Duty Preference Programs

Transcription

1 Global Sourcing and Regulatory Compliance in a New Era Society of Corporate Compliance and Ethics 10 th Annual Compliance & Ethics Institute Geoffrey M. Goodale Foley & Lardner LLP (202) ggoodale@foley.com Duty Preference Programs Free Trade Agreements (NAFTA, CAFTA-DR, etc.) African Growth and Opportunity Act Andean Trade Preference Act Caribbean Basin Economic Recovery Act Caribbean Basin Trade Partnership Act of 2000 Freely Associated States Generalized System of Preferences 1

2 Foreign Trade Zones (FTZs) Types General-Purpose Zones Subzones Benefits Deferral of duties Elimination of duties Inverted duty savings Property tax Zone-to-zone transfer Defect/Damage/Waste/Scrap/Obsolescence Activities Permitted in an FTZ Assembly and processing Repacking and relabeling Destruction Mixing Manipulation Testing Sampling Storage Salvaging Manufacturing (Special FTZ Board approval required) 2

3 CBP Audit Types Focused Assessments (FAs) Company selected based on a risk model Internal control review Transaction testing Risk determination (Acceptable or Unacceptable) Follow-up (CIP or Assessment Compliance Testing) Quick Response Audits (QRAs) Testing is generally more extensive than FAs and is designed to determine if transactions are in compliance with Customs laws At the end of a QRA, CBP determines if further action is needed CBP s Priority Trade Issues Agriculture Antidumping/Countervailing Duty Import Safety Intellectual Property Rights Penalties Revenue Textiles Trade Agreements 3

4 Reasonable Care Pursuant to Customs Mod Act, importers must use reasonable care. Reasonable care must be applied to all Customs requirements. Classification Valuation Origin Preferential trade programs (e.g., NAFTA, CAFTA-DR, GSP) Reasonable Care (cont d) Requesting advice, prior to importation from recognized Customs expert (e.g., trade attorney, customs broker, CBP personnel) Providing full disclosure to expert of all facts and circumstances Relying on expert advice to file entry Good faith, professional disagreement as to classification - not a violation 4

5 Internal Controls Control Environment sets the tone Risk Assessment identifies, analyzes, and determines how to manage risks to achieving objectives Control Activities specific policies and procedures to help ensure objectives are met Information and Communication necessary to support all other control components Monitoring assess the quality and effectiveness of the system s performance Customs Compliance Programs Tone at the top Organizational structure and staffing Supply chain, logistics, finance, tax, legal, other Compliance v. operations Geographical scope Authority and seniority 5

6 Customs Compliance Programs (Cont d) Policies, internal controls and procedures Use Focused Assessment (FA) process as roadmap Must be documented Tools and templates Automation Customs Compliance Programs (Cont d) Training Live sessions, webinars, on-line Separate training for senior management, specialized topics Interaction, e.g., quizzes, voting, games Training records and centralized database 6

7 Customs Compliance Programs (Cont d) Audits and self-assessments Risk assessments Internal v. external resources; peer review Detailed templates/checklists but not too detailed Reporting results and implementing corrective actions Reporting violations Anonymous or confidential hotline without retaliation Voluntary disclosures to government Ruling Requests Classification Country of Origin Marking Valuation Government Procurement ( Buy America ) Temporary Importation under Bond Bonded Warehouse Trade Agreements and Trade Programs Drawback FTZ 7

8 Types of CBP Decisions That Can Be Protested Appraised value of merchandise Classification and rate and amount of duties All charges or exactions (including accrual of interest) Exclusion of merchandise from entry or delivery Liquidation or reliquidation of entry Refusal to reliquidate an entry under 19 U.S.C. 1520(c) [19 U.S.C. 1514; 19 C.F.R ] Parties That Can Protest CBP Decisions Importer or Consignee Any person paying any charge or exaction (Or seeking a refund of any charge or exaction) Any person seeking entry or delivery Any person filing a claim for drawback Any exporter or producer of merchandise challenging a CBP NAFTA verification or determination Any authorized agent of any of the above kinds of aggrieved parties 8

