Enhanced Enforcement of Antidumping and Countervailing Duties, New Petitions

This is an old blog we lost during our transfer of site hosting. Update on this topic is forthcoming in a future blog.

  1. Executive Orders

President Trump issued two Executive Orders on March 31, 2017, signaling the new administration’s opposition to unfair trade practices. The first Executive Order (See Original Document Here) directs the Department of Commerce (“DOC”) and the United States Trade Representative (“USTR”) to conduct a broad review of differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights, and labor standards, etc. The second Executive Order (See Original Document Here) aims at the collection of antidumping and countervailing duties. Both address enforcement of violations of U.S. trade laws.

The U.S. estimates that uncollected AD/CVD duties for 2015 reached $2.3 billion. CBP is directed to develop a plan requiring “covered importers” of subject merchandise who pose a risk to the revenue of the United States to provide security through a bond or other legal measure. “Covered importers” are defined as new importers or importers for which the agency has a record of incomplete or late payment of antidumping or countervailing duties. Those benefiting from low bonds should be careful now to ensure timely and sufficient payment of the AD/CVD duties or otherwise be subject to the increased bond requirements.

CBP must “develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation.” What “methods of interdiction and disposal other than seizure” means is unknown.

Regarding the protection of intellectual property rights at the border, now the government will share with right holders, to the extent permitted by law, information necessary to determine whether there has been an IPR infringement and information regarding merchandise that has been abandoned before a seizure. Previously that “commercial proprietary information” was withheld. The change may allow right holders to sue infringers in U.S. courts or to seek exclusion orders from the International Trade Commission.

The Department of Justice (“DOJ”) must “allocate appropriate resources to ensure that Federal prosecutors accord a high priority to prosecuting significant offenses related to violations of trade laws.”  Normally, U.S. trade enforcement attorneys who deal with penalty cases are in the Civil Division at DOJ and are not called “prosecutors.” It seems that the Executive Order refers to a prosecution of criminal violations.  As we know, federal laws impose criminal sanctions on a wide spectrum of illegal activities, such as fraudulent and/or knowing importation (or facilitation of such importation) of counterfeit merchandise or merchandise whose importation is “contrary to law,” false claims for refund of duties, false classification, false statements, smuggling, etc. We may see more prosecutions of individuals for trade-related cases.

  1. Recent AD/CVD Development

AD/CVD cases had already increased under the Obama Administration. In Fiscal Year (FY) 2016, $14 billion in imports were subject to AD/CVD, and CBP collected $1.5 billion in AD/CVD cash deposits.  CBP’s collection of AD/CVD cash deposits increased over 25 percent since FY 2015 and by almost 200 percent since FY 2014.  As of the end of FY 2016, $2.8 billion of AD/CVD duties were owed to the U.S. government for imports going back to 2001. With the new emphasis on combating unfair trade practices, we can expect to see continued AD/CVD cases during the Trump Administration.

Below are highlights of recent new AD/CVD petitions:

  • April 19, alleging that cold-drawn mechanical tubing from China, Germany, India, Italy, Korea, and Switzerland is sold at less than fair value in the U.S. market and that such goods from China and India are benefitting from countervailable subsidies. The petition alleges dumping margins of 88.82 percent to 188.88 percent for China, 70.53 percent to 148.32 percent for Germany, 25.48 percent for India, 37.23 percent to 69.13 percent for Italy, 12.14 percent to 48.61 percent for Korea, and 40.53 percent to 115.21 percent for Switzerland. (Scope of Investigation Can Be Seen Here).
  • April 11 alleging that metal tool chests and cabinets with drawers from China and Vietnam are sold at less than fair value in the U.S. market and that such goods from China are benefitting from countervailable subsidies. The petition alleges dumping margins of 167.5 percent for China and 58.2 percent for Vietnam. (Scope of Investigation Can Be Seen Here).
  • March 31 alleging that carton-closing staples from China are sold at less than fair value in the U.S. market. The petition alleges dumping margins ranging from 15.8 percent to 148.8 percent. (Scope of Investigation Can Be Seen Here).
  • March 28 alleging that carbon and alloy steel wire rod from Belarus, Italy, Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates, and the United Kingdom is sold at less than fair value in the U.S. market and that CASWR from Italy and Turkey is benefitting from countervailable subsidies. The petition alleges dumping margins of 179.07 percent to 304.94 percent for Belarus, 26.36 percent for Italy, 41.72 percent to 53.09 percent for Korea, 216.50 percent to 821.40 percent for Russia, 159.35 percent to 164.08 percent for South Africa, 32.64 percent for Spain, 45.1 percent for Turkey, 21.64 percent to 61.64 percent for Ukraine, 69.57 percent for the UAE, and 88.25 percent for the UK. (Scope of Investigation Can Be Seen Here).
  • March 23 alleging that biodiesel from Argentina and Indonesia is sold at less than fair value in the U.S. market and/or benefitting from countervailable subsidies. The petition alleges numerous subsidy programs in each country as well as dumping margins of 23.3 percent for Argentina and 34.0 percent for Indonesia. (Scope of Investigation Can Be Seen Here).
  • Aluminum Trade Enforcement Working Group filed a petition on March 9, alleging that aluminum foil from China is being sold at less than fair value in the U.S. market and/or benefitting from countervailable subsidies. The alleged dumping margins range from 37.57 percent to 134.33 percent. (Scope of Investigation Can Be Seen Here).
  • March 7 alleging that silicon metal from Australia, Brazil, Kazakhstan, and Norway is sold at less than fair value in the U.S. market and/or benefiting from countervailable subsidies. The alleged dumping margins are as high as 52.81 percent for Australia, 134.92 percent for Brazil, and 45.66 percent for Norway. The petitioners have also identified several programs in Australia, Brazil, and Kazakhstan as providing unfair subsidies. (Scope of Investigation Can Be Seen Here).

Some other trade remedy cases:

  • A Section 201 Petition was filed with USITC for global safeguard relief from imports of crystalline silicon photovoltaic (“CSPV”) cells and modules. Under Section 201 of the Trade Act, domestic industries seriously injured or threatened with serious injury by increased imports may petition the USITC for import relief. The USITC determines whether an article is being imported in such increased quantities that it is a substantial cause of serious injury, or threat thereof, to the U.S. industry producing an article like or directly competitive with the imported article. If the Commission makes an affirmative determination, it recommends to the President relief that would prevent or remedy the injury and facilitate industry adjustment to import competition. The President makes the final decision whether to provide relief and the amount of relief. Section 201 investigations do not require a finding of an unfair trade practice such as under the antidumping and countervailing duty laws. In this case the petitioner is seeking the following.
    • an additional tariff starting at $0.40/watt per CSPV cell and falling incrementally to $0.33/watt in year four
    • a minimum price starting at $0.78/watt per module and falling incrementally to $0.68/watt in year four
    • a new economic investment development program funded with the safeguard tariffs
    • an equitable distribution of AD and CV duties collected in two existing AD/CV cases
    • bilateral and multilateral negotiations to reduce global excess capacity

Some of these measures would likely be in violation of U.S. obligations as a member of the World Trade Organization.

  1. Concerns for Your Business

Expanded AD/CVD enforcement can have widespread and varied effects depending on your company’s position in the market.  If you are a domestic manufacturer who suffers from unfair trade competition, going forward you may find it easier to file AD/CVD petitions with increased likelihood of success.  If you are a U.S. importer, you should scrutinize your supply chain, making sure the products you import are not subject to the AD/CVD orders or if they are, paying adequate cash deposits. If you are a foreign manufacturer and/or producer exporting subject products to the United States, you may want to participate in the investigation or reviews, so you may be qualified for a lower rate.  We can help in each case, should you so desire.

Share

U.S. CBP New Regulations

This is an old blog we lost during our transfer of site hosting. Update on this topic is forthcoming in a future blog.

When foreign manufacturers sell below the cost of production or “fair market value”, it is known as “dumping.”  Dumping is a worldwide issue and phenomenon.  Every country and trade block, and virtually every major multinational and/or trade union is claiming “foul” with regard to some competitor.   The U.S. attempts to offset any gap in pricing by applying a duty specifically calculated, case by case, to increase the selling price to our evaluated fair market value. Countervailing duties involve a similar issue, arising when a foreign government provides benefits such as tax incentives to exporting companies.  Countervailing duties are adjusted to fit each country’s specific policies, while dumping is calculated per shipment. Because of the need for clarity with ever-changing cost, incentive, rates and duties, U.S. Customs and Border Protection has published new procedures for claim investigations dealing with the evasion of antidumping (“AD”) and countervailing (“CV”) duties as follows.  The purpose is to create additional avenues for spurring investigations of the preceding potential issues.   These are double-edged swords: opportunities for U.S. companies and additional risks for overseas entities.   We are always glad to advise from either perspective.

The Changes

  • Scope and purpose of the interim regulations: These regulations intend to clarify deadlines and procedures that Customs and Border Protection (“CBP”) must follow during the investigation of an alleged “evasion” of payment by an importer of product subject to AD or CV duties. Evasion is defined as the act by which “any amount of applicable antidumping or countervailing duties [is either] reduced or not being applied with respect to the covered merchandise.” Before the new standards were published, CBP was already authorized to handle AD and CV duty evasion through administering penalties for fraud or negligence. However, prior to the new procedures, if a private party submitted evasion allegations then they themselves did not have the benefit of formal investigative procedures.
  • Process for triggering an investigation: In order to trigger an investigation, the interim regulations give “interested parties” and federal agencies the ability to formally ask that CBP look into an alleged evasion. The regulations specify that an “interested party” refers to manufacturers, producers, exporters, or importers of the merchandise at issue based in the U.S. and overseas. Trade associations and unions comprised of these groups are also able to issue an investigation suggestion.
  • Initiation and notification of investigations ? and possible use of “interim measures”: Once the CPB receives a formal request from either a federal agency or “interested party,” they must evaluate the claim. If they find that the request “reasonably suggests” that the accused importer’s merchandise came into the U.S. through evasion, the CBP will open an investigation. The interim regulations allow CBP to take interim measures where it has a “reasonable suspicion” that the accused importer is evading an AD or CV order. These measures include the suspension of liquidation of the importer’s entries, requiring them to secure a single transaction bond, and ordering that they post a deposit in cash.
  • Creation of administrative record and possible use of adverse facts: Thanks to the interim regulations, CBP is now required to maintain an administrative record with all information it relied upon during the course of its investigation. When CBP is gathering information on an investigation, questionnaires and written correspondence with the parties will be the general methods used. The only material CBP is allowed to use during their assessment of fault is that which has been properly filed with respect to the new regulations. If a party does not cooperate with a CBP information request, then they may be subject to adverse inferences based off of the facts available. The regulations still stand in this situation, as only the information on file may be used pertaining to a non-cooperative party.
  • Treatment of confidential information and alternatives to filing allegation: the interim regulations do not provide for an administrative protective order (“APO”) mechanism. However, interested parties may request that CBP treat submitted information as business confidential information (“BCI”). According to the guidelines, BCI treatment is a right to privacy which will be granted in order to protect trade secrets and confidential commercial or financial information. Identification of the parties involved, description of the merchandise at issue, and specification of the basis upon which the alleging party is interested are all specified as ineligible for BCI treatment because they are so central to the investigation. Because their identity will likely be denied BDI treatment, interested parties may be deterred from lodging an allegation directly. In order to remain anonymous but still trigger an investigation, such parties should consider lobbying a separate federal agency to submit a referral to CBP instead of doing it themselves.
  • Determinations and Reviews: CBP has 300 calendar days, with the possibility of a 60 day extension for unique or especially complicated investigations, to issue a determination of evasion. If it finds that evasion has occurred, measures will be taken against entries of the merchandise at issue in union with the U.S. Department of Commerce (“DOC”). Additionally, the CBP will assess the appropriate duty rates in conjunction with the DOC, requiring the appropriate cash deposits to be made. Any party involved in the investigation has 30 days to request a de novo administrative review of the CBP’s determination as to evasion. At the close of administrative proceedings, CBP must issue a final administrative determination to the parties. The only possible review at this point would require judicial review by the U.S. Court of International Trade.
Share

Finding Your Company’s Worth

Business Valuation is the process of determining the economic value of a business or company. Although this may seem pretty straightforward, accurately valuing each business takes a great amount of preparation and thought. Establishing what a business is worth is not an exact science, largely due to the way different people view each aspect of a company. An investor will likely base their assessment of the Startup Stock Photosbusiness value solely on how much money the company brings in, while the owner may heavily value its connection to the community it serves. Beyond the possible differences in opinion, economic conditions affect what people believe a business is worth. As job scarcity increases, the number of business buyers in the market follows and that increased competition results in higher selling prices.  Also, low interest rates spur investors to put their money into businesses rather than banks, because returns are so much higher.

