March 30, 2006
Over the last months, U.S. Customs and Border Protection (CBP) significantly increased their enforcement of the Chinese safeguard and quota requirements for imported textiles based on invoice misdescriptions, incorrect classifications, and transshipments.
On February 2, 2006, CBP issued a press release that it had seized more than $10 million of textiles over the prior four months that were misdescribed in an effort to circumvent trade laws (i.e., quotas).
Deborah J. Spero, the Acting Commissioner, stated:
CBP is committed to facilitating and stimulating the flow of legitimate international trade and collecting import duties. However, CBP also intends to maintain a robust trade enforcement program and textiles is a priority issue.
According to the notice, the enforcement of textile regulations is especially important, since they represent 43 percent of all revenue collected by CBP.
Misdescription Of Textile Products
CBP indicated in its news release that they had uncovered a scheme to circumvent the China safeguards by misdescribing cotton merchandise as “ramie”, which has a much lower rate of duty. During November and December 2005 alone, CBP conducted an additional 2,000 examinations to identify merchandise that had been misdescribed or smuggled. Some of the seizures made by CBP also involved Intellectual Property Rights (IPR) violations.
On-Site Verification Of Textile Manufacturers
CBP indicated that an important tool used by CBP is to send Textile Production Verification teams to foreign factories to review and verify that wearing apparel exported to the United States is actually made in those factories. Of the 195 high-risk factories reviewed, 70 were closed, 24 refused admission to the CBP officials, 50 were considered high potential for transshipments, and 3 had evidence that they were engaging in illegal transshipments. As the result of these on-sight verification visits, CBP commenced seizing textile shipments from any factory that was determined closed (with a domestic value of $1.3 million). On-site verification visits will continue as an integral part of CBP's enforcement against textiles.
On March 22, 2006, CBP stated they seized an additional $6 Million in textile products since February 24, 2006. In addition, CBP announced that they had seized approximately $1.3 million (in domestic value) of textiles made by factories deemed to be suspect as a result of CBP's verification visits.
Importer Action To Take At This Time
Importers should implement written procedures to verify the correctness of the invoice descriptions against the merchandise prior to filing an entry. For some products, fiber analysis of pre-production samples may be necessary.
In addition, importers should have established written procedures to verify that the factory identified on the commercial invoice or by the MID number actually produced the merchandise. These procedures could include questionnaires to the factory to determine its capacity and ability to produce textile products.
Importer Action To Take If A Seizure Notice Is Issued
Many textile importers may have received or will be receiving seizure notices of their textile import shipments. Importers are given various options, including the filing a petition for relief from the seizure. The seizure notices indicate that these petitions must be filed within 30 days, but sometimes extensions can be obtained.
The fact that an importer has received such a seizure notice does not mean that relief is precluded. A thorough examination of the circumstances must be reviewed. It may be necessary to obtain and submit production records and related information. The fact that a factory has closed should not, in itself, be a reason to deny relief from the seizure. Importers who have received seizure notices should consider engaging legal counsel who has expertise in CBP matters.
Protesting Notices Of Redelivery
Some importers may receive a Notice of Redelivery from CBP relating to certain entries of apparel items. Because CBP believes that the textile shipment involves violations of the textile laws and regulations (misdescription, closed factory, IPR, etc.), these notices are being issued with a request that the importer redeliver or return the merchandise within 30 days.
Importers can take action to contest the timeliness of these Notices. Under the CBP regulations, the conditional release period for apparel and textiles is 180 days from the entry date. CBP takes the position that they can ask for redelivery within a reasonable period (i.e., 30 days), following the end of this 180-day period. However, there is some question as to whether CBP can ask for redelivery after the 180-day period expires. Importers can file protests to contest these Notices, which, under current law, are due within 180 days of the protestable event, which, in this case, is the date that the Notice of Redelivery was issued.
If the importer is not able to redeliver the merchandise, then CBP will issue “liquidated damages”, which, for textiles, can be as high as three times the FOB value of the shipment. It is possible to file petitions to mitigate the amount of the liquidated damages. Again, importers who have received such notices should consider engaging experienced counsel.
If you have any questions with regard to these issues, please contact Steve Spraitzar at (415) 288-0427 or firstname.lastname@example.org or George R. Tuttle at (415) 288-0425 or email@example.com.
Stephen S. Spraitzar and George R. Tuttle are attorneys with the Law Offices of George R. Tuttle in San Francisco. The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.
Copyright © 2006 by Tuttle Law Offices.
All rights reserved. Information has been obtained from sources believed to be reliable. However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.