OFAC Enforcement Against Va. Forwarder and Fl. Shipper

I. Virginia Forwarder

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a Finding of Violation to DNI Express Shipping Company (“DNI”), incorporated in McLean, Virginia, for a violation of § 501.602 of the Reporting, Procedures and Penalties Regulations, 31 C.F.R. part 501 (RPPR) as to the provision of farm equipment to Sudan. Specifically, DNI violated § 501.602 of the RPPR by providing information to OFAC during the pendency of OFAC’s investigation, including a subpoena response, that contained contradictory, false, materially inaccurate, materially incomplete, and misleading statements.

OFAC considered the following to be aggravating factors:

(1) DNI, through counsel, demonstrated reckless disregard for its U.S. sanctions requirements by failing to provide accurate and complete information in response to an OFAC Administrative Subpoena;

(2) DNI, and its owner, facilitated both the shipment and attempted shipment of goods to Sudan and provided financing for such shipments. Accordingly, DNI had actual knowledge that its responses to OFAC’s Administrative Subpoena concerning the facilitation of the shipment and attempted shipment of goods to Sudan and related financing were false, materially inaccurate, materially incomplete, and misleading;

(3) After supplying OFAC with responses that were false, materially inaccurate, materially incomplete, and misleading, OFAC gave DNI the opportunity to correct or clarify its original responses. However, DNI failed to appropriately amend its responses and instead confirmed its original responses; and

(4) By providing false, materially inaccurate, materially incomplete, and misleading statements, DNI did not fully cooperate with OFAC’s investigation.

For more information, please visit the following web notice.

II. Florida Shipper

Separately, OFAC issued a issued a Finding of Violation to Southern Cross Aviation, LLC (“Southern Cross”), incorporated in Florida and with offices in Florida and North Carolina, for a violation of the RPPR. OFAC stated it had reason to believe that Southern Cross was recently involved in the sale of several helicopters destined for Iran via an Iranian businessman based in Ecuador.  Southern Cross violated § 501.602 of the RPPR by failing to provide complete information to OFAC in response to an Administrative Subpoena issued to Southern Cross.

OFAC considered the following to be aggravating factors:

(1) Southern Cross demonstrated reckless disregard for its U.S. sanctions requirements by failing to provide accurate and complete information in response to an OFAC Administrative Subpoena;

(2) Southern Cross had actual knowledge or reason to know of the conduct that led to the violation in this instance; and

(3) Southern Cross did not fully cooperate with OFAC’s investigation.

For more information, please visit the following web notice.

New information on OFAC Civil Penalties and Informal Settlements is now available.

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Delay on Certain Tariffs on Chinese Goods


Today, August 13, 2019, The United States Trade Representative announced that certain products such as cell phones, laptops, video games consoles, certain toys, some clothing and shoes are being removed from the forthcoming tariff list based on health, safety, national security, and other factors. These items will not face the additional tariffs of 10 percent which were planned to take effect September 1st. They will be delayed until December 15. The list of the items that will still be affected by the tariff on September 1st has been updated.

The exact details along with the lists of the tariff lines that are affected have been posted to the Federal Register. An exclusion process for these products will shortly be released as well.

This topic is still developing, and we will keep a close watch on it. If you have any questions or would require any legal advice, please feel free to contact us.

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Update on List 4 Trump Tariffs

On August 1, 2019, President Trump announced on Twitter that the U.S. will impose a 10% tariff on roughly $300 billion worth of Chinese imports (List 4). The additional duties will go into effect beginning September 1, 2019. A confirmation from the USTR has not been issued yet.

The proposed list 4 was released on May 13, 2019. It covers essentially all of the Chinese products that were not covered by the previous lists. The comment period has been closed. We expect that the USTR will provide exclusion request procedures as it did in the previous three lists.

If you are interested in participating in the exclusion process or exploring possibilities to minimize or eliminate Section 301 duties, please contact us.

