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Introduction
With the government’s renewed emphasis on enforcement, it has become mission critical for parties engaged in international trade to set their strategic offensive in place through programs such as “regulatory defense.” Recently, the new administration issued executive orders that will increase trade enforcement by stepping up the collection of antidumping and countervailing duties and the prosecution of trade and customs laws violations. Additionally, federal agencies have issued regulations and decisions underscoring the need for product and food safety as well as intellectual property compliance. Much of this was put into motion last year when Congress passed the Trade Facilitation and Trade Enforcement Act (“TFTEA”), which is changing the way customs brokers and forwarders, as well as importers and exporters operate their day-to-day operations. The law includes provisions that provide business opportunities but also call for heightened regulatory enforcement.
Discussion
Antidumping & Countervailing Duties
In light of a government report that $2.3 billion in antidumping (“AD”) and countervailing (“CV”) duties went uncollected over the previous fifteen (15) years, it is evident that CBP is taking steps to improve AD/CV duty collections. In fact,\ domestic parties and competing importers already have taken advantage of new procedures that CBP issued pursuant to the TFTEA’s Enforce and Protect Act, to report suspected evaders to CBP. Further, a recent executive order requires stronger bonding requirements for importers of goods subject to AD or CV duties for which CBP has no record of previous imports or has a record of the importer’s failure to pay AD/CV duties in full or on time.
With a major emphasis on such evasion as well as collection shortfalls, now more than ever, brokers need to carefully review their customers’ imports in connection with AD and CV investigations and subsequent orders to ensure importers are paying such duties. While importers may utilize foreign trade zones or bonded warehouses to lawfully transit and export such products out of the U.S. to avoid these duties, we have witnessed enforcement actions in the case of misdeclarations using such facilities. As an example, in one case CBP issued a penalty against a customs broker for failing to appropriately classify merchandise and file the entries as type “03” designating them as antidumping. After filing a petition, supplemental petition and offer in compromise, CBP drastically reduced its claim to a few hundred dollars.
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As an example, in one case CBP issued a penalty against a customs broker for failing to appropriately classify merchandise and file the entries as type “03” designating them as antidumping. After filing a petition, supplemental petition and offer in compromise, CBP drastically reduced its claim to a few hundred dollars. |
Intellectual Property & Product Admissibility
Executive orders also direct CBP to develop and implement a strategy and plan to combat violations of trade and customs laws for goods and for enabling interdiction and disposal of inadmissible merchandise entering through any mode of transportation. Further, such orders enhance CBP’s authorization to share with intellectual property rights (“IPR”) holders any information to determine if there has been an infringement or violation or regarding goods that are voluntarily abandoned even if done so prior to seizure. Finally, the order directs the Justice Department to work with DHS to develop prosecution practices and to allocate resources to ensure that federal prosecutors place high priority to significant offenses related to trade law violations. Accordingly, brokers and forwarders need to ensure they collect and submit to CBP accurate product information to avoid not only border delays but also enforcement actions due to the attempted introduction of inadmissible merchandise.
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For instance, in one case CBP detained counterfeit sneakers and sent formal requests to the customs broker to confirm whether they had verified the powers of attorney from the importer and to assess the broker’s level of contact with their customers. Because of the broker’s responses to the information requests, CBP provided the broker only with a warning along with suggestions on how to validate powers of attorney in the future. |
As an example, the new FDA Foreign Food Supplier Verification (“FSVP”) rule now requires food importers to verify that their shipments meet U.S. safety standards. Noncompliant importers risk supply chain disruptions, entry processing and possibly the exclusion of products from the U.S. marketplace particularly if the broker does not 
properly identify the FSVP Importer at the time of entry. Meanwhile, now that the Automated Commercial Environment (“ACE”) is operational, other partner government agencies (“PGAs”) such as the Fish and Wildlife Service (“FWS”), Environmental Protection Agency (“EPA”) and Animal and Plant Health Inspection Service (“APHIS”) continue to contemplate what new or additional data they will require for admissibility or have already begun collecting it. These changes have led the PGAs along with CBP to re-examine how to enforce cases involving the attempted introduction of inadmissible merchandise.
For lower value, e-commerce type, shipments the de minimis exception increased the daily duty and entry exemption from $200 to $800 providing a huge opportunity to facilitate trade for smaller shipments. However, such duty exemptions are creating more challenges for intermediaries who still need to be mindful where product admissibility requirements apply, particularly due to a lack of clarity at this point from the various PGAs.
Partnership Programs and Penalty Mitigation
While the TFTEA requires programs such as the Customs-Trade Partnership Against Terrorism to provide benefits to importers, exporters and their intermediaries such as less security exams, the new law also mandates a compliance and PGA component for companies to achieve “trusted trader” status. Along these lines, CBP has publicly explained that its Centers of Excellence and Expertise will facilitate issues for such partners but will remain very vigilant when it comes to enforcement matters like seizures, penalties and liquidated damages claims now that they are able to detect compliance anomalies within the industry.
Much of the enforcement challenges come down to how well you really know your importer or exporter customers and if they are members of partnership
programs such as C-TPAT or the Import Self Assessment (“ISA”) which entitle companies to enhanced penalty mitigation in some cases. At least that is the question CBP now will be asking brokers prior to filing entry for importers. Under the TFTEA, if brokers fail to collect and maintain adequate importer identification information, they can expect penalties up to $10,000 for each violation and possibly have their license or permit revoked or suspended.
Much of the enforcement challenges come down to how well you really know your importer or exporter customers and if they are members of partnership programs such as C-TPAT or the Import Self Assessment (“ISA”) which entitle companies to enhanced penalty mitigation in some cases. At least that is the question CBP now will be asking brokers prior to filing entry for importers. Under the TFTEA, if brokers fail to collect and maintain adequate importer identification information, they can expect penalties up to $10,000 for each violation and possibly have their license or permit revoked or suspended.
And we already have seen Census question forwarders how well they really know their customers, in cases where they misdeclare information on the electronic export electronic information filings.
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For instance, in one case a forwarder received a $10,000 penalty for failing to correct an AES filing prior to export. The AES indicated the wrong port of export. Because of the response to the penalty notice, CBP ultimately assessed a fine of only a few hundred dollars. |
Conclusion
In this climate of heightened enforcement, programs such as “regulatory defense” provide brokers, forwarders and other intermediaries with the assurance that should a potential claim arise from any major government agency or department you will have the representation needed to dispose of, or at least mitigate the action. Specifically, through regulatory defense, you will receive the necessary consultation and legal assistance if an administrative fine, liquidated damages or penalties claim; license revocation and/or suspension proceeding; or letter of investigation is initiated against you or your company. With new laws and policies demonstrating the government’s renewed emphasis on enforcement, brokers, forwarders, warehouse proprietors and other intermediaries cannot underestimate the value of such protection.
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