May, 2016

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Trade Facilitation and Trade Enforcement Act of 2015

Mark K. Neville, Jr.

Every now and then Congress turns its attention to customs and trade matters and decides to tackle the issue in a truly comprehensive way. This February was such an occasion when Congress passed and the President signed the Trade Facilitation and Trade Enforcement Act of 2015 (Trade Act). The passage of this law, long in the making, will bring about sweeping changes.

The last time anything this comprehensive had been done with the US trade laws was in 1993, when Congressional efforts brought in the “Mod Act,”1 and with it the notions of “informed compliance” and NAFTA, among other innovations. You can judge for yourself whether these changes are as significant as those of the 1993 legislation. This brief overview of the statute is not intended to cover all corners of the legislation or to treat any of them in a close study. Instead, it is meant to shine a light on those areas that I feel may have your interest and that are deserving of a further review. There are bound to be some changes of real importance to some of you that I do not mention2 and for that I offer only the rejoinder that these are the highlights, as I see them, from an omnibus assortment of changes.

You will see that some of the legislation puts a statutory footing on existing Customs and Border Protection practices, such as the use of the Centers of Excellence and Expertise (CEEs). On the other hand, as you will see, most of the provisions work changes to existing law and practice.

What is especially meaningful is the title of the new statute. For several decades, there has been a “ying and yang” dyad between trade facilitation and enforcement. The all-too-modest and often elided word “and” in the title tells us that Congress is seeking to reconcile these two polarities. After a review of the legislation, however, in my opinion, it appears that it is skewed heavily toward enforcement, although some of the liberalizing changes such as the Chapter 98 reforms (Section 904 of the Trade Act) and the duty drawback reform (Section 906 of the Trade Act), among others, are quite beneficial and welcome. In no particular order, you might want to consider:

De Minimis Shipments (Section 901)

The US has just expanded the dollar limit from $200 to $800 under which shipments can be admitted to the US under an administrative exemption.  By "exemption," we refer to goods being shipped with no duty, fee or tax and with a bare minimum of customs formalities. Customs entry is not required and admission can be made on the basis of a cargo manifest. This is a move that is sure to be a major boon for e-commerce and catalogue sellers, and was strongly supported by them and by the express carriers.

Almost all goods purchased in a single day by a single customer up to that $800 level for their fair retail value.  The new cut off point of $800 should benefit most direct sellers to customers, probably all but sellers of expensive goods such as haute couture fashion. You should note that the issue of raising the limit had been pending for the past several years, and there had even been discussion of the limit being raised to $1000. The applicable statutory reference is Section 321 of the Tariff Law of 1930, still the basic customs law in the US, with the regulations set forth in Subsections 10.151 and .153 of the customs regulations.3

To be sure, almost all goods are allowed the exemption, with the exceptions being (i) alcoholic beverages or (ii) perfume containing alcohol (unless valued at less than $5.00 in the country of shipment), and cigars and cigarettes or (iii) goods that are subject to absolute or tariff rate quotas.  In the case of quota goods, only non-commercial shipments are allowed.  That quota goods exception is not bad news for e-commerce or catalogue sellers, at least in the B2C space, because purchases by customers for their own use are not "commercial" but personal. 

  This US move did not arise in isolation and should be seen in context.  The raising of de minimis levels was one of the goals set by the Revised Kyoto Convention and the WTO Trade Facilitation Agreement, but that is going to be difficult to achieve. Even at $200, the US limit was set a much higher level than other countries.  For instance, apparently the level in the Philippines had been set at 10 Philippine pesos since 1957. That equates to roughly US$0.20 at today’s exchange rate. The amount was just raised to 10,000 pesos, or about US$200.00.4 In the case of Australia, with a duty and Goods and Services Tax (GST)-free de minimis level currently set at A$1,000.00, roughly US$730.00, that de minimis regime is set to expire on July 1, 2017.