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Exclusion Request for List 3 Products Available from June 30, 2019 to September 30, 2019

On June 20, 2019, the U.S. Trade Representative announced that an exclusion process for List 3 products would open at noon EST, on June 30, 2019. The products on List 3 are currently subject to a 25% additional tariff. The deadline for submitting an exclusion request is September 30, 2019.

Products for which exclusion requests are granted will be excluded from the application of the additional 25% tariff.  The exclusion will be effective retroactively from September 24, 2018 (the effective date for List 3) and extend for one year after the exclusion is published in the Federal Register. Importers who have paid the additional duties will have the opportunity to seek refunds from U.S. Customs and Border Protection.

If your products are on List 3 and you wish to submit exclusion requests, please contact us.

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UPDATE- Section 301 (Tranche 3) Duties as of May 10, 2019

Yesterday, May 9, 2019, U.S. Customs and Border Protection (“CBP”) clarified that the Section 301 tariffs apply only to merchandise exported on or after May 10, 2019. Today, May 10, 2019, CBP provided updated guidance of the following (CSMS #19-000238):

  • Effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and exported to the United States on or after May 10, 2019, the rate of additional duties on imported articles classified in a subheading covered by the September 21, 2018 Federal Register notice, as amended, will be 25 percent ad valorem.
  • For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and exported to the United States on or after May 10, 2019, report the following HTS numbers and duty rates:

  HTS: 9903.88.03 and 9903.88.04

  Duty Rate: 25 percent 

  • For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and before June 1, 2019, and exported to the United States before May 10, 2019, report the following HTS number and duty rate:

  HTS: 9903.88.09

  Duty Rate: 10 percent 

  • The subject imports of China that are entered into the United States on or after June 1, 2019 are subject to the 25 percent rate of additional duty under HTS 9903.88.03 and 9903.88.04.
  • The Section 301 duties only apply to products of China, and are based on the country of origin, not country of export.

                Accordingly, goods exported before May 10, 2019 must be entered in the U.S. or withdrawn from warehouse before June 1, 2019 in order to qualify for the lower 10% additional duty rate. Goods entered on June 1, 2019 or later will be subject to a 25% additional duty rate irrespective of the date of export.

                If you have any questions, please feel free to contact us.

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Most Recent Update on Section 301 List 3 Tariffs

Following up with yesterday’s blog on Section 301. Today the USTR published in the Federal Register the formal notice to increase the additional tariffs on List 3 products. The Notice reads:

“Effective with respect to goods (i) entered for consumption, or withdrawn from warehouse for  consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (ii) exported to the United States on or after May 10, 2019, subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States is modified …”

Due to the confusion this language creates, this afternoon, Customs Customs and Border Protection (“CBP”) held an ACE Trade Call where representatives from CBP Trade Remedy team clarified that the increased tariff only applies to goods exported on or after May 10, 2019. Because ACE does not currently have a duty rate/tariff classification tied to export dates, importers who have Chinese origin goods subject to List 3 Section 301 tariffs can choose to do one of the following:

  • File the entry summary and pay 25%, then apply for a Post Summary Collection (“PSC”) to then possibly collect a refund; or
  • Do not file entry summary immediately (under CBP regulations, importers can file entry summaries within 10 business days after the time of entry), hopefully within this period, CBP has promulgated a clear filing instruction by which the importers can file entry summary using 10% tariff.

This topic is evolving, and we will keep close watch on this. If you have any questions regarding how to legally avoid paying Section 301 tariff, please feel free to contact us.

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Update on Section 301 List 3 Tariffs

On May 5, 2019, President Trump tweeted that the U.S. would raise the Section 301 tariffs on List 3 products (i.e., $200 billion of goods) from 10 percent to 25 percent. The President also hinted that tariffs on a fourth list of products ($325 billion of goods) would be forthcoming. On May 7, the U.S. Trade Representative (“USTR”) confirmed that the tariffs on List 3 products would be increased to 25 percent. The increase came as a result of stalled trade negotiations between China and the U.S, but more specifically Chinese officials were allegedly attempting to change the language on a deal they had previously discussed.

