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When we’re talking about assists, we’re not talking about an assist in basketball.  Rather, for importers, assists are important to understand when valuing your merchandise.

As we all know, importers are responsible for exercising reasonable care in valuing imported merchandise and in providing the information and documentation necessary for U.S. Customs and Border Protection (CBP) to properly assess the duty and to determine whether any other applicable legal requirements are met.  

The preferred method of appraisement is Transaction Value, which is defined as the price paid or payable in an arm’s length sales transaction for export to the United States, plus certain statutory additions:

• Packing costs incurred by the buyer;
• Selling commissions incurred by the buyer;
• The value of any assists, apportioned as appropriate;
• Royalties or licensing fees the buyer is required to pay, directly or indirectly, as a condition of the sale;
• The proceeds of any subsequent resale, disposal or use of the imported merchandise that accure, directly or indirectly, to the seller.

19 U.S.C. §1401a(b).

In determining the proper value of the subject merchandise, many importers fail to capture all the required costs and are not properly declaring the correct value for any import.  Of particular concern are assists.

An assist is any of the following items that a buyer of imported merchandise provides, directly or indirectly, free of charge or at a reduced cost, for use in the production or sale of merchandise for export to the United States, such as:

• Materials, components, parts and similar items incorporated into the merchandise;
• Tools, dies, molds and similar items used in producing the merchandise;
• Merchandise consumed in producing the imported merchandise;
• Engineering, development, artwork, design work, plans and sketches that are undertaken outside the United States.

Identifying an assist, valuing an assist and determining how to apportion the value of the assist over the production of a good can be quite complicated for importers.

How is the value of an assist determined?  

The value of the assist is either the cost of acquiring the assist by the importer from an unrelated seller, or the cost of producing the assist if produced by the importer or person related to the importer.  The value of the assist must also include the cost of transporting the assist to the place of production.  The value of assists used in producing the imported merchandise is adjusted to reflect use, repairs, modifications, or other factors affecting the value of the assists.  So, for example, if the assist was previously used, the original cost of acquisition or production must be decreased to reflect the use, regardless of whether the importer acquired or produced the assist.  On the flip side, repairs or modifications to the assist may result in the value of the assist having to be adjusted upwards.

What is important to consider when dealing with assists is how to apportion the value of the assist to the imports and what is the best method to adjust customs value.

How is the value of an assist apportioned?

The apportionment of the assist to the value of imported merchandise may be done in a reasonable manner appropriate under the circumstances in accordance with generally accepted accounting principles.  In determining how to apportion the value of the assist, the devil is in the details!  For example, if the importer expects the entire production to be exported to the United States, then the value of the assist could be pro-rated over the first shipment, if the importer wants to pay duty on the entire value at one time; or the value of the assist could be pro-rated over the number of units produced up to the time of the first shipment; or the value of the assist could be pro-rated over the entire anticipated production.

However, if the importer is unsure whether the entire production will be destined to the United States, then the importer must apply some other method of apportionment that is consistent with generally accepted accounting principles.

Most importantly, even when an import is duty free, the value of any assist must be declared upon import.  It is the importer’s responsibility to ensure that all imports are correctly valued.  Be sure with your items that you understand what costs should or should not be included in the value of your imported product.

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Happy Happy Holidays!  Wishing everyone all the very best this holiday season.  See you in the new year!

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As Santa prepares his sleigh for his whirlwind cruise around the world to all the good little boys and girls, does Santa have to clear Customs every time he enters that bag of toys into the commerce of the United States?  Nearly all merchandise imported into the U.S. undergoes the entry process, unless specifically excepted (for example, a Santa Clause).  If you aren’t Santa what is the entry process like?  

To properly “enter” merchandise, documents containing sufficient information must be filed with U.S. Customs and Border Protection (CBP).  Importers must provide CBP with information such as declared value, tariff classification and rate of duty, as well as other information necessary to enable CBP to properly assess duties, collect accurate statistics and determine whether other applicable requirements of law have been met.

Right to Make Entry

Only certain persons, including businesses and individuals, have the right to enter goods.  The party must have a “financial interest” in the transaction and can be:

• The actual owner, purchaser or consignee of the goods;
• A licensed customs broker authorized by the owner;
• A buying or selling agent;
• A person who imports under consignment, on a loan or on a lease;
• A person who imports for exhibition at a trade fair; or
• A person who imports for repair, alteration or further fabrication.

Owners and purchasers of imported merchandise may file the entry documents themselves, or hire a licensed Customs broker who is familiar with the complex importing process to do so on their behalf.  An owner, purchaser or, in some cases, broker filing the entry is referred to as the “importer of record,” and is the party responsible for payment of all the duties and taxes due on the transaction.

The merchandise may also be entered in a number of different ways:  for consumption, admitted into a bonded warehouse or foreign trade zone, or transported in bond to another port of entry or country.

Entry Process

Formal entry for consumption typically involves the filing of an entry on Customs Form (CF) 3461, as well as other documentation necessary to determine merchandise admissibility (commercial invoices, packing lists, etc.), within 15 calendar days after a vessel, aircraft or vehicle lands, after receipt under a permit to transfer, or after arrival at the port of destination (for merchandise transported in-bond).  A follow-up entry summary on a CF 7501, with estimated duties attached, must be filed within 10 working days after the time of entry.

Alternatively, an importer can file only a CF 7501 entry summary with estimated duties attached, prior to the release of merchandise.  In this case, the CF 7501 serves as both the entry and the entry summary, but effectively deprives the importer of the 10 working day duty deferral period available when a CF 3461 is used.  This type of entry is referred to as a “live entry,” and can be filed either at the option of the importer or if required by CBP in circumstances where:

• The importer has repeatedly failed to file timely entry summaries;
• The importer has not taken prompt action to settle a claim for liquidated damages;
• The importer has repeatedly delivered incomplete or erroneous entry summary documentation;
• The importer is substantially or habitually delinquent in the payment of CBP bills; or
• The merchandise is of a special class.

If an importer fails to timely file a CF 3461 entry (or a CF 7501 for a live entry) the merchandise may be sent to a bonded warehouse that is eligible to receive and store “general order” merchandise.  Merchandise can remain in general order storage for up to six months before being sold at public auction.  If an importer fails to file a CF 7501 entry summary within 10 working days after the time of entry, CBP will make a demand for liquidated damages against the importer’s basic importation bond.

In general, the applicable rates of duty are those in effect at the time of entry.[1]  As a result, importers may be able to receive a more favorable rate of duty by effecting the time of entry.  The recognized time of entry when a CF 3461 is filed is:

• The time of release;
• The time the CF 3461 is filed, if requested by the importer on the CF 3461 at the time of filing and the merchandise has already arrived within the port limits; or
• The time the merchandise arrives within the port limits, if the entry documentation is submitted before arrival and the importer makes a request on the entry documentation at the time of submission.

For live entries, merchandise withdrawn from a warehouse for consumption, and merchandise released under the immediate delivery procedure, the time of entry is the time the CF 7501 entry summary is filed in proper form with estimated duties attached.  The time of entry for quota class merchandise is the time of presentation of the entry summary or withdrawal for consumption in proper form with estimated duties attached (or without estimated duties attached if the entry/entry summary information and a valid scheduled statement date have been successfully received by CBP using the Automated Broker Interface (ABI)).

Bonds

In order for merchandise to be released from CBP custody, a single entry or continuous bond on a CF 301 must be on file for the importer.  A single entry bond covers one entry transaction, whereas a continuous bond covers all entry transactions that take place over a one-year period.  A basic importation bond is a contract whereby a surety, acting as guarantor, has an obligation to pay CBP should the importer, acting as the bond principal, default in the performance of any of the bond conditions, which includes agreement to:

• Pay duties, taxes and other charges;
• Make or complete entry;
• Produce documents or evidence;
• Redeliver merchandise;
• Rectify any non-compliance with provisions of admission;
• Hold merchandise for examination;
• Reimburse or exonerate the U.S.;
• Use and handle duty-free merchandise in accordance with the law;
• Comply with CBP Regulations applicable to CBP security areas at airports;
• Comply with electronic entry and/or advanced cargo information filing      requirements;
• Ensure and establish the issuance of softwood lumber export permits and collection of export fees.

Default on any of these agreements may lead to an assessment of liquidated damages against the principal and surety for breach of the bond conditions.

Basic importation bonds may be secured through approved surety companies, with cash or through certain U.S. government obligations.  Customs brokers may also permit use of their bond to provide the required coverage.

Immediate Delivery

An importer may chose to request a special permit for immediate delivery of their merchandise by designating a CF 3461 as a special permit instead of as an entry under the following circumstances:

• Land shipments from Canada and Mexico;
• Shipments of fresh fruit and vegetables from Canada and Mexico which are transported to the importer’s warehouse at the port of arrival for examination, resulting in entry being made only on those portions with commercial value;
• Shipments of certain quota class merchandise;
• Shipments of trade fair articles;
• U.S. government shipments;
• Split shipments for which an incremental release election has been made;
• Other shipments authorized by CBP, such as those that occur at the end of the      calendar year, when importers may elect a time of entry in the following year when duty rates have decreased through use of special permit procedures.

