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

Hundreds of people apply every year to become a customs broker. Customs brokers are licensed by U.S. Customs and Border Protection (CBP). The process requires passing a rigorous multiple choice examination, and then passing a background investigation.  For many applicants who successfully pass the examination, they are denied a license because the background investigation revealed a poor credit history and rating. 

Although the application to be a customs broker is submitted to the local port, the decision letter granting or denying a broker license is issued by Allen Gina, Assistant Commissioner, Office of International Trade, CBP Headquarters in Washington, D.C.  A typical denial letter would state:

After careful evaluation of the information obtained from the background investigation, we must deny your application due to your financial history.

The denial letter always cites the CBP regulation at 19 CFR 111.16 - a failure to establish the business integrity and good character of the applicant.  Fortunately, the letter also cites 19 CFR 111.17 which provides the right of appeal of the denial of the customs broker license.

The appeal must be filed, in writing, and submitted to Mr. Gina no later than 60 days from the date of the denial letter. The appeal must persuasively argue why the applicant has business integrity and good character.  For example, if the applicant went through a divorce, and the former spouse failed to pay certain bills which negatively affected the applicant's credit history and rating, that is an important fact that must be argued, and documented, in the appeal.  

There are numerous reasons why CBP may legitimately deny a customs broker license to an applicant who has a spotty financial history. Similarly, there are numerous reasons to explain to CBP that despite what appears to be a questionable financial history, the applicant has business integrity and good character, and should still receive the customs broker license.

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Comments or questions, click below, or contact me directly.

Peter Quinter, Partner in Charge

Customs and International Trade Law Department

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

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 Alan Becker, Board member of Enterprise and Chair of Beacon Council, with Gov Scott meets with business leaders in Sao Paulo, Brazil

Editor's Note: Thanks to Managing Shareholder Alan Becker, our guest blogger, who just returned from the Enterprise Florida Trade Mission to Brazil with Governor Rick Scott and a delegation of Florida business leaders. Alan is the Chair of the Beacon Council, MIami Dade County's Economic Development agency.

Alan S. Becker

Brazil was the # 1 trading partner for the Miami Customs district in 2010 and has been the top trading partner for more than a decade. It is Florida's # 1 trade partner with over $15 billion in annual trade. Of that, $13 billion is export to Brazil, so there is a lot of room for increased trade importing to Florida.
 
Many of the largest Brazilian companies already have regional or US headquarters in Miami, such as Odebrecht, Itau Bank, TAM Airlines, and many others.
 
Miami - Dade County is the area where most of this trade takes place, which is not surprising. Of Dade's 2.5 million residents, half are foreign born and 2/3 speak a second language in addition to English, almost all from the Caribbean, Central and South American. There are at least 50,000 Brazilians living in South Florida.
 
In 2010, 555,000 visitors came from Brazil just to Miami-Dade County and spent $1 billion--the first country to reach $1 billion in visitor spending. It is estimated that if there were a waiver of the visa requirement, those figures would immediately double.

Miami International Airport has more daily direct flights to South America than all other US airports combined. There are 93 weekly direct flights to cities in Brazil with 20,000 seats. The Port of Miami services 13 Brazilian Ports with cargo ships each week. With the deep dredge of the Port, making us the first ready for the post Panamax super ships, and the tunnel to move Port travel, the Port of

Miami, already # 1 in international cargo, is positioned to double its cargo capacity by 2014.

This affinity between Miami and Brazil underscores the reason why business activity is so great and is growing.

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Michael De Biase

Among its other duties, U.S. Customs and Border Protection ("CBP") has the daunting task and responsibility to search and seize products that are counterfeit or otherwise infringe the intellectual property rights of original goods manufacturers. This is accomplished through CBP's Intellectual Property Rights Recordation System. As the name suggests, trademark and copyright owners record their intellectual property rights with CBP and CBP keeps records of such recordings via this system, which can be accessed online at http://iprs.cbp.gov/. Using this system, an importer can determine if any of the products that it is importing actually violate the intellectual property rights of somebody else. However, there is a big problem with this system that can cause CBP to wrongfully seize goods, thereby inflicting substantial monetary damages and significant delays in delivery times.