On May 8, the USTR issued a notice confirming that the List 3 products will be subject to an increased tariff rate of 25% ad valorem, effective on goods: (1) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time, Friday, May 10, 2019, and (2) exported to the United States on or after May 10, 2019.

Pursuant to 19 C.F.R. 141.68(a)(3), importers can use the date of a vessel’s arrival in the port limits as the entry date. Therefore, this strategy can be used for goods that are scheduled to arrive in the United States before May 10, 2019, to avoid the duty increase. The importer must make specific requests to have the date of arrival deemed the date of entry when the entry documentation is filed with U.S. Customs and Border Protection. Importers should contact their customs brokers to arrange such filing.

In the May 8, 2019 Notice, the USTR also announces that the long-awaited exclusion process for List 3 Products will be published in a separate notice. Interested persons can request products on List 3 be excluded from the additional duties or to oppose exclusion requests.

There are different ways to legally avoid the Section 301 tariffs, such as:

  1.  submitting an exclusion request;
  2. redesigning or repackaging the products (i.e., tariff engineering by which the importer can fashion merchandise to obtain the lowest rate of duty and the most favorable treatment because merchandise is classifiable in its condition as imported and the processing subsequent to importation is generally not relevant);
  3. reclassifying goods if goods were previously misclassified;
  4. utilizing foreign trade zones or bonded warehouse to defer entry or if goods will be subsequently exported or can be stored until the punitive tariffs are removed;

If you are interested in participating in the exclusion process or exploring possibilities to minimize or eliminate Section 301 duties, please contact us.

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More Duties and Tariffs

More Duties and Tariffs

1. New AD/CV Duties Possible on Ceramic Tile from China

A petition was filed on April 11, 2019, alleging that ceramic tiles from China is being sold at less than fair value in the U.S. market and benefitting from countervailable subsidies. The alleged average dumping margins are 178.22 percent to 428.58 percent.

This petition covers ceramic tiles regardless of the percent water absorption. The covered products include porcelain tile, vitreous tile, semi-vitreous tile, and non-vitreous tile, glazed and unglazed ceramic flooring and wall tile, countertop tile, paving tile, hearth tile, porcelain tile, mosaic cubes, finishing tile, and the like, whether or not the tile is on a backing. Imports of subject goods are classified under a number of subheadings in HTSUS headings 6905, 6907, and 6914.

Ceramic tiles produced in China that undergo processing in another country, including beveling, cutting, trimming, staining, painting, polishing, finishing, or other processing, before entering the United States are also covered.

Ceramic bricks properly classified under HTSUS 6904.10.00 through 6904.90.0000 are excluded from the scope of the petition.

The Department of Commerce and the International Trade Commission are still deciding whether or not to launch an investigation on the products mentioned in the petition. There are strict statutory deadlines associated with the investigation. If you are an importer, exporter, manufacturer of the covered products, or other concerned parties, you can contact us for more information.

2. Wooden Cabinets and Vanities from China

On March 6, 2019, a petition was filed by The American Kitchen Cabinet Alliance alleging that wooden cabinets and vanities from China are being sold at less than fair value in the U.S. market and benefitting from countervailable subsidies. The alleged average dumping margins are 175.50 percent to 259.99 percent.

The goods covered by this petition are cabinets and vanities made substantially of wood products, including solid wood and engineered wood products (including those made from wood particles, fibers, or other wooden materials such as plywood, strand board, block board, particle board, or fiberboard), or bamboo. Wooden cabinets and vanities with or without wood veneers; wood, paper, or other overlays; or laminates; with or without non-wood components or trim such as metal, marble, glass, plastic, or other resins; whether or not surface finished or unfinished; and whether or not assembled or completed are included.

