U.S. Customs Ruling Concerning Country of Origin for Section 301 Purposes

On September 13, 2018, U.S. Customs and Border Protection announced a new ruling that will be pertinent to any company seeking to shift production from China to Mexico (or Canada) in hopes of mitigating the effect of Section 301 duties. The most important take-away is that although the NAFTA Marking Rules (19 C.F.R. Part 102) are used to determine the country of origin of articles imported into the U.S. from Mexico for marking purposes, the traditional substantial transformation test is used to determine the country of origin of articles for Section 301 duty purposes.

CBP illustrated the application of the ruling using the example of parts of a motor imported into Mexico for assembly. The assembly operation in Mexico was sufficient to satisfy the applicable NAFTA Marking Rule and thus for marking purposes, the finished article was deemed to be a "product of Mexico." However, CBP went on to say that the traditional substantial transformation test is used for purposes of "antidumping, countervailing, or other safeguard measures[.]" CBP then applied the traditional substantial transformation test to the facts and reached the conclusion that the Mexican assembly operations were not sufficient to confer origin and, therefore, the finished motor imported into the United States was a "product of China" for Section 301 purposes. So, in short, the product had to be marked to indicate that it was of Mexican origin, but the importer had to pay the Section 301 duty applicable to Chinese-origin articles.

Importers should be aware of what CBP’s analysis indicates: while the traditional substantial transformation test and the NAFTA Marking Rules are intended to rest on the same origin principles, they do not always produce the same result due to the nature of the tests. This is largely because the NAFTA Marking Rules are objective and the substantial transformation test is more subjective. Further, where Section 301 is concerned, the traditional substantial transformation test must be used even if the goods are imported from an FTA-partner country such as Mexico, Canada, Singapore, etc. Thus the NAFTA Marking Rules may be useful to that analysis, but cannot be considered determinative. In some cases, then, a company might find that an article marked as a product of Mexico could still be subject to duties applicable to products of China.

Protests in the New ACE Single Window System

In an effort to streamline and automate the process of documenting the importing and exporting of goods, Customs and Border Protection (“CBP”) has stated its aim of shifting fully to using the Automated Commercial Environment (“ACE”) by the end of 2016. Under this process, ACE with become the “single window” through which the trade community will be able to report imports and exports and receive information regarding admissibility from the government. The entire process will eventually eliminate paper processing, allowing the trade community to comply with US laws more efficiently. Core ACE trade processing capabilities should be completed and deployed by December 2016.

One processing capability under development is the ACE module for filing protests. CBP recently hosted a webinar to review the current design of the ACE protest module, though it’s not yet finalized. CBP intends that ACE will provide an electronic mechanism for the submission of protests, thus reducing the need for the submission of paper, and this will allow for seamless processing by the agency. In order to submit a protest electronically through ACE, those wishing to file protests will be able to do so by creating an account. If already in possession of an ACE account, then ‘protest filer’ may be added to the list of business partners. Those without an ACE account will be able to obtain a ‘protest filer’ account (this is not yet available). In addition, attorneys will be able to have filer accounts, as well as corporate representatives.

Within the protest module, the data fields found on the traditional CBP Form 19 will be able to be populated. The lead entry number for the protest, once input, will auto-populate the importer identification number (“IIN”), port and team number for the protest based on that entry number. However, the assigned review team will be able to be overridden if it is known that a CEE or specific team should be assigned the protest. In other cases, CBP assigns the reviewing party based on the lead entry number. It will be possible for filers to see the protest history for an importer, but the history will only relate to protests submitted by that particular filer. For instance, a broker would be able to see protests that it filed but it wouldn’t be able to access the history of protests filed independently by an importer client. CBP is still developing certain processes within the module, such as the handling of samples, the submission of protests relating to situations without entry numbers, and the uploading of supplemental information. The protest module is currently designed to allow for additional arguments or amendments to be uploaded (“see attachment” can be noted in the reason field).