Intellectual property rights are not absolute and can therefore be challenged and cancelled through the U.S. federal court system. When a trademark is cancelled, the U.S. district court has to notify and direct the Director of the U.S. Patent and Trademark Office ("USPTO") to remove the trademark registration from the USPTO's registrar. Until CBP is notified that the trademark has been cancelled, CBP will continue to seize products that potentially infringe the rights of the now cancelled trademark. This causes products to be wrongfully seized, and, in turn costs the importer tens of thousands of dollars as well as significant delays.

To avoid falling victim to this situation, you must contact an attorney. An attorney can perform the proper legal research to determine whether your shipment contains products that are likely to be seized for infringement of intellectual property rights. In such an instance, the old saying "an ounce of prevention is worth a pound of cure" really holds true.

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The U.S. Food and Drug Administration ("FDA") has strict labeling requirements for cosmetic products.  One area that consistently causes confusion among companies that distribute cosmetic products to countries on different continents is the area of labeling. Different products have different labeling requirements depending on the application of the product, the type of ingredient being labeled, the size of the product, and the country to which the product will be shipped. For example, the rules regarding how to describe color additives for products entering the U.S. are different than those for Canada and Europe.

Fortunately, it is possible to comply with the labeling requirements for the U.S. as well as Canada and Europe using only one label. In fact, it can even be accomplished with a product bearing a label as small as that of mascara. Accomplishing this is greatly beneficial to these companies because they can take advantage of economies of scale and taper production costs by merely having one label printed to be distributed to several countries.  However, this is a delicate maneuver that, if not done properly, will likely result in seizure and detention by the FDA or a foreign country's equivalent agency. This will cause delays in the shipments, and may cause civil penalties and forfeiture of the products.

To avoid this common mistake and take advantage of the fact that one label may be used throughout the U.S., Canada, and Europe, you should contact an attorney well versed in the FDA regulations. Taking this precautionary measure is an investment in greater profits and peace of mind.

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The annual seminar "Practical Tools for Trade in the Food Industry" takes place at the Miami Seaport on September 7, 2011 from 8:30 a.m. to 12:30 p.m.  Sponsored by the Miami-Dade County Office of Economic Development & International Trade, and supported by the Port of Miami, this year we will again focus on what importers need to know about both U.S. Customs and Border Protection and U.S. Food and Drug Administration requirements.  There will  be special emphasis on the new Food Safety Modernization Act of 2011.

The seminar takes place at the beautiful Port of Miami Conference Room, 1015 N. America Way, Miami.  Registration may be done on-line.   Questions regarding REGISTRATION may be directed to Adam Peters, Trade Development Specialist at (305) 375-5420 or apeters@miamidade.gov.  Question regarding content of the seminar may be directed to me or Jennifer Diaz, Senior Attorney, Customs and International Trade Department, Becker & Poliakoff law firm (305) 260-1053.

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For questions or comments, please contact:

Peter Quinter, Partner, Customs and International Trade Department

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

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Let's discuss some fundamental customs laws and policies first.  A bond is a contract between a principal (i.e. importer) and a surety (i.e. insurance company), with CBP serving as the beneficiary when an importer fails to pay any duties, taxes, and fees assessed by CBP on the imported merchandise.  The single transaction bond amount for the importer established by CBP is typically 1 to 3 times the total value of the imported merchandise for that particular shipment, plus duties, taxes, and fees.  If the importer does not pay the assessed amounts promptly, a liquidated damages claim is issued by the Fines, Penalties, and Forfeitures (FP&F) Office of CBP against the importer and the surety company.  

Although in theory, this type of insurance policy should pay CBP in full every time, it does not really work that way.  Blame it, in part, on anti-dumping and countervailing duty cases.  The U.S. Government Accountability Office (GAO) estimates that it takes over 3 years in anti-dumping or countervailing duty cases between the initial entry of merchandise subject to an anti-dumping or countervailing duty order, and when the final duty bill is issued to the importer.   Importers that are unwilling or unable to pay, or have already gone out of business, result in a loss of revenue to CBP. 

