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Greetings!
Welcome to the November addition of Global Trade Expertise's newsletter, the Global Trader. This newsletter strives to provide relevant news updates to the international trade community. We would greatly appreciate your feedback as to what in topics are of interest to you. Thank you for reading! Jennifer Kessinger & Tammie Goldstein KrauskopfGlobal Trade Expertise
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BIS Publishes Proposed Rule Making SNAP-R Mandatory
Any comments must be received by Dec. 18, 2007
On October 19, 2007, the U.S. Bureau of Industry and Security (BIS) published in the Federal Register a proposed rule which would require that export and reexport license applications, classification requests, encryption review requests, License Exception AGR notifications and related documents be submitted to BIS via its Simplified Network Application Process (SNAP-R) system. This requirement would not apply to applications for Special Comprehensive Licenses or in certain situations in which BIS would authorize paper submissions.
Any public comments must be received by December 18, 2007. Additional information on submitting comments can be found here.
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BIS Publishes Final Rule on Burma
Rule Moves Burma Into More Restrictive Country Groupings
 On October 24, 2007, the Bureau of Industry and Security (BIS) published a final rule amending the Export Administration Regulations (EAR) to move Burma into more restrictive country groupings and impose a license requirement for exports, reexports or transfers of most items subject to the EAR to persons listed in or designated pursuant to Executive Orders 13310 and 13448. BIS states that the final rule was in response to the Government of Burma's continued repression of the democratic opposition in Burma and consistent with Executive Order 13310 of July 28, 2003 and Executive Order 13448 of October 18, 2007.
This rule creates a new section 744.22 to set forth the new license requirements. Further, in part 740 of the EAR (License Exceptions), this rule moves Burma from Computer Tier 1 to Computer Tier 3, restricting access to high-performance computers and related technology and software under License Exception APP (Section 740.7).
In Supplement No. 1 to part 740 (Country Groups), this rule moves Burma from Country Group B (countries raising few national security concerns) to Country Group D:1 (countries raising national security concerns), which further limits the number of license exceptions available for exports to Burma. Burma will remain in Country Group D:3 (countries raising proliferation concerns related to chemical and biological weapons).
On October 30, 2007, BIS published Questions and Answers regarding the final rule on Burma.
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BIS Publishes Final Rule Implementing December 2006 Wassenaar Arrangement Plenary Agreement
Rule Expands and Adds New Export Controls
 On November 5, 2007, BIS publshed a final rule implementing the December 2006 Wassenaar Arrangement Plenary Agreement. The rule expands existing controls and adds new export controls.
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White House May Face Battle with Congress Over Arms Sale to Saudi Arabia
Battle would be first in 17 years over sale to Saudi Arabia
 On November 19, 2007, the World Tribune reported that President Bush may be facing the first battle over Congressional approval for a proposed $20 billion arms sale to Saudi Arabia for the first time in 17 years. The arms sale includes missiles, munitions, air defense systems, advanced satellite-guided bombs, upgrades to fighters, and new naval vessels, which has made Israel and some of its supporters in Congress nervous. The New York Times reported on the initial proposed sale in July 2007 here.
World Tribune reports that while the Administration believes they have the support needed in Congress to approve this sale, others believe opposition is growing both publicly and privately. If a battle ensues over the proposed sale, it would mark the first fight between Congress and the White House over an arms sale to Saudi Arabia since 1990 when the House persuaded the administration of then President George H. W. Bush to reduce the $20 billion defense package to $7.3 billion and remove the airborne early warning and control aircraft and the KE-3 tanker aircraft.
Officials of the Bush Administration say that the proposed sale would be formally relayed to Congress soon while prenotification of the sale was given to House Speaker Nancy Pelosi on November 13, 2007. The article states:
"People of all political stripes have come out against this deal," Rep. Anthony Weiner, a New York Democrat said. "It's mind-bogglingly bad policy because the Saudi's at every turn have been uncooperative. The idea that we are going to reward the Saudi's with precision weaponry is a stunningly bad idea, and clearly deserves the full review of Congress."
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House Passes U.S.-Peru Free Trade Agreement
Peru Trade Agreement Passes by Wide Margin
 On November 8, 2007, the U.S. House of Representatives passed the U.S.-Peru Trade Promotion Agreement by a vote of 285 to 132.
U.S. Trade Representative Susan C. Schwab issued the following statement:
Today's vote
marks an historic achievement for the U.S. and Peruvian people. The
U.S.-Peru Trade Promotion Agreement is the foundation of an enduring
partnership with one of America's key friends and allies in Latin
America. . . . I look forward to an equally strong and bipartisan vote as
soon as possible in the Senate, and additional successes on the
Colombia, Panama, and Korea FTAs.
Her full statement can be found here.
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Interagency Working Group on Import Safety Presents Action Plan to President Bush
 On November 6, 2007, the Interagency Working Group on Import Safety presented its "Action Plan for Import Safety: A roadmap for continual improvement" to President Bush. The Action Plan can be found here. The plan is comprised of 14 broad recommendations and 50 specific action steps based on its previous report, "Protecting the American Consumer Every Step of the Way: A strategic framework for import safety" and the Immediate Actions Memorandum presented to the President on September 10, 2007.