The covered products serve the purpose and function of permanently affixed cabinetry typically found throughout the home, including kitchen and bath cabinetry, modular vanities, and pedestal vanities (which may or may not include a top composed of stone, plastic, or other material). Covered products can also be used in places other than in a home kitchen or bathroom, such as laundry room cabinets, home office, kitchen and bathroom in commercial buildings, apartments, hotels, assisted living or healthcare facilities, or other environments.

Covered products also include component parts of cabinets and vanities, including frames; boxes (which typically include a top, bottom, sides, back, base blockers, ends/end panels, stretcher rails, toe kicks, and/or shelves); doors; drawers and drawer components (which typically include sides, backs, bottoms, and faces); back panels and end panels; and desks, shelves, and tables attached to or incorporated in the subject goods.

Wooden cabinets and vanities and in-scope components that have been further processed in a third country (including one or more of the following: trimming, cutting, notching, punching, drilling, painting, staining, finishing, assembly, or any other processing) can also be subject to the antidumping and countervailing duties.

Imports of subject goods are normally classified under HTSUS 9403.40.9060 and 9403.60.8081, and the subject component parts may be entered under HTSUS 9403.90.7080.

Commerce has initiated the investigation.  There are strict statutory deadlines associated with the investigation. If you are an importer, exporter, manufacturer of the covered products, or other concerned parties you can contact us for more information.

3. Quartz Surface Products from China Subject of New AD/CV Petition

The petition for antidumping and countervailing duty investigation concerning quartz surface products was filed on April 17, 2018. On November 20, 2018, Commerce issued a preliminary determination concerning antidumping duties (case A-570-084). Commerce also preliminarily determined that critical circumstances existed with respect to QSP from China for CQ International, Foshan Yixin Stone Co., Ltd. (Yixin Stone), and Guangzhou Hercules Quartz Stone Co., Ltd. (Hercules Quartz), all other separate rate companies and the China-wide entity.

On November 15, 2018, Commerce issued the preliminary affirmative determination of critical circumstances in the countervailing duty investigation (case C-570-085). Commerce preliminarily found that critical circumstances existed with respect to Foshan Hero Stone and Fasa Industrial, but did not exist with respect to Foshan Yixin or all-other rates companies.

The combined ADCVD rate varies from 270 – 500%.

It is expected that within the next few weeks, Commerce will issue its final determination as to antidumping, countervailing and their respective critical circumstances.

If you are an importer, exporter, manufacturer of the covered products, or other concerned parties you can contact us  for more information.

4. Possible Retaliatory Duties On Products From The European Union

The Section 301 Tariffs (aka Trump Tariffs) do not only apply to Chinese origin goods, but E.U. goods are now threatened to be subject up to 100% tariff. This threat came from a prolonged discussion on aircraft subsidies.  

A preliminary list has been published. It includes about 317 different tariff lines: from products in the aerospace sector to handbags to swordfish steaks and to guava jam. An arbitrator from the WTO is set to make a decision on the amount of countermeasures the U.S. may impose against the EU.

USTR is inviting public comments on any aspect of the proposed retaliation, including (1) products that should be retained, removed, or added; (2) how high tariffs should be raised; (3) the aggregate level of trade to be covered by additional tariffs; and (4) whether higher tariffs might harm U.S. stakeholders, including small businesses and consumers. The important dates are:

The relevant dates are as follows:

  • May 6, 2019 – Due date for submission of requests to appear at the public hearing and summary of testimony
  • May 15, 2019 – Public hearing convened by the Section 301 Committee
  • May 28, 2019 – Due date for submission of written comments, including post-hearing rebuttal comments

If you have any questions or would like to make comments to the USTR, please contact us.

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Time is Running Out – Renew Your Registration of Food Facilities Now!

This is an old blog we lost during our transfer of site hosting.

The 2016 Food Facility Registration biennial renewal period is wrapping up! In January of 2011 the FDA Food Safety Modernization Act (“FSMA”) was signed into law. It designated a renewal period spanning from 12:00 AM on October 1st to 11:59 PM on December 31st. If an importer’s registration is not renewed during this time, it will be completely removed from the account due to expiration.