According to the OIG Report, CBP has written off tens of millions of dollars "because of inaccurate, incomplete, or missing bonds" such as a lack of signatures or inaccurate transaction numbers.   Moreover, it turns out that CBP is not doing a good job of keeping copies of the bonds, but often relies upon the customs brokers to do so.  The OIG Report concluded that "there is a potential for collusion between the broker and the importer."  Well, at least, for once, DHS and CBP don't blame this problem on those pesky customs lawyers.

So, you ask, what will happen now.  No surprise this time - CBP will certainly re-evaluate its current monetary guidelines, last significantly updated in November 2010, to establishing higher bond limits, especially for food and drug products regulated by the FDA which pose a potential threat to the public health and safety.  Importers should expect to see such letters from CBP's Revenue Division at the National Finance Center located in Indianapolis, Indiana, and more liquidated damages claims from the FP&F offices around the country.

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For questions or comments, please contact:

Peter Quinter, Partner, Customs and International Trade Department

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

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Every year, the numerous agencies of the United States Government send out letters to companies putting them on notice that the company is suspected of committing some serious violation.  Usually, the letter or notice demands a written response within 30 days or the company will be subject to a penalty or fine.  Knowing how to handle such letters, notices, or subpoenas is critical in terminating the investigation successfully, not paying a huge penalty, and even avoiding criminal prosecution.

The Executive Branch departments, bureaus, and agencies of the Federal Government  all have the legal authority to investigate and assess penalties against companies that violate that particular Government agency's regulations. This is especially true of companies which are importers, exporters, or otherwise involved in international trade such as customs brokers, international freight forwarders, airlines, and indirect air carriers.  The U.S. Food and Drug Administration (FDA) would issue an "Administrative Subpoena" or a"Notice of FDA Action", the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) would issue an "Administrative Subpoena" while the U.S. Department of Transportation's Federal Aviation Administration (FAA) would call it a "Notice of Proposed Civil Penalty", the U.S. Department of Homeland Security's Customs and Border Protection (CBP) describes it as a "Notice of Action" and "Pre-Penalty Notice", the Environmental Protection Agency (EPA) calls it a "Request for Information", the U.S. Commerce Department's Bureau of Industry and Security (BIS) calls it a "Proposed Charging Letter", and the Transportation Security Administration (TSA) would call it a "Letter of investigation". 

Whatever pseudonym or term is used, the Government documents are all similar in that they:

(1) are a legal demand from the Government,

(2) require a written response by the addressee,

(3) describe briefly the factual basis for the demand,

(4) threaten action against the company for not providing a timely response, and

(5) threaten action against an individual if false information is provided to the Government.

The first response by the President of the company (or its General Counsel) who receives the letter is - you guessed it - identify and call a lawyer very knowledgeable and experienced in handling these investigations.  All communications between the company and its outside lawyer are considered to be under the attorney-client privilege. That means that anything the President or other employees of the company say to the attorney are entirely confidential.  The inquiry by the outside legal expert is also confidential, so anything the attorney discovers or discusses with the company's employees do not have to be subsequently disclosed to the Government.

In my over 20 years of practice as a customs and international trade lawyer routinely involved in defending companies under investigation by the U.S. Government, the biggest error by company officers is that they respond directly to the U.S. Government without seeking proper legal advice.  Only after the company receives a large penalty do I finally get the call to straighten it all out. Fortunately, whether the letter of investigation is from Washington, D.C. to a company located in California, Florida, New York, or elsewhere in the United States, the administrative procedures are identical.

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Please click the word "Comments" below to share your thoughts.

Peter Quinter, Partner, Customs and International Trade Department

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

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The National Customs Brokers and Forwarders Association of America (NCBFAA) is hosting a webinar on the topic of "EPA Import Compliance - What To Do When Things Go Wrong".

The webinar will focus on the practical import compliance policies and procedures of both the U.S. Environmental Protection Agency (EPA) and U.S. Customs and Border Protection (CBP) for the importation of mobile source equipment such as non-road and marine spark ignition engines in motorcyles, generators, and lawn mowers. 

An introduction to the EPA's enforcement of the Clean Air Act through its regulations will be discussed.  Learn about 'EPA Certificates of Conformity,' ' EPA Administrative Settlement Agreements,' and the proper use of EPA Form 3520.