9 Substantive Requirements for Protests Name, address, and importer number of protestant Numbers and dates of entries Dates of liquidation of entries (or dates of decisions in cases not involving liquidation) Specific description of merchandise involved Reasons for protest Declaration regarding drawback Date of receipt and protest number of any previously filed protest that is the subject of an AFR (if applicable) Application for Further Review An Application for Further Review (AFR) may be made on the same CBP Form 19 used for the protest or on a separate CBP Form 19 The AFR must provide information that clearly identifies the protest to which it applies and the protestant In the AFR, the protestant must state that: It has not previously received an adverse decision from CBP and does not have a presently pending application for an administrative decision on the same claim It has not received an adverse court decision on the same claim Additional legal arguments can be made in the AFR 9

10 Processing of Protests Generally, CBP must rule on protests within 2 years from the date on which the protest was filed If several timely filed protests are treated as part of a single protest, the 2-year period runs from the date of the last protest In cases relating to the exclusion of merchandise, CBP must issue a ruling within 30 days from the date of the protest Accelerated disposition of a protest may be requested at any time after 90 days from the filing of the protest Such a request must be submitted by registered or certified mail If CBP does not issue a ruling within 30 days from receipt of a request for accelerated disposition, the protest is deemed denied Appeals of Denied Protests A protestant can seek judicial review of a denied protest by the U.S. Court of International Trade (CIT) An appeal must be filed with the CIT within 180 days of: The date of mailing of the notice of denial of a protest The date that a protest for which accelerated disposition was requested was deemed to have been denied The date that a protest involving the exclusion of merchandise was deemed to have been denied The CIT reviews CBP s decision on a de novo basis CIT rulings can be appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC) 10

11 Discovery of Violations Determine and implement corrective action if the violation is on-going. Conduct an internal investigation to determine cause, scope and effect of violation. Consider whether a prior disclosure should be filed. Prior Disclosures Disclose the circumstances of the violation: (1) identify class/kind of goods; (2) identify import; (3) specify material falsities; and (4) provide true, accurate information and data. Prior disclosure must be made before or without knowledge of the commencement of formal investigation of violation (commencement document) by CBP. Tender actual loss of duties at time of prior disclosure or within 30 days after written notification of loss calculation by CBP. 11

12 Prior Disclosures (Cont d) Issuance of CBP Form 28 or 29 may serve as commencement of a formal investigation, depending on contents. Did import specialist have a reason to believe there has been a violation? Does language communicate to importer that CBP suspects a violation? Communicate that CBP is looking beyond the cited entry? If content of CF 28/29 initiates a formal investigation, importer s receipt creates presumption of knowledge. Key Court Cases Involving Prior Disclosures Yuchius Morality Co. [26 CIT 1224 (2002)] Tikal Distributing Corp. [970 F. Supp 1056 (CIT 1997)] Brotherhood Int l Corp. [294 F. Supp. 2d 1373 (CIT 2003)] Nat l Semiconductor Corp. [Slip Op (Fed. Cir. Nov. 13, 2008)] Ford Motor Co. I [435 F. Supp. 2d 1324 (CIT 2006)] Ford Motor Co. II [463 F.3d 1267 (Fed. Cir. 2006)] Bridalane Fashions, Inc. [32 F. Supp. 2d 466 (CIT 1998)] Pentax Corp. [125 F.3d 1457 (Fed. Cir. 1997)] 12

13 Contact Information Geoffrey M. Goodale Foley & Lardner LLP (202) Thomas J. Jesukiewicz U.S. Customs and Border Protection (562) ext Latest Trends in Regulatory Audit Society of Corporate Compliance and Ethics 10th Annual Compliance & Ethics Institute September 12 th, 2011 Tom Jesukiewicz, Field Director, Houston Field Office 13

14 Objectives Focused Assessment (FA) Other Types of Audits Supply Chain Security Observation Specialization/Subject Matter Expert Other Government Agency (OGA) Importer Self Assessment (ISA) Regulatory Audit Locations Headquarters D.C., 10 Field Offices Seattle San Francisco San Jose Long Beach Laguna Niguel San Diego Regulatory Audit Headquarters Regulatory Audit Field Offices Regulatory Audit Sub-offices Minneapolis Buffalo Detroit Philadelphia Chicago Denver Ft. Mitchell St. Louis Nashville Charlotte Memphis Atlanta Dallas El Paso Houston New Orleans Laredo Miami McAllen Boston New York JFK Newark Baltimore Headquarters 14

15 Caridad & Tom Forever FA Statistics Over a 1,250 FA Audits 90% of FAs Took Less Than One Year to Complete 30 15

16 FA Statistics Over $100 Million in Loss of Revenue (excludes PD & Penalties) 60% of FA Audits Concluded Unacceptable Compliance Top 3 Areas with Unacceptable Compliance Value Duty Free Provisions Classification 31 Common Internal Control Deficiencies No Internal Control Procedures In Place Not Monitoring/Verifying Broker s Work Not Maintaining or Updating Classification Database Not Requesting CBP Assistance/Input with New or Complex Issues Other Departments Not Communicating Potential CBP Related Information to the Import Department No Testing of Entries for Accuracy 32 16

17 Common Compliance Errors Lack of Documentation to Substantiate Various Claims Price Paid or Payable Is Not Fully Reported Inaccurate or Incomplete Description of Articles as a Basis for Classification. 33 What TRADE Can Do (Best Practices) 1. Management Commitment 2. Establish Compliance Goals 3. Develop Formal Policies & Procedures 4. Establish Training Programs 5. Conduct Internal Control Reviews 6. Create a CBP Compliance Group 7. Access to Executives for Needed Resources 8. Develop Compliance Requirements for Suppliers 9. Establish a Record Keeping Program 10. Partner with Customs & Border Protection 17

18 Examples of QRA Subjects Improper Valuation Anti Dumping Duty Violations FTZ Inventory Discrepancies Bonded Warehouse IPR Infringements ICE Fraud Support Health & Safety Container Exam Station (CES) 35 QRA Statistics Almost 700 Audits Percent with findings (unacceptable compliance): 50% Total Loss of Revenue: More Than $140 Million 36 18

19 Specialization Complex and diverse trade issues (Priority Trade Issues- PTI) call for more centralized areas of expertise and development of Subject Matter Experts within Regulatory Audit Assignment of areas of specialization by Field Offices (FO) Alignment of offices in conjunction with National Targeting and Analysis Group (NTAG) FO can work closely with NTAG to promote development of high level of expertise by PTI 37 Importer Self Assessment (ISA) ISA ISA - Product Safety 38 19

20 Information Sharing and Other Government Agencies (OGA) Increased interagency interaction with other Government Agencies (CPSC, Agriculture, FDA, DOT, etc.) 39 Health & Safety Audits Agriculture Consumer Product Safety Commission DOT EPA 40 20

21 Agriculture Audit Labeling indicates amino acid 41 Agriculture Audit Inspection reveals meat 42 21

22 Agriculture Audit Instant Noodle: HTS Agriculture Audit Overall Impact 40,700 units of prohibited merchandise were attempted to be entered into the United States (21 entry summaries); 21,622 units entered the United States commerce 19,078 units were seized and destroyed 44 22

23 Agriculture Audit 45 Importer Self-Assessment/Product Safety Benefits to the Importer Reduced product safety tests on goods Front of the line testing at CPSC laboratories Destruction of products in lieu of redelivery Fast Track Product Recall Program Special training on compliance, internal controls, and audit trails Benefits to CPSC Concentration of limited resources on non-compliant importers while protecting the American consumer from harm 46 23

24 THANKS!