A recent series of settlements in False Claims Act (FCA) cases and a large fine imposed by a California District court demonstrate the importance of complying with the Customs and Border Protection (CBP) importation regulations. FCA cases are filed by “whistleblowers”, on behalf of the United States, charging any person with making a false claim to the federal government. The whistleblower, called the relator, receives a portion of any agreed settlement.

In Georgia, an importer of tools will pay $1.9 million to settle FCA allegations that it was falsely labelling its tools as “made in Germany” when, in fact, the tools were made in China. The settlement states that tools manufactured in China were sent to Germany for some additional processing and were then commingled with tools that had no additional processing done in Germany. All the items were then claimed to be of German origin upon importation into the U.S., thus avoiding the payment of Section 301 duties of 25%  assessed on certain imports of Chinese origin.

In Texas, in another FCA settlement, an importer of industrial products, along with two Chinese companies and two individuals, agreed to pay $2.5 million to resolve allegations that they were undervaluing imported goods. Commercial invoices were submitted to CBP at time of entry for the items in question showing values that were lower than the actual values and agreed prices. Invoices showing the true higher values were then sent by the Chinese suppliers to the importer at a later time. This resulted in the loss of revenue for CBP in the form of underpaid customs duties and other fees.

Finally, in California, in another double-invoicing scheme, a clothing wholesale company was fined $4 million, ordered to pay $6,390,781 in restitution, and placed on probation for five years for undervaluing imported garments in a scheme to avoid paying millions of dollars in customs duties. In this case as well, a false lower valued commercial invoice was submitted to CBP at time of entry, and a true higher value invoice was then sent later to the importer by the Chinese supplier resulting in the underpayment of duties and fees.

On December 18, the U.S. Food and Drug Administration (FDA) announced the launch of the Cosmetics Direct electronic submission portal for registration and listing of cosmetic product facilities and products. Cosmetics Direct is dedicated exclusively to cosmetic product facility registration and cosmetic product listing electronic submissions mandated by the Modernization of Cosmetics Regulation Act of 2022 (MoCRA). FDA had advised previously that enforcement of these new requirements would be delayed to provide industry with sufficent time to submit the facility registration and product listing information. FDA will not be enforcing the requirements until July 1, 2024. However, the law is now in effect, and all facilities required to register and submit product listings should do so as soon as possible and well before the July 1 deadline.

Senators Bill Cassidy of Louisiana and Sheldon Whitehouse of Rhode Island introduced the bipartisan Customs Modernization Act of 2023 which would make significant changes to laws administered by Customs and Border Protection (CBP).

Some of the key sections of the proposed bill include:

• Allowing CBP to access data prior to entry from parties throughout the supply chain. The importer of record could convert this pre-entry information into a certified entry filing. For any violation relating to the filing of the required pre-entry information by any party, CBP may impose a penalty of $5,000 for the first violation of these regulations and $10,000 for subsequent violations.

• At present, only ocean vessel manifest information must be publicly disclosed. The proposal would make it mandatory to also publicly disclose aircraft, truck and rail manifest information for the purpose, inter alia, of monitoring supply chains for illegal goods like fentanyl and those made with forced labor, combatting trade-based money laundering, and identifying unfair trade practices like dumping.

• Relaxing the seizure and forfeiture rules to allow for the summary forfeiture of certain IPR-infringing goods by CBP without having to go through the formal seizure/forfeiture process. This is to allow CBP the ability to seize and forfeit articles found violative in the de minimis realm in an expedited fashion.

• Specific penalties are enumerated for violations of the Section 321 de minimis provisions of up to $1,000 for the first violation and $2,000 for each subsequent violation.

• Under current law, CBP can penalize vessel masters, aircraft pilots, and persons in charge of a vehicle for failing to comply with reporting requirements like providing manifest information. However, much of this data is now transmitted electronically by other parties such as the air carrier. A new provision would clarify that “any person” reporting such information who knowingly provides incorrect information is liable for a civil penalty.