Real-life examples of detentions and seizures by CBP will be used, along with a step by step "how to" resolve seizures and penalties by CBP and settle civil penalty cases with the EPA.

Registration may easily  be done on-line by clicking on this "Register Now"  link, or by calling Brian Barber, Director, NCBFAA Educational Institute, at (202) 466-0222.

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Peter Quinter, Partner, Customs and International Trade Department

pquinter@becker-poliakoff.com or (954) 985-4101

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I have been an international trade attorney for over 20 years.  In that time, I have represented a few thousand companies involved in the importation, exportation, and international transportation of merchandise.  I have seen respectful, efficient U.S. Government employees and the most uncaring bureaucrats, importers who care about the law and others who only care how to get around it, and customs brokers who always try to do the right thing and others who you wonder how they ever passed the broker exam and the background check.  I have listed the 10 Most Common Misconceptions in International Trade.

I have actually heard intelligent people who are CEOs or General Counsels of their companies say the most surprising things to me over the years. 

1.  It is ok to bring in up to $100 worth of Cuban cigars into the United States.

2.  Dietary supplements that are "all natural" are not regulated by the U.S. Food and Drug Administration (FDA), and, therefore, can make all kinds of medical claims.

3.  The U.S. Government does not care about the value of cargo being exported from the United States because there are no duties, taxes or fees paid to the U.S. Government on exports.

4.  If an airlines passenger brings into the United States over $10,000 in cash, the passenger must pay a tax to U.S. Customs or the IRS.

5.  If an importer uses a customs broker to file an entry with U.S. Customs and Border Protection, and some false information is provided to U.S. Customs, only the customs broker is liable to U.S. Customs, not the importer.

6.  No one gets hurt by importing, buying and selling counterfeit merchandise.

7.  If some food product is marked with "Made in America" it must be good, but if it is marked "Made in China" it must be bad.

8.  Is an imported item is marked "Made in Vietnam" or "Made in Malaysia" or "Made in America" then if really must have been manufactured or produced in the identified country, and no other.

9. Since it is illegal to sell military items to places such as North Korea and Iran, if a U.S. company ships those items to a friendly country such as Australia or England, and the buyer in those countries then re-export them to North Korea or Iran, the U.S. company has done nothing wrong.

10.  A product manufactured in India, transported to Mexico, and then imported into the United States from Mexico should enter duty free under NAFTA because Mexico, Canada, and the United States are all members of the North American Free Trade Agreement (NAFTA).

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I welcome hearing about your stories. Please click on the "Comment" box below to share them with me.

Peter Quinter, Partner in Charge, Customs and International Trade Department

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

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On May 20, 2010, the top management of both U.S. Customs and Border Protection (CBP) and the U.S. Immigration and Customs Enforcement (ICE) testified before the U.S. House of Representatives' Committee on Ways and Means Subcommittee on Trade.   Chairman Tanner said the hearing was "to strike the right balance" between trade facilitation and security.  Unfortunately, the Committee heard all about the enforcement success of both ICE and CBP without hearing about the difficulties faced daily by importers and customs brokers.

Chairman Tanner accurately stated:

There has been a growing concern that, in particular, CBP's modernization of trade functions, facilitation of trade, and enforcement of traditional customs laws have appeared to lag while the agency tightened security screening of passengers and cargo.

ICE was particularly proud of its accomplishments by its National Intellectual Property Rights Coordination Center.  In ongoing Operation Guardian, ICE has interdicted substandard, tainted, or counterfeit products, including food and medicine that pose health and safety risks to American consumers.  $26 million of such condoms, circuit breakers, toys, extension cords, honey, and shrimp were seized by ICE and CBP.

What was not revealed was how many unnecessary delays and expenses were caused by ICE and CBP for the legitimate merchandise that entered or transited the United States.  In order to determine the effectiveness of the targeting programs used by CBP, Congress needs to inquire about the number of detentions and examinations by CBP, and the consequential financial costs to importers.  The U.S. Government Accountability Office (GAO) is also concerned with properly targeted imported food shipments, as indicated in its May 6, 2010 report on "Food Safety".

Does CBP do a good job at targeting imported shipments?

