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

Ever since the tragic events of 9/11, the sole focus of U.S. Customs and Border Protection has been anti-terrorism.   This is true, despite the rhetoric in more recent years that U.S. Customs serves the equally vital goals of anti-terrorism and facilitating the flow of legitimate trade and travel.  The former priorities of collecting customs duties and fees, facilitating international trade, preventing illegal trade practices, and interdicting drugs and other contraband was shoved to the side in the name of protecting our homeland from terrorists.

Fortunately, the United States Congress, through the Senate Finance Committee led by Sen. Max Baucus (D-Montana), on August 6, 2009, introduced a bill entitled "The Customs Facilitation and Trade Enforcement Reauthorization Act of 2009." Senator Baucus said that U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) have not been focusing sufficient resources on their trade missions, “and this bill would direct them to do so.”

If the bill becomes law, and it should, because of both Democratic and Republic support,  it would refocus U.S. Customs on regulating international trade, a mission U.S. Customs has performed very well for over 200 years.   In summary, among other things, the law would:

1) Replace the Office of  Trade Relations with a new Trade Advocate, who would be the primary liaison between the public and U.S. Customs;

2) Create a Principal Deputy Commissioner, appointed by the President of the United States;

3) Consolidate the current Office of International Trade and the Office of International Affairs into a single Office of International Trade;

4) Make health and safety issues a top priority;

5) Make protection of intellectual property rights a top priority;

        a) allow trademark and copyright owners to simultaneously electronically register a trademark with the U.S. Patent and Trademark Office or a copyright with the U.S. Copyright Office and also record it with U.S. Customs;

        b) create a new National Intellectual Property Rights Center within the U.S. Immigration and Customs Enforcement Agency; and

6) create enhanced benefits for importers, customs brokers, ocean carriers, and other participants in the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT).

This legislation is long overdue, and I hope it will be supported by the international trade and transportation community of the United States.  For those who want to read all 400 sections of the bill, it is S. 1631.

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Did you hear that Mexico replaced all 700 Customs Inspectors?  It did so because the Mexican Customs officers were considered corrupt, allowing undeclared merchandise (including drugs and weapons) to cross into and out of Mexico.  The replacement officers are allegedly specially trained to collect the tax revenues that the Mexican Government depends upon, and prevent undeclared merchandise from entering the country (i.e. smuggling).  Mexico depends upon collection of revenues by the Mexican Customs authorities much more than we do in the United States with the customs duties and fees collected by our U.S. Customs and Border Protection (CBP) officers.  Most importantly, the new Mexican Customs officials are supposed to be specially selected and trained so they will not be susceptible to the same enticements that corrupted the former 700 Mexican Customs officials.  Mexican Government officials say not to worry about  the new Mexican Customs officials as over 70% of the new Mexican Customs officials are colleged educated, as opposed to just 10% for those who were fired.

Do you believe any of this nonsense?  This is not the first time that the Mexican Government has fired huge numbers of its Customs officials.  It happened before and it will likely happen again.  Mexican Customs officials need better salaries and better working conditions, not college degrees.

In contrast, if an international passenger or importer or exporter attempted to bribe a U.S. Customs officer, the chances are excellent that the U.S. Customs officer would promptly arrest or take other similar serious and immediate action.  That is not to say there are not any bad apples within U.S. Customs -  there always have been and always will be, just like any other large organization.  Just recently, a U.S. Customs officer pled guilty to stealing a laptop computer from an international passenger who landed at the Philadelphia International Airport.

We're not going to address the operational inefficiencies that exist within CBP in this post, but when it comes to integrity, my opinion is that CBP passes the test with flying colors.  CBP identifes its "Core Values" as Vigilance, Service, Integrity. As a former attorney with the United States Customs Service in Miami, I still prefer the former core values of "Honor, Tradition, Service."

U.S. Customs has long had its own Office of Internal Affairs. Plus, U.S. Customs is an agency within the huge U.S. Department of Homeland Security which has an Office of Inspector General.  U.S. Customs enjoys a positive worldwide reputation among Customs Administrations throughout the world.  Who knows, maybe it's because all U.S. Customs officials have at least college, and perhaps masters or doctorate degrees.

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Lesson of the day -  Don’t make an intentionally false or misleading statement to the U.S. Commerce Department's Bureau of Industry and Security (BIS)! Carol Wilkins apparently did, and will now pay $15,000 to the BIS. Important to note is that this export manager was fined individually. RF Micro Devices, Inc., the company Carol worked for, was fined $190,000 separate and apart from Carol. 

From at least 2002-2003, a responsibility of Carol’s was export control compliance for RF Micro Devices, Inc. The company had exported spread-spectrum modems which are properly classified as ECCN 5A001 to China.  Yet, the company did not obtain the required license from the BIS.

The BIS Charging Letter discussed Ms. Wilkins' false or misleading statement to the BIS. During the course of a BIS investigation, she allegedly told a BIS Special Agent that all product classifications were confirmed by an outside consultant to be EAR99 (no export license required). Apparently the consultant disagreed, and even kept the documentation in which the consultant had specifically advised Carol that the items were not EAR99.  Carol might not have realized how resourceful the BIS Agents could be as she may not have realized that BIS Agents would confirm her statements to them by doublechecking with the consultant. Even I was always taught "trust but verify".  BIS is no different in this case. 

Whenever you are going to be interviewed by a Special Agent of BIS or any other Federal law enforcement agency, always remember two things: (1) tell the truth, and (2) seek the advice of legal counsel. 

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The U.S. Court of Appeals for the Federal Circuit just issued an important decision that will help all customs brokers who are facing a broker penalty action pursuant to 19 U.S.C. 1641 and 19 CFR Part 111.  The Court held that U.S. Customs and Border Protection (CBP) must consider all ten factors specifically identified at 19 CFR 111.1 when determining whether or not to mitigate a penalty issued by CBP against a customs broker for failing to excercise "responsible supervision and control."  CBP had argued to the Court that it only needed to consider those factors it thought were relevant.  The Court disagreed with CBP, and reversed the decision of the U.S. Court of International Trade. The Court stated:

"Because Customs did not consider all ten factors listed in 19 CFR 111.1, its determination that UPS violated 19 U.S.C. 1641 was improper. Accordingly, we vacate that portion of he Court of International Trade's judgment and remand for further proceedings."

So, even though the Court determined that UPS was wrong in its tariff classification of imported merchandise, and even though UPS paid CBP $15,000 in penalties for failing to exercise responsible supervision and control, it remains to be seen whether CBP will assess another $75,000 in penalties against UPS.   My guess is that CBP will pursue the remaining penalties against UPS which were also for alleged misclassification of the same merchandise on different entries.  The Court required CBP to at least consider all ten factors, but also explicitly stated that CBP has the discretion to weigh each of the factors as it deems appropriate in determining whether to mitigate a penalty against a customs broker.

If CBP does pursue the penalties, no doubt UPS will challenge them, especially because another remaining legal question will be whether the CBP regulation at 19 CFR 111.91 which limits penalties to a maximum of $30,000 will apply.  That is another issue of importance to all licensed customs brokers. If interested, please read the complete Federal Circuit decision.

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 Exporting motor vehicles from the United States to foreign destinations is a common occurrence at many ports around the country, including South Florida’s ports. Whether exporting vehicles for business or personal use, it is important to know the procedures that U.S. Customs (“CBP”) expects you to follow. Not paying attention to the “rules of the road” can result in the seizure of your vehicle(s), and the imposition of hefty penalties.

