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

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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.   

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments (14)
• Trackbacks
• Share Link

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!

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link