Peter Quinter, Partner in Charge, Customs and International Trade Department

pquinter@becker-poliakoff.com or (954) 985-4101

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At today's Food and Drug Law Institute's annual conference in Washington, D.C., FDA Commissioner Margaret Hamburg, M.D. said that one of her priorities is responding to the globalization of the food supply, and the increase in misbranded and adulterated food products imported into the United States.  Dr. Hamburg stated that the FDA "cannot wait until the food arrives at our borders," that "extending the FDA's global reach is key to our success," and that the FDA's new PREDICT system will focus FDA Inspectors to select, stop, and examine high-risk shipments being imported into the United States.

Ralph Tyler, FDA's new Chief Counsel, stated that the laws enforced by the FDA affect 25% of the American economy.  The crowd in attendance applauded when Ralph stated that "FDA lawyers are not doing their jobs when they simply say 'no'" to the food, drug, and cosmetic companies regulated by the FDA.

Michael Chappell, FDA's Associate Commissioner for the Office of Regulatory Affairs (ORA), is the person responsible for managing the import, inspections and enforcement policy of the FDA.   He stated that companies are now operating in "an age of heightened enforcement by the FDA."  He stated that "salmonella and listeria remain major problems in food manufacturing facilities."  He advised that there were 19 million customs entries in 2009, and the number is ever increasing.   He stated that the FDA had in 2010 already issued a record number of Warning Letters to importers, producers, and distributors of FDA regulated products, especially dietary supplements and cosmetics.

In summary, my take away after hearing from the top 3 people at FDA is that it is a much more aggressive agency under the leadership of Dr. Hamburg than previously.  Importers should be more careful than ever to understand and comply with the FDA regulations, or not be surprised to receive a Notice of Refusal, a Warning Letter, or even a civil penalty or subpoena.

For any questions about food and drug law, you may contact me at pquinter@becker-poliakoff.com or (954) 270-1864.

Peter Quinter, Partner, Becker & Poliakoff law firm, Miami, Florida.

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The annual conference of the National Customs Brokers and Forwarders Association of America (NCBFAA) just concluded in San Antonio, Texas. Several prominent speakers from U.S. Customs, the Federal Maritime Commission, the U.S. Census Bureau, the Bureau of Industry and Security, the Office of Foreign Assets Control, Transportation Security Administration, and the Department of Homeland Security discussed new policies and procedures that every customs broker and international freight forwarder should use to serve their import and export clients.

Deputy Commissioner for U.S. Customs, David Aguilar, used a new talking point in his repeated use of the phrase "protect the American way of life" which apparently has replaced "protect the border" in his description of the mission of the U.S. Customs and Border Protection.  U.S. Customs Senior Attorney Susan Terranova stated that in 2009, Customs had issued over 500 penalties against exporters and freight forwarders for failing to file timely or accurately complete Automated Export System (AES) filings. Each penalty was issued in the amount of $10,000.

Marc Rossi, Branch Chief, Certified Cargo Screening Program, Air Cargo Division, TSA, stated that there are 98 foreign flagged airlines that fly into the United States, over 4,000 indirect air carriers (IACs), 52 independent cargo screening facilities, and only 403 IACs certified by the TSA as Certified Cargo Screening Facilities (CCSF), in preparation for the August 1, 2010 100% screening of air cargo aboard passenger aircraft in the United States.  More information about the implementation of the 100% screening rule is available at www.tsa.gov/ccsp. 

Along with Brandon Fried, Director, Air Forwarders Association, I lectured at the NCBFAA Conference about Export Compliance for Freight Forwarders.  The focus of my presentation was on exactly how to mitigate penalties once a Proposed Charging Letter, Pre-Penalty Notice, or Notice of Proposed Penalty has been issued by BIS, OFAC, or TSA.  The Power Point presentation is available only upon request.

See you at next year's NCBFAA Conference at the Sheraton Wild Horse Pass Resort and Spa near Phoenix, Arizona.

Please contact me at pquinter@becker-poliakoff.com or (954) 270-1864.