If you are in the business of exporting cars, or plan to export a car to a foreign country for personal use, it is important to know two different sets of rules. Part 192 of Title 19 of the Code of Federal Regulations (“CFR”) contains the rules for exporting used vehicles. Used vehicles include any vehicle where legal title has been transferred by a manufacturer, distributor, or dealer to the person buying the car. These regulations explain the basic requirements for how to export cars, including the documentation that must be presented to CBP, such as a Power of Attorney, where a company or individual is shipping a motor vehicle on behalf of someone else. The regulations also describe how much it will cost in penalties if a person fails to submit the right documentation, or no documentation at all. The penalties can be severe - up to $10,000 where CBP determines the car was stolen, or the vehicle identification number (“VIN”) has been tampered with.

The second set of rules that you need to know are the port-specific requirements imposed by CBP. This can be tricky because the rules at different ports are not always the same. CBP's Miami Seaport Vehicle Export Section has published a helpful Information Bulletin to assist exporters. The Bulletin describes where, when and how an individual must present documentation for exporting a vehicle from the Port of Miami. The Bulletin also contains a list of the most likely reasons that CBP will reject the export documentation, and prohibit a person from exporting a vehicle.

Anybody who desires to export a motor vehicle should know these rules and follow them carefully. The rejection of documentation by CBP can cause unnecessary delays and additional transactional costs, including storage fees. Failing to follow the rules of the road can even result in seizure of the vehicle(s) by the Government, and the assessment of significant penalties against the exporter. 

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On August 14, 2009, Jennifer Diaz and I will speak at the annual FIME Conference taking place at the Miami Beach Convention Center, Miami Beach, Florida. The FIME Conference is one of the largest trade shows in the United Stated attended by medical device manufacturers, importers, and distributors from throughout the United States and Latin America.

The seminar topic is “How to Effectively Resolve Typical U.S. Food and Drug Administration and U.S. Customs and Border Protection Issues for Medical Devices.”

Medical devices are strictly regulated by the FDA.  We will discuss how to handle everyday examples of difficult issues with he U.S. Food and Drug Administration (FDA).  FDA issues include what to do if you receive a "Notice of FDA Action" or a "Warning Letter" that could potentially state you must stop producing or importing certain medical devices.  FDA may allege that the device is adulterated because you do not have an approved Premarket Approval Application (PMA) to demonstrate that the device is safe and effective for the new intended uses for which you are marketing it. In addition, the FDA may allege that a device is misbranded because you have not submitted a section 510(k) premarket notification to notify the FDA of your intent to introduce the device into commercial distribution for these new intended uses. Your company may have its imported merchandise authomatically detained by the FDA because it is on the "detention without physical examination" list.  Fortunately, there is a procedure to get off that list.

Effectively resolving U.S. Customs and Border Protection (CBP) issues includes appropriately responding when CBP says your medical devices are under "detention," or will be "seized" and "forfeited".   You will also learn the appropriate response after you receive a "liquidated damages claim" up to $75,000 from CBP.    

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More and more importers/exporters are being stopped and shipments detained and even seized by CBP (U.S. Customs). Many feel they are being targeted by CBP, simply for the type of merchandise or because of the country with which they may be doing business.

While you would think that electronics would be the most sought after, the fact of the matter is that electronics is a small piece of the seizure pie, with the biggest piece going to footwear! Talk about picking a product and running with it!

However, regardless of the industry, the primary reason for detentions is IPR (intellectual property rights) violations. You see, whether its shoes or cell phones, foreign manufacturers need to adhere to CBP protocols, as do U.S. importers and exporters.

One way to make sure that all of your ducks are in a row is to the become C-TPAT certified. Benefits are such that importers are 4 to 6 times less likely to incur a security or compliance examination by CBP. That in and of itself is almost reason enough. It’s not a complicated process as long as you are not dealing with fly by night manufacturers, but it is a process nonetheless. Do your due diligence. It’s fairly simple to confirm a licensing agreement. Most trademark and copyright holders have the pertinent contact information online. You could apply yourself, but it’s a little more involved than just that. You need to provide not only the manufacturer information, but also information on who ships your merchandise, how it’s packed and shipped, as well as information regarding your own company, such as security, HR, IT and other background information.

