In a Federal Register notice, the United States Trade Representative (USTR) announced that 77 COVID-related and 352 other Section 301 duty exclusions that were set to expire on December 31, 2023, will be extended for an additional 5 months through May 31, 2024. The Section 301 duties were imposed on various products from China to counter certain acts, policies and practices related to technology transfer, intellectual property and innovation. The USTR stated that the extension of the exclusions “will enable the orderly review of the exclusions consistent with statutory factors and objectives to identify in which cases additional time would enable shifts in sourcing to the United States or third countries”. The statutorily required four-year review of the Section 301 duties themselves is currently in process and the USTR further stated that this extension “will also facilitate the alignment of further decisions on these exclusions with the ongoing four-year review”.

Customs and Border Protection (CBP) is still welcoming importers of record and licensed customs brokers to participate in the Global Business Identifier (GBI) Evaluative Proof of Concept (EPoC). The GBI is a test to determine a potential replacement for the Manufacturer or Shipper Identification code (MID) currently required to be provided on entries filed with CBP. This new identifier could also be used for other entities involved in the entry process to obtain a “deeper insight into the legal structure of “who is who” across the spectrum of trade entities, and to understand more clearly ownership, affiliation, and parent-subsidiary relationship”. Participants in the EPoC can provide, at the time of entry filing, any of three entity identifiers associated with manufacturers, shippers, and sellers of merchandise covered by the entries. These identifiers are the nine (9) digit Data Universal Numbering System (D–U–N–S®), thirteen (13) digit Global Location Number (GLN), and twenty (20) digit Legal Entity Identifier (LEI). The test is limited to entry types 01 and 11, and to certain commodities and countries of origin. The limitations of the MID are well known in trade circles. Therefore, CBP is encouraging participation in this EPoC to facilitate the determination of a more robust replacement. If you would like to participate in this EPoC, contact compliance@jas.com.

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.