A few details still need to be worked out, since paper documents have not yet entirely been eliminated. For requests for accelerated disposition of the protest, the regulations specify that requests must be made by certified or registered mail. To handle this, CBP is asking that the filer input the protest in the module, and subsequently go into the protest record and request an “action” that specifies accelerated disposition. The filer will then still need to upload the proof that the request was mailed, the date, etc. As long as the regulations specify that accelerated disposition requests must be submitted by mail, extra steps will be required to designate accelerated disposition in ACE.

Since all the details on the ACE protest module have yet to be completely finalized and it has not yet been deployed, it is helpful to follow postings on its progress at CBP’s website.

Suzanne DeCuir

February TFTEA Implementation

The U.S. Department of Customs and Border Protection (CBP) is preparing for the implementation of new changes to duty drawback specified in the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). Passed in 2015, the law gave CBP a two-year implementation period which expires on February 24, 2018.

Important changes of note concern ACE (Automated Commercial Environment) and how drawback, the refund of duties, taxes, and other fees, are handled. Starting on February 24th, drawback, as defined under current statue, will begin to be filed through ACE. Furthermore, TFTEA greatly changed many aspects of drawback law. These new TFTEA claims will also become effective starting on February 24th. This distinction is important because core drawback claims, under the current legislation, will continue to be accepted via ACE until February 24th, 2019, as specified under TFTEA. During this transition, claimants will be able to choose whether they would prefer to submit under the current legislation or under TFTEA.

Other important changes under TFTEA include:

  • Redefining the concept of “substitution” of exported goods for imports. This change
    uses the Eight-digit Harmonized Tariff Schedule of the United States (HTSUS)
    classification or Export Schedule B numbers instead of part number-based criteria.
  • The timeline for filing a drawback claim related to a given import has been expanded
    from three years to five years from the date of importation.
  • Certificates of delivery are no longer required. Claimants must only be able to produce
    “normal business records.”

Final touches are still being put on the exact specifics for how ACE and TFTEA will function. No new or revised regulations relating to TFTEA have been issued. However, regulations are currently being reviewed by the Treasury and must still be reviewed by other agencies as well. CBP is planning to release a guidance document for policies that will be applied to TFTEA claims while these regulations are still being reviewed. Keep your eye out for these finalized documents, as understanding the regulations and differences between regulations will be especially important for this transition year.

Max Krauskopf

DHS/CBP Amends Customs Regulations to Include Civil Monetary Penalty Adjustments

On December 8, 2017, U.S. Customs and Border Protection (CBP) amended its regulations to adjust for inflation the amounts that CBP can assess as civil monetary penalties for the following three violations:

  • The penalty for transporting passengers between coastwise points in the United States by a non-coastwise qualified vessel has been increased from $750 to $762.
  • The penalty for towing a vessel between coastwise points in the United States by a non-coastwise qualified vessel has been increased from $875-$2,750 plus $150 per ton to a new amount of $889-$2,795 plus $152 per ton.
  • The penalty for dealing in or using an empty stamped imported liquor container after it has already been used once has been increased from $500 to $508. 

These changes are being made in accordance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 which was enacted on November 2, 2015. In addition, a number of other CBP civil penalty amounts were adjusted pursuant to this 2015 Act in previously published documents published in the Federal Register on July 1, 2016, and January 27, 2017; however, the adjustments for these three civil penalties were omitted from those documents inadvertently and so are being published now.   The rule went into effect on December 8, 2017.  The adjusted penalty amounts will be applicable for penalties assessed after December 8, 2017 if the associated violations occurred after November 2, 2015.

Suzanne DeCuir, Global Trade Expertise

Update: H.R. 3551: C-TPAT Reauthorization Bill

On September 25, 2017, the House Homeland Security Committee favorably reported a bill concerning C-TPAT to the House of Representatives. This bill, H.R. 3551, would reauthorize the Customs Trade Partnership Against Terrorism program (C -TPAT) which has not been reauthorized in its 11-year history. The bill was introduced by Rep. Martha McSally of Arizona. If passed, a number of changes will be put in place reflecting current global security concerns and trade conditions.