The registration renewal window occurs in the same October-December window of every even-numbered year. If you don’t renew in time there is no planned extension; This is not something to put on the back burner! Be sure to note that renewing a registration is a completely different process than updating a registration. You are unable to update without renewal first. On the FFRM main menu, the “Update Facility Registration” button will remain hidden until your registration renewal has been processed.

The main effect that the FSMA had on the shipping industry is that it mandated that any domestic or foreign facility that manufactures, processes, packs, or holds food for human or animal consumption in the United States must register with the FDA. If a company meets these requirements but doesn’t renew in time, all food imported from the source is subject to be held at the port upon arrival in the U.S. Because of the severity of this risk, import brokers are encouraged to take early action and contact any clients who import high-volume food shipments and be sure they are updated where they need to be. Clarify that the renewal status is properly associated with their shipments, confirm any new registration numbers, and do so before 2017 rolls around and you’ll be in the clear!

If you have any questions about renewal, updating, or whether or not you meet the requirements contact us and we will gladly help you navigate these regulations.

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The Death of Intermediaries? Maersk’s Canary in the Coalmine.

This is an old blog we lost during our transfer of site hosting.

Maersk, the world’s leading container ship operator, and Alibaba, the owner of China’s biggest e-commerce platforms, have decided to join forces in what has traditionally been the domain of NVOCCs
and Freight Forwarders.  The two have established a portal to allow shippers/customers to use Alibaba to book space on Maersk vessels. This union illustrates the growing trend of e-commerce and logistics firms working together, and to me sounds very much like an early warning signal for the great diminishment, if not demise altogether, of NVOCCs and Freight Forwarders.

Effective December 22nd, 2016 Chinese shippers obtained the ability to reserve space through Alibaba’s OneTouch booking website. OneTouch is intended to cater to small and medium-sized Chinese exporters by providing online services including logistics and customs clearance. OneTouch also gives these exporters access to platforms where they can book air freight and parcel delivery services while still supporting the business-to-business marketplace that Alibaba is known for. Traditionally, shippers had gone through freight forwarders in order to book on container vessels.  However, vessel operators such as Maersk are beginning to streamline this process by allowing the beneficial owner of the cargo (the shipper, rather than the shipper’s intermediary) to book directly from the internet.

What does Alibaba gain from its involvement in this? In recent years, Alibaba has been making inroads into logistics services by buying warehouses and taking stakes in couriers.  E-commerce giants are increasingly venturing into logistics in order to enhance their control over the supply chain networks they work with.  Amazon, for example, has dedicated fleets of aircraft, drones, and stores (which are actually mini warehouses/distribution centers), and is rumored to be planning its own U.S. domestic delivery fleet.  Walmart will not remain far behind: its brick and mortar locations and existing truck fleet give it a strong start in the logistics arena.

When asked about the Alibaba partnership, Maersk said that this was part of the shipping line’s plan to provide digitized services to consumers and that it plans to initiate more pilot programs on third-party portals in the near future. Maersk stated that the launch of the service was not focused on bypassing the industry’s traditional middlemen (freight forwarders and NVOCCs), as the OneTouch platform still engages freight forwarders to offer some services, including haulage. Though it may not be the public goal of this joint venture, bypassing intermediaries will inevitably be an effect.

Many tech startups have launched services like this one, attempting to bypass third-party shipping services, but until now Amazon has been the only other high-profile company to venture into these waters. This new partnership between Alibaba and Maersk will add another big name to the list of e-commerce companies exploring a streamlined process, as well as giving carriers a chance to see how these online retail capabilities mesh with their shipping business.  Forwarders and NVOCCs are well-advised to watch this trend closely, and be careful about large investments in physical facilities. A look at today’s ghost towns which were formerly bustling shopping malls gives you a hint of what could be if intermediaries become very easily done without.

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