The bottom line here is that if CBP knows who is manufacturing your goods, where it’s coming from, where it’s headed and how it’s getting there, then that’s half the battle. If CBP knows that you are dealing with legitimate manufacturers that are properly licensed to produce your merchandise and who’s shipping it, then that’s the other half and your battle may be won.  Think seriously about joining C-TPAT, and run with it.

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There are many reasons to be detained by an officer of the United States Customs and Border Protection (CBP) when returning to the United States, but you wouldn’t think that one of those reasons would be because you have too much cash on you. CBP doesn’t come right out and say “show me the money”, but travelers are required to report monies over $10,000 and a supplemental form must be completed by the traveler. In speaking with many foreign travelers, the big misconception is that taxes, customs duties, or some other fee must be paid to the United States Government on the monies over $10,000. WRONG! 

Think about this, who travels with large amounts of money and for what? The most cash heavy travelers are gamblers attending Poker Tournaments, and tradeshow vendors/buyers that travel abroad to make their purchases. Do you really think that they pay customs duties on the cash- NO. On the merchandise possibly, but that’s another blog.

If you do not declare the cash you have and CBP finds it, you will not only forfeit all of your money, but you may also have to pay a penalty and possibly be criminally prosecuted.

In speaking with a few United States Immigration and Customs Enforcement (ICE) officers, CBP is more concerned about where the money came from and the reasons for carrying large amounts of cash than anything else. In today’s economy, could your average Joe Traveler just go to the bank and withdraw $10,000 and travel abroad? The answer is probably not. However, could the average Jane Buyer withdraw legitimate company funds, travel to a vendor’s factory and make purchases? Absolutely!

It basically comes down to these Do’s and Don’ts: 

• Do advise CBP of what you have.
• Don’t, under any circumstances, lie to CBP. 

• Do declare the exact amount you are carrying.
• Don’t try to hide money throughout your person and/or luggage with the thought that “They’ll never look there”, because they will. 

• Do keep a record from where you withdrew the funds you are carrying.
• Don’t try to pass off money to your traveling companion so the amount carried is less than $10,000. 

• Don’t try to handle the matter without legal counsel familiar with these matters.

It’s not rocket science, but if you are willing to take a chance on CBP seizing your cash, the old adage comes to mind, “A fool and his gold are soon parted!”

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What is the FDA 'Black List'?

The United States Food and Drug Administration (FDA) has authority to put an importer, manufacturer, shipper, grower, geographic area of a country, or an entire country on a “detention without physical examination” (DWPE) list  (a/k/a the FDA’s 'Black List').  To check if a company you are doing business with is on such a list, check FDA’s Import Alert page.   You can search by country, company, etc.  If your company is on this list, any merchandise you attempt to import into the United States may be detained by the FDA as soon as it is offered for entry into the United States.  An importer will have to prove to the FDA that the merchandise should be allowed to enter the U.S., otherwise, it will be refused entry and must be exported or destroyed within 90 days.  The company/country, etc. will remain on this 'Black List' until sufficient information is presented to the FDA that proves the merchandise complies with the FDA requirement.

How to Get Off the Black List

FDA’s Regulatory Procedures Manual provides guidance to those who wish to get off the 'Black List'.  The specific method to use to get off the 'Black List' is directly related to why you were placed on the 'Black List' in the first place.  For example, if a food product was placed on the 'Black List' because it was deemed “adulterated” or “misbranded” by the FDA, a minimum of five consecutive non-violative commercial shipments must thereafter enter the U.S., and at least one of the five non-violative entries should be audited by the FDA to ensure compliance.  The five shipments must be over a reasonable time period, not one day.  Separately, a Petition must be filed with the FDA requesting that the importer be removed from the 'Black List'.  The Petition must include the specific products being automatically detained, the Entry Numbers, and any other relevant documentation to detail steps taken to prevent entry into the U.S. of merchandise that violates the FDA's many requirements. 

It is wise to know whether you or your company are on the FDA 'Black List', to know the FDA requirements to get off the list as soon as possible, and to take action, so that you too, can get off the FDA 'Black List'.

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