Some of the changes that the bill calls for are as follows:

1. Each C-TPAT participant must designate a company employee (not a contractor or third-party) to hold the participant accountable for managing participation in the program.

2. The bill would require CBP (in consultation with industry) to review the C-TPAT minimum security criteria at least every two years, making updates as needed.

3. CBP would be required to put in place additional security procedures for certain categories of participants, individual participants, and specific entities in order to focus closely on security vulnerabilities.

4. The bill would extend eligibility to participate in C-TPAT to exporters, importers, freight forwarders, customs brokers, air carriers, ocean carriers, land carriers, and contract logistics providers.

5. The bill establishes C-TPAT as the authorized economic operator program to grant CBP the latitude and flexibility to improve and expand its trusted trader program as needed.

Suzanne DeCuir, Global Trade Expertise

Transition to New ACE System Begins July 8, 2017

U.S. Customs and Border Protection (CBP) announced that July 8, 2017 is the effective date for the transition to the new electronic CBP authorized system for entry filings.  This transition had been delay repeatedly, but it is finally ready for implementation, and all electronic drawback, duty deferral entries and entry summary filings will need to be processed using this system.  ACE will be used for all flagging of entries as well. The old system, ACS, will no longer be a CBP-authorized EDI (Electronic Data Interchange) system after the transition.

Additional information about the Automated Commercial Environment (ACE) is available on the CBP website and includes the types of entries that will be supported by ACE, along with details related to filing protests, drawbacks, duty deferrals, reconciliations, liquidations, and other filings. 

In December of 2016, CBP described in detail that changes that will affect reconciliation; these can be found on the first CBP site listed under sources, below.  Two important changes pertain to flagging of entries and the filing of reconciliation entries.  Under the new system, blanket flagging will be eliminated. Where filing of reconciliation entries is concerned, importers and their brokers will no long be able to submit entries using CD/ROMs or paper.  The type 09 reconciliation entry using ACE is to be used even though the entries being reconciled were not initially filed using ACE.  “Entry by entry” or “aggregate” reconciliation entries will still be accepted. 


On August 15, 2016, the GAO (US Government Accountability Office) released a report that was critical of CBP’s handling of antidumping and countervailing duty orders, detailing the failure of CBP to collect roughly 2.3 billion in duties between 2001 and 2014.  In the report, the GAO stated the CBP “missed opportunities to identify and mitigate nonpayment risk.”  The trade community expects to see enforcement efforts increase in light of the fact that this report has a high profile and was delivered to the Senate Finance Committee.

Also released recently were CBP’s interim regulations, called “Investigation of Claims of Evasion of Antidumping and Countervailing Duties.”  These regulations took effect on Monday, August 22 and outline the process for CBP’s investigation of claims of AD/CVD order evasion. The new regulations were mandated by section 421 of the Trade Facilitation and Trade Enforcement Act of 2015 which became law earlier in 2016.  The current e-allegation system will continue to be in place, but the new system is designed to have advantages over that system; the procedures laid out include detailed steps for initiating, carrying out, and completing investigations.  This comprehensive process for investigating can be used by other government agencies as well as private parties.

CPB Announces One-Day Grace Period This Month

CPB has been working to make a transition to all electronic filing of protests to ACT, the Automated Commercial Environment.  A series of notices lays out some of the guidelines and deadlines, and on August 8th, CBP announced the addition of a one-day grace period; CBP stated that it will accept protests filed in the ACE Portal past the required due date.  Beginning on August 27th, all Protests must be filed in the ACE Portal.  The transition from ACS to ACE will occur on August 29th, 2016, and since the ACS will be down on August 28th for the cutover, CBP will allow any protest due on August 28th to be filed in the ACE Portal on August 29th. 