Examination and Release

After an entry is filed, CBP has 5 working days to examine the merchandise and decide whether to release, seize or detain merchandise (so long as no other agency determines admissibility).  If the port director issues a permit to release, the merchandise will be released.  Merchandise not released within the 5-day period is considered detained.

CBP must issue a detention notice within 5 working days after deciding to detain the merchandise or failing to release the merchandise within the 5-day period.  CBP then has 30 days from the date of presentation for examination to decide whether to release, seize or deny entry to the goods.  If entry is denied or no decision is made within 30 days, the merchandise is deemed excluded, and may be exported.

CBP may conditionally release merchandise before all required evidence is produced, quantity and value are determined, or the right of admission into the U.S. is determined.  However, CBP may demand redelivery of the merchandise if the merchandise:

• Fails to comply with the laws or regulations governing admission into the U.S.;
• Must be examined, inspected, or appraised; or
• Must be marked with the country of origin as required by law or regulation.

A demand for redelivery will be made on a CF 4647 within 30 days of the release date or 30 days of the end of the conditional release period, whichever is later.  A conditional release period may be established in one of two ways:

1. By regulation (such as 19 CFR 141.113(b), which allows for 180 days to determine the country of origin of textiles); or
2. By notifying the importer of record of the conditional release period within 30 days after release (such as through issuance of a CF 28 “Request for Information” requesting a sample).

A failure to comply with a request for redelivery will result in a demand for liquidated damages.  (Remember, that if liquidated damages are made, you will certainly want to keep track of those dates!  See Timing is Everything:  Keeping Track of Liquidation, dated August 21, 2012.

Importers involved in the importation of certain goods, such as art and antiques, should be aware that such goods may receive enhanced scrutiny.  CBP, in combination with its sister agency, Immigration and Customs Enforcement (ICE), has increased its efforts to interdict, seize and return art or other artifacts that try to enter the U.S. without proper documentation, authorization or provenance.

So, it’s a good thing that Santa is excepted from the entry process.  There might be a lot of unhappy kids out there on Christmas Day!

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U.S. Customs and Border Protection (CBP) opened its twelfth annual East Coast Trade Symposium today in Washington D.C.  Originally scheduled to take place last month, Hurricane Sandy blew the event right off of the October calendar and into November.  The annual meeting is a two-day symposium that presents panel discussions with members from the trade community, CBP personnel and representatives from other governmental agencies.  The panels address a broad range of topics from global supply chain security to the role of the broker to the various programs implemented by CBP.

Today, CBP Deputy Commissioner David Aguilar announced the expansion of the Centers of Excellence and Expertise (CEE); creating six new centers in 2013.  If you recall, in May we discussed these Centers of Excellence and Expertise in “`Tailor-Made Trade’:  Centers of Excellence and Expertise“.  The six new CEEs to be established in FY 2013 are:

• Agriculture & Prepared Products:  Miami, FL
• Apparel, Footwear & Textiles:  San Francisco, CA
• Base Metals:  Chicago, IL
• Consumer Products & Mass Merchandising:  Atlanta, GA
• Industrial & Manufacturing Materials:  Buffalo, NY
• Machinery:  Laredo, TX

Currently, CBP has established CEEs in:

• Electronics:  Long Beach, CA
• Pharmaceuticals, Health & Chemicals:  New York, NY
• Automotive & Aerospace:  Detroit, MI
• Petroleum, Natural Gas & Minerals:  Houston, TX

The CEEs were developed to address the issues of specified industries and to provide a single point of contact for questions and/or concerns related to that industry.  The CEEs would empower CBP and would allow the agency to “effectively partner with industry to facilitate international trade through U.S. ports of entry.”  It is expected that the CEEs will lower the cost of doing business for the trade, provide greater consistency and predictability, enhance CBP’s enforcement efforts and serve as a resource to the broader trade community and CBP’s agency partners.

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The world is getting smaller and, if we aren’t already, we are quickly becoming a global economy that is inclusive of all the world’s countries and their national economies.  Domestic producers can participate in the international scene and consumers are free to choose between purchasing a local or an imported product.  And, as our global economy continues to grow, the U.S. Customs and Border Protection (CBP) underscores its dual mission of securing the Nation’s borders while facilitating legitimate trade.  As part of this dual mission, the CBP has prioritized what trade issues the agency should closely look at “using a strategically layered risk management approach based on the potential impact of noncompliance.”  What are the priority trade issues?  How have these priority trade issues been selected?   