Of course the trade-off in a net economic benefit analysis is trade facilitation vs. foregone revenue.5  The new law contains a "sense of Congress" statement wherein Congress expresses its hope that the US Trade Representative will be able to successfully negotiate at bilateral, regional and multilateral for higher de minimis limits at least for express courier and postal shipments. The levy of Value Added Tax (VAT) or GST in these other jurisdictions is sure to be a complicating factor.6

Convict Labor (Section 910)

As many readers already know, the United States trade policy is heavily influenced by human rights and other considerations that are pegged to deeply held US values.7 One of these is the prohibition against importing articles that are made with convict labor.8 But it is a little known fact that this prohibition has not been absolute.

Indeed, as the law has been in place until this revision, there has been a “consumptive demand” criterion in place. As a result, products from convict, indentured or forced labor might still be allowed entry to the US to meet consumer demand. This deeply offended many human rights activists. The removal of this “carve out” was long overdue. And that is not all. The legislation requires annual reporting by CBP of denial of entry activity so that monitoring and enforcement will be enhanced.

Reliquidation (Section 911)

Congress has aimed for a degree of certainty in the entry process. There is a conditional finality to the administrative process coming with liquidation. The importer has 180 days after liquidation to file a protest.9 For its part, under Section 1501,10 CBP has 90 days within which to make a voluntary reliquidation. The trigger point under the law for CBP’s reliquidation was the date on which notice of the original liquidation was given or transmitted to the importer.

The problem with this arrangement for certain liquidations, i.e., those which are “deemed liquidations”, formally “liquidations by operation of law,” has been that there is no specific deadline by which or date on which CBP must provide the notice. The regulations11 specify a “reasonable period” after the date of the deemed liquidation for the issuance of the notice and the courts had struggled with this lack of precision and have looked to a “reasonable” time for CBP to issue the notice.12

Going forward, with this welcome change in the law, there is a firm start date for CBP’s 90 day reliquidation window for all entries—it is the date of the original liquidation. However, there is a question about the effective date for this statutory change. Does this change affect only all entries made on or after the effective date of the statutory enactment? Or to any entry whose liquidation occurs only after that effective date? Either of those lines would mean that CBP is still entitled to purport to issue a reliquidation from 90 days of notice. Instead, does the change have a fully retroactive effect, prohibiting any reliquidation effected more than 90 days from the date of the original liquidation?

And it is worthwhile commenting further upon reliquidations deemed liquidations. The general rule for entries outside the AD/CVD context is that the entry is deemed liquidated after one year from date of entry if the period for the liquidation of the entry has not been extended or the entry has not been validly suspended.13 Make no mistake, all circumstances in which there is a claim of a deemed liquidation are contentious. Still, for deemed liquidations of entries of goods subject to an antidumping or countervailing duty order (AD/CVD entries), the stakes are raised dramatically. The timing of the reliquidation, normally many months or years after the date of the deemed liquidation and other circumstances, e.g., the differential in duty liability between the two liquidation events, are especially significant.

In the case of the AD/CVD laws, entries they are deemed liquidated by operation of law if no liquidation has been taken by CBP within 6 months of receiving notice from the Commerce Department that the entry should be removed from suspension.14 Such issues as whether an actual liquidation taking place after a deemed liquidation can or must first be protested by the importer or whether an importer can eschew a protest but nevertheless obtain CIT review by means of the CIT’s fallback jurisdiction15 have been the subject of a number of CIT and Federal Circuit decisions.16

One issue that is still possibly open is whether a deemed liquidation can be the subject of a reliquidation in the first place,17 although the statute18 seems to state that liquidations under Sections 1500 and 1504 may be reliquidated. Going beyond that, we come upon the timing of reliquidations. For AD/CVD entries with a deemed liquidation, these will typically have fallen a great distance off the radar and it is possible that they will only be “rediscovered,” if you will, after a significant delay from the 6-month date of their deemed liquidation. Would that languor not spell defeat for CBP?