Peter Quinter, Partner, Customs and International Trade Department, Miami, Florida

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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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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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The annual CBP Symposium, held at the D.C. Convention Center, Washington, D.C. from December 8-10, 2009, was the 10th year of this very successful event.  Over 850 attendees were initially greeted by outgoing Acting Commissioner Jay Ahern.  The Symposium agenda was a smorgasbord of information that was appropriate for anyone with a serious interest in international trade and logistics. Highlights included presentations from Assistant Commissioner Dan Baldwin, Office of International Trade, Rich DiNucci, Director, Secure Freight Initiative ("10+2"), Bob Swierupski, Director, National Commodity Specialist Division, and Brenda Smith, Executive Director, Trade Policy and Programs, about what the international trade community should expect in 2010 from CBP.  Special Presentations were made by Jeremy Baskin, Office of General Counsel, U.S. Consumer Product Safety Commission, and Domenic Veneziano, Director, Division of Import Operations and Policy, U.S. Food and Drug Administration.

Mr. DiNucci's presentation on Importer Security Filing (ISF) stated that CBP has received from January 26, 2009 through December 6, 2009 3.65 million ISF filings from over 1,900 ISF filers representing 103,000 ISF importers. There is now a 95% acceptance rate on ISF filings.  As you know, the enforcement mode for ISF begins January 26, 2010, and there will be a $5,000 penalty issued by CBP for a violation per ISF transmission or $10,000 maximum per ISF filing.  Importers should be familiar with the ISF Interim Final Rule, the FAQ on ISF, and the Mitigation Guidelines issued by CBP.

Therese Randazzo, Director, IPR Policy and Programs Division, stated that CBP had issued over 1,000 fine notices, pursuant to 19 U.S.C. 1526(e), totaling $94 million against importers for attempting to import counterfeit merchandise.  However, only $2 million was collected from those importers.   Ms. Randazzo acknowledged that the U.S. Attorney's Offices are reluctant to pursue such cases because the importer has already been punished in that the merchandise was seized and forfeited, and adding a fine on top of that may be considered a violation of the "excessive fine" clause of the United States Constitution.  Charles Steuart, the new Intellectual Property Rights and Restricted Branch Chief, stated that CBP had  "targeting inefficiencies because of  lack of information of the international supply chain from trademark and copyright holders" who have recorded their trademarks, trade names, and copyrights with CBP.

Mr. Swierupski stated that his office had issued 6,821 Rulings pursuant to 19 CFR Part 177 in FY 2009, that Rulings from his New York office are issued within 30 days and those from CBP HQ are issued within 90 days.  Myles Harmon, Director, Commercial and Trade Facilitation Division, reminded persons submitting Ruling Requests to do so using CBP's new e-Rulings system, however, if a physical sample is submitted to CBP, the Ruling must still be made by paper, and not through the e-Rulings system. CBP has issued about 160,000 rulings available on CROSS.  Advance Ruling Requests are still the best method of predicting proper classification, valuation, country of origin, and other import requirements.

I look forward to next year's CBP Symposium. Be sure to sign up early as the event is always quickly sold out.

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On November 20, 2009, in Federal Court in Miami, Florida, Mr. James Garrido and the company he controlled, Kroy Corporation, pled guilty to charges related to their illegally smuggling into the United States certain restricted ozone-depleting substances, in violation of the Clean Air Act enforced by the U.S. Environmental Protection Agency.

Chlorofluorocarbons (CFCs) are ozone depleting substances and include CFC-22 which is otherwise known as R-22 or popularly known by its trademark name, Freon, owned by DuPont.  CFC-22 is a widely used refrigerant for residential heat pump and air conditioning systems.

In 1988, the United States ratified the Montreal Protocol on Substances that Deplete the Ozone Layer. By ratifying the Protocol, the United States committed to a collaborative, international effort to regulate and phaseout ozone-depleting substances. The United States amended the Clean Air Act (CAA) in 1990 to include Title VI, Stratospheric Ozone Protection. The Clean Air Act established a schedule to phase out the production and importation of CFC-22.  Individual companies are licensed annually by the EPA to import specified maximum quantities of CFC-22.  By 2030, the CFC-22 will be completely phased out.