A complete summary of the transition dates and necessary steps for using the new system is available at CBP at: https://www.cbp.gov/trade/automated/news/protest 

Consequences of Non-Compliance – Lacey Act Enforcement

One particular area where U.S. companies have failed to comply with stringent import laws, knowingly or unknowingly, involves wildlife and natural products. The Lacey Act, 16 U.S.C. 3371, is one of the primary federal statutes employed to combat the illicit trafficking of products within these categories. Initially enacted to protect animal species, the Act was amended in 2008 to more broadly include plant species. Specifically, the Act now prohibits the U.S. importation of illegally-harvested timber, meaning it is unlawful to trade in any plant that is taken, possessed, transported or sold in violation of the laws of any U.S. state, Indian Tribe, or any foreign law that protects plants. The Lacey Act does not impose U.S. law on other countries. “Illegally sourced” is defined by the content of a sovereign nation’s own laws. In addition, it is unlawful to falsify or submit falsified documents, accounts or records of any plant covered by the Lacey Act.

Violations of the Lacey Act carry serious penalties for companies and individuals. In addition to civil fines and forfeiture of goods, criminal penalties may also attach to the companies and individuals found to have knowingly violated the Act. A misdemeanor violation of the Lacey Act is punishable by up to one year in prison and a fine of $200,000.00 for companies and $100,000.00 for an individual. Felony culpability is punishable by up to five years in prison and a $500,000.00 fine per violation for a company and $250,000.00 for an individual.

Two Lacey Act enforcement agreements that demonstrate the severity of violations and highlight the importance of companies having compliance infrastructure that properly functions to avoid such violations are the Gibson Guitar Corporation Settlement and the Lumber Liquidators Settlement.

Gibson Guitar Corporation (“Gibson”) came under federal scrutiny not once but twice, first in 2009 and again in 2011 for violations of the Lacey Act. Gibson is headquartered in Nashville, Tennessee and manufactures a variety of musical instruments, most notably guitars. The violations involved parts of the guitar called fretboards. The imports at issue were orders of Madagascar ebony fingerboards (used to make fretboards) from a supplier called T.N. GMBH (“TN”), located in Hamburg, Germany. Gibson failed to verify that TN was sourcing its wood legally from Madagascar, and it turned out that it was illegally sourced. In addition, Gibson knowingly ignored red flags that the wood TN was providing was illegally obtained. For example, TN’s failed to provide documentation to Gibson evidencing that the ebony sourced from Madagascar was harvested lawfully. Madagascar law states that all ebony harvested after a specific date was illegal unless it was considered “finished wood” or had received “exceptional authority” from the government.

In addition, prior to purchasing the wood, Gibson had sent a specialist to Madagascar to assess the potential for supporting sustainable forestry. During his investigation, the specialist obtained the Madagascar Order regarding the particularities about finished and unfinished wood and in his report highlighted that this would be an issue for Gibson. Despite this knowledge, Gibson continued to purchase wood from TN.

These violations resulted in the finding of a Lacey Act misdemeanor violation with a fine of $300,000.00 plus a $50,000.00 community service payment to the National Fish and Wildlife Foundation. In addition to the monetary fines, Gibson also was required to strengthen its compliance program.

Gibson established a new compliance program that clearly stated the objectives of maintaining compliance with relevant laws and in particular the Lacey Act. The new program provided the history and applicable penalties for the Lacey Act, listed the due care standard that it would apply to its processes to assure compliance with applicable law, and then listed the internal checks and balances that would be implemented to demonstrate the satisfaction of this duty. The compliance program also stressed Gibson’s commitment to developing policies and procedures for the procurement of wood and for verifying that all necessary foreign licenses and/or certifications are obtained prior to approval of a purchase. The compliance program listed resources to obtain current applicable law and stated a commitment to an annual audit of its wood purchasing processes, a commitment to training its employees, and plans for retaining adequate records.

The compliance program created by Gibson emphasizes the necessary steps required under the Lacey Act to specifically detail the unique company processes and procedures created to effectuate compliance and satisfy reasonable care in conducting imports.