Consider what happened with an importer, Texmac, who entered its goods with an estimated AD of 2.74%. CBP failed to liquidate within six months, so the importer avoided liquidation at the AD rate that was assigned after the Commerce Department review, 45.83%. Instead, the entry was deemed liquidated on January 14, 2007, which was the six month point after the publication of the Federal Register notice of the Final Determination by Commerce [August 10, 2006]. For well over two years CBP did nothing but then the agency issued notices and announced reliquidations, the latter a full thirty months after the entries were deemed liquidated by operation of law. The importer protested the legality of the reliquidations and, as stated in its Headquarters ruling issued in reply to the importer’s protest,19 the following is instructive

Upon discovering the deemed liquidation had occurred, on April 9, 2010 and April 23, 2010, CBP posted notices of the deemed liquidations in the customs house. On June 24, 2010, CBP issued two notices of action [presumably CF 29s] to Texmac advancing the rate of antidumping duties to the all-others rate per Commerce’s instructions… Thereafter, on July 8, 2010, CBP reliquidated the entries. The reliquidation of the deemed liquidated entries must occur within 90 days from the date notice of the underlying deemed liquidation occurred. 19 USC § 1501. Here, notice of the deemed liquidation occurred on April 9, 2010, and CBP timely reliquidated the entries on July 8, 2010, within 90 days.

The entire purpose of deemed liquidation is to bring certainty and finality to the entry process. According to CBP’s logic, CBP is authorized to reliquidate an entry within 90 days of its notice of the original liquidation, regardless of the time elapsed between that liquidation and the CBP notice And what if that notice were issued two years, or five years, or ten years after the date of the original deemed liquidation?

As has been noted above, the courts have written of a “reasonable” time standard here,20 but Congress presumably intended to achieve greater certainty by eliminating the CBP notice from the chain of events. You may have observed that Congress could have inserted a specific time period for CBP’s issuance of the notice but it took the approach of eliminating notice altogether from CBP’s otherwise self proclaimed “always open” season for voluntary reliquidation in Section 1501.

Marking on manholes and other castings (Section 917)

While on a New Year’s holiday in Colombia I spent almost a week in the delightful colonial town of Barichara in the Department of Santander. The tiled roofs, white washed tapia mud walls, and sunny days made for a pleasant time. The cobbled streets were uneven so one had to watch one’s step. One notable feature was the presence cast iron water meter boxes installed flush with the sidewalks, and it was interesting to note that early US export efforts had been successful. The boxes were stamped “Wabash Indiana” and, from memory, “Ford Meter Box Co.”

That stroll down memory lane brings us to the change in the marking law to extend the special marking rule for manholes, 19 USC § 1304 (e), to such other casting products such as hydrants, grates and lamppost bases. Further, the country of origin marking must remain visible after installation. I imagine this latter requirement will allow someone else making a walk down a US street to follow the path of history.

It is interesting to trace the origin of this new provision. A Pennsylvania company, the Spring City Electrical Manufacturing Company, Inc., had sought a ruling from CBP on the marking requirements for competitor’s imported casting products, cast iron and aluminum lampposts and lamppost bases. CBP determined that the special marking rule for manholes, which had been added to the statute in 1984, did not apply to other castings.21 Presumably Spring City availed itself of its right to petition the government…and got the law changed to apply not only to lampposts and bases but a wider range of casting products.

Penalty for late filing of income tax return (Section 921)

What is this doing in my trade bill? While we are it, to my mind the inclusion of Subpart B of Title VIII, Sections 811-819, with its focus on “preclearance” which has a meaning in customs law, is misplaced. This Subpart B deals only with immigration issues.

Centers of Excellence and Expertise (CEEs) (Section 110)

CBP implemented a test program for four CEEs organized along industry sectors in 2012. These Centers were inserted into a middle position in the existing structure, between Headquarters and the ports of entry. Of course the National Commodity Specialist Division with its team of Import Specialists (NISs) in New York, which is carried on the Table of Organization of Headquarters’ Office of Regulations and Rulings (OR&R) has long been an intermediate point of resource for tariff classification and labeling matters.