Senator Cassidy also advised that a bipartisan Trade Facilitation measure will be introduced in 2024 as well.

The Departments of the Treasury, Commerce, Justice, State and Homeland Security jointly published a Quint-Seal Compliance Note entitled “Know Your Cargo: Reinforcing Best Practices to Ensure the Safe and Compliant Transport of Goods in Maritime and Other Forms of Transportation”. The document provides information on potential indicators of efforts to evade sanctions and export controls, emphasizing the need to “know your cargo”. Also included are various examples of recent criminal and civil enforcement actions taken for violations of sanctions and export controls. With six government agencies being involved in the publication of this compliance note, all participants in the global transport of goods should review it in detail.

The United Kingdom (UK) announced that it will be implementing a Carbon Border Adjustment Mechanism (CBAM) by 2027, joining, among others, the European Union whose own CBAM entered its transitional phase in October with the first reporting period set to end on January 1, 2024. The UK CBAM will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK from the aluminum, cement, ceramics, fertilizer, glass, hydrogen, iron and steel sectors, with the precise list to be provided sometime in 2024 after additional consultations. The liability applied by the CBAM will depend on the greenhouse gas emissions intensity of the imported good and the gap between the carbon price applied in the country of origin (if any) and the carbon price that would have been applied had the good been produced in the UK. CBAM liability will lie directly with the importer of imported products within the scope of the UK CBAM on the basis of emissions embodied in those goods. Further details will be provided in 2024 also after additional consultations. Exporters of products to the U.K., and to the European Union as well, will need to become familiar with these mechanisms, as their customers in these countries will be needing detailed information on the greenhouse gas emissions intensity of the products they import.

The New Democrat Coalition (NDC), a caucus of nearly 100 members of the House of Representatives, recently issued a letter to the President outlining a list of their  legislative priorities, one of which stated “Advance equity in trade policy by considering solutions to reduce gender bias and regressivity of the tariff system, in consultation with Congress”. Now, it may seem a stretch to claim that something like the Harmonized Tariff Schedule, a legalistic, inanimate document for the classification of imported products, could be biased towards a particular gender. However, after further examination, it seems that the NDC is correct, and the tariff may be somewhat biased towards women. A study performed by the International Trade Commission entitled “Gender and Income Inequality in United States Tariff Burden” discovered, “Across genders, we find large differences in tariff burden…The gender gap exists because spending on women’s apparel is higher than on men’s and because the average applied tariff rate on women’s clothing is higher than on men’s”. The study found “the average applied tariff rate for women’s apparel was 14.9%, but it was only 12.0% on men’s apparel. It was also noted that “the gender difference in applied tariff rates is mostly attributed to the sourcing of imports as a much greater share of men’s apparel than women’s apparel comes from U.S. Free Trade Agreement partners”. Perhaps some adjustments in the tariff are in order.

In a recent Federal Register notice, the Environmental Protection Agency (EPA) is proposing the prohibition of the manufacture, importation, processing, or distribution in commerce of Trichloroethylene (TCE). TCE is widely used as a solvent in a variety of industrial, commercial and consumer applications including for hydrofluorocarbon (HFC) production, vapor and aerosol degreasing, and in lubricants, greases, adhesives, and sealants. In the proposed rule, EPA lists numerous and diverse industries that would be affected by this proposal. Comments on the proposal are due by December 15, 2023. Importers of products containing TCE should review this proposal and submit any comments deemed necessary.

‍

The annual eligibility review for the African Growth and Opportunity Act (AGOA), in accordance with Section 506A(a)(3)(B) of the Trade Act of 1974, has resulted in the termination of eligibility for the Central African Republic, Gabon, Niger, and Uganda. The White House and the Office of the United States Trade Representative announced that recent unconstitutional changes in government in Gabon and Niger, and the resultant threat to political pluralism and the rule of law, led to their termination. The termination of the eligibility of the Central African Republic and Uganda was a result of gross violations of internationally recognized human and worker rights. On a positive note, the country of Mauritania had its eligibility reinstated based on progress it has made with respect to worker rights and eliminating forced labor across the country. Ethiopia, however, did not have its eligibility reinstated at this time. Recently, there have been a lot of discussions in Congress about the need to renew AGOA well in advance of its current September 2025 expiration date, to ensure the continuity of the program and encourage long term investment in the region.