The Office of International Trade (OT), led by Assistant Commissioner Allen Gina, focuses its resources on designated Priority Trade Issues (PTIs), which are identified as high risk areas that can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people.  These PTIs “form the core of the risk management approach outlined in the CBP Trade Strategy.”  The CBP Trade Strategy was developed to address the growth, risk and complexities of international trade and to build a system that is safe and secure for ensuring legitimate imports into the United States.  CBP has stated that this vision could be realized by achieving four strategic goals:

• Facilitate Legitimate Trade and Ensure Compliance.  Manage a consistent and risk-based trade process, reduce delays to compliant imports, and strengthen partnerships to ensure compliance.
• Enforce U.S. Trade Laws and Collect Accurate Revenue.  Apply expert knowledge of trade laws and swift enforcement actions to identify, address and deter high-risk trade law violations and ensure proper revenue collection.
• Advance National and Economic Security.  Protect the U.S. economy and consumers from unsafe imports and unfair trade practices, assist in establishing and directing U.S. trade policy, and operate trade import processes that complement national and economic security goals.
• Intensify Modernization of CBP’s Trade Processes.  Position the agency to successfully achieve business results and realize the benefits of modernization.

For a full report on CBP’s Trade Strategy, see CBP Trade Strategy Fiscal Years 2009-2013.

What is important about these PTIs is that CBP makes determinations as to where to invest CBP resources, enforcement and facilitation efforts based upon this risk management approach, again, as outlined in the CBP Trade Strategy.  This includes the selection of audit candidates, special enforcement operations, policy issuance, outreach and legislative and regulatory initiatives.  Essentially, it gives the industry an insider’s view, if you will, of what CBP is focusing on.  If you’re in the trade industry, it should come as no real surprise that the top PTIs include:

1. The Role of the Broker;
2. ACE, the agency’s automated cargo processing system;
3. The Centers of Excellence and Expertise;
4. Simplified Entry-Air Cargo Advanced Screening;
5. Trusted Trade Partnerships;
6. Trade Intelligence; and
7. One U.S. Government at the Border

Role of the Broker

Current broker regulations, 19 C.F.R. § 111, have not kept up with advancements in technology or the facilitation goals of CBP.  CBP has been conducting public webinars and hosting Broker Roundtables to solicit input and comments from the industry and from brokers.  In its effort to update the broker regulations, CBP’s goals are to:

• Clarify brokers’ responsibilities related to importer validation and provide greater visibility of importers.
• Modernize the regulations to align with current electronic capabilities and business practices.  (These improvements could decrease administrative costs for both CBP and brokers.)
• Reinforce the broker’s responsibility to exercise due diligence in conducting business and to “professionalize” the customs broker by introducing a continuing education requirement.

See The Role of the Broker Fact Sheet.

ACE:  Modernization Information Systems

ACE is the commercial trade processing system being developed by CBP to facilitate legitimate trade and strengthen border security.  This effort to modernize business processes has been underway for over ten (10) years and has just gone into its planned operations and maintenance phase.  This year, alone, we have seen the following functions implemented:

• e-Manifest:  Rail and Sea.  Provides a consolidated view of rail and sea shipment manifest and entry data at the bill of lading or container level to facilitate the identification of shipments that may pose a risk and expedite the pre-arrival processing legitimate cargo.  On September 29, 2012, ACE became the only CBP-approved Electronic Data Interchange (EDI) for submitting rail and see manifests and CBP is on track to decommission legacy rail/sea manifest processing by the end of the 2012 calendar year.
• Cargo Release/Simplified Entry.  Streamlines the data required to obtain release of products for cargo, eliminating the current entry (CBP Form 3461) for transactions in the Simplified Entry pilot.  The Cargo Release pilot begain in May 2012 in the air mode of transportation and, as of October 18, 2012, approximately 27,400 Simplified Entries have been successfully filed for 580 importers of record.
• Partner Government Agency (PGA) Interoperability.  Enables CBP to share data, documents and events of interests with PGAs in an automated manner.
• Document Image System (DIS).  Allows trade members to electronically supply documentation needed during the cargo release process to CBP and other Federal agencies.
• Remote Location Filing for Type 03 Entry Summaries.  Effective October 22, 2012, ACE Entry Summary filers may begin transmitting Entry Summaries certified for cargo release for  Entry Type 03 (AD/CVD) using Remote Location Filing (RLF).

There is a lot of work and effort going into ACE, so be sure to stay tuned to all the new developments as they happen.  See Automated Systems and Operational Support.