The original four are
  • the Electronics Center (Los Angeles)
  • the Pharmaceutical, Health & Chemicals Center (New York)
  • the Petroleum, Natural Gas, and Minerals Center (Houston) and
  • the Apparel, Footwear & Textiles Center (San Francisco)
This listing was later expanded to add an additional six CEEs:
  • Machinery (Laredo)
  • Agriculture & Prepared Products(Miami)
  • Base Metals (Chicago)
  • Consumer Products & Mass Merchandising (Atlanta)
  • Automotive & Aerospace (Detroit)
  • ndustrial & Manufacturing Materials (Buffalo)
The CEE Directors have been delegated with many of the powers usually assigned to port directors of CBP. As a result, for example, the importer has a choice of filing a protest with the port or with the CEE.

While an effort by CBP to roll out a dispersed cadre of Field National Import Specialists (FNISs) about twenty years ago was not a success, the CEEs appear to be doing a good job. The identification of a CEE with particular location is a bit misleading in the sense that the Tables of Organization show their leadership is divided up along various team lines, headed by experienced CBP professionals from around the country. What is still to be sorted is the role of the NISs in New York.

This section of the Trade Act codifies this administrative program.

Intellectual Property Rights (IPR) Enforcement (Title III)

For CBP, the enforcement of IPR has been a Priority Trade. It is not surprising, then, to discover that an entire Title of the Trade Act has been set aside to deal with IPR issues. In fact, IPR enforcement is going “big time” with this statute, with plans for a National IPR Coordination Center (Section 305) and a Joint (CBP and Immigration and Customs Enforcement, ICE) Strategic Plan. (Section 306)

Among the other noteworthy revisions to the law are the following In the case of goods that are suspected to be counterfeits or copyright violations, if CBP feels that it would be helpful, the trademark or copyright owner (i) may be provided access to information about or photographs or (ii) provided with samples of the suspect goods if the trademark or copyright has been recorded with CBP. (Section 302) This protection will be extended to copyrights pending registration at the Patent and Trademark Office. (Section 304)

The list of goods subject to Seizure and forfeiture of merchandise introduced contrary to law24 is expanded to include devices intended to circumvent technological measures that control access to a copyrighted work. (Section 303)

Prevention of Antidumping and Countervailing Duty Evasion (Title IV)

No trade bill in these times would be complete without some coverage of AD/CVD issues and no issue has been more important for the domestic industry than the notion of circumvention of the additional duties owed by importers of goods subject to AD or CVD Orders. This Title even has its own name, the Enforce and Protect Act of 2015. One solution is for the establishment of a Trade Remedy Law Enforcement Division at the Office of Trade within CBP Headquarters. (Section 411) The duties are spelled out and they include a mandatory sharing of updates and other information with the domestic industry. The requirement for importers and foreign parties to cooperate with the collection of information has teeth, as a failure to do so will allow “adverse inferences” to be drawn. (Section 412) Just what that could lead to is suggested by a reading of Section 421, which shows a new provision being inserted into the Tariff Act of 1930, Section 1517, codified at 19 USC § 1517. A quick glance at this new regime adverse inference could result in the issuance of a civil penalty under 19 USC § 1592 or the opening of an investigation that could lead to civil or criminal penalties.

On a related point, the domestic industry has succeeded in getting interest on its Byrd Amendment payouts from collected antidumping and countervailing duties. (Section 605).

Additional Trade Enforcement Activities (Title VI)

We must never lose sight of the fact that almost all substantive US trade and customs laws are the expressions of international agreements. Certainly tariff classification, customs valuation and the trade remedy laws all fit that bill.

As a player in the international trade system, the US has made various trade concessions and it retains the right to suspend those trade concessions vis a vis any trading partner which abrogates its obligations to the US. One example of such an abrogation would be if a country erected trade barriers to a US exporter’s entry into its market or if it imposed taxes on imports from the US that were higher than those imposed on like domestic goods. Another example would be if the trading partner failed to apply the Customs Valuation Agreement, for example, by applying minimum pricing derived from valuation databases. In such cases, the US would be entitled to invoke the WTO’s Dispute Settlement process and, ultimately, if it were to prevail in Geneva, to suspend concessions.25

The Trade Act amends 19 USC § 2420, setting forth a new provision for the US Trade Representative to set trade enforcement priorities and to consult with the Senate Finance Committee and the House Ways and Means Committee on a semiannual basis (Section 601). The circumstances in which a terminated trade retaliation might be reinstated at petitioner’s or domestic industry request. (Section 602).