‍

Customs and Border Protection (CBP) published a new guide entitled “TIPS FOR FILING AN HFC IMPORT IN ACE” to assist the import community with filing obligations related to imports of bulk hydrofluorocarbons (HFCs) under the American Innovation and Manufacturing (AIM) Act. The Environmental Protection Agency (EPA) also announced in November that allocations for the import of HFC’s will be reduced to 60% of the stipulated baseline levels in January 2024. Importers of HFCs should consult this new guide as filing requirements for HFC’s can be complicated. CBP will advise in early January via the Cargo Systems Messaging Service (CSMS) when the new requirements will be operative in ACE.

‍

The protracted quest of Mr. Byungmin Chae to have his 2018 Customs Broker License Examination results changed to a passing grade came to an end when the Supreme Court denied his petition for a writ of certiorari in October. Mr. Chae’s case, if nothing else, proved he possesses ample persistence and determination. The court filing states that his original score on the April 2018 exam was 65%, with 75% or higher being needed for a passing grade. He filed a timely appeal to Customs and Border Protection (CBP) requesting that his answers to 13 of the questions originally marked wrong be deemed correct. Subsequent to his appeal, CBP announced that all test takers would be given credit for 3 particular questions, 2 of which Mr. Chae had been marked wrong on originally. This raised his score to 67.5%. CBP then denied his appeal request for the other 11 questions. Mr. Chae then appealed this decision to the Office of Trade. The Office of Trade granted his appeal for 3 of the questions, raising his score to 71.25%, but still short of a passing grade. Undaunted, Mr. Chae proceeded to file a petition with the Court of International Trade (CIT) as allowed by the regulations.

The CIT gave him credit for one more of the contested questions, raising his total of correct answers to 58 of the 60 he would need for a passing grade. Still undaunted, Mr. Chae filed an appeal of the CIT decision to the Court of Appeals for the Federal Circuit asking for 3 questions to be further reviewed. The Appeals Court gave him credit for one of the questions, raising his correct answer total to 59 of the 60 needed. However, the Supreme Court denial of his certiorari request ended the appeals process, terminating his case and giving new meaning to the phrase “so close, yet so far…”.

A rule proposed December 28, 2022, by the National Marine Fisheries Service (NMFS) to significantly expand the species covered under the Seafood Import Monitoring Program (SIMP) was withdrawn on November 16. The additional species to be added to the SIMP, along with a change stating that the importer of record on the customs filing must also be the party that holds the required  International Fisheries Trade Permit, had caused concern in the trade community leading to a significant number of comments being filed with NMFS concerning the proposed rule. The NMFS advised that they will now conduct a comprehensive SIMP review to determine any future action to be taken in order to strengthen the impact and effectiveness of SIMP.

‍

In a recent Cargo Systems Messaging Service message, CBP provided a list of the countries that are members of the European Union and who, therefore, use the Euro as their domestic and international trade currency. It was further stated, “Therefore, all invoices, other documents, and entry transmissions from these countries must show EUR for the foreign value or as their currency code”. CBP is updating its records to reflect the Euro as the appropriate currency for all countries listed.

‍

Customs and Border Protection (CBP) will hold an important webinar on December 15, 2023, from 2PM to 3PM on the topic of the 2024 Permit Annual User Fee and Triennial Status Report Filing. The webinar will explain the process for paying the Permit fee and filing a Triennial Status Report via the e.CBP online portal. A link to register for the webinar is below.