More information can be found at: www.importsafety.gov.
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Importer Fined $7.5 Million for Declaring Incorrect "Provisional" Customs Values
CIT Found Importer Acted Fraudulently in Employing Undervaluation Scheme with No Plan to Correct Provisional Values with Customs
 In a recent case, United States v. Inn Foods, Inc., CIT Slip Op. 07-142 (September 25, 2007), the Court of International Trade penalized Inn Foods, Inc. for fraudulently declaring the value of imported frozen food from Mexico to the U.S. using "provisional" invoice values, rather than the final value paid for the goods. The case involved the importation of frozen produce into the United States by Inn Foods and Seaveg, a related Cayman Islands corporation, from six Mexican growers between 1987 to 1990.
Based on the facts found at trial, Seaveg would negotiate the initial price for the produce with the Mexican growers by telephone and then, under an agreement with its suppliers, receive an invoice at 70% of the negotiated price, with the understanding that the remaining 30% would be paid within 60 days of delivery into storage after certain adjustments were made. At the time of entry, the invoice at 70% of the true sales price was declared value to Customs. However, neither Inn Foods, Seaveg, nor the customs broker informed Customs that the invoice values declared at the time of entry were "provisional."
Firstly, the court found that Inn Foods was responsible for all of the liabilities despite the fact that Seaveg and Inn Foods were incorporated as two separate entities because it found that Seaveg was an alter ego or alias of its sister subsidiary Inn Foods.
Secondly, the court found that Inn Foods' conduct was fraudulent as Customs had proved that Inn Foods had deliberately introduced merchandise into the commerce of the United States by means of material false statements with the intent to defraud the revenue or otherwise violate the laws of the United States. Although Inn Foods and Seaveg argued that there was no evidence adduced at trial that indicates that "Inn Foods knew or understood the legal effect of post-importation price adjustments to the price actually paid or payable to the grower/packers based on the U.S. resale prices," the court found the argument to needlessly confuse the crux of the wrongdoing. The court stated that the wrongdoing is that:
Inn Foods knew that (1) the prices on the subject entries were significantly undervalued, (2) these undervaluations caused a commensurate reduction in lawful Customs duties owed and (3) there was no plan or intention to correct these undervaluations. . . . Therefore, while Inn Foods correctly states that "there is nothing sinister, per se, about provisional pricing agreements," it is not the provisional pricing agreement here that is at issue, but the underlying undervaluation scheme which the provisional pricing agreements only play a part.
Customs sought $624,602.55 in unpaid duties and merchandise processing fees and civil penalties in the amount of $15,319,513.35 if Inn Foods' conduct was found to be fraudulent. In determining the penalty to be assessed, the court noted that for violations of fraud, the maximum penalty is the domestic value of the merchandise with no set minimum penalty and that the court possesses the discretion to determine a penalty within the parameters of the statute. After considering a number of factors as set forth in United States v. Complex Machine Works Co., 23 CIT 942, 949-50, 83 F. Supp. 2d 1307, 1315 (1999), the court ordered that Inn Foods pay $624,602.55 for unpaid duties plus pre-judgment and post-judgment interest, and civil penalties in the amount of $7,500,000.00, plus costs and fees and interest from the date of judgment.
This case represents a cautionary tale for importers who use any type of provisional invoices, including those importers who true-up customs valuations at some point after entry due to the additions to value, such as assists, royalties, buying commissions, etc. Importers have a continuing obligation to review the correctness of information contained in invoices used as entry documents, and to declare to Customs the true and correct value of the goods at the time of entry. See 19 U.S.C. §§ 1484 and 1485. Accordingly, importers should maintain proactive internal controls over their Customs valuation and understand the impact of the full financial transaction for imported goods, including any possible additions to value.
If an intercompany or transfer price is declared as the customs value of an imported good, an importer should assess whether the intercompany or transfer price satisfies the customs valuation statute independent of the acceptability of the price for tax purposes. See Customs' Informed Compliance Publication, Determining the Acceptability of Transaction Value for Related Party Transactions. In addition, importers who utilize a customs value that must be adjusted subsequent to entry should consider joining Customs' Reconciliation program. This program allows importers to declare estimated customs values and subsequently adjust those values to final values and pay or be refunded any additional duties or fees owed.
Finally, an importer may be able to limit its liabilities for valuation and other errors it discovers on its own by filing a prior disclosure with Customs. By filing a prior disclosure, an importer voluntarily discloses to Customs the factual circumstances of a violation of the customs statute and tenders any duties and fees owing. If the prior disclosure is done properly, the importer's liability for penalties can be reduced to the interest owed, unless fraud is found.
Global Trade Expertise can assist with an importer in assessing the validity of their customs valuations, joining CBP's Reconciliation program, and/or filing a valid prior disclosure with CBP. Please contact us for assistance.
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China to Host C-TPAT Meeting
China Customs Moves Further After Agreeing to Allow Access to U.S. CBP Officials to Chinese Manufacturers to Validate Security Plans
 American Shipper reported today that U.S. Customs and Border Protection (CBP) officials plan to meet with Chinese counterparts in Beijing sometime in December to work out details for cooperation on the Customs-Trade Partnership Against Terrorism (C-TPAT) program. This information was relayed from Michael Mullen, Assistant Commissioner for International Affairs and Trade Relations.
CBP reported last month that China's Minister of Customs, Mu Xinsheng, had finally agreed to allow U.S. CBP inspectors in the country to verify security compliance of manufacturers and logistics providers whose customers participate in C-TPAT. Prior to this, CBP had authorized the use of 11 private companies in the Third Party Validation Pilot program, but interest from the trade community had been minimal due to concerns about sharing proprietary business and security data and the costs associated with the validation, which were to be incurred by the importer. China had been the only country to refuse to allow access to U.S. Customs teams seeking to validate that foreign suppliers are following the security plans submitted by their U.S. import customers and approved by CBP.
Mullen stated that the two customs administrations have exchanged letters about moving forward with joint validations in which CBP supply chain specialists would accompany Chinese officials during on-site visits of domestic companies. The two sides are still in the process of setting up a meeting at the invitation of Mu, Mullen stated.
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Wall Street Journal Reports on Problems with Tainted Ginger Imported from China
Complex Global Supply Chains Complicate Efforts to Police Production
 On November 19, 2007, the Wall Street Journal reported on the problems arising from the importation of ginger from China that have been tainted with a dangerous pesticide. The article states that Chinese ginger shows up in American cuisine in everything from soups to cookies, and sells in many U.S. grocery stores. The article describes the long trip from the farms of China to U.S. stores with layers of middlemen that complicates efforts to police the production process. In an illustrative example, the article states:
In the case of tainted pet food that first raised concern over Chinese imports in March, neither the Chinese government nor the U.S. Food and Drug Administration has pinpointed the original source of the problem ingredient, contaminated wheat gluten. In that probe, FDA officials traveled to China and worked with the Chinese government. But often, U.S. officials trace problem with food imports within American borders, due partly to limited resources.
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CBP Moves Forward with C-TPAT for Air Carriers and 3PLs
CBP Released Minimum Security Criteria for Air Carriers Last Week and Plans to Draft Proposal for 3PLs by Early December
 On November 19, 2007, American Shipper reported that U.S. Customs and Border Protection (CBP) is moving forward on extending the voluntary security program, Customs-Trade Partnership Against Terrorism (C-TPAT), for air carriers and 3PLs. Last week, CBP released its minimum security criteria for air carriers participating in C-TPAT and Bradd Skinner, the program's director, said he hopes to have similar security criteria in place for third-party logistics providers by early 2008.
American Shipper reports that CBP officials had previously said they intended to open up enrollment for the first time to logistics providers by the end of last summer, but CBP is carefully studying the dynamics of the outsourced logistics sector and developing a common definition for such a service provider, which is proving difficult because the industry is using so many subcontractors. CBP wants to ensure that any security plans instituted by the 3PL are also pushed down the pipeline to the companies doing the actual work.
The C-TPAT office plans to complete a draft proposal for 3PL minimum security requirements by early December, get executive approval by the end of the month and present the standards to the Commercial Operations Advisory Committee for final review.
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Who's Hiring?
A Summary of Current Trade Job Opportunities
 As a service to the international trade community, Global Trade Expertise compiles links to trade job opportunities from many different sources. New trade job listings are posted frequently at on our website. Since mid-October, the following regions have trade job opportunities:
West - 33
Midwest - 25
South - 22
Northeast - 16
DC Metro - 17
Current trade jobs are available in the following fields:
Customs - 31 Export - 35 Import/Export - 30 Logistics/Transportation - 3 Current trade job opportunities are available at the following levels: Analyst/Specialist/Coordinator/Officer - 72
Manager - 33
Director - 6
To sort the job opportunities by region, fields, or levels, click on the appropriate "Tag" in the right column on our Trade Jobs webpage. |
Calendar of Events
Upcoming Industry Events & Seminars
 Women in International Trade - Northern California (WIT-NC) -Chinese Decorum - Making All The Right Moves
Dec. 5, 6-8pm
Palo Alto, CA
BIS Seminar - Essentials of Export Controls
Dec. 6
Austin, TX
BIS Seminar - Technology Controls
Dec. 7
Austin, TX
BIS Seminar - Essentials of Export Controls
Dec. 12
Boston, MA
BIS Seminar - How to Classify Your Item
Dec. 13
Boston, MA
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Thanks again for your interest in our newsletter!
Sincerely,
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Jennifer Kessinger & Tammie Krauskopf
Attorneys & Consultants
jk@globaltradeexpertise.com
tammiekrauskopf@globaltradeexpertise.com
Tel. 925.876.1381 (Jennifer Kessinger)
Tel. 708.707.4087 (Tammie Krauskopf)
www.globaltradeexpertise.com
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