In last month’s column we discussed the enforcement regime by which certain cultural property was denied entry into the US.26 In this regard, the Trade Act places a focus upon illicitly imported, trafficked or exported cultural property, archaeological or ethnological materials or fish, wildlife or plants. The CBP Commissioner and the Director of ICE are directed to ensure that adequate personnel are properly trained. Moreover, the agencies are directed to accept training from experts from outside the Federal Government. (Section 606).

Educational Seminars (Section 104)

In the same fashion, the Trade Act anticipates going to the private sector for assistance in providing seminars to CBP and ICE personnel on tariff classification, customs valuation and to improve trade enforcement efforts in such areas as AD/CVD, textile imports, IPR and child labor laws. This is very welcome, as the private sector has a unique perspective on these matters and easily disabuse CBP and ICE about any misgivings of legitimate practices at the same time that they point out markers of noncompliant behavior.

Importer Identification and Risks (Sections 114, 115, 116)

CBP has been committed to tightening up the process whereby persons are assigned importer ID numbers as a step in gaining importer of record (IOR) status. In particular, CBP has wanted to make sure that they had sufficient information on all persons seeking to act as IORs, e.g., verifying their existence and learning if multiple numbers have been assigned to the same importer. These sections describe this new process, place responsibility under pain of a civil penalty on the shoulders of the licensed customhouse brokers to verify importers’ identities, and allow for an adjustment of the required bond in response to a proper risk assessment.

Chapter 98 Amendments (Section 904)

The special regimes of Chapter 98 of the Harmonized Tariff Schedule of the US (HTSUS) allow for the duty free or reduced duty entry of special classes of goods. There were three amendments wrought by the Trade Act. The first two concern goods not advanced in value or improved in condition while abroad.

1. The basic provision for American Goods Returned, 9801.00.10, had a provision that allowed US-origin goods to be allowed in duty free after they had been exported from the US without having been advanced in value or improved in condition while abroad. This has just been expanded to include the duty-free entry of non-US goods as well, if they are being reimported within three years of their date of export. This is a major benefit.

2. One new provision was added, item no. 9801.00.11, for US government property being returned to the US without having been advanced in value or improved in condition while abroad.

3. The third provision concerns two categories of goods that have been advanced in value or improved in condition while abroad, generally heading 9802. These two specific categories are articles exported for repairs or alterations item numbers 9802.00.40 (pursuant to warranty) and 9802.00.50 (other). The amendment is a liberalization, allowing for the commingling of fungible goods and the reliance on inventory management methods recognized under the Generally Accepted Accounting Principles (GAAP).

ITDS--Customs Single Window (Section 107)

One of the principal means of the international trade community push for trade facilitation27 is the adoption of an outward facing “single window” concept whereby the trade community need only deal with a central coordinating agency for its all of its customs and related issues. This is reckoned to be more efficient for both the trade community and the government agencies than having agencies with a stake deal

separately, and often redundantly, with import and export issues. For example, an importer of a processed food gains immeasurably by only having to work with CBP as its single point of contact instead of having to dual with both CBP and the Food and Drug Administration (FDA) whether simultaneously or seriatim. The Trade Act amends the International Trade Data System (ITDS), the federal government’s single window initiative that was established in 2006 legislation, and assigns specific target dates directly into the customs law section covering customs automation, 19 USC § 1411 (d). 28



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1. The Customs Modernization and Informed Compliance Act, Pub. L. 103-182, 107 Stat. 2057, Act of Dec. 8, 1993.