‍

Christmas crackers are a festive holiday tradition in the United Kingdom, Australia, Canada, New Zealand and South Africa. They consist of a decoratively wrapped tube with a prize, a paper hat and a joke card inside. The wrapping on the tube is extended outwards on both sides and twisted around a shock sensitive card strip similar to what is used for cap gun shot caps. A person at each end will then pull on the wrapping simultaneously, generating a bang or cracking sound and causing the tube to open and reveal the prizes. It is believed that Christmas Crackers were invented in London around 1847 by a confectioner named Tom Smith who was looking for a way to repackage the candies he sold to increase sales. The hats and prizes were added by his son Walter Smith to further increase sales as other competitors began selling crackers as well. If you are planning on visiting the United Kingdom and are thinking of bringing back any Christmas Crackers, kindly note that the Transportation Security Administration does not allow crackers in carry-on bags or checked luggage on flights to the U.S.

‍

A petition was filed on October 4, 2023, and an investigation instituted on October 13, 2023, by the Commerce Department and the International Trade Commission to greatly expand the antidumping and countervailing duty orders in effect on aluminum extrusions from China to cover products that are now exempt and to add 14 additional countries. The petition was filed by the United Steelworkers Union and the U.S. Aluminum Extruders Coalition. The requested scope of the order is five pages long and covers aluminum extrusions for a wide variety of applications. The list of countries to be included are Colombia, the Dominican Republic, Ecuador, India, Indonesia, Italy, Malaysia, Mexico, the People's Republic of China ("China"), South Korea, Taiwan, Thailand, Turkey, the United Arab Emirates and Vietnam. Importers of aluminum extrusions from the listed countries should follow the progress of this investigation and possibly pursue legal involvement in the proceedings if appropriate.

‍

The Internal Market and International Trade committees of the European Parliament adopted a draft regulation that would ban the importation and exportation of goods proven to be made with the use of forced labor. Items suspected of being made with forced labor would be halted at the border. If forced labor use is proven, the items would have to be donated, recycled, or destroyed. Any related goods that had already reached the European Union (EU) market would have to be withdrawn from the marketplace. The regulation would also create a list of geographical areas and economic sectors at high risk of using forced labor. For goods from these areas and sectors, there would be a presumption that forced labor was involved and the company attempting to import or export such goods would have the burden of proof to show otherwise. The EU council will review the proposed regulation next and then talks will start over the final shape of the regulation.

‍

On October 25, the Bureau of Industry and Security (BIS) published in the Federal Register several updates to its comprehensive interim final rule of October 7, 2022, which amended the Export Administration Regulations (EAR) to implement controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items exported to China. The updates, inter alia, adjust the thresholds for which chips are covered by the regulations, expand licensing requirements to an additional 43 countries included in the D:5 Country Group of the EAR, and add several dozen items to the list of controlled semiconductor manufacturing equipment. Exporters of ICs and semiconductor manufacturing items should thoroughly review the notice and submit any comments to BIS by the December 18, 2023, deadline. The Center for Strategic & International Studies has published a concise summary and commentary on these updates prepared by Emily Benson. A link to this commentary is below.

‍

Customs and Border Protection Agriculture Specialists (CBPAS) are tasked with preventing the introduction of invasive species and toxic substances into American agriculture and natural resources. To accomplish this task, a CBPAS will utilize targeting, detection and interception techniques while examining passengers returning to the United States and commercial cargo arriving into U.S. ports of entry. CBPAS’ also work to identify and prevent any attempts at agro-terrorism via the intentional introduction of disease or the contamination of food products with toxic substances. The diversity of passengers and cargo attempting to enter the United States on a daily basis can lead to some interesting interceptions by agriculture specialists.

One recent example took place at the Minneapolis-Saint Paul International Airport in early October. CBPAS’ inspected a small box carried by a passenger returning from Kenya. To the specialists surprise, the box contained giraffe fecal material. The passenger then advised that she had obtained the droppings in Kenya and planned to make a necklace with them, also stating that she had used moose feces at her home in Iowa in the past for the same purpose. The box was then seized and destroyed.

