Prince Law Group News

The October 15, 2009 Federal Register contains a notice from CBP proposing to amend title 19 of the Code of Federal Regulations to preclude situations where imported merchandise subject to Federal excise tax is allowed into the United States, in effect, 99 percent free of that tax through application of a drawback claim. Specifically, the proposed amendments would preclude the filing of a substitution drawback claim for internal revenue excise tax paid on imported merchandise in situations where no excise tax was paid upon the substituted merchandise or where the substituted merchandise is the subject of a different claim for refund or drawback of tax under any provision of the Internal Revenue Code. This document also proposes to amend title 19 by adding a basic importation and entry bond condition to foster compliance with the amended drawback provision. CBP is accepting comments until November 16, 2009. 

On September 10, 2009, CBP issued a notice stating that CBP is delaying, until further notice, its enforcement of the requirement for containers with any amount of cargo residue to be manifested and entered.  CBP is delaying enforcement in order to enable the trade community to implement procedures to comply with the new entry requirements.  CBP is encouraging importers to take steps to comply with the new entry requirements at their earliest opportunity. 

The Bureau of Industry and Security (BIS) and the Office of Foreign Assets Control (OFAC) alleged DHL executed over 300 barred shipments to Iran, Sudan, and Syria over the past five years.  As part of a settlement agreement, DHL has agreed to pay a $9.4 million civil penalty and conduct an external audit of all transactions to Iran, Sudan and Syria between March 2007 and December 2009. 

BIS alleged that on eight occasions the company caused or aided acts prohibited by Export Administration Regulations (EAR).  BIS went further to charge DHL with failing to retain air waybills with regards to 90 exports which is also a violation of the EAR.  OFAC charged DHL with making more than 300 illegal shipments to Iran and Sudan and failure to retain required records.   

For a company that did not submit a voluntary self-disclosure, a $9.4 million fine for over 300 violations, some of which appear to be carried-out with knowledge and direct intent to violate the export regulations, is barely a slap on the wrist.  The outstanding question is what penalties will be forth coming for the companies that actually owed the goods that DHL illegally exported.  I would expect such fines will be levied just in time to make the 2009 Holiday Season very memorable for some. 

Recently CBP has implemented a new policy extending the role of Focused Assessments (”FA”).   Over the past few months, companies undergoing a FA that are not C-TPAT members are being subjected to a Supply Chain Security Observation (”SCSO”) and required to complete a C-TPAT type questionnaire.  The obvious issue with such a broadening of power under a FA is that membership in C-TPAT is technically voluntary while complying with a FA is mandatory. 

Although CBP has historically used various methods to persuade companies to join C-TPAT, this new approach appears to be far reaching for the Regulatory Audit division of Customs and beyond even CBP’s self-disclosed purpose in conducting a FA.  In CBP’s Focused Assessment Manual, CBP expressly provides that with the implementation of C-TPAT, the Regulatory Audit members will not use the results of a FA to determine the level of cargo examinations to which a company should be subjected.  CBP’s own guidelines set forth the risk factors (e.g., value, classification, ADD/CVD, transshipment, etc.) to be considered during a FA and those risk factors do not include supply chain security. 

At this point, it appears as though all companies have complied with CBP’s request to conduct a SCSO as part of a FA.  If you have received a SCSO request from CBP and would like further guidance on this issue, please contact Prince Law Group.     

Mattel has agreed to pay the U.S. Consumer Product Safety Commission (CPSC) a $2.3 million fine stemming from the 2007 recall of toys that contained dangerous levels of lead.  CPSC has never imposed such a steep fine for allegations of importing or distributing a regulated product.   

CBP to require all imports of containers with residual chemicals to be manifested and entered in compliance with all Customs laws.  After months of anticipation, in the July 17, 2009 Customs Bulletin, U.S. Customs and Border Protection (“CBP”) issued its final determination regarding the modification of Letter Ruling HQ 113129 (Jul. 12, 1994) which had previously provided for the treatment of containers with residual chemicals as Instruments of International Traffic (IIT) and therefore not subject to entry.  See Customs Bulletin, Vol. 43 No. 28 (Jul. 17, 2009).  Effective, August 16, 2009, all entries of containers with residual chemicals, regardless of the amount (no de minimis exception), must be classified, manifested, and entered in compliance with general Customs laws. 

CBP is implementing this change in order to be consistent with CBP’s treatment of similar commodities (petroleum slops) and to protect the safety and security of CBP personnel who examine the containers.  CBP received fourteen (14) industry comments regarding the proposed change.  Most notably, a number of commenters argued that requiring the filing of an entry for empty containers (with residue) is a new requirement and therefore must be submitted to OMB as a new information collection request and/or is a new significant rulemaking that requires publication and notice in the Federal Register. CBP disagreed, stating the new requirement is merely bringing empty containers (with residue) in line with customs legal requirements from which they were incorrectly exempted in the past.       

We recommend the all importers immediately work with their logistics team to determine the impact of implementing processes and procedures necessary to file entries on each empty container.  Given the Effective Date of August 16, 2009, there is only a short window of time to address this change.  We anticipate there will be an industry effort to counter this new requirement, or at a minimum, a request to move-back the Effective Date.

PLG is currently assisting several companies as they make operational adjustments in order to comply with this new regulation and will gladly assist your company as well. 

Discover the benefit of our programs. Contact us today to schedule your next compliance coaching session.

Past Speaking Engagements

• “Protecting Your Business Globally,” Independent Lubricant Manufacturers Association Management Forum, Bonita Springs, FL
• “Navigating the Trade Triangle: Importer’s Master Class in Maximizing the Benefits and Duty Savings Available Under NAFTA” Marcus Evans’ Import Compliance Forum, San Francisco, CA

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Need a speaker for your company or trade association seminar or webinar? Contact us at 704.910.4772 or plginfo@princelawgroup.com.

Prince Law Group unveils its new web site designed by Metheney Consulting, Inc. Metheney Consulting, Inc. has been one of the Top 25 web designers in Charlotte, for the last 7 years, according to the Charlotte Business Journal. The new site features a news blog, firm profiles, a more global branding and more information about the boutique law firm.

The 12 year old web development firm specializes in designing sites that focus on the business objectives of it’s clients. Prince Law Group wanted a site that would provide their prospective clients more information about their company and that would enable them to easily publish news and updates.