Centers of Excellence and Expertise (CEE)

The CEEs have been referenced as a “game changer” for CBP.  The purpose of the CEEs is to enhance, improve and make more uniform efficient facilitation and CBP’s enforcement efforts.  Presently, CBP intends on establishing a total of nine CEEs:

• Electronics
• Pharmaceutical, Health & Chemicals
• Automotive & Aerospace
• Petroleum, Natural Gas & Minerals
• Agriculture & Prepared Products
• Base Metals & Machinery
• Consumer Products & Mass Merchandising
• Industrial & Manufacturing Materials
• Textiles, Wearing Apparel & Footwear

Simplified Entry-Air Cargo Advanced Screening

Simplified Entry (SE) began in May 29, 2012 at three ports:  Indianapolis, Chicago and Atlanta, with nine initial pilot filers:  AN Deringer, Expeditors, FedEx Trade Networks, FH Kaysing, Janel Group of New York, Kuehne & Nagel, Inc., Livingston International, Page & Jones, Inc. and UPS.

The goal of SE is to reduce transaction costs, expedite cargo release and enhance cargo security.  Currently, CBP is working on soliciting additional pilot participants and the agency is continuing its efforts to on developing, expanding and deploying additional functionality.

Trusted Trade Partnerships

We are all pretty familiar with the Trusted Trade Partnership programs, which include Customs-Trade Partnership Against Terrorism (CTPAT) and the Importer Self-Assessment Program (ISA).  CBP continues to examine how it can increase participation with the ISA partnership program and is examining how to merge the key benefits of these current programs with new programs.

Trade Intelligence

CBP has held a number of Trade Intelligence Forums to inform the industry about this PTI.  The Trade Intelligence initiative has been designed to connect individuals representing the industry sector with CBP agents to identify issues of mutual interest and to provide CBP with targeting, enforcement, and/or intelligence information.  This initiative was a little confusing to me as Mr. Leonard, the Acting Executive Director for Trade Policy and Programs, stated, “Trade Intelligence provides a  means for two-way intelligence communication between industry and CBP that will lead to more effective and focused trade enforcement.”  But, I’m not sure, yet, how or what intelligence would flow from CBP to the industry.

The Fact Sheet for the Trade Intelligence PTI indicates that CBP is developing a Private Sector Intelligence Liaison Office (PSILO), which would dedicate industry personnel to strategic CBP locations.  These industry personnel would then “provide critical insight to CBP on enforcement issues related to developments in the intellectual property rights, AD/CVD, trade preference areas as well as advising CBP on current industry-wide changes.

One U.S. Government at the Border

This PTI furthers CBP’s efforts to coordinate with federal agencies, the trade community and foreign governments to better define risks through increased automation, information sharing and interagency partnership programs.  CBP is looking at ways to improve its electronic data system so that Partner Government Agencies (PGAs) can share data and information to facilitate the movement of goods and to allow the agencies to target and conduct risk analysis.

Many of these PTIs have been in the pipeline for many years.  And over the years, the industry and CBP have dedicated a lot of time, energy and resources into shaping these programs into what we have today.  Although much work remains to be done, the current status and the future of these PTIs will certainly up for discussion at the 2012 East Coast Trade Symposium, which has been rescheduled for November 27-28, 2012.

If you aren’t able to attend the Symposium in person, it is possible to tune in via live Webcast.  Click here, for the 2012 East Coast Trade Symposium agenda.

Until then, have a safe and wonderful Thanksgiving holiday.  Gobble, gobble!

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Most of the dust from last week’s election has settled, but some states are still awaiting their results as  thousands of provisional ballots remain to be counted.  And, if you recall, Import Trade Law posted about California’s Proposition 37, which would have required labeling of all food products containing genetically modified organisms within two years. Proposition 37 was defeated, but IF it had passed, California would have been the first state to require such labeling on all foods containing genetically modified ingredients.  See A Full Plate for Food Manufacturers and Importers:  California’s Proposition 37.  But, the fight isn’t over quite yet. 

Now, the groups that supported Proposition 37 are now watching the Farm Bill and keeping a laser focus on federally regulating the labeling of genetically engineered foods.  In addition, a petition was filed with the Food and Drug Administration (FDA) calling upon the FDA to:

• Issue new regulations requiring labeling of all foods produced using genetic engineering;
• Change the way the FDA defines “material” to a change in food at the atomic, molecular or genetic level that a significant share of consumers would find relevant to their purchasing decisions; and/or
• Issue new regulations requiring labeling of all transgenic food because it always results in novel DNA and proteins never before present in the foods, and which consumers would not expect.