Neither Mr. Garrido nor Kroy Corporation were ever licensed by the EPA to import CFC-22.  They imported approximately 420,000 kilograms of CFC-22 valued at about $4 million over 2 years in violation of  18 U.S.C. section 545(smuggling).  They intentionally misdescribed the CFC-22 on documentation presented to U.S. Customs and Border Protection as another refrigerant, R-134A, which did not require any special license from the EPA. As stated in the press release by the United States Attorney's Office for the Southern District of Florida:  "Except for a small quantity of legal refrigerant strategically placed in front of the contraband, the shipment contained CFC-22 and were accompanied by false documentation."

The case was investigated by Special Agents from the Miami offices of the EPA and the U.S. Immigration and Customs Enforcement (ICE).  Sentencing will take place on February 11, 2010.  Mr. Garrido could be sentenced to 20 years imprisonment, and a criminal fine of $250,000 for each of the three counts to which he pled guilty.

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The United States Congress is considering legislation to make the food we eat, especially imported food, "safe and secure".  In my opinion, even if our food needs protecting, the proposed legislation only adds to the current Federal bureaucracy.  The U.S. Food and Drug Administration (FDA) already has a comprehensive regulatory procedure to stop, examine, and refuse imported food which it considers adulterated or misbranded, or otherwise not fit for human (or animal) consumption.  The current FDA system is working very well, and  the only achievement of the proposed legislation will be to increase the price of food.  We need enforcement of the current laws, not a bunch of new laws.

Granted, there are numerous instances of imported food making people sick, and even causing death.  15% of the food we eat is imported. Nevertheless, the overwhelming number of Americans who get sick or die from consuming food had nothing to do with imported food.  You may get sick at your local restaurant with food poisoning because of the poor handling of the food at the restaurant, not because the food came from overseas.

Currently, for any food to enter the United States, the importer must submit an electronic entry to both U.S. Customs and Border Protection and the FDA.  The entry information includes the name of the importer, a description of the imported food, the name of its manufacturer, the country of origin, the value, the buyer of the food, and where the food is to be delivered.  The requirements of the Bio-terrorism Act of 2002 require "prior notice" which means that the importer must advise U.S. Customs and the FDA far in advance of the arrival of the food at a border crossing of the United States. The U.S. General Accountability Office just issued a thorough Food Safety Report which has an excellent graphic at page 58-59 describing the imported food procedures.  The Report did state that our food supply is safe, but that U.S. Customs and FDA could do better. 

The Government made significant changes already regarding the traceability of food in the Bioterrorism Act which went into effect in December 2003. It required all foreign companies involved in the manufacturing, processing, packing, or holding food that enters the United States to first register with the FDA so that the food may be traced all the way back from the retailer to its source overseas.  Companies may register on-line at www.FDA-USA.com.   

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This weekend, I visited both Lowe's and Home Depot looking for some new plants for my backyard. As I walked by all the newly arrived Christmas merchandise, I casually picked up a few to see where they were made.  You guessed it, from Santa to Rudolph, one by one they all clearly stated "Made in China". I finally did find one item that stated "Assembled in USA from foreign and domestic components." I was getting frustrated. After all, as a customs and international trade attorney for the past 20 years, including the first 5 as an attorney for U.S. Customs, I have made a living doing international trade. I wondered, what happened to our balance in international trade? What happened to "Made in America"?

Everyone knows that mountains of Chinese goods are daily shipped to and sold in the United States, but what about the reverse.  Fortunately, I also have that perspective, as I visit the People's Republic of China (PRC) at least once a year for U.S. based clients importing from China or Chinese companies selling to the United States. I travel to China on an airplane, am transported to the hotel by car, and sometimes go down to the bar to have a drink.  The plane is made by Boeing, the car is a Ford, the hotel is a Sheraton, and the drink is a rum and Coke (Bacardi and Coca-Cola).  All of those iconic names are pure Americana. 

With 1.4 billion people in China, no wonder American companies,and the rest of the world, are tripping over themselves to get into the Chinese consumer market.  On October 28-29, 2009, United States Department of Agriculture Secretary Tom Vilsack will participate in the U.S.-China Joint Commission on Commerce and Trade (JCCT) meeting in Hangzhou, China, along with U.S. Trade Representative Ron Kirk and U.S. Commerce Secretary Gary Locke.  Since China’s accession to the World Trade Organization in 2001, the country has become one of the fastest growing markets for U.S. agricultural, fish and forest exports. U.S. exports to China increased from $2.2 billion in 2001 to $13.2 billion in 2008. Today, China is the fourth largest market for U.S. agricultural exports, and the largest for soybeans, cotton, hides and skins.

