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Department of Homeland Security  Customs and Border Protection. U.S. Customs and Border Protection. WESCCON October 22, 2010 San Diego, California. The Textile Import Industry. 2. Textile/Apparel Supplier Countries by Value 2008 and 2009. Apparel Supplier Countries by Value.

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trade preference programs

Department of Homeland Security  Customs and Border Protection

Trade Preference Programs
  • Unilateral/Bilateral/Multilateral Preference Programs
    • African Growth and Opportunity Act
    • Qualifying Industrial Zones; Jordan/Israel/Egypt
    • Caribbean Basin Trade Partnership Act
    • Haiti HOPE 1 and 2, HELP
    • Andean Trade Promotion and Drug Eradication Act
    • Free Trade Agreements (Israel, NAFTA, Jordan, Chile, Singapore, Australia, Morocco, CAFTA, Bahrain, Oman, Peru)
  • Unique Qualifying Rules for Each
textile enforcement

Department of Homeland Security  Customs and Border Protection

Textile Enforcement
  • Textile Production Verification Team 2009 (Preference Claims)
    • Visited 11 Countries
      • Visited 223 Factories to Validate FTA/Trade Preference Claims
      • Number of Factories Compliant: 111
      • Number of Factories Non Compliant: 96
      • 45% Non-Compliance Rate
enforcement challenges post 1 1 09

Department of Homeland Security  Customs and Border Protection

Enforcement Challenges Post 1/1/09
  • Significant Shift Away from China Quota Enforcement
    • FTA/Trade Preference Claims
      • Continue to Use Textile Production Verification Team Visits
      • Port Verifications
      • Continue to Initiate Special Enforcement Operations
      • Continue to Work with Foreign Counterparts to Exchange and Reconcile Trade Data
      • Continue to Work and Expand Interaction with U.S. Mills to Ensure Validity of Claims
        • Altered Affidavits
        • Misrepresentation of Information
verifying trade preference claims

Department of Homeland Security  Customs and Border Protection

Verifying Trade Preference Claims
  • Verifications Will NOT Require the Detention of the Merchandise
  • A Sample from the Immediate Shipment May Be Required; This Requires an Examination
  • CBP Will Request the Affidavit via a CBP 28 Request for Information
  • CBP Will Contact the Mill Regarding the Veracity of the Document and the Information Contained on the Affidavit Including Quantity and Type of Yarn and Fabric
verifying trade preference claims9

Department of Homeland Security  Customs and Border Protection

Verifying Trade Preference Claims
  • CBP Does NOT Support the Use of Blanket Certificates
  • Affidavits Must Contain Contact Information
  • The Yarn Producer Must Prepare the Affidavit
  • Affidavits Must Contain Specific Information
    • Type of Yarn/Fabric
    • Should Link to Other Supporting Documents; Contracts; Invoices; Purchase Order Numbers
verifying trade preference claims10

Department of Homeland Security  Customs and Border Protection

Verifying Trade Preference Claims
  • Document Requirements for Claims Requiring U.S./Regional Yarn or Fabric
    • Records that Demonstrate the Goods Were Made in the U.S./Region
      • Purchase Orders
      • Invoices
      • Delivery Notices
      • Transportation and Export Records
      • Entry Documents Showing Goods Crossing the Border into the Country of Final Production
verifying trade preference claims11

Department of Homeland Security  Customs and Border Protection

Verifying Trade Preference Claims
  • If Documents Do Not Substantiate the Claim of Preference the Duty-Free Treatment Will Be Denied.
  • Prior Claims May Be Reviewed for Sufficiency and CBP Will Determine if a Pattern of Non-Compliance Exists
  • Penalties May Be Assessed, as Appropriate
special enforcement initiatives

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • Use of Short Supply Claims in CAFTA
    • FY 08 and 09: 474 lines with a total value of $12.8 M for 38 different importers were reviewed.
    • 243 (51%) of those lines were determined to be non-compliant.
    • $1.4 M in revenue to be recovered has been identified. 
  • Pocketing Fabric
    • 22 Targeted Entry Reviews; Loss of Revenue $70K
  • FTA Annual Verification Initiative
special enforcement initiatives13

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • Operation Mirage Initiated As a Prototype to Determine the Scope and Impact of Undervalued Textiles Claiming China as the Country of Origin
  • Scientific Statistical Sample of 181 Importers of Record (IoR) and 400 Entry Lines
    • New IoR Number Used over the Last 18 Months
    • More than $50,000 in Value
    • ISA Partners Eliminated
  • Volunteer Teams of CBP and ICE Personnel Conducted Visits to the Sampled IoR
    • Visits to the Brokers (Filers) and Freight Forwarders Were Also Conducted
special enforcement initiatives14

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • Approximately 55% of the IoR Visited Did Not Have the Legal Right to Make Entry (19 U.S.C. 1484)
    • Did Not Own the Goods
    • Had No Financial Interest In the Goods
    • In Most Instances Did Not Even Know that Goods Were Being Imported into the United States
    • Had NO KNOWLEDGE of the Transaction; No Paperwork: Contracts, Invoices, Payment Records
    • DDP/LDP Parties Importing Branded Merchandise for Major Retailers
special enforcement initiatives15

