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U.S. Customs Proposes Change in Policy Relating to Customs Valuation and Post-Importation Transfer Price Adjustments

Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP / www.gdlsk.com

U.S. Customs and Border Protection (CBP) has proposed a significant change in policy with respect to post-importation price adjustments between related parties.

In a notice published in the Customs Bulletin December 28, 2011, CBP proposes to issue a ruling in which an importer can utilize the transaction value basis of appraisement and adjust declared values upward or downward provided certain criteria are met and the adjustments are declared to CBP through Reconciliation entries. CBP is accepting comments up through January 27, 2012.

Most multi-national firms have policies for setting intercompany prices (transfer prices). Many such policies utilize retroactive adjustments when settling prices between the related buyer and seller, or otherwise for ensuring appropriate distribution of profits for tax purposes. Previous CBP rulings have generally held that, under transaction value, post-importation retroactive transfer price adjustments could not be taken into account if the adjustments would reduce the declared customs value. CBP made an exception for transfer price adjustments made pursuant to an “objective formula,” but CBP had a very restrictive interpretation of acceptable formulas. Most transfer price policies failed to satisfy CBP’s interpretation.

Under the proposed ruling, CBP is modifying its policy on what constitutes an acceptable objective formula. CBP proposes to allow the importer to use transaction value and report retroactive adjustments through Reconciliation under certain criteria. Importers must also be able to establish that the final prices, as adjusted, qualify for transaction value under either the test value method or circumstances of sale method.

While the proposed ruling is a generally favorable change for related party importers, the proposed ruling raises a number of potential issues and concerns for importers operating under transfer price agreements.

If you have questions concerning the proposed ruling and its impact, or otherwise have questions concerning customs rules on valuation of related-party imports, please feel free to contact Erik D. Smithweiss. Comments on the proposed ruling must be submitted to CBP by January 27, 2012.

 


 

2012 Sugar Allocations

U.S. Customs & Border Protection / www.cbp.gov

Pursuant to Additional U.S. Note 5 to chapter 17 of the Harmonized Tariff Schedule of the United States (HTS), the United States maintains tariff-rate quotas (TRQs) for imports of raw cane sugar and refined sugar. Pursuant to Additional U.S. Note 8 to Chapter 17 of the HTS, the United States maintains a TRQ for imports of sugar-containing products. Section 404(d)(3) of the Uruguay Round Agreements Act (19 U.S.C. 3601(d)(3)) authorizes the President to allocate the in-quota quantity of a TRQ for any agricultural product among supplying countries or customs areas. The President delegated this authority to the United States Trade Representative under Presidential Proclamation 6763 (60 FR 1007). On August 1, 2011, the Secretary of Agriculture (Secretary) announced the sugar program provisions for fiscal year (FY) 2012. The Secretary announced an in-quota quantity of the TRQ for raw cane sugar for FY 2012 of 1,117,195 metric tons * raw value (MTRV), which is the minimum amount to which the United States is committed under the World Trade Organization (WTO) Uruguay Round Agreements. USTR is allocating this quantity (1,117,195 MTRV) to the following countries in the amounts specified below:

FY 2012 Raw cane sugar

Country allocations (MTRV)

Country FY 2012 Raw cane sugar allocations (MTRV)
Argentina 46,154
Australia 89,087
Barbados 7,513
Belize 11,807
Bolivia 8,587
Brazil 155,634
Colombia 25,760
Congo 7,258
Costa Rica 16,100
Cote d'Ivoire 7,258
Dominican Republic 188,908
Ecuador 11,807
El Salvador 27,907
Fiji 9,660
Gabon 7,258
Guatemala 51,520
Guyana 12,880
Haiti 7,258
Honduras 10,733
India 8,587
Jamaica 11,807
Madagascar 7,258
Malawi 10,733
Mauritius 12,880
Mozambique 13,953
Nicaragua 22,540
Panama 31,127
Papua New Guinea 7,258
Paraguay 7,258
Peru 44,007
Philippines 144,901
South Africa 24,687
St. Kitts & Nevis 7,258
Swaziland 17,174
Thailand 15,027
Trinidad & Tobago 7,513
Uruguay 7,258
Zimbabwe 12,880

These allocations are based on the countries' historical shipments to the United States and consultations with quota-holding countries. The allocations of the in-quota quantities of the raw cane sugar TRQ to countries that are net importers of sugar are conditioned on receipt of the appropriate verifications of origin, and certificates for quota eligibility must accompany imports from any country for which an allocation has been provided.

On August 1, 2011, the Secretary also announced the establishment of the in-quota quantity of the FY 2012 refined sugar TRQ at 112,718 MTRV for which the sucrose content, by weight in the dry state, must have a polarimeter reading of 99.5 degrees or more. This amount includes the minimum level to which the United States is committed under the WTO Uruguay Round Agreements (22,000 MTRV of which 1,656 MTRV is reserved for specialty sugar) and an additional 90,718 MTRV for specialty sugars. Based on consultations with quota-holding countries, USTR is allocating a total of 12,050 MTRV of refined sugar to Canada and 8,294 MTRV of refined sugar to be administered on a first-come, first-served basis.

Imports of all specialty sugar will be administered on a first-come, first-served basis in five tranches. The Secretary has announced that the total in-quota quantity of specialty sugar will be the 1,656 MTRV included in the WTO minimum plus an additional 90,718 MTRV. The first tranche of 1,656 MTRV will open October 12, 2011. All types of specialty sugars are eligible for entry under this tranche. The second tranche of 33,565 MTRV will open on October 26, 2011. The third, fourth, and fifth tranches of 19,051 MTRV each will open on January 11, 2012, April 11, 2012 and July 11, 2012, respectively. The second, third, fourth and fifth tranches will be reserved for organic sugar and other specialty sugars not currently produced commercially in the United States or reasonably available from domestic sources. With respect to the in-quota quantity of 64,709 metric tons (MT) of the TRQ for imports of certain sugar-containing products maintained under Additional U.S. Note 8 to chapter 17 of the HTS, USTR is allocating 59,250 MT to Canada. The remainder, 5,459 MT, of the in quota quantity is available for other countries on a first-come, first-served basis.

In response to increased tightness in the U.S. raw cane sugar market, USDA also announced that it will open its raw cane sugar TRQs on September 1, 2011, a month earlier than the usual entry date of October 1. This early entry date does not apply to TRQs for refined and specialty sugar and sugar-containing products.

* Conversion factor: 1 metric ton = 1.10231125 short tons.

Questions from the importing community regarding this message should be referred to the local CBP port.

 


 

CBP Provides Additional Information on New Centers of Excellence and Expertise

Sandler Travis & Rosenberg PA / www.strtrade.com

U.S. Customs and Border Protection has posted to its Web site additional information about the centers it is establishing to speed the processing of imported goods. The first two – the Center of Excellence and Expertise – Electronics in Los Angeles and the Center of Excellence and Expertise – Pharmaceuticals in New York – were created last October, and others are anticipated in 2012. Each CEE will seek to increase the uniformity of practices across ports of entry, facilitate the timely resolution of trade compliance issues nationwide and further strengthen CBP knowledge on key industry practices.

Scope of CEEs. CBP states that each CEE will address an entire industry and provide a single point of contact for questions or concerns related to that industry. This will enable CBP trade personnel to specialize in a key industry, building advanced knowledge in the intricacies of particular business practices, processes and products. CEEs also will serve as a ready source of clear and definitive information for trade and government partners on CBP requirements and best practices. As the CEEs expand they will provide “one-stop” processing for trusted traders in a particular industry, processing entry summaries and subsequent activities (e.g., post-entry amendments, protests) for trusted traders.

The trade community can contact CEEs for assistance in the following areas: technical guidance on covered imports, clarification of CBP policies and procedures, assistance with CBP requests for information/action (CF-28s, CF-29s, etc.), assistance with lengthy cargo holds, and information regarding counterfeit/substandard imports.

Trusted Traders. For the moment, a trusted trader is an importer that is Customs-Trade Partnership Against Terrorism certified (tier 3 or 2) and a member of the Importer Self-Assessment program. As the CEEs expand CBP will look for opportunities to work with industry on expanding the definition of a trusted trader.

Import Processing. CBP states that the process flow for entries and entry summaries will not change and that the location of CBP processing for post-release aspects of trusted trader shipments will simply be moved from ports of entry to the appropriate CEE. For example, an electronics importer may currently import through 60 ports of entry, with post-release processing being done at each location. Once the CEEs are fully staffed and have necessary trade functionality they will handle such processing, leading to greater uniformity in decision making.

Training. CEEs will develop and foster training initiatives for both agency personnel and members of the trade community. This may include collaborative efforts with the private sector to enhance agency understanding of the industry at large. CEEs can also serve as an important resource for small and medium-sized importers who may not have large compliance departments.

Other Government Agencies. CEEs will be expected to partner with OGAs and promote the adoption of risk management and segmentation practices that will result in even greater facilitation of legitimate trade and enhanced enforcement activities. CBP would welcome OGA participation and staffing in the CEEs whose industries are regulated by those agencies.

Expansion. CBP plans to establish additional CEEs over the next three years and to have all imported commodities covered by CEEs by the end of that time.

Account Managers. All trusted partners within a CEE-covered industry will continue to have account managers assigned to them.

Cargo Security. CBP states that cargo security aspects will remain within the current organizational elements but that CEEs will play an integral role in enhancing the link between security and trade functions as they evaluate the impact of security efforts on their specific industries and accounts.

 


 

CBP Releases Data on Textile and Apparel Enforcement in 2011

Sandler Travis & Rosenberg PA / www.strtrade.com

U.S. Customs and Border Protection has posted to its Web site the following statistics on its textile and apparel enforcement efforts in 2011. CBP states that these statistics reflects its “assertive” approach in this area, which focuses on transshipment, evasion, and improper/misleading country of origin marking.

  • There were no quota seizures in 2011
  • The value of intellectual property seizures steadily declined throughout the year, from $4.66 million in the first quarter to $2.45 million in the fourth quarter. The number of seizures totaled 7,711 and ranged from 1,166 in the third quarter to 3,477 in the second quarter.
  • There were a total of 48 commercial fraud penalties totaling $27.32 million, with a quarterly high of 19 penalties for $20.1 million in the third quarter.
  • Total liquidated damages claims associated with textiles numbered 746, the vast majority of which were related to entry.
  • CBP visited a total of 165 factories in nine countries to investigate concerns about illegal transshipment and trade preference claims. The percentage of discrepant factories averaged out to 22% for the former and 27% for the latter.
  • A total of 10,444 examinations were conducted during the year, with an average 13% discrepant rate.
  • CBP initiated 36 audits and completed 40 in 2011. Recommended recoveries totaled $6.5 million, more than half of which originated in the first quarter.
  • Of the 1,363 samples tested in CBP labs, 654 (48%) were found to be discrepant.
  • Eight special enforcement operations were initiated, all in the first half of the year, and seven were completed.

See Customs website: http://www.cbp.gov/xp/cgov/trade/priority_trade/textiles/textile_apparel_stats.xml

 


 

Commerce Initiates Antidumping Duty (AD) Investigations of Steel Wire Garment Hangers from Taiwan and the Socialist Republic of Vietnam (Vietnam) and a Countervailing Duty (CVD) Investigation of Steel Wire Garment Hangers from Vietnam

International Trade Adminstration / www.trade.gov

 

http://ia.ita.doc.gov/download/factsheets/factsheet-vietnam-taiwan-swgh-adcvd-init-20120119.pdf

 


 

CBP In Arizona Seizes More Than $16M in Narcotics This Week

U.S. Customs & Border Protection / www.cbp.gov

Tucson, Ariz. — U.S. Customs and Border Protection’s Joint Field Command - Arizona reports the seizure of almost 30,000 pounds of narcotics valued in excess of $16.2 million, and the apprehension of 2,554 illegal and 146 inadmissible immigrants at the Arizona border Jan. 9 – 15.

Narcotics seizures consisted of more than 29,700 pounds of marijuana, 46 pounds of cocaine, 41 pounds of methamphetamines and 64 pounds of heroin. CBP also intercepted $121,299 in illegal outbound currency, 3,489 rounds of ammunition and 58 vehicles used for illicit purposes.

Last week, the Border Patrol in Arizona presented 624 individuals in federal court for prosecution. Of those, 565 were prosecuted on immigration charges; 400 under Operation Streamline, seven for alien smuggling and 52 on federal drug charges.

Conviction Highlight

On May 30, 2011, Border Patrol agents working in the west desert arrested 38-year-old Alfredo Bautista-Jeronimo, a Mexican national from Mexico City, for attempt or conspiracy to possess or distribute marijuana. At the time of his arrest, Bautista was one of a group of individuals smuggling more than 242 pounds of marijuana on foot through the desert. He was sentenced Jan. 11, 2012, in U.S. District Court to 60 months in prison. Bautista was convicted in 2004 in Seattle for manufacture/delivery of Schedule I/II narcotics and conspiracy, and received 90 days in jail with 12 months of supervised probation. CBP considers drug smuggling a serious offense and is determined to prosecute smugglers to the fullest extent of the law.

Since launching the Southwest Border Initiative in March 2009, the Department of Homeland Security, under Secretary Janet Napolitano, has engaged in an unprecedented effort to bring focus and intensity to Southwest border security; coupled with a reinvigorated, smart and effective approach to enforcing immigration laws.

Joint Field Command-Arizona integrates combined assets from the Tucson and Yuma Border Patrol Sectors, the Tucson Field Office, and the Office of Air and Marine’s Tucson and Yuma Air Branches, enabling CBP leadership in Arizona to direct an integrated approach to border security, commercial enforcement and trade facilitation.

 


 

CBP Agriculture Specialists at Laredo Port of Entry Intercept 23 Live Ticks Found on Deer Hide

U.S. Customs & Border Protection / www.cbp.gov

Laredo, Texas - U.S. Customs and Border Protection (CBP) agriculture specialists at the Laredo Port of Entry recently intercepted a significant amount of possible cattle fever ticks found on an imported trophy deer hide.

On Jan. 8, 2012 a CBP officer at Colombia-Solidarity Bridge referred a driver of a Chevy pickup truck to secondary examination after he declared a trophy deer hide originating from Nuevo Leon, Mexico. A CBP agriculture specialist conducted an examination and discovered 23 live ticks on the hide.

A U.S. Department of Agriculture entomologist identified the pest as Boophilus sp., which includes cattle fever tick, a pest of quarantine significance in cattle.

CBP refused entry of the hide. The hunter abandoned the hide for destruction.

Imported trophy deer hides must be free of live or dead ticks. Hides must be treated chemically or be frozen to ensure elimination of these pests.

“This is the largest amount of fever ticks that our agriculture specialists have found on a single deer hide this season,” said Sidney Aki, CBP Port Director, Laredo. “Stopping fever ticks at the border illustrates the crucial role CBP agriculture specialists play in protecting American agriculture and livestock and preventing possible adverse impact to the U.S. cattle industry.”

 


Salazar Announces Ban on Importation and Interstate Transportation of Four Giant Snakes that Threaten Everglades

U.S. Fish and Wildlife Service / www.fws.gov

WASHINGTON, DC – The U.S. Fish and Wildlife Service has finalized a rule that would ban the importation and interstate transportation of four nonnative constrictor snakes that threaten the Everglades and other sensitive ecosystems across the United States, Secretary of the Interior Ken Salazar announced today.

The final rule – which incorporates public comments, economic analysis, and environmental assessment – lists the Burmese python, the yellow anaconda, and the northern and southern African pythons as injurious wildlife under the Lacey Act in order to restrict their spread in the wild in the United States. It is expected to publish in the Federal Register in the coming days.

“Thanks to the work of our scientists, Senator Bill Nelson, and others, there is a large and growing understanding of the real and immediate threat that the Burmese python and other invasive snakes pose to the Everglades and other ecosystems in the United States,” Salazar said. “The Burmese python has already gained a foothold in the Florida Everglades, and we must do all we can to battle its spread and to prevent further human contributions of invasive snakes that cause economic and environmental damage.”

The four species were assessed by the U.S. Geological Survey as having a high risk of establishing populations and spreading to other geographic areas in that agency’s 2009 report, Giant Constrictors: Biological and Management Profiles and an Establishment Risk Assessment for Large Species of Pythons, Anacondas, and the Boa Constrictor.

Sixty days after publication of the final rule in the Federal Register, interstate transport and importation of live individuals, gametes, viable eggs, or hybrids of the Burmese python, northern and southern African pythons and yellow anaconda into the United States will be prohibited. None of these species is native to the United States.

“Burmese pythons have already caused substantial harm in Florida,” said U.S. Fish and Wildlife Service Director Dan Ashe. “By taking this action today, we will help prevent further harm from these large constrictor snakes to native wildlife, especially in habitats that can support constrictor snake populations across the southern United States and in U.S. territories.”

Ashe said the Service will continue to consider listing as injurious the five other species of nonnative snakes that the agency also proposed in 2010 – the reticulated python, boa constrictor, DeSchauensee’s anaconda, green anaconda and Beni anaconda.

Most people who own any of these four species will not be affected. Those who own any of these four species of snakes will be allowed to keep them if allowed by state law. However, they cannot take, send, or sell them across state lines. Those who wish to export these species may do so from a designated port within their state after acquiring appropriate permits from the Service.

The Burmese python has established breeding populations in South Florida, including the Everglades, that have caused significant damage to wildlife and that continue to pose a great risk to many native species, including threatened and endangered species. Burmese pythons on North Key Largo have killed and eaten highly endangered Key Largo wood rats, and other pythons preyed on endangered wood storks.

In the Everglades alone, state and federal agencies have spent millions of dollars addressing threats posed by pythons – an amount far less than is needed to combat their spread. If these species spread to other areas, state and federal agencies in these areas could be forced to spend more money for control and containment purposes.

Interior and its partners, including the Florida Fish and Wildlife Conservation Commission (FWC), South Florida Water Management District, and others are committed to controlling the spread of Burmese pythons and other large nonnative constrictors. For example, FWC recently implemented the use of a “snake sniffing” dog to help in its efforts to find and eradicate large constrictor snakes. This dog was present at the Secretary’s announcement today, along with a 13-foot-long Burmese python.

Under the injurious wildlife provisions of the Lacey Act, the Department of the Interior is authorized to regulate the importation and interstate transport of wildlife species determined to be injurious to humans, the interests of agriculture, horticulture, forestry, or to wildlife or the wildlife resources of the United States.

For more information on injurious wildlife and efforts to list the four species of snakes as injurious under the Lacey Act, please visit: http://www.fws.gov/invasives/news.html

 
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