Another recent example occurred at the Chicago O’Hare International Airport. Two passengers returning from Congo were referred for inspection. Inside their baggage was found an unknown meat along with 15 pounds of raw goat viscera including, among other things, the heart, lungs and entire digestive system of a goat. The items, of course, were confiscated. Never a dull moment in the life of a CBPAS!

‍

Customs and Border Protection (CBP) quietly unveiled a new online portal, ePetition, for the filing of required documentation for petitions for mitigation of amounts charged in penalty notices and liquidated damage claims. Petition filers, however, should still make contact with the responsible CBP officer stated on the notice to confirm that uploaded documents are well received. Petitions can then subsequently be looked up on the portal and the status checked.

‍

As of November 1, 2023, the Traffic Mitigation Fee (TMF) charged at the ports of Los Angeles and Long Beach will increase 4 percent. The increase is a result of the 4 percent increase in longshore wage and assessment rates recently ratified in the coastwide contract between the International Longshore and Warehouse Union and the Pacific Maritime Association. The TMF was instituted as a way to encourage shippers to have their cargo picked up at the terminals during late night shifts or on weekends to reduce the congestion at the terminals occurring during normal business hours. Beginning November 1, the TMF will be $35.57 per TEU (twenty-foot equivalent unit) or $71.14 per forty-foot container.

‍

Customs and Border Protection (CBP) recently announced that it will be providing a quarterly series of webinars free of charge to assist and train small and medium-sized businesses on how to report trade violations that could threaten their bottom line and hurt the overall economy. The webinars will run from November 7, 2023, through September 10, 2024, and will guide participants through the process of reporting commercial trade violations using the Trade Violations Reporting Tool. The webinars will demonstrate how to report allegations of a variety of trade violations, including antidumping and countervailing duty evasion, forced labor, and natural resource crimes.

‍

On November 23, Thanksgiving Day will be celebrated in the United States. In the town of Leiden, Netherlands stands an ancient church, called the Pieterskerk, that has a unique connection to the Thanksgiving Day celebration. Inside this church, you will find a large display dedicated to the Pilgrims who landed at Plymouth, MA on December 22, 1620. The one hundred or so individuals who arrived in Plymouth on the vessel Mayflower are widely known for having fled England to escape religious persecution for their Puritan faith. However, less widely known, is that many of these pilgrims actually first fled to Leiden in the Netherlands and lived there for around 12 years before setting sail for America. Their pastor John Robinson was buried at this church and there is a prominent memorial display for him inside. The church also has an ancient pipe organ that is still played and that contains some pipes dating to the 1400’s. Another interesting fact about Leiden is that during the same time the pilgrims were living there, a teenager by the name of Rembrandt Harmenszoon van Rijn was living there as well. This young man became known to history as a brilliant painter and printmaker, going simply by his first name, Rembrandt. If you ever travel to the Netherlands, make sure to visit Leiden and the Pieterskerk.

‍

JAS Forwarding had its ninth facility certified for cargo screening as a Certified Cargo Screening Facility (CCSF) by the Transportation Security Administration (TSA) on August 9, 2023. Located in Somerset, NJ, the facility handles eCommerce and, as a result, 60 pallets a day on average are being screened. This equates to approximately 10,000 to 15,000 pieces of cargo being screened at this one facility. With the approaching eCommerce peak season about to start in November, the volume of cargo screened is expected to increase 150%! The primary screening method is K9, therefore, our K9 handlers and K9’s such as Zeus (pictured above and below) will be hard at work!

A U.S. government shutdown was averted at the eleventh hour on the evening of September 30, when both the House of Representatives and Senate passed bills to extend present government funding levels for 45 days to November 17. Additional aid to Ukraine and provisions to enhance border security were left out of the measures, while a large appropriation of $16 billion for disaster relief was included. The limited term of the measures, however, means that a shutdown could well become imminent again unless longer term funding bills are approved within the next 45 days.

‍