TradePost Archives > September 17, 2008 > this article

Customs update: New changes bring headaches

September 4, 2008
By Susan Kohn Ross, Journal of Commerce

In August's column, I took political leadership to task, or put more correctly, the amazing lack of political leadership. One of the agencies criticized in the process was Customs. Now, however, some of its common sense and partnership philosophy has been let loose.

In addition to the Country of Origin Labeling (COOL) rule changes mentioned last month, there are several other important revisions coming out of the recently enacted Farm Bill that Customs will be called upon to implement. First impressions suggest Customs will be doing so in partnership with the trade community.

The trade community railed against Customs' plan announced in January to eliminate the first sale rule, and a halt to that effort was called by Congress. [In its simplest terms, the first sale rule means that if you have the necessary documents and you are purchasing from a middleman, the price that middleman paid for your goods can be used as the value upon which duty is paid at the time of your importation.]

A provision in the Farm Bill, Public Law 110-234, made clear Congress would not tolerate the change without proper justification. As a result, Customs must now start to collect data about the application of this basis for valuation. Specifically, Customs must:

-- Develop a declaration as part of the entry process;
-- Provide the data collected monthly to the ITC;
-- Submit a report to the House Ways and Means and the Senate Finance Committees within 90 days of Customs’ final monthly report;
-- Not impose its revised value definition on any goods which are imported prior to Jan. 1, 2011;
-- Wait until Jan. 1, 2011 before reintroducing the proposed change, and then, only if it consults with and notifies the Congressional committees within certain time frames, and consults with COAC also within certain time frames, plus receives explicit approval from the Secretary of the Treasury prior to publishing the change.

As to the data collection element, in the August 25, 2008 Federal Register, Customs published its implementation proposal and that requires importers to insert an “F” next to the declared value at time of entry. A copy of that Federal Register notice can be found at: First Sale Implementation and took effect on August 20, 2008, with the comment period closing on October 24, 2008. Acknowledging that significant programming changes will be needed to implement this reporting change, Customs also published a notice that implementation will be delayed until September 20, 2008. That Customs notice can be found at: First Sale Designation Delayed. Keep in mind that entries filed between August 20 and September 19 must be amended through a procedure yet to be published.
 
For softwood lumber importations, the Farm Bill adds requirements that importers now submit the export price, estimated export charges, and a new importer declaration directed at disclosures about value. Additionally, for some softwood lumber kits and home packages not otherwise subject to reporting, there are new record-keeping requirements. This new rule is effective Sept. 18, 2008. Again, comments are due no later than Oct. 24, 2008. For more details see Softwood Lumber Regulations.

Finally, the Farm Bill at Section 8204 also makes potentially massive changes to the tariff as a result of amendments focused on the Lacey Act which regulates the importation, exportation, transportation, sale, receipt, acquisition or purchase by any person of any fish, wildlife or plant taken, possessed, transported, or sold in violation of any law, treaty, or regulation of the United States or in violation of any Indian tribal law whether in interstate or foreign commerce.

The full Farm Bill can be found at 2008 Farm Bill. The changes brought by Section 8204 seek to prevent illegal logging. There are suggestions that as much as one-third of the tariff may be affected by these revisions alone which encompasses plants, including roots, seeds, parts and products thereof, and trees, but not fish or wildlife. Importers are now going to be expected to state the scientific name of any plant (including genus and species), along with the value of the shipment and the quantity of plants.  Exclusions take the form of common cultivars, except trees, and common food crops, including roots, seeds, parts or products thereof, along with scientific specimens of plant genetic materials, including roots, seeds, germplasm, parts or products thereof, used only for laboratory or field research, and any plant that is to remain planted or to be planted or replanted. There are also exceptions to the exclusion which consist of plants listed in the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); those listed as endangered species, and species that are indigenous under the law of any state and threatened with extinction.

Finally, until regulations are put in place, imports of plants are required to state the species used to produce the plant product which if unknown, must contain the name of each species of plant that may have been used to produce the plant product; where the plant is commonly taken from more than one country, and the country from which the plant was taken and used to produce the imported plant product is unknown; the name of each country from which the plant may have been taken must be stated; and where recycled paper or paperboard plant product includes recycled plant product, the average percent of recycled content must be stated without regard for the species or country of origin of the recycled plant product, along with the information for the non-recycled plant content otherwise required by this new law! If these changes alone do not give you a headache, you are addicted to brain twisters! The exclusion is plants used exclusively as packaging material to support, protect, or carry another item, unless the packaging material itself is the item being imported.

If there was ever a good example of Congress enacting a law that is just about unenforceable, this is it. How in the world are buyers ever going to get this information and if they figure to get it from their suppliers, how will they validate what their suppliers tell them? Nonetheless, to its credit, Customs realizes what a massive undertaking is before them to update the Harmonized Tariff for just the Lacey Act changes alone, and so the agency is working with the National Customs Brokers and Forwarders Association of America to organized implementation of these changes.Perhaps the difference in attitude among Customs’ employees comes from the fact the folks who are in operations seem to hold a greater appreciation for their customers/partners, the trading community, than others within the agency. Of course, having said that, there is still 10+2 to worry about! But there is more!

Last week the Food & Drug Administration announced an end to the salmonella outbreak. That’s the good news. The bad news is the agency is no closer to understanding the source of the problem than it was at the outset, some four months ago. We all remember FDA’s insistence that the source was tomatoes. It took weeks before FDA budged and, in the process, it became clear the agency had nothing really substantive to go on in reaching that conclusion. In much the same way that the Honduran melon problem arose in circumstances where the original product had been further handled, in that case, in a salad bar, the salmonella outbreak was focused on salsa, which perