Legal Trade Tips -
Like any good bridge that gets you from point A to point B, these "Legal Trade Tips" are designed to help importers quickly increase their understanding of trade/compliance strategies. We hope this information provided in small chunks can serve as a resource to help companies better understand what affirmative actions will give them competitive advantages, avoid disputes with the US government, and potentially cut costs along the way.
Assessing Risk: What are the Largest Risks and Liabilities to your Business?
Do you know what areas of the law present the greatest areas of risk to your imports and exports? Is it related party valuation? AD/CVD exposure? The potential for Intellectual Property Rights violations? Export Control violations? In order to make that assessment, you need to either educate yourself, or work with professionals who already have such understandings. Understanding and evaluating risk, is a fundamental exercise that allows compliance resources be directed correctly into the right areas. Exercises such as external "compliance reviews" and self-assessments can be very effective.
Apply U.S. Law, and Carefully Expand Compliance Abroad (3/17)
Obviously, different countries hold different rules, and professional trade guidance is always a necessity; however, it is often very helpful to have a starting point for compliance principles in a developed nation. U.S. legal requirements are often highly accessible to attorneys, and often well-defined in comparison to those in other foreign countries. For example, it is often possible to obtain a ruling from U.S. Customs that details the proper origin, classification, valuation or admissibility of a good; whereas such rulings in other foreign countries are often far less detailed (e.g., BTI issued by Europe), or simply unavailable.
Seek Scope Exclusions from AD/CVD (2/17)
Antidumping and Countervailing Duties (AD/CVD) can impose prohibitive costs to a supply chain. The application of AD/CVD is governed "scope" of the Order. It is often possible to carefully engineer a product around the scope language of an Order, and sometimes it is possible to to avoid the application of AD/CVD, and to confirm that exclusion by obtaining a scope ruling from the Department of Commerce.
Use the MTB as a Backup for NAFTA and GSP provisions (10/16)
President Trump's campaign promise was the elimination of the NAFTA agreement in order to revitalize American manufacturing. Further, some GSP provisions may soon face expiry. For those importers currently using those provisions within their supply-chain, these changes in 2017, could be problematic -what can be done? The revised MTB petitioning process could prove helpful. It allows importers to seek duty reductions and suspensions now being administered by the International Trade Commission. Importers interested in this option need to act quickly! The filing deadline is about to close in late December, 2016.
Responding to Informed Compliance Letters
Some importers are receiving Informed Compliance Letters from Customs Regulatory Audit in Texas. There is some misunderstanding about what these letters represent, including articles written that these represent Customs using advanced analytics to let importers know that Customs perceives the likelihood of errors in their transactions. Because of these letters from Customs, many law firms and consultants have stressed the need to initiate audit preparations. So what's the truth of the matter? In fact, these letters were merely issued to the top 1,000 importer of record numbers that have not been subject to a Customs audit within the past 10 years. In other words, Customs realized that with a minimal amount of effort, they might encourage greater compliance from the 1,000 largest importers around the country. While Customs indicates that these large importers can be expected to be subjected to either a Focused Assessment or a Quick Response Audit in the near future - well, they already knew that didn't they? Does this mean that audit preparations are needed - perhaps. Different importers will hold radically different risk profiles from a Customs audit perspective; for example, an importer that ships only one duty-free product and a well-trained compliance department holds a radically different risk profile from an importer shipping a wide-variety of dutiable goods, and goods subject to FTA qualification.
Document Buying Agency Commissions (9/16)
Buying Agency Commissions are widely used to avoid dutiable payments to a foreign intermediary who assists with non-manufacturing services related to imported goods (for example partial list of services might include: quality control inspections, translation and communication with factories, routing of orders, coordination of materials ordering, and logistics). Customs however is frequently able to invalidate the relationship as that of a "buying agent" - and in those instances, Customs may claim these payments are fully dutiable (often extending this back across 5 years of imports). Importers using a buying agency should counsel to review the program so that it will stand up to Customs eventual review.
Examine "First Sale" duty savings opportunities (8/16)
"First Sale" duty savings opportunities are a powerful means of optimizing your supply chain costs; however, first sale has many levels of understanding and many techniques developed around first sale are not effectively published. As a result, the implementation of these programs is often profoundly misunderstood, and often performed incorrectly. In such instances, the duty savings can quickly become an unforeseen duty bill extending back against perhaps 5 years of imports. For example, in HQ H272113 Customs invalidated the detailed proposal for a first sale duty savings plan on the basis of both inconsistent incoterms and inadequate support of a transfer price. Importers need professional help in order to set up these program up correctly.
Examine Issues of Related Party Valuation (7/16)
Related party valuation is common in international trade. Related parties might obviously exist, for example, when a parent company sells to a subsidiary, or a person sells to another blood relative; but there are many forms of "relatedness" (defined at 19 CFR 152.102(g)). These transactions are of concern to U.S. Customs, because if the parties choose to voluntarily lower the value of the imported goods, then the U.S. government may be deprived of duties, taxes and/or fees. Unfortunately, small importers are usually not concerned with the arcane subject of customs transfer pricing; and therefore, when the business grows and U.S. Customs does raise the valuation issue, there may be 5 years of imports whose valuation becomes legally in question. To make matters worse, the customs valuations statute (19 USC 1401a) is absurdly complex and nuanced. Related party issues usually requires importers to seek experienced legal counsel.