The second settlement involved Lumber Liquidators (“LL”). LL is a Virginia-based flooring retailer that was sentenced to pay a total of $13.15 million for five counts of Lacey Act violations. The fines included 7.8 million in criminal fines, $969,175.00 in criminal forfeitures, $1.23 million in community service payments, and 3.15 million in civil forfeitures. They were also sentenced to a five-year probationary term during which they were to create an Environmental Compliance Plan and engage an outside accounting and environmental consulting firm. The $13.5 million dollar penalty constitutes the largest financial penalty ever for illegal trafficking in timber under the Lacey Act.

The retailer pleaded guilty to one felony count of importing goods through false statements and four misdemeanor violations of the Lacey Act. The charges stated that Lumber Liquidators was using timber that was illegally logged in Far East Russia and had submitted false Lacey Act declarations that obfuscated the true species and the source of the timber. Although, LL had a compliance program in place that identified this activity, it ignored the red flags and continued to purchase the timber.

LL imports wood flooring from China and distributes it throughout the U.S. However, the timber used to manufacture the flooring in China was harvested from different countries, two of which were Far East Russia and Myanmar. LL had a compliance program at the time of the violations and, in fact, employees were aware that some of the wood was harvested from Far East Russia and posed a significant compliance risk. In addition, LL had also been conducting employee training discussing the compliance risk of Far East Russia. But despite this information, LL continued to import wood coming from Far East Russia and Myanmar. Thus, although the compliance program was in place, LL failed to uphold the policies in its manual. In addition, LL also submitted inaccurate information on Lacey Act documentation required upon importation.

What these examples illustrate is that the enforcement of U.S. Customs laws, and in particular the Lacey Act, has significant monetary and functional consequences. There is a strict duty to comply imposed on the party conducting the international trade and the responsibility to develop processes to comply with U.S. Customs laws is imposed on both the business and individual level. The penalties go far beyond mere monetary fines, and include forfeitures, corporate governance and operational restrictions.

Furthermore, having a compliance program alone does not protect against violations or mitigate penalties. Compliance programs will be judged on their actual application to relevant internal processes, the effectiveness of their implementation, and their actual capacity to successfully identify and remedy trade violations. Ultimately, the law imposes a corporate responsibility to educate employees and management who oversee trade functions and instruct them on how to effectively remedy identified violations.

What does this mean for the US business? Investing resources into developing a compliance program and implementation is an upfront cost that is absolutely necessary and indirectly required to avoid the significant consequences of violating US Customs laws.

Amber M. Johns, Global Trade Expertise Intern

Mistaken Importer of Record Held Liable for Duties After Liquidation

Lifestyle Furniture has been pursuing two separate federal court cases in an effort to avoid paying antidumping duties, which are being assessed because it was incorrectly listed as the importer of record on an entry.  According to CBP ruling HQ H157616, Lifestyle Furniture was listed as the importer of record for an entry to Puerto Rico in 2005 and is liable for antidumping duties of in the amount of 216.01% for wooden bedroom furniture from China.  

According to Lifestyle, Starcorp, the Chinese exporter, was supposed to be listed as the importer of record, but the customs broker listed Lifestyle Furniture by mistake.  Starcorp hired C.H. Robinson as its broker, but entries subject to antidumping duties were not eligible for remote filing under national permits.  Therefore, C.H. Robinson brought in Nestor Reyes, a local Puerto Rican customs broker to file entry.  Reyes had power of attorney (POA) for Starcorp, but not for Lifestyle.  Reyes proceeded to file the entry, but listed Lifestyle as the importer of record in error.  Both C.H. Robinson and Reyes have admitted fault in this error, but claim no responsibility for the duties owed.

Although Lifestyle protested paying the antidumping duties due to error, CBP advised that Lifestyle is liable because it is the parties’ responsibility to determine who will be listed as importer of record.  Because Lifestyle is actually an eligible importer of record as the consignee, CBP is not responsible to determine which eligible party to accept entry from.  While CBP sent a notice of liquidation to Lifestyle one month prior to liquidation, Lifestyle stated that it was not notified until receiving the final bill of liquidation, arguing it was not given time to correct the entry.  CBP held that it is the responsibility of the importer to maintain processes of checking entries to ensure that all entries with their name as importer of record are correct if they do not want to be held liable for errors, such as these.  Furthermore, Lifestyle, nor CBP can go after Starcorp for the duties owed because it has gone out of business.   