The fight is long from over.  I am sure that propositions and measures similar to California’s Proposition 37 will continue to show up in other states.  And, food manufacturers and importers should certainly keep an eye on what these states are doing. But, keep your other eye on what develops federally.  This will certainly be a hot topic for some time.

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With the northeast region still recovering from Superstorm Sandy and a Nor’easter threatening to undo the repairs that have been made in these past few days, CBP has been scrambling to implement interim measures in an effort to alleviate continued interruption of cargo and release services at the ports of New York and Newark.  

The CBP website is being updated regularly to keep the trade current on the operating status of each port.  On November 2, 2012, CBP issued interim processes related to cargo, entry filing and collection.  Hurricane Sandy Interim Processes for New York and Newark Related Cargo, dated November 2, 2012.

Cargo Release

To facilitate cargo release, CBP has advised:

• Vessels with current manifest and entries filed for the Ports of New York/Newark shall leave their data as is and not re-file at the diversion Port of Entry.
• Vessles with manifests re-filed for the diversion Ports of Entry with all entries still filed at the Ports of New York/Newark must re-file their manifests back to the Ports of New York/Newark.
• All future vessels without entry and manifest data filed must file at the actual port of arrival.
• Carriers may accept stamped “delivery authorized” paperwork from CBP at the Port of Arrival, if the the carrier wants a paper copy of the documentation.
• CBP will not issue penalties against carriers and importers for diverting cargo without changing the manifest and entry data electronically OR for removing containers from the yard for delivery without an electronic release message.

If a vessel has already been diverted to another Port of Entry from New York/Newark, and CBP has already received the manifests, those manifests should not be altered.  Vessels should be aware that they will not receive electronic release notifications and will be required to use the stamped “delivery authorized” paperwork to remove remove the container from the yard.  And, because the electronic systems will show the Port of Arrival as either the Port of New York or Newark, each vessel must report the intended arrival telephonically to the diversion port. Again, CBP has provided the numbers for each diversion port.

Entry Summary and Collections

Special interim provisions have been implemented for filers that are unable to submit their entry summary and payment via check or ABI/ACH.  (If you are able to submit your entry summary and payment via check or ABI/ACH, you should follow the normal processing methods.)

• Importers and filers may use FedWire to transmit monies owed directly to the Office of Administration, Revenue Division (OA/RD) for processing.  Entry summaries should not be sent to OA/RD.  Rather, entry summaries should be sent to the appropriate port.
• FedWire payments should include the purpose of the payment on the Originator to Beneficiary Information (line 2 on the attached form).  Supporting documentation should be sent electronically to cashier@cbp.dhs.gov.
• For shipments released in the Ports of New York, Newark and JFK, the importer or filer may submit the payment directly to those ports or the OA/RD for processing.  Again, entry summaries should be submitted to the appropriate port.
• Payments submitted directly to the OA/RD should include supporting documentation (such as entry number, bill number, case number, etc.) and sent to:

Customs and Border Protection
Revenue Division
PO Box 68907
Indianapolis, IN 46268-0907

or, for overnight delivery:

Customs and Border Protection
Revenue Division
6650 Telecom Drive, Suite 100
Indianapolis, IN 46278

Broker Permits

Filers that are temporarily conducting business in the Ports of Norfolk, Baltimore, or Philadelphia that are not currently permitted in that port, may obtain a temporary, local permit by contacting the Broker Management Officer at the port.  CBP is waiving the required fee.

CBP is working as quickly as possible to get each port up and running at normal capacity.  However, much work still has to be done and with the pending Nor’easter expected to hit the same area later this week, it’s a good idea to monitor the CBP website to keep current on the Business Resumption Messages, special instructions and advisories CBP is issuing.

Our thoughts are will all those impacted by Hurricane Sandy.  And, if you still can’t make it into work, I hope you can make it out to vote!

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So, the joke goes:  Three tomatoes were walking down the street; Papa Tomato, Mama Tomato and Baby Tomato.  Baby Tomato starts lagging behind.  Papa Tomato gets really angry and goes back and  squishes him and says, “Ketchup!”

Why the bad joke?  It brings to mind the story of the tomato.  Specifically, the Flavr Savr tomato–the world’s first commercially-available genetically modified whole food.  And, why do we care about the Flavr Savr tomato?

We care because of California’s Proposition 37 or the “California Right to Know Genetically Engineered Food Act”.  

