Last month, US Customs and Border Protection (CBP) made a Federal Register Notice public entitled: “Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers”. The Federal Register has been an incredibly vital line of communication between CBP and the global trade community, publishing notices almost weekly since 2003. Part of being an informed importer means that you stay aware of the various topics of discussion and changes to regulations by regularly visiting the register. You may access it here. 

The Federal Register is the daily journal for the United States Government and a critical tool in learning about varied federal agencies, including CBP. The Office of the Federal Register (OFR), the National Archives and Records Administration (NARA), along with the US Government Publishing Office (GPO), have teamed up to manage and administer FederalRegister.gov. The website was created in order for citizens and communities to understand the regulatory process and provide transparency into the decision-making process.

What is CDSOA?

This notice concerns the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), which was enacted as a part of the Agriculture, Rural Development, and the Food & Drug Administration, and Related Agencies Appropriations Act (Sections 1001-1003). CDSOA’s purpose was the add a section under the Tariff Act of 1930 to:

“provide that assessed duties received pursuant to a countervailing duty order, an antidumping duty order, or a finding under the Antidumping Act of 1921 will be distributed to affected domestic producers for certain qualifying expenditures that these producers incur after the issuance of such an order or finding.”

What is an Affected Domestic Producer?

“The term “affected domestic producer” means any manufacturer, producer, farmer, rancher or worker representative (including associations of such persons) who:

(A) Was a petitioner or interested party in support of a petition with respect to which an antidumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered;

(B) Remains in operation continuing to produce the product covered by the countervailing duty order, the antidumping duty order, or the finding under the Antidumping Act of 1921; and

(C) Has not been acquired by another company or business that is related to a company that opposed the antidumping or countervailing duty investigation that led to the order or finding (e.g., opposed the petition or otherwise presented evidence in opposition to the petition). The distribution that these parties may receive is known as the continued dumping and subsidy offset.”

What does Federal Notice 2021-10396, “Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers”, mean for the trade community? 

All duties collected on an entry filed before October 2007 must be distributed as if CDSOA had not been repealed. Pursuant to CDSOA, this notice of intent to distribute assessed antidumping or countervailing duties in 2021 in connection with various orders and findings. This document provides instructions for Affected Domestic Producers (or anyone that alleges eligibility) to receive distribution. 

Certifications for a continued dumping and subsidy offset must be received by July 27, 2021.

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If you have any questions about this notice, or any other regulatory requirements. Contact a broker today!

Earlier this month, the US Department of Agriculture released a statement calling for feedback on the Animal and Plant Health Inspection Service (APHIS) online portal to simplify the flow of information on requirements for imported agricultural goods into the US.

On the USDA website, APHIS is described as: 

“APHIS plays a vital role in ensuring the free flow of agricultural trade by keeping U.S. agricultural industries free from pests and diseases and certifying that the millions of U.S. agricultural and food products shipped to markets abroad meet the importing countries’ entry requirements. 

APHIS makes sure that all imported agricultural products shipped to the United States from abroad meet the Agency’s entry requirements to exclude pests and diseases of agriculture.”

Meet the Agricultural Commodity Import Requirements (ACIR) online portal. Importers can hop online and use the portal to identify the requirements that they must meet based on the type of goods. The agricultural imports are broken down into 7 key categories:

1. Plants for Planting and Propagation*
2. Plants and Plant Products Not for Propagation
3. Animal Products and Byproducts
4. Soil and Soil Amendments
5. Treatments (Phytosanitary treatments for quarantine-significant plant pests on imported and domestic commodities)
6. Procedure (Guidance for port operations, including phytosanitary treatments; some information may be accessible to internal users only)
7. Other Items (Tools, materials, or machinery that can act as carriers for pests, including vehicles, containers, bags, packing materials, and other similar articles) 

You can also research based on different groups, by crop group, port group, and regions. Importers that visit the site will note that there is still some information missing, but, as mentioned in the USDA statement, the tool is expected to be completed in the fiscal year 2022. 

The intention is that this tool will ultimately replace the USDA Reference Manuals, along with an amalgamation of other information. (For reference, you may find the manuals here.)

The USDA is confident that this will streamline processes for agricultural importing, for customs officers and trade professionals alike. They state the following benefits for the various involved stakeholders:

APHIS’ ACIR stakeholders benefits include:

• A user-friendly search tool for commodity import information.
• All relevant import requirements for a given commodity are presented in one place.
• Self-service responses to entry requirement questions.

Importers will be able to refer back to ACIR to determine whether they need to apply for a permit or not, based on the types of goods they wish to move into the US. The electronic filing system (eFile) for permits, licensing, and registration will use the import requirement data as stipulated on ACIR in order to process plant and plant product permit applications.

As of now, APHIS is in the stage of asking for feedback on ACIR from importers., as they are currently in beta-testing mode for the first module: Plants and Plant Products not For Propagation. The feedback provided by users will be incredibly useful in improving the user experience and functionality of the tool as they continue to build it into 2022. 

Importers may provide feedback here. 

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If you have any questions about how to navigate this new system, or about moving agricultural goods into the US in general, contact us here!

It is the responsibility of the importer to ensure that valuation laws and regulations are well-grasped. Of course, CBP requires that all importers moving goods into the US exercise reasonable care during all parts of the process. Under this legal framework is the payment surrounding the transactions outside of the actual invoice (also known as statutory additions – as referred to be CBP). However, this part of the transaction is often overlooked, because the organization’s lawyers or accountants may not be versed in CBP valuation laws. (ex: royalty payments, commissions, assists, etc.)

This presents an issue because getting the valuation and the statutory additions right for your import is critical for you to move goods into the US with ease. In turn, this will also have an impact on the organization’s bottom line as well. 

An organizational valuation program that is equipped for the full scope of additions required by CBP is, in essence, a fully integrated valuation program. In a piece by Torres Law, PLLC, an international trade firm, on the topic, they explain this integration:

“A fully integrated valuation program must cover the price actually paid or payable, basis of appraisement, related party transactions, and statutory additions. Reviewing your company’s financial data is one key area to identify the statutory additions. Like other trade areas in a Customs compliance program, risk assessment and monitoring are a balance of the appropriate internal resources and external expertise.”

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Below, we’ll outline a few CBP regulations to look out for, as stipulated in the Tariff Act. These regulations include, but are not limited to:

19 CFR Part 163: general records to be maintained, who is responsible for maintaining/recordkeeping, and for how long. (Appendix (a)(1)(A)). (Recommended Reading: What Every Member of the Trade Community Should Know about Recordkeeping)

19 CFR 152.103: determining transaction value for imported products, along with elements to add to the price paid: 

• Packing costs
• Commissions
• Assists
• Royalties
• Proceeds

19 USC 1509: informs the importer that CBP maintains the right to examine any record that may be relevant to an import investigation (ex: statements, documents, etc.) 

Beyond this, CBP may ask for other kinds of documents within a ruling – this may include financial statements, ledgers, accounting reports, balances, chart of accounts, etc. In addition, Torres Law warns that:

“At times restrictions imposed by a parent entity limit the amount of information that can be shared between related entities creating challenges to accurately support additions.

[…]

There is no one size fits all approach and method. If your company has not recently completed a review of the company’s financial data, a more thorough approach and review is warranted. When identified, the risk of additions is low, and a stop-and-go approach can be taken with fewer transactions reviewed.”

(Recommended Reading: CUSTOMS AUDIT CHECKLIST: GET PREPARED FOR US CUSTOMS AUDITS) 

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So many organizations are feeling the pinch of navigating the pandemic, maintaining profits, streamlining supply chains, and more. The last thing importers need right now is a CBP investigation as a result of customs valuation missteps. 

To ensure that your organization stays in a healthy place, you can contact a customs consultant or customs broker. Click here to get the conversation started!

Tariff engineering has been somewhat of a hot topic in the logistics and supply chain industry for a little while now. The United States has been putting additional pressure on their trading partners like China and Mexico, causing businesses to look to alternative methods of sourcing and production for their imports. 

One of the “workarounds” used by importers used as a solution for shifting international trade relationships is tariff engineering. 

Below, we’ll do an overview on what tariff engineering is, things to watch out for, examples, and a checklist if you’d like to try leveraging this technique. Read on for more details:

What is tariff engineering? 

For centuries, businesses have changed their sourcing and production processes in order to make their goods be considered another HTS classification — with lower duties, of course! This may sound a bit unscrupulous, but it is actually totally legitimately so. Strategic tariff engineering brings importers huge benefits.

In essence, an importer would alter the product in such a way that less duties are applied. For the most part, tariff engineering happens at the beginning of the design and production process, as businesses are equipped with a good understanding of duties and goods classifications. 

Particular attention must be paid here because businesses must make sure that the alterations to do the goods do not negatively impact the cost of materials or manufacturing. Or the goods’ overall marketability in the U.S.

There are a few things that could make this process illegitimate, so be warned: this should not be done with the intention of undoing the alteration once imported into the U.S. 

In the event that an importer is caught doing so, CBP will likely fine and penalize them.

The classic tariff engineering example: Converse, owned by Nike, adds an extra layer of felt to the bottom of their sneakers to qualify for a lower duty rate. From a rate up to 48% to 3%, in fact! As you may be able to tell, this can be very beneficial for businesses if applied and planned for correctly.

Another pretty baffling example of this: Women’s shirts and blouses can have duties that reach almost 27%, but it can be classified at a lower rate if the apparel has a pocket situated below the waist. Check out CBP’s guide for Apparel Terminology under the HTSUS.

Recommended reading: The State of Textile Importing & Exporting in the US

Interested? Here is a checklist for you before embarking on a tariff engineering journey. Make sure to ask yourself these questions before beginning:

• What cannot be changed about your goods? From a technical perspective and design perspective? 

• Can you simply import your goods from another country with lower tariffs?

• Are there similar materials that can be swapped out to achieve the same effect?

• Will it cost more to modify your goods — in terms of materials, manufacturing, safety precautions — than pay the higher duties?

• If questioned by CBP, would you be able to justify the classification of these goods?

• Is this legitimate tariff engineering? For example: would CBP consider this an artifice, disguise, or fictionalization of your declared goods?
• Are alterations a worthy endeavor in consideration of the fact that classifications change regularly?

One of the things that makes this process so tricky: the volatility of HTS classifications. We’ve seen this quite a bit as the Trump Administration imposes and lifts tariffs without much notice.

Importers can expect that the classification system is updated yearly, at a minimum. So certainly be mindful of any tweaks that you decide to make on your goods to take advantage of tariff engineering. 

As regulations are put forth, new products come out, and classifications are updated, it’s important to stay partnered up with a customs broker that can help you navigate these things and avoid missteps. Click here to contact a broker. 

Last year, Customs and Border Protection (CBP) proposed a rule to bolster the process of verifying importers that operate in the US. As described by CBP, the “Customs Broker Verification of an Importer’s Identity” rule will amend CBP regulations to require certain information from importers so that brokers can verify their identities — including non-resident importers as well. 

This would be enacted in the form of an amendment to the Trade Facilitation and Trade Enforcement Act of 2015. Previously, TFTEA provided general guidelines for how customs brokers can validate the identity of an importer. These guidelines include directives such as: 

1- Review personal identification such as a driver’s license or passport.

2- Cross-check the business registration online and with State authorities. 

3- Verify the business’s trade or fictitious names that might appear on the POA. 

4- Make note of things such as importer name and number, Employer Identification Number, and verify if it matches the information in ACE. 

5- Check if the importer is a restricted person by the US Government. 

In the proposal from last August, CBP explains their reasons for perhaps wanting additional information from importers:

“Since the collection and verification of any additional information from the importer is voluntary, certain brokers do not require any additional information. 

As a result, an atmosphere of “broker shopping” has been created where an importer that does not wish to provide this additional information might refuse to provide the information to one broker in the hopes that another broker will not ask for that information. 

If the second broker does not request the additional information, that broker, with minimal knowledge about the importer, transacts customs business on the importer’s behalf leading to the possible use of shell or shelf companies, revenue loss, increased security risks with the goods being imported into the United States, and an uneven playing field for brokers.”

In a piece in American Shipper Magazine, regulatory journalist Chris Gillis explains that the National Customs Brokers and Forwarders Association of America (NCBFAA) have some reservations about the rule. In essence, the rule requires the broker to collect 12 unique data elements at the moment in which POA is received from the importer. 

These data elements are as follows: 

• Importer name and date of birth for individuals
• Trade name and grantor’s date of birth for partnerships and corporations
• Address
• Phone number
• Email address
• Business website
• IRS number, employer identification number or importer of record number
• Business identification number, such as a data universal numbering system number
• Credit report
• Business registration and license with state authorities
• Grantor’s valid government-issued photo ID
• Grantor’s authorization to execute power of attorney on client’s behalf

It is estimated that the broker industry will need to spend over $22 million from 2019-2023 to ensure compliance. However, NCBFAA believes that this number is much higher. At the core: it is unlikely that the broker will be able to provide all of the required information at one given time, and unlikely as well as the provided info can be validated at once either.

If compliance is not met, the penalties may range all the way up to $10,000 per client or even a suspension of license. This would certainly take a toll on the importing industry in the U.S.

As of now, brokers have about 2 years to comply with the new rule. Teaming up with an experienced broker that can navigate the frameworks surrounding this new rule is integral to the success of the importer. To learn more about our expertise, you can contact us here.