Lifestyle Furniture has now filed a lawsuit against CBP regarding its initial protest in the Court of International Trade, as well as seeking a ruling against both Reyes and C.H. Robinson in the district court of North Carolina.  At this time, neither case has been heard before the courts.

Aaron Ambrite, Extern, Global Trade Expertise

CBP Rules Time Limit for Liquidation Begins Day After Triggering Event

In Headquarters Ruling Letter H173819, dated September 12, 2014, Customs and Border Protection ("CBP") determined that it had correctly liquidated an entry made by Coaster Corporation of America within the six-month required timeframe that starts the day after the triggering event.

Coaster Corporation imported furniture from China in 2008.  At the time of entry, Coaster paid antidumping duties of 7.24%.  The antidumping order dated January 4, 2005 regarding the imported product actually set the duty at 6.65% and instructed CBP to suspend liquidation of all entries of the subject merchandise.  On August 18, 2010, the Department of Commerce published the Federal Register dictating a new antidumping duty of 216.01% for the subject merchandise.  On February 18, 2011, CBP liquidated the subject entry and assessed the 216.01% antidumping duty.

“CBP is obligated to suspend the liquidation of entries once Commerce makes an affirmative preliminary determination of dumping pursuant to 19 U.S.C. § 1673b(d)(2).  Once suspension is removed, 19 U.S.C. § 1504(d) requires CBP to liquidate the entry within six months after receiving notice of lifting of the suspension, unless liquidation is properly extended.” HQH173819.  If CBP does not liquidate within six months of receiving notice, the entries are deemed liquidated at the rate of duty declared by importer.  The court has determined that publication of the final results of the Federal Register constitutes notice from the Department of Commerce to CBP that the suspension of liquidation on entries subject to the administrative review is removed.  

Coaster argued that CBP did not liquidate “within” the required six-month time period after receiving notice from the publishing of the Federal Register and that the entry should be deemed liquidated at the 7.24% duty initially entered.  Coaster asserted that the statutory time limit expired at the end of the day on February 17, 2011, which is six months after the Federal Register was published on the August 18, 2010.  CBP, however, ruled that the end of the day on February 18, 2011 was the last day to liquidate within the six-month required timeframe.  CBP declared that both the courts and the CBP have consistently calculated statutory deadlines starting the day after the triggering event and including the entirety of the deadline day.  CBP ultimately concluded that the end of the day on February 18, 2011 was the last day to liquidate within the six-months because the time limit begins the day after the triggering event.  

Aaron Ambrite, Extern, Global Trade Expertise

Forwarder Required to Pay $10,000 Penalty for “Customs Business” without License

On January 21, 2015, the CIT ordered Freight Forwarder International (FFI) to pay a $10,000 penalty for intentionally paying duties and fees on behalf of non-related parties to CBP without a corporate license.  

Between June of 2009 and January 2010, FFI was the payer company for duties and fees on 19 entries paid on behalf of other persons.  FFI then invoiced its clients for the payments on its own letterhead.  Although FFI advertised itself as having in-house customs brokers services and retained an employee with a customs broker’s license, FFI did not hold a corporate custom’s broker’s license in accordance with 19 U.S.C. § 1641.  The CIT found “section 1641(b)(6) makes it a violation for any person who intentionally transacts customs business, other than solely on the behalf of that person, without holding a valid customs broker's license granted to that person.”  As per 19 U.S.C. § 1401(d) a person “includes partnerships, associations, and corporations.”  The CIT concluded “customs business includes payment of duties and the preparation of invoices intended to be filed with CBP.”

Because FFI was a corporation preforming customs business without a license, the CIT held FFI liable for a $10,000 penalty plus post-judgment interests and costs.