When it comes to business valuation, there are three umbrella terms for methods used. Each of the following represents a choice of several methods all grouped into the same approach.

Asset approach: The asset approach views the business as a set of assets and liabilities that are weighed against one another to determine business value. The asset approach is based on substitution by answering this question: What would it cost to create an identical business that will produce equal economic benefit for its owners?   Although this may seem like a fairly simple equation, there are many important details than cannot be overlooked, including which assets and liabilities should be considered, what standard to use to measure their value, and how to set each individual item’s worth.

Market approach:  As one could assume from its name, the market approach relies on signals from the market place to determine what a business is worth.  The market approach applies the principle of competition, asking “What are businesses worth that are comparable to my business?” In assessing the value of a company using the market approach, the fair market value-a value which buyers are willing to pay and sellers are willing to accept-is found by searching the market for the current business price equilibrium. The market approach is commonly used as a way to substantiate one’s offer or asking price. If you determine the “going rate” is a certain amount, why offer any more or accept any less?

Income Approach:  This approach focuses in on a company’s core motivation for existing: profit. It attempts to answer the question “If I invest time, money, and effort into owning this business, what economic benefits will it provide me, and when?”  The income valuation approach centers around a future expectation of economic benefit while also factoring in the risk of the money not being brought in on time – or at all.   This is probably the most common in the Customs brokerage and/or freight forwarding fields, as the companies tend not to be asset based, and market valuations are difficult among closely held businesses which don’t publicly report sales, income, or private sale prices.

With three different approaches, business valuation methods often produce different results.  When deciding which assessment style best fits your needs, it is important to consider the size and age of the business in question, as well as whether what you’re valuing is a start-up or already a cash cow. Although you may find a particular method best geared towards your company (i.e. the income approach with a brand new company that has yet to bring in much profit) it is important to keep in mind that all of the approaches listed above are reliable methods which can be successfully applied to a business of any kind.

Contact us anytime if you have any questions about this topic or would like to speak with a member of our experienced legal team.  In the past year we have performed valuations of roughly a half-dozen logistics firms.  Contact Us

 

Share

Reducing Your Duty Rate, an Easier Way

On May 20, 2016, Congress enacted the American Manufacturing Competitiveness Act, a new law to restructure the  process companies go through to obtain temporary duty reductions and suspensions.  Previously, companies would have to petition members of Congress to submit individual bills requesting  tariff reductions, which were then accumulated and piled into one large omnibus bill known as  a Miscellaneous Tariff Bill (MTB). Under the new law, businesses will instead be able to submit their petitions directly to the U.S International Trade Commission, which in turn, shall advise Congress of the merits.

Tariff reductions are a great relief for US companies which import products.  The imported articles are often ingredients or components used to manufacture a finished American product. To qualify for duty relief,

  • The item at issue must be exclusively produced outside of the US (If there is any domestic production, there must be no objections by competing US companies);
  • The reduction must cost the US Treasury no more than $500,000 in lost tariff revenue per year; and
  • The relief must be uncontested by any member of Congress.

New the Process for MTB

Under the new law The International Trade Commission will open the floor for petitions and you will have 60 days to file your petition beginning this fall on October 15, 2016. When this window closes, it will not reopen for another three years in October of 2019.

The following must be included when filing a petition as stated by the  American Manufacturing Competitiveness Act :

  1. Name and address of the petitioner.
  2. Statement of whether the petition is for an extension of an existing duty suspension or reduction, or for a new one.
  3. A certification that the petitioner is a likely beneficiary of such a duty suspension or reduction
  4. Descriptions of the article covered by the duty suspension or reduction.
  5. Classification ruling and location of the article under the Harmonized Tariff Schedule of the United States (HTSUS) and relevant documentation.
  6. Description of the U.S. industry that uses the item.
  7. An estimate of the total value (in US dollars) of imports of the item for each of the five calendar years after the petition is filed.
  8. If available, The name of each person that imports the item.
  9. If available, a description of any domestic production of the item.

 

Following the submission period, the ITC will publish what was received and there will be a 45 day window for public commentary on the submitted petitions.  After taking public comments, the Commission will submit a preliminary and then final report(s) to Congress on each individual petition for tariff suspension or reduction.  Congress will prepare the MTB legislation based on the recommendations provided by the ITC.  At no point can Congress insert new items on the list given to them by the ITC, but they do have the authority to reject or amend a proposal.  Congress has no deadline for the enactment or introduction of MTB legislation, but given the timeline, it is possible to see it in the latter half of 2017, given the October petition date.

We are very interested in helping you, our friends and clients, apply for relief this year!

Share

Understanding General Average

495744-nzh0554375803

Import and export traffic in our globalized world generally runs quite smoothly, but occasionally, the very real risks associated with the natural elements at sea or simple human error impact transportation adversely. Severe weather including wind, rain, swells  and lightning storms can create a recipe for disaster for traveling ships. Less violent, but still serious issues can arise when technology fails or a mistake is made by a crewman which puts the ship and cargo in peril.  General Average (GA) is the legal principle in maritime law that permits the ship-owner to voluntarily sacrifice part of the ship or cargo to save the rest or majority of the vessel  and cargo. The term “average” in this case should be understood to mean “loss”. When an event is declared as a General Average, the ocean carrier is fully relieved of the liability of loss; that burden is instead, distributed collectively  to each cargo owner who’s goods were on that ship.

The most common instance of GA is when crews jettison cargo to lighten a threatened ship; other bases for GA claims include stranding, fires and collisions that may occur either in international waters or on the high seas. These partial losses may be small or reflect millions of dollars in damage. An insurance policy with a General Average protection can, in these instances, protect cargo owners from thousands in out of pocket costs for these claims. It is important to note that there is a difference between General Average protection and Particular Average protection which is covered under a marine insurance policy.

To have a valid General Average claim, the sacrifice must be a voluntary, rather than inevitable decision, necessary for common interests, not merely a part of the property involved, and successful. When a GA claim is made, landed cargo will be detained until a cash bond or security deposit is provided prior to release. Until such bond or security is made, ship-owners hold a lien on the cargo (see our recent post about liens by clicking here). If the General Average claim is small, and the cargo is insured, ship-owners may release the cargo under a General Average Guarantee. This guarantee is a simple form that states the insurers agree to pay the ship owner the owed contribution for the General Average, salvage and any other incurred charges. This guarantee form should include the:

  • Ship/ vessel name
  • Date
  • Brief description of goods insured

Note that you may be required to also place an Average Bond along with the Guarantee if the insured amount of the cargo is less than its contributory value. Please click here for more detail

The General Average claim will be assessed by a general average surveyor who is responsible for determining and reporting the official loss amount. This process can take years and the fee for the adjuster is also billed across the cargo owners. Once all the fees have been applied and totaled with the damages, billing is typically split by percentage according to the amount and value you had on the vessel. The ultimate goal of the General Average Principle is to place the carrier who incurred the loss in as close to a financial position as the carriers for whom the sacrifice was made.

For a full breakdown of General Average as well as a look at the York-Antwerp Rules which govern this principle please click here.

If you are facing legal action with regard to a General Average claim or have any further questions, please contact us.

 

Other useful links:

http://www.shapiro.com/resource-center/resources/cargo-insurance-what-is-general-average/

Share

Unpacking Warehouse Liens

Warehouses are massive repositories of risk and are responsible for holding, in many cases, millions of dollars in property. Because of this huge responsibility, warehouses have the right to contractually limit liability for loss or damage, and to issue liens to protect themselves from unpaid storage bills. A common inquiry among NVOCCs, forwarders, and warehousemen alike, is whether or not they have a legitimate lien on the cargo in their possession. The answer depends on the execution of a detailed  series of  steps that have been adopted in every U.S. state through the  Uniform Commercial Code.  This simple outline serves to help unpack these steps so that you can make certain that your warehouse receipt is compliant with Florida Statutes, and you obtain the full lien privileges provided under the law.

A Warehouseman’s Lien is a security interest that gives the warehouse keeper the right to retain possession of the stored property until their rental and/ or warehouse charges are paid in full. The failure to pay for the agreed upon services may allow the lien holder to keep possession of, and indeed sell, the property involved.  Liens are normally very hard to obtain: you only have one if it was either  A) expressly given to you by the cargo owner; or B) given to you by statute. Warehousemen fall into the latter category, and thus, do not have to ask for lien privileges. They do, however, have to have a proper warehouse receipt in order for the lien to be enforceable.  For more limitations on what can be claimed as a lien click here.   The general structure of the receipt must be in accordance with the following (in Florida it is Statute 677.202, but every state has its own numbering systems):

  • A warehouse receipt does not need to be in any particular form.
  • The following must be included in the warehouse receipt; omission of these parts may lead to loss of lien rights:
    • The location of the warehouse where the goods are stored;
    • The date of issue of the receipt;
    • The consecutive number of the receipt;
    • A statement as to whether the goods received will be delivered to the bearer, to a specified person, or to a specified person on his or her order;
  • The rate of storage and handling charges must be expressly stated  with the exception of good stored under a  field warehousing arrangement.
  • A description of the goods or of the packages containing them must be stated.
  • The signature of the warehouseman (may be made by his or her authorized agent)
  • A statement of ownership for goods owned  by the warehouseman either solely,  jointly, or in common with others.
  • A statement of the amount of advances made and of liabilities incurred for which the warehouseman claims a lien or security interest (Florida Statutes 677.209). If the precise amount of such advances made or liabilities incurred is unknown to the warehouseman or to his agent  at the time of the issue of the receipt, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient.

It is important to note that if the lien is not “continuing”, meaning that if you release without first collecting your due, then the lien is gone and you are simply an unsecured creditor.  If this is not the case, and you have secured a proper warehouse receipt, you are wholly within your rights to retain the cargo until payment of all storage. A detailed look into the effects of liens and its implications for customers can be found here

If you have any questions about this topic or would like to speak with a member of our experienced legal team, call our office at (800) 583-0250.

In our next discussion of Warehouse Liens, we will discuss Bills of Landing and Business Terms and Conditions.

Share

Shedding Light on the Gray Market

Counterfeit goods and other methods of product reproduction that infringe upon the intellectual property of the owner are strictly illegal, and heavily regulated, especially within the US. The gray, or “grey”, market however, enjoys much fewer limitations as the goods are authentic and obtained by legal means. “Gray goods”  are legally manufactured goods purchased from certified distributors, which are then resold, generally, without the permission of  the trademark holder. Though this channel is completely legitimate and lawful, there are some important trade and import restrictions surrounding gray market merchandise that must be adhered to. For example, if an Argentine company has a trademark and participates freely in the US market, there is no CBP restriction on its products’ entry into United States by other importers.   However, if the owner of that trademark is a U.S. entity, any imported product bearing the trademark becomes a restricted gray market article.  Click here to learn more.

A restricted gray market article is a foreign-made article bearing a genuine trademark owned and recorded by a  U.S. entity, imported without the authorization of the U.S. trademark owner.  In other words, gray market goods bear a genuine  mark which has been applied with the approval of the trademark owner, but the approval is limited to sales in a country other than the United States.  Restricted gray market merchandise will be seized for a violation of  19 U.S.C. 1526(b) if discovered by CBP.

Only trademarks which are recorded with CBP are entitled to gray market protection. Whenever a CBP Inspector queries the CBP Intellectual Property database, he or she will check the recordation file screen to determine whether the “Genuine Trademarked Articles Restricted” box states “Y” or “N”. If the box associated with that section is marked with a “Y”, it indicates that no one, except the trademark holder or his designee, may import genuine articles bearing that trademark. So if the goods are genuine, and a “Y” appears in the trademark recordation screen, the goods may not be imported without the U.S. trademark owner’s consent.

If, however, the box is marked with an “N”, this indicates that gray market goods bearing that mark may be imported by anyone, without restriction and regardless of whether the trademark holder consented.   This does not exempt Counterfeit goods from being seized, regardless of whether there is CBP recordation.  Read about the Supreme Court’s ruling in favor of the gray market in a suit against EBay and other discount retailers.

It is imperative to familiarize yourself with the ownership and recordation of trademarks in the U.S. before you attempt to import goods.  More and more often, companies are taking action to protect their product from unauthorized distribution, and Customs continues to strictly clamp down on restricted gray market items. Knowing your rights, and those of the trademark owner, can help you avoid a costly seizure of legally purchased goods.

Share

SOLAS  New Container Weighing Requirements

Change is on the horizon in the shipping industry, and it is important to make sure you are staying informed. Effective July 1st, 2016, changes adopted by the International Maritime Organization (IMO) regarding verified container weights will become effective. These changes were first introduced at the 2014 Safety of Life at Sea (SOLAS) Convention, but it is now time for implementation. The full text of the applicable SOLAS regulations can be found here

These regulations initially came about as a result of safety issues within the shipping industry. There were problems regarding overweight/underweight containers, misreported freight, poor weight distribution within containers, and more: see “Safety and Shipping Review 2014“. Ideally these changes will help accomplish a reduction in loss of containers from vessels, increased assurance to all parties within the supply chain, and overall improved safety.  These new requirements will apply to all 171 IMO member countries, as well as the three associate members of this organization.

The responsibilities of the shipper (as designated by the bill of lading) under these new regulations are particularly important. The shipper will now be required to verify the gross mass of each container via a signed document; this document must be physically signed (stamps will be unacceptable), and the form must be submitted in time to be used by the master and terminal representatives in the ship’s stowage plan.  The shipper has the option of submitting the container weight via the shipping instructions to the line, or in a specific communication such as a weight certificate. Regardless of submission method, the weight included must be designated as the “verified gross mass” and authorized by the accompanying signature. The shipper is able to determine whether they would prefer to weigh the contents of the container prior to or after loading, but the critical designation is that estimated weights are not permitted. The equipment used to weigh contents must meet national certification requirements, and the party verifying container weight is not permitted to use weight provided by a previous party. Click here for the Implementing Guidelines issued by MSC

The execution of enforcement for this new requirement will be put on the shoulders of the carriers. Essentially, carriers are highly encouraged to refuse to load containers for which a signed weight verification is missing. Refusing to carry these containers will encourage shippers to abide by the new requirements set forth by SOLAS. As July is only a few months away, it is important for shippers to begin proactively planning how they will adjust their processes to abide by these new requirements.

 

If you are in need of additional resources or more information, please visit the following link: http://www.worldshipping.org/industry-issues/safety/faqs.

 

Share

Antidumping Duties: What You Need to Know

As any Customs broker can tell you, there are an ever-increasing number of antidumping duty cases filed. It is imperative that importers (and their brokers) understand this topic.  Dumping duties are tariffs imposed by a government when it believes foreign goods are being sold below their fair market value or cost of production.   The whole world does it. This practice of foreign goods being “dumped” below cost both skews the market and cripples domestic competitors.  In the United States it is not uncommon for antidumping duties to be implemented at rates of 100% or 200% of invoice value;  this is in hopes of protecting domestic competitors and insulating the market from below-cost distortion.  Ideally, this raises the goods’ U.S. sale price to something closer to the cost of production with some profit.  For a complete overview of the countervailing duty petition and investigation process please reference the following handbook released by the United States International Trade Commission: https://www.usitc.gov/trade_remedy/documents/handbook.pdf.

Antidumping duties can be crippling to companies who do not realize they are subject to such payments, which is why it is extremely important to be aware of which duties pertain to the products you import. At this time we have people who sold goods three years ago being advised that they owe 214% duty!  Can you imagine the devastating surprise?   The Mooney Law Firm is involved in antidumping cases involving products such as seafood, ball bearings, solar panels, oversized tires, garlic, auto parts, wooden bedroom furniture,  refrigerator parts, and more; this range of products demonstrates that antidumping cases can be brought in virtually all industries.  As the importer, you are responsible for determining which duties apply to the goods you import.  In addition to payment of back duties, the fines for neglecting to pay these antidumping duties on time are significant, which is why it is critical to be attentive and accountable for what you are importing.   You don’t want that 214% duty bill some years after the goods have been sold!  You are able to search by case number in the following database categorizing all of the active antidumping and countervailing duty cases: http://adcvd.cbp.dhs.gov/adcvdweb/ad_cvd_msgs?utf8=%E2%9C%93&commit=View+most+recent+messages.

Note that the agency responsible for enforcing antidumping duties is the Department of Commerce: most mistakenly assume it is Customs.  Under the umbrella of the DOC, the United States International Trade Commission is the federal agency in charge of investigating claims of dumping.  As an importer you have an obligation to be accountable for the product you bring in, and an important piece of this is abiding by the proper duty payments.

Share

FMC Remains Aggressive with Penalties

Since the summer (2015) there have been penalty settlements announced by the Federal Maritime Commission (FMC) which total in excess of $2,000,000.00.  Its Bureau of Enforcement (BOE) is the arm of the Commission specifically focused on prosecution.  The BOE investigates violations of the Shipping Act as well as enforces FMC regulations, and Bureau attorneys are the ones who act as trial counsel in all formal Commission proceedings.  Often a settlement is reached between violating parties and Bureau attorneys, and detailed below are some notably large cases from the past year.   Settlements generally avoid any admission of wrongdoing, and avoid the extensive time and money expenditure required by administrative trials.

In August, the BOE announced FMC collections of $1,227,500.00.  These collections were made in the form of penalty payments by a variety of different parties, including seven different non-vessel operating common carriers (NVOCCs) and one vessel-operating common carrier (VOCC).  The violations alleged of the NVOCCs included unlawfully collecting forwarder compensation, misrepresenting the names of shipper accounts, allowing improper parties to access service contracts, knowingly obtaining transportation less than applicable rates, and more. The most heavily penalized party was the vessel operator United Arab Shipping Company; it was charged with violating 46 U.S.C. 41104(1) and 46 U.S.C. 41104(2) for allegedly paying unlawful rebates to a shipper and providing transportation at rates inconsistent with their published tariff.  In total, United Arab Shipping Company paid $537,500.00 in penalties to the agency.

In September another announcement was made regarding penalty collections, but this time only one party was involved.  A VOCC based in Norway named Siem Car Carriers was found to be in violation of 46 U.S.C. 41102(b).  In this case the violations were voluntarily disclosed, and an agreement was reached in which Siem paid $135,000.00 in penalties.  The Chairman of the FMC, Mario Cordero, states, “Voluntary disclosures can serve to diminish carrier exposure to very significant monetary penalties.”  Based on this, it is reasonable to assume that Siem would have been responsible for greater penalties if they had not taken the initiative to disclose this information voluntarily.   In January of this year we presented our first seminar on voluntary disclosure to Federal agencies.   It is interesting to see how the disclosed entity paid roughly 25% of what the non-disclosing entity paid above, though of course the facts and extent of the alleged violations may have differed greatly.

In December 2015, still more violations were announced, and this time they involved freight forwarders, NVOCCs, and two unlicensed entities acting as ocean transportation intermediaries (OTIs). The British Association of Removers and Sparx Logistics are both NVOCCs that allegedly violated FMC regulations by obtaining ocean transportation at lower than applicable rates; while neither company admitted to actually doing so, they did agree to settle and pay penalties. Wilhelmsen Ships Services and N/J International are licensed NVOCCs and freight forwarders which were involved in cases charging them with operating without a valid Qualifying Individual for a period of over one year. As a result, both companies were ordered to pay penalties to the FMC. Lastly, Azap Motors and Knopf International are unlicensed entities that were both alleged to be offering OTI services without a proper FMC license. Both companies agreed to pay penalties, and Azap Motors even dissolved as a company.  Collections from penalty violations totaled $334,000.00 for the month overall.

As 2016 has kicked off, so have the FMC collections. It was announced recently that the FMC collected a total of $520,000.00 through civil penalties in the month of February.  These penalties came from four different OTIs (both NVOCCs and freight forwarders) and one VOCC. It is important to note that in that month all NVOCCs were penalized for the same action: they allegedly obtained transportation at less than applicable rates. The FMC takes this seriously, and it is important to ensure you are paying a fair price for transportation as set by tariffs.   Misrepresentation of weight, volume or commodity is dealt with harshly by the agency.

You can learn a great deal from examining past FMC penalties.  When dealing with trade and transportation it is your responsibility to understand the regulations set forth by the FMC as well as the Shipping Act, and to ensure that your actions are in accordance with these guidelines.  Otherwise, as we have seen in these cases, severe penalties may be assessed letting the agency laugh all the way to the bank.

Share