2. We could cite to Section 608 which calls for measures by CBP and the Food and Drug Administration (FDA) to counter the transshipment of honey—but there, I’ve mentioned it. We may hazard a guess that this move was in response to a CBP Headquarters ruling, no. H187175 (5/14/14), citing to a 2012 federal district court case that disallowed CBP Lab test protocols for being unreliable. If you are interested in the broader issue of transshipment and fraud, and the reliance on laboratory testing to establish geographic origin, as illustrated in the importation of garlic, see Neville, “Hope dims for honest trade in bulbs,” 24 JOIT No. 4 at 18 (April 2013).

3. 19 USC §1321, 19 CFR 19 CFR §§ 10.151 and .153.

4. For a copy of the 2014 bill, see http://www.congress.gov.ph/download/basic_16/HB05180.pdf

5. For a very cogent and comprehensive Australian study on de minimis in the context of Asia-Pacific Economic Cooperation (APEC), see De minimis Thresholds in APEC, IST Global and Canberra University (September 2012).

6. You may be interested in the ICC’s February 2015 Policy Statement, with its aspirational goal of a global US$1000 limit, obtainable at http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2015/ICC-Policy-Statement-on-Global-Baseline-De-Minimis-Value-Thresholds

7. For more on the topic of convict or forced labor, see Neville (ed.), International Trade Laws of the United States: Statutes and Strategies, ¶ 9.05[2][k]. For a discussion of the political context of the Generalized System of Preferences, see Id., ¶ 7.08[1][a].

8. Section 307 of the Tariff Act of 1930, 19 USC § 1307.

9. 19 USC § 1514. Note that the time period was extended from 90 days in 2004 at the same time that an importer’s ability to file a petition for clerical error or mistake of fact within one year of the date of liquidation under 19 USC § 1520 (c) was eliminated.

10. 19 USC § 1501, 19 CFR § 173.3.

11. 19 CFR § 159.9 (c) (2) (ii).

12. See, e.g., United States v. Great American Insurance Co. of New York, Slip Op. 15-129 (CIT 2015) (GAIC) and cases cited therein.

13. 19 USC § 1504 (a) (1).

14. 19 USC § 1504 (d).

15. Under 28 USC § 1581 (i).

16. See, e.g, Cherry Hill Textiles v. United States, 112 F.3d 1550, 1560 (Fed. Cir. 1997), United States v. American Home Assurance Co., 964 F.Supp.2d 1342 (CIT 2014) and Hutchison Quality Furniture, Inc. v. United States, Slip Op. 15-55 (CIT 2015)

17. At least that was the plaintiff’s position in GAIC. But see Norsk Hydro Can., Inc. v. United States, 472 F3d 1347, 1362 n.26 (Fed. Cir. 2006) (noting that “[s]ince § 1504(d) is the deemed liquidation provision, it follows that deemed liquidations are subject to reliquidation by Customs”).

18. 19 USC § 1501.

19. Ruling no. H136435 (5/22/14).

20. The GAIC court, Slip Op. at 14, was not troubled by a ten-month delay from the date of the deemed liquidation to the notice, citing to an earlier Federal Circuit case (Koyo Corp. of U.S.A. v. United States, 497 F.3d 1231 (Fed. Cir. 2007)) where there had been a twelve-month gap.

21. Ruling no. H215535 (5/31/13).

22. See Delegation Order, http://www.cbp.gov/sites/default/files/documents/DO%20With%20External%20Guidance%2012162015.pdf

23. This will be codified at a new section, 19 USC § 1628A.

24. 19 USC § 1595a (c) (2).

25. For a useful example of a WTO dispute action, i.e., the complaint brought by the Philipines against Thailand, see Neville, “The next frontier: border taxes in emerging markets,” 22 JOIT No. 9 at 17 (Sept. 2011).

26. Neville, “Putting the brakes on cultural property,” 27 JOIT No. 4 (April 2016).

27. The Ministerial Decision of 7 December 2013 as the WTO Trade Facilitation Agreement (TFA) was signed in Bali in December 2013, WT/L/931 (15 July 2014). It is available online here: https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm The “single window” concept is discussed in Article 10, point 4.

28. For more on this topic, see Neville, The Customs “Single Window”, 25 JOIT No. 6 at 27 (June 2014).

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