Source:  U.S. v. Freight Forwarder Int'l, Inc., Slip Op. 15-05, #14-00134, dated 01/21/15, Judge Kelly
Aaron Ambrite, Extern, Global Trade Expertise, February 6, 2015

CBP Rules that Importer Cannot Claim Post-Pricing Sales Adjustments

In an August 18, 2014 ruling, U.S. Customs and Border Protection ("CBP") determined that a pharmaceutical product importer cannot claim post-import pricing adjustments without first meeting the standards CBP has set for related party transactions and post-import adjustments.  The redacted ruling, HQ H204329, stemmed from a 2012 request for internal advice regarding the treatment of extra payments the importer made to its related supplier for tax purposes.  

The importer contends that it used the proper transaction value method for appraisement, but CBP stated that the company cannot claim post-import adjustments unless it produces the documentation necessary to satisfy the five-factor criteria CBP says is applicable in these kinds of cases involving adjustments related to the value of imported goods.  

Counsel for the importer argued that the criteria did not apply in this case; they further argued that even through the post-import adjustments the importer declared were assigned to certain products, the payments submitted were made only for tax purposes and did not have any bearing on the customs value of the merchandise.  CBP disagreed and put forth this explanation in the ruling:

The ultimate selling price (operating profit) of Company A in the United States takes into account the costs of the product throughout each step, in sale from the manufacturer to the consumer.  Thus, by working back from the arm’s length net margin (or profit) of Company A, the arm’s length COGS (or price actually paid or payable for customs purposes) can be deduced.  Accordingly, we find that the customs value of the imported merchandise is affected every time the related parties reduce or increase their profitability pursuant to the APAs or transfer pricing studies, which cover the imported goods, resulting in payments, transfer of funds, or credit/debit transactions between the related parties.  We also note that even though in this case, Company A’s complex APA covers tangible and intangible transactions between the parties, as well as services, the related parties made the adjustments to their profitability, which resulted in the transfer of funds between the parties, the adjustments booked to COGS, and the revised supply Agreements.  Therefore, these adjustments must be reported to CBP since they directly relate to the imported goods; however, in order for Company A to claim post-importation adjustments to the value of the imported goods, Company A must satisfy our five-factor criteria, specified in HRL W548314, dated May 16, 2012, which is applicable to cases that involve compensating (post-importation) adjustments made to the profitability of related parties pursuant to APAs or transfer pricing studies.

A second point at issue was whether or not the price actually paid for the imported merchandise was influenced by the relationship of the parties.  CBP maintains that the importer did not successfully demonstrate that the adjusted prices were not influenced by the relationship for purposes of the circumstances of the sale or test values tests.  

In conclusion, CBP ruled that in the absence of the required information needed to meet the five-factor criteria called for in W548314, the importer cannot claim the downward adjustments.  Therefore, transaction value was not the proper method of appraisement in this case, and to the extent that the value of the goods has increased, the importer will be required to submit payment for any duties owed.

by Suzanne DeCuir

2014 ACE Satisfaction Survey for the Trade is Now Available

U.S. Customs and Border Protection (CBP) has made the 2014 Automated Commercial Environment (ACE) Satisfaction Survey available for the trade on its website. CBP is inviting anyone employed as or by a broker, importer, or a land border, ocean, or rail carrier and have an ACE portal account to take the survey. CBP would like feedback on the problems and benefits users are experiencing with ACE.

Participation is completely voluntary and the survey may be taken anonymously. The survey only takes about 5-10 minutes to complete unless extensive comments are added.

According to CBP, new for this year is:

This year CBP is asking that broker and self-filing importer respondents provide us with cost and time saving information for Periodic Monthly Statement processing, Post Summary Corrections, and Census Warning Override functionality, as appropriate. This information will allow us to better document the benefits of ACE to our stakeholders. It also asks all respondents to identify the most useful functionality currently being used and the most anticipated functionality that is scheduled for delivery.