Genetically modified foods have been around since the late ’80′s.  During that time, Calgene, a California biotech firm, invented the Flavr Savr tomato.  The Flavr Savr tomato was invented to keep tomatoes firmer as they ripened on the vine, to survive trucking to market.  Scientists were able to isolate a gene in the tomato and, with modification, interfered with the gene encoding to slow down the cells from breaking down in the tomato.

The pace on genetically engineered foods quickened and today, there are genetically modified feed, plants and crops.  For example, Hawaii’s papaya industry was facing disaster because of a deadly papaya ringspot virus.  Today, 80% of Hawaiian papayas are genetically modified to resist the virus.  Without this engineering, the state’s papaya industry would have collapsed.

The whole issue of genetically modified foods is taking center stage in the Golden State and importers of food product should pay special attention.  California’s Proposition 37, if approved by voters, will require a special label for foods sold to consumers  made from plants or animals with genetically engineered material .  Specifically, Proposition 37 will:

• Require labeling on raw or processed food offered for sale to consumers if the food is made from plants or animals with genetic material changed in specified ways.
• Prohibit labeling or advertising such food as “natural”.
• Exempt from this requirement foods that are “certified organic; unintentionally produced with genetically engineered material; made from animals fed or injected with genetically engineered material but not genetically engineered themselves; processed with or containing only a small amounts of genetically engineered ingredients; administered for treatment of medical conditions; sold for immediate consumption such as in a restaurant; or alcoholic beverages.”

If passed, California would become the first state to require such labeling on all foods that contain genetically modified ingredients.  Food makers and importers would have to review their labeling and/or reformulate their products to either comply or avoid the labeling requirements.  And, it is important to note that, if passed by California voters, the measure can be enforced by “any person”.   That’s right.  Individuals or groups can sue the food manufacturer and, perhaps, the supermarkets and food retailers, if they find food that has been mislabeled.

Proposed legislation similar to California’s Proposition 37 is being considered by twenty other states and those other states will certainly be watching what happens with this initiative.

But, what about the Food & Drug Administration (FDA)?  The FDA regulates and ensures the safety of all domestic and imported foods in the United States (with the exception of meat, poultry and egg products, which are regulated by the United States Department of Agriculture (USDA)).  What does the FDA think about labeling genetically engineered foods?  The FDA has said that although labeling is generally not necessary because the genetic modification does not materially change the food, the agency is reviewing and studying the labeling petition and will be watching what happens in California.  The New York Times, “Battle Brewing Over Labeling of Genetically Modified Food“

To review the complete text of California Proposition 37, click here.  

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When people or companies engage in transactions, there are usually risks involved for all parties involved.  When engaging in international commercial transactions, those risks can be managed when you have clear terms by which all parties operate.  In January 2011, the International Chamber of Commerce (ICC) published an updated and revised version of the International Commercial Terms, which we know as the Incoterms® rules.  The Incoterms® rules are pre-defined, internationally accepted, commercial terms used in international commercial transactions to convey the obligations, costs and risks associated with the transportation and delivery of goods.  These rules define the responsibilities of exporters and importers in the arrangement of shipments and the transfer of liability involved at various stages of the transactions.

These rules are important in international commercial transactions because they provide for a consistent understanding and application of the commercial terms, which reduces the likelihood of misinterpretations of the rules from different countries.  In short, the Incoterms® 2010 rules play an important part of the daily language of trade.  With the publication of the Incoterms® 2010 rules, what has changed?

Basically, the Incoterms® 2010 rules eliminated four terms and added two, with the intention of providing better clarification and consistency in application of the eleven (11) incoterms and to better reflect current global trade practices.

The Incoterms® 2010 rules are divided into two groups:

Rules for Sea and Inland Waterway Transport

FAS (Free Alongside Ship):  The Seller is obligated to deliver the goods alongside the vessel at the port of shipment.  From that point, the Buyer bears all costs and risks of loss or damage.

FOB (Free On Board):  The Buyer assumes all costs and risks when the goods have passed over the ships rail at the port of export.

CFR (Cost and Freight):  The Seller must pay all costs and freight to move the goods to the named port of destination.  The Buyer bears all risks of loss or damage when the goods pass over the ship’s rail in the port of shipment.

CIF (Cost, Insurance and Freight):  The Seller has the same obligations under CFR but is required to provide insurance against the Buyer’s risk of loss or damage to the goods that might occur during transit.

Rules for Any Mode or Modes of Transport

EXW (Ex Works):  The Seller is only responsible to make the goods available at the Seller’s premises.  The Buyer bears full costs and risks of moving the goods from the Seller’s premises to destination.