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • Bogus (Exist on Paper Only) Importers
  • No CBP Systems to Validate IoR
  • EIN/CBP Generated ID Numbers Are Not Vetted
  • Entities Keep Generating New Identities on Paper
        • Inability to Collect Duties
        • Inability to Penalize
        • Inability to Hold Anyone Accountable
special enforcement initiatives16

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • First Time Importers Are Assumed to Be Low Risk
  • IoR Quickly Saturates the Bond before Discrepancies Are Found
  • Bonds Cover Duties, but No Monetary Penalties
  • Entities Find It More Advantageous to Change Their Names and Obtain New Bonds
  • Companies Not Paying Their CBP Bills; on the Sanction List and Create New Identities
special enforcement initiatives17

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • Brokers Have No Contact with the IoR
  • Relying on Information Provided Through Freight Forwarders
  • Not Exercising Proper Supervision and Care
  • Accepting Billing Waivers
  • Powers Of Attorney Not Validated; Improperly Executed
special enforcement initiatives18

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • 19 U.S.C. 1484
  • …information shall be transmitted either by the owner, or purchaser of the merchandise or…a person holding a valid license…
  • A nominal importer does not have the right to make entry.
  • The importer must exercise reasonable care
special enforcement initiatives19

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • 18 U.S.C. 1001
  • … falsifies, conceals, covers up by any trick, scheme, or device a material fact;
  • Makes any materially false, fictitious, or fraudulent statement or representation, or
  • Makes or uses any false writing or document…
  • Shall be fined, imprisoned not more than 5 years…
special enforcement initiatives20

Department of Homeland Security  Customs and Border Protection

Special Enforcement Initiatives
  • 18 U.S.C. 1002
  • Ditto for possession of false papers to defraud the United States
doing business using ddp ldp
Doing Business Using DDP/LDP
  • Don’t!!!!! But If You Insist…
    • Make a Surprise Visit to the IoRs Address
    • Does it Exist?
    • Is Anyone There?
    • Is It “Virtual” Office Space?
    • Do They Know Details about the Transaction?
    • How Many Layers Are in the Transaction?
doing business using ddp ldp22
Doing Business Using DDP/LDP
  • Ask for and Review the Customs Entry
    • Does the Information on the Entry Match Your Purchase Order?
    • Description?
    • Quantity?
    • Value?
  • Who Is the Broker? Has the Broker Met the Importer of Record? Who is Orchestrating the Transaction? Importer? Freight Forwarder?
role of the broker

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • The Broker is Licensed by CBP to Conduct CBP Business
  • The Broker is a Critical Player in and Advocate of a Secure Supply Chain
    • If You Do Not Know Who Is Importing the Goods Do You Know What They Are Importing?
    • If the Information Regarding the Importer Is Incorrect Are You Confident that Everything Declared to CBP on the Entry Is Correct?
role of the broker24

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • The Purpose of a Customs Broker’s License Is NOT Simply to File Entry Data on Behalf of Others
  • “No Person May Conduct Customs Business . . . Unless that Person Holds a Valid Customs Broker’s License Issued by the Secretary under Paragraph (2) or (3)” of 19 U.S.C. 1641(b). 
role of the broker25

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • The Term “Customs Business” Is Defined to Mean “Those Activities Involving Transactions with (CBP) Concerning the Entry and Admissibility of Merchandise, Its Classification and Valuation, the Payment Of Duties, Taxes, or Other Charges Assessed or Collected By (CBP) upon Merchandise by Reason of Its Importation . . . .”  19 U.S.C. 1641(a)(2).
role of the broker26

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • “It also includes (“also includes” means in addition to the primary task set forth in the previous slide) preparation of documents or forms . . . and the electronic transmission of (same) . . . intended to be filed with (CBP) in furtherance of such activities. . .or activities relating to such preparation, BUT DOES NOT INCLUDE THE MERE ELECTRONIC TRANSMISSION OF DATA RECEIVED FOR TRANSMISSION TO CUSTOMS.” 
role of the broker27

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • The importer of record has to be the owner or purchaser of the merchandise, and the broker should always ascertain if that is the case before declaring that a certain party is the importer of record.  Bear in mind that the declarations made at entry are to be done exercising reasonable care and are certified by the broker as being true and correct.  19 U.S.C. 1484.
role of the broker28

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • The customs broker statute provides: “A customs broker shall exercise responsible supervision and control over the customs business it conducts.”  19 U.S.C. 1641(b)(4).  The phrase “responsible supervision and control” is defined to mean “that degree of supervision and control necessary to ensure the PROPER transaction of (its) customs business . . ..” 19 CFR 111.1.  If a broker does not know that the person it is listing on an entry is a qualified “importer of record,” it clearly has failed to ensure that a PROPER transaction of its customs business has occurred.
role of the broker29

Department of Homeland Security  Customs and Border Protection

Role of the Broker
  • Invalid POAs. Part C of 19 CFR 141
  • Disclosing business proprietary and Customs business documents to unlicensed persons. 111.24
  • Freight forwarders conducting Customs business without a license.
  • Brokers accepting made-up commercial invoices without any supporting documentation. 141.86
  • Brokers NOT properly identifying importer when the transaction’s terms of sale identify DDP or LDP party.