Chinese culture is 4,000 years old, and it was the Chinese who invented the compass, writing paper, and gun power, among hundreds of other items.  More recently, the Chinese have contributed greatly to making items affordable at your local department store.   While I certainly admire the cultural achievements of China, and especially its incredibly rapid economic development over the past 20 years, for some reason, I am still perturbed that so many of the everyday items I use come from China - from books I check out at the local library which say "Printed in China" to the 13 different styles of bird feeders that I recent looked at while visiting a Wal-Mart. Every single one of the bird feeders was "Made in China"!

Don't get me wrong. I love to live in a world where my pasta is from Italy, my olive oil is from Spain, my asparagus is from Peru, my wine is from Australia, and my cheese is from France.  But why does it seem that so much of what you can buy in the stores, and not just bird feeders, is from China? From bicycles to basketballs...heck, even this Microsoft Wireless Comfort Keyboard 4000 that I am typing on right now is prominently marked "Made in China".  I challenge you to find a television that says "Made in USA".

Our trade balance with China is totally out of whack.  America needs to keep inventing, building, and selling its ideas and products to China, and to the rest of the world.   U.S. Government policies should encourage investment in the United States, and exports to China and the rest of the world.  Otherwise, in another 20 years, the powerful, American iconic companies such as GE, IBM, GM, Coca-Cola, Microsoft, Apple, and Boeing will dwindle and even disappear altogether, as Chinese companies continue to expand market share worldwide.

Did you know that in 2008, for the first time in history,  there was more foreign direct investment into China than the United States, or that China now graduates 10 times as many engineers from college compared to the United States.  Or that there are more Chinese people who speak English than the approximately 300 million Americans. Those are alarming statistics.

We need to be more sophisticated and welcoming of foreigners. Did you know that many of the street names in Beijing are in English as well as Mandarin? Can you imagine all the streets in Washington, D.C. being in English and Mandarin?  Two way, free and fair trade is the answer to creating a balance of international trade.

In conclusion, I sure do look forward to my next trip to Beijing. I love Peking Duck, the Forbidden City, and the Great Wall.  Hopefully, I will find on a restaurant menu a Napa Valley sauvignon blanc wine and Florida oranges, watch CNN International, admire the Chinese who increasingly follow the American traditions of Halloween and Valentine's Day, see Chinese children's books with Disney characters, and grab a mocha latte at the local Starbucks.  Yes, international trade and travel is a great thing. We just need more of it to be from America. 

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On September 9, 2009, the South Florida chapter of the Organization of Women in International Trade (OWIT) will host Ambassador Juan Miguel Gutierrez Tinoco, the Consul General of Mexico. This month, OWIT-South Florida’s focus is Mexico at our monthly luncheon. The luncheon will take place at the Sofitel Hotel from 11:30 to 1:00 p.m. I hope you make it!  Register here.

Did you know Mexico is the third largest trading partner of the United States? Mexico’s top import into South Florida is gold, up by 184.17% according to World City’s 2009 Miami Trade Numbers.

Save the Date!

Please save November 12, 2009, for our annual International Business Women of the Year (IBWOY) awards luncheon, honoring exemplary women in the South Florida international trade community.  While the details are being fine tuned, I can say that we are doing something different this year. Typically, we raise money for a scholarship for a university student.  However, this year, so many of us have been touched by cancer.  We recently lost Bunny Schreiber, a beacon in the South Florida trade community, and one of our own Board members is currently fighting cancer. Therefore, this year we would like to raise money for breast cancer awareness and will donate proceeds of our silent auction to the Susan G. Komen foundation. If you have any items you'd like to include in the auction, or are interested in sponsorship, please contact me.

I have to say, I personally have truly enjoyed being a Board member of OWIT for the past four years, and hope you too will get involved!  We'd love your feedback for future events, and would appreciate new faces on our committees!

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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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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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