FCA (Free Carrier):  The Seller delivers the goods, cleared for export, to the carrier selected by the Buyer.  The Seller loads the goods if the carrier pickup is at the Seller’s premises.  From that point, the Buyer bears the costs and risks of moving the goods to destination.

CPT (Carriage Paid To):  The Seller pays the freight for moving the goods to the named destination.  The Buyer bears the risk when the goods have been delivered into the custody of the carrier.

CIP (Carriage and Insurance Paid To):  The Seller pays for moving the goods to destination.  From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage.  The Seller purchases the cargo insurance.

DAT (Delivered At Terminal):  The Seller delivers the goods and unloads at the named terminal at the place of destination.  From that point, the Buyer assumes full responsibility for loss or damage.

DAP (Delivered At Place): The Seller is obligated to place the goods at the Buyer’s disposal on the arriving means of transport.  The Seller bears the all the risks involved in bringing the goods to the named place.

DDP (Delivered Duty Paid):  The Seller is responsible to deliver the goods to the named place in the country of importation and must pay all Customs duties and taxes.

Although the Incoterms® 2010 rules are not exactly “new”, it is important that all parties to an international commercial transaction understand what terms are being agreed upon because these terms define your obligation, your costs and your risks involved with the movement of the good from the Seller to the Buyer.  It is equally important to understand what the incoterms do not do.  The incoterms do not:

• create a contract;
• determine ownership or transfer title to the goods;
• evoke payment terms;
• apply to service contracts, nor define contractual rights or obligations (except for delivery);
• define breach of contract remedies; or
• protect parties from their own risk or loss.

It’s easy to forget what the many acronyms and abbreviations mean in our industry and incoterms are no exception.  Take a little time to get back to basics and review those incoterms!

The ICC has provided a good guide and introduction to the Incoterms® 2010:  Introduction to the Incoterms 2010

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Just the other day, I heard an interesting story on KQED Public Radio about Northern California’s very own Napa Valley.  “Napa Valley” Label Gets Legal Status in China.  Napa Valley, as we all know, is one of the famous wine-producing regions in the world.  Napa Valley vintners sell their products around the globe and China is one country where business is booming  About one-fourth of Napa’s wineries are doing business in China.  In fact, business in China is booming!  It was reported that Napa’s wineries did $31.5 million in 2010 and $55.5 million in 2011.  So, what’s the problem?  Counterfeiting!  

That’s right.  Winemakers in Napa Valley discovered that some products made in China were misusing the Napa name on the label.  Wine scandals are not new and nor are they specific to just the Napa Valley.  In 1985, Austrian wineries were hit with a scandal in which a toxic substance, diethylene glycol–a primary ingredient in some brands of antifreeze–was added to make the wines taste sweeter and more full-bodied.  Obviously, placing a toxic substance in any beverage has the potential of causing serious health damage.  Thankfully, there were no reported instances of injuries to those that drank the tainted Austrian wines.  As a result of this antifreeze scandal, the Austrian wine export business completely collapsed and the reputation of the entire Austrian wine industry suffered, taking well over a decade for the industry to recover.

When Napa Valley wineries learned of the misuse of the Napa Valley name in China, there was immediate concern.  Napa Valley winemakers did not want consumers to associate the Napa Valley name with an inferior product.  Over the past ten years, Napa Valley vintners have been working with the Chinese government to take steps to protect the Napa Valley name.  Today, Napa Valley has a new legal status in the world’s second-largest economy.  The new legal status granted to Napa Valley is called “geographic indication status”.

A geographic indication is a sign used on goods that have a specific geographical origin and possess qualities, reputation or characteristics that are essentially attributable to that place of origin.  Napa Valley has a valuable reputation and if it is not adequately protected, might have been misrepresented in China.  This is the first time China has granted this status to any American agricultural product or to any wine-producing region outside of China’s borders.  But, the fact that Napa Valley now has geographic indication status in China is not only good for Napa Valley vintners.  It is also good for the Chinese consumer.  Chinese consumers can be assured that they are buying a genuine product with specific qualities and characteristics that are expected from the Napa Valley.

Napa Valley vintners have achieved similar status (protection) in the European Union, India, Thailand, Canada and Brazil.  Geographic indications are regulated by each country and, as you can guess, each country has different standards and levels of enforcement.  However, there have been attempts to harmonize the different approaches and standards that governments use to register geographic indication products.  The first attempt was in 1883 in the Paris Convention, followed by a much more detailed provision in the 1958 Lisbon Agreement on the Protection of Appellations of Origin and their Registration.

The next challenge for Napa Valley vintners and the Chinese authorities will be to see how the geographic indication status can be enforced.