When Good Claims Go Bad! When U.S. Customs Makes You Pay Duty on Duty-Free Merchandise

Transcription

1 When Good Claims Go Bad! When U.S. Customs Makes You Pay Duty on Duty-Free Merchandise Hosted by United States Fashion Industry Association (USFIA) and Grunfeld Desierio Lebowitz Silverman & Klestadt LLP March 10, :00 P.M. Eastern/11:00 A.M. Pacific

2 Today s Speaker Arthur Bodek Partner GDLSK LLP

3 Do you have a question? During the webinar, all attendees will be assigned to listenonly mode. Please use the Questions box on your dashboard to ask a question during the webinar.

4 USFIA Fashion Forward: Columbus March 24, 2016 L Brands HQ in Columbus, Ohio Join the United States Fashion Industry Association (USFIA) for Fashion Forward: Columbus, our full-day trade and customs seminar! Our agenda includes: Alice Kipel, Executive Director of CBP Office of Regulations & Rulings Representatives of the CBP CEE for Apparel, Footwear, & Textiles USFIA leadership and legal counsel on hot trade and customs policy issues USFIA Innovation Partner Amber Road on supply chain security USFIA Customs Broker Partner OHL on the customs legislation Panel of experts from WRAP, Better Cotton Initiative, and more on compliance And plenty of time to network with your peers and new business leads! To register, visit m&task=civicrm/event/info&itemid=141&reset=1&id=132

5 Q u e s t i o n s? Please use the Questions box on your dashboard on the right side of your screen. You can also ask a question after the webinar. info@usfashionindustry.com Phone:

6 When Good Claims Go Bad! When Customs Makes You Pay Duty on Duty-Free Merchandise March 10, 2016 Arthur W. Bodek, Esq Arthur W. Bodek / abodek@gdlsk.com /

7 Plethora of Duty-Free Programs The United States has free trade agreements in force with 20 countries. This does not include the 12-country TPP (nor TTIP). Unilateral duty-free programs (AGOA, CBPTA, Haiti, QIZ, GSP). Other duty-free provisions (e.g., American Goods Returned, Unconditional duty-free ). Arthur W. Bodek / abodek@gdlsk.com /

8 Recurring Problems Wrong Program Claimed. Correct program claimed but lacking documentation / substantiation. How (if at all) can the claims be fixed? Arthur W. Bodek / abodek@gdlsk.com /

9 Wrong Program Claimed NAFTA vs Example: U.S. goods imported into Canada under NAFTA. After not being needed, the goods were returned to the United States under the NAFTA. Held: NAFTA does not apply. Why? NAFTA is limited to qualifying goods that qualify to be marked as goods of Canada [or] Mexico. HTSUS, GN 12(a). NAFTA does not normally apply to U.S.-origin goods imported into the United States! Arthur W. Bodek / abodek@gdlsk.com /

10 Wrong Program Claimed NAFTA vs Example: U.S. yarns imported into Canada under NAFTA and subjected to a process not ordinarily origin-conferring (e.g., twisting, dyeing). Several years worth of claims for duty-free treatment under 9801 / American Goods Returned were denied. Why? The non-origin conferring processing constituted an advancement in value or improvement in condition thus negating CBP agreed that NAFTA applied by virtue of the NAFTA Preference Override provision. However, in most instances, it was too late to make a NAFTA claim. Customs did not accept the no harm, no foul argument (i.e., duty-free whether under 9801 or NAFTA). Arthur W. Bodek / abodek@gdlsk.com /

11 Wrong Program Claimed NAFTA vs Products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad. When there is any processing abroad, care must be taken to assess whether the processing is an advancement in value or improvement in condition. Arthur W. Bodek / abodek@gdlsk.com /

12 Wrong Program Claimed NAFTA vs NAFTA how do we treat U.S. NAFTAoriginating articles undergoing processing steps in Canada (or Mexico) that do not change the origin under the NAFTA marking rules? Example U.S.-origin yarn dyed in Canada. See e.g., Ruling NY K80733 (December 3, 2003). Arthur W. Bodek / abodek@gdlsk.com /

13 Wrong Program Claimed NAFTA vs NAFTA Preference Override (19 CFR ) If a NAFTA-originating good: has been exported from, and returned to, the United States, after being advanced in value or improved in condition in a NAFTA country, is determined to have a U.S. origin... That origin will be overridden! It will instead be considered a product of the last NAFTA country in it was advanced in value or improved in condition before its return to the U.S. Arthur W. Bodek / abodek@gdlsk.com /

14 Wrong Program Claimed NAFTA vs Critical difference between NAFTA and 9801 for returning U.S. NAFTA-originating goods is: Was the U.S. article advanced in value or improved in condition abroad? If no possible 9801 If yes possible NAFTA Arthur W. Bodek / abodek@gdlsk.com /

15 Wrong Program Claimed Originating Goods vs. TPL Many FTAs have tariff shift rules to determine whether goods are originating and, therefore, eligible to preferential or duty-free treatment. Example: A change to headings 6109 through 6111 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or headings 5508 through 5516 or 6001 through 6006, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA parties. For most tariff-shift based FTAs, for most garments a yarn forward rule applies. MANY exceptions apply. Arthur W. Bodek / abodek@gdlsk.com /

16 Wrong Program Claimed Originating Goods vs. TPL Many FTAs also have a Tariff Preference Level ( TPL ) provision extending duty-free treatment to certain non-originating goods cut and sewn in the FTA territory. Example: The rate of duty in the "Special subcolumn of rates of duty column 1 followed by the symbol "MX" in parentheses shall apply to imports from Mexico, up to the annual quantities specified... of apparel goods provided for in chapters 61 and 62 that are both cut (or knit to shape) and sewn or otherwise assembled in the [NAFTA] territory... from fabric or yarn produced or obtained outside the [NAFTA] territory. Arthur W. Bodek / abodek@gdlsk.com /

17 Wrong Program Claimed Originating Goods vs. TPL Different provisions. Different reporting and documentation. Rulings reflect the two are sometimes confused. Here too, CBP position is to reject No harm no foul. Fact-specific. Arthur W. Bodek / abodek@gdlsk.com /

18 Insufficiently Substantiated Claims NAFTA Certificate of Origin [NAFTA] declaration must be based on a complete and properly executed original Certificate of Origin, or copy thereof, which is in the possession of the importer and which covers the good being imported. In the era of ACE and Customs Modernization, this is one area where a paper requirement stubbornly persists. Arthur W. Bodek / abodek@gdlsk.com /

19 Insufficiently Substantiated Claims NAFTA Certificate of Origin CBP has assessed astronomical amounts in duty when it could not be shown that the importer possessed the NAFTA Certificate before making the claim even if it could produce a Certificate later and the underlying NAFTA manufacturing details were not in dispute. Arthur W. Bodek / abodek@gdlsk.com /

20 Insufficiently Substantiated Claims Foreign language documents. Failure to present production documents either in English or with an English translation will likely result in a denial of a claim. HQ H of 2/12/2009. Arthur W. Bodek / abodek@gdlsk.com /

21 Insufficiently Substantiated Claims Weak audit trail This Court, however, while sensitive to the purposes of AGOA and the hardships faced by Swaziland, cannot fault Customs for denying Polly s claim to preferential treatment as Customs has the discretion to enter these items as dutiable if the documentation is found to be substantially insufficient either in quality or quantity. Polly USA v. United States (8/6/2009). Arthur W. Bodek / abodek@gdlsk.com /

22 Insufficiently Substantiated Claims Document Inconsistencies relating to Invoice description. Role of the parties. Invoice prices. Shipping documents. Missing production records. Ruling HQ H of November 21, Arthur W. Bodek / abodek@gdlsk.com /

23 Insufficiently Substantiated Claims CBP Factory Visits that raise questions. CBP inability to reach parties in the supply chain. Arthur W. Bodek / abodek@gdlsk.com /

24 How Can You Fix a Good Claim Gone Bad? It depends on the duty-free program and the relevant mechanisms. CBP HQ Memorandum of August 11, 2014 distinguishes between those programs that have a formal post-importation claim mechanism and those that do not. Arthur W. Bodek / abodek@gdlsk.com /

25 How Can You Fix a Good Claim Gone Bad? Questions to Consider Did I make a claim at the time of entry? Am I operating under a program that allows postimportation claims? Am I still timely? If not, can I still file a PEA or PSC? If I did make a claim at the time of entry, has the entry liquidated? Arthur W. Bodek / abodek@gdlsk.com /

26 How Can You Fix a Good Claim Gone Bad? Where applicable, CBP HQ will consider laterprovided information in reversing a denial. The documentation submitted to the port was not sufficient to support the claim... However, the importer has provided this office with the missing information to show that the goods are indeed eligible under the DR-CAFTA. (Ruling HQ H of May 16, 2012). Arthur W. Bodek / abodek@gdlsk.com /

27 How Can You Fix a Good Claim Gone Bad? Think out of the box! HQ (March 22, 2006) Article (casino kiosk) entered under the NAFTA. NAFTA claim properly denied by CBP; duties assessed based on the HTS provision used at the time of entry. We prevailed on the argument that the goods were more properly described by an unconditionally duty-free provision. Arthur W. Bodek / abodek@gdlsk.com /

28 Fixing Claims in a Prior Disclosure Special Issues Associated with Offsets 19 U.S.C. 1509(b)(6) allows for certain offsets in audits Policy has been extended to prior disclosures. However, regulations provide that Offsetting will not be allowed with respect to overpayments or over-declarations resulting from a failure to timely claim or establish a duty allowance or preference. Ongoing debate between import community and CBP. Arthur W. Bodek / abodek@gdlsk.com /

29 Recap Know which of the duty-free claims applies. Make the right claim. Document it thoroughly. Understand the options to fix a good claim gone bad. Arthur W. Bodek / abodek@gdlsk.com /

30 When Good Claims Go Bad Thank you! Questions? Arthur W. Bodek / abodek@gdlsk.com /