in violation of 19 U.S.C. 1592.  Increasingly often, the customs broker may itself be investigated  by U.S. Customs for failing to exercise responsible supervision and control in violation of 19 U.S.C. 1641. 

It is standard practice for U.S. Customs to demand that the broker appear before the Broker Compliance Unit of U.S. Customs at the local port of entry to answer questions about the mistakes discovered by Customs regarding a particular importer or set of entries.  The broker is usually directed to bring with him/her certain documents for review by U.S. Customs at the meeting.  The broker may be accompanied by an attorney during this informal stage of the investigation. The customer of the customs broker, the importer, is generally not made aware by U.S. Customs that its customs broker has been summoned to a meeting with Customs for a counseling session.

If the U.S. Customs personnel are not satisfied with the answers by the broker at the meeting, U.S. Customs will issue a Notice of Pre-Penalty against the broker. The penalty may be up to $30,000. The broker will have 30 days to file a written petition, and request an oral presentation.  A lawyer who is an expert in customs law and procedure should be involved to advise and represent the broker to attempt to get the penalty canceled or mitigated.  The guidelines of what to say in such a Petition are set forth in an Appendix  C to Part 171 of the Customs Regulations.  U.S. Customs personnel must consider a certain set of factors before determining that the customs broker failed to exercise reasonable care and "responsible supervision and control".  Every customs broker should read, the U.S. Court of International Trade decision issued on January 28, 2010 in the case of United States v. UPS Customhouse Brokerage, Inc.. for a better understanding of both a customs brokers' and U.S. Customs' rights and responsibilities.

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Bank accounts are more frequently being frozen or seized by the Federal Government.  The typical allegation by the Federal Government is that the money in those bank accounts were the proceeds of money laundering.  Often, the owners of the seized bank accounts were somehow connected to shipping cargo to, receiving cargo from, or doing business with Colombia.  The owners of the seized bank accounts then typically receive a letter from U.S. Customs and Border Protection advising of the seizure, and the procedure to attempt to get the money back.

Money laundering typically means that the money in the bank account was seized because Immigration and Customs Enforcement (ICE) believes it was generated from the sale of illegal drugs.  ICE refers to this type of financial crime as "Trade-Based Money Laudering."  So, for example, if a company in Colombia received money from the sale of drugs, and then purchased some merchandise from a U.S. company, and paid that U.S. company, the money received by the U.S. company could be seized as the proceeds of certain unlawful activity set forth in the money laundering law at 18 U.S.C. 1956.  The allegation of money laundering is sometimes accompanied by an allegation of filing a false shipper's export declaration or Automated Export System (AES) with U.S. Customs, in violation of 15 CFR section 30.7.

Persons who, or companies which have their bank accounts frozen or seized are entitled to know the reasons for such a severe action by the Federal Government. They are also entitled to challenge the actions by the Federal Government through the administrative petition process with U.S. Customs and Border Protection or by going to Federal Court. Legitimate business persons whose bank accounts have been frozen or seized by ICE or through a Seizure Warrant should contact a knowledgeable attorney to pursue having their money returned to them promptly.

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You may legally carry or mail any amount of money you want into or out of the United States, but if it is more than $10,000 at one time, you better first report it to U.S. Customs and Border Protection. Otherwise, you risk U.S. Customs taking it from you, and never getting it back. Why?  Because your failure to report the international transportation of money is a violation of the Currency and Foreign Transaction Reporting Act.

All too often, I am contacted by a distraught American ciitizen or resident returning from a trip overseas, or a foreign visitor to the United States, who was unaware of the laws regarding currency reporting.  The person was asked by a U.S. Customs officer upon arrival at the international airport if he or she was carrying over $10,000. When the passenger honestly answer "yes", or the U.S. Customs officer believes the passenger may be lying about the amount of money being transported, the passenger and his or her luggage are examined.  If over $10,000 in monetary instruments, including travelers checks and U.S. or foreign money, is discovered, and the required form, FINCEN Form 105, has not been filed with U.S. Customs, all of the money is likely to be seized on the spot by U.S. Customs.

A formal Seizure Notice will eventualy be issued by U.S. Customs to the passenger, and the passenger may hire a customs attorney to pursue the administrative petition process to get the money (or most of it) back.  Proof of the legitimate source of the money and proof of the legitimate intended use of the money are required in communicating with Customs.  Eventually, after several months, Customs may return typically 90% of the money. 

It is an expensive mistake to not report to U.S. Customs when either carrying, mailing, or receiving over $10,000 internationally.  Please read U.S. Customs and Border Protection's "Currrency Reporting" flyer and look at the FINCEN Form 105 and its instructions before attempting to transport over $10,000.  There are no customs duties, taxes or other fees paid to U.S. Customs for the international transportation of the money; it is merely a reporting requirement to U.S. Customs.

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My friends tell me one of their favorite activities in China is to buy counterfeit items such as Gucci handbags or Montblanc pens. My friends do worry about U.S. Customs and Border Protection (U.S. Customs) officers looking through their luggage upon arrival at an airport in the United States, seizing the counterfeit items, and fining them.  The truth is that U.S. Customs allows the importation of counterfeit merchandise, but closely follow the rules as I explain them to you now.

First, know that it is generally illegal to import counterfeit merchandise into the United States.  The word "counterfeit" is defined in the Lanham Act at 15 U.S.C. 1124, and the U.S. Customs applicable law allowing for the seizure of counterfeit merchandise is 19 U.S.C. 1526.  That law gives your friendly U.S. Customs officers who are waiting for you at the airport the authority to look through your luggage, and seize counterfeit merchandise from you.  The U.S. Customs regulations at 19 CFR Part 133 give more specific guidelines to travelers interested in this topic. 

What the readers of this blog, and even many U.S. Customs officers, do not know is that it is perfectly legal for a person who visits China, or any other foreign country, to buy counterfeit merchandise there, including one counterfeit Gucci bag and one counterfeit Montblanc pen, declare it on the U.S. Customs declaration form, pass through U.S. Customs, and enjoy using the counterfeit items in the United States.   Of course, you generally get what you pay for, so the $2,000 Gucci bag that you purchased in China for $80 may not be such a bargain, but it can be a lot of fun to shop at a Chinese flea market, and compare the purchased products to the genuine items at your local U.S.-based retail store, or so I am told. 

According to Customs Directive No. 2310-011A dated January 24, 2000, "Customs officers shall permit any person arriving in the United States to import one article, which must accompany the person, bearing a counterfeit, confusingly similar, or restricted gray market trademark, provided that the article is for personal use and not for sale."  Moreover, the Directive states that "Customs officers shall permit the arriving person to retain one article of each type accompanying the person." 

Now, don't go crazy trying to bring too much counterfeit stuff into the United States at once. There are many restrictions.  You can only bring counterfeit stuff in every 30 days, it must "accompany" you which means no FedEx, UPS, or DHL packages, and it is only applicable to "one article of each type" which means, for example, if you attempt to bring in two counterfeit Gucci bags, they both will be seized by U.S. Customs. And "personal use" means for you the traveler only; no counterfeit gifts for your friends and family. 

Finally, please don't waste the U.S. Customs officer's time attempting to explain to him that the fancy watches you purchased are marked "Rolexx" so they are not counterfeiting the Rolex trademark because of the different spelling, or that you did not know that importing counterfeit merchandise was illegal, because now you have read this blog post from "Mr. Customs".  

Just in case you do bring in one too many counterfeit products, there is an administrative process to challenge all seizures made by U.S. Customs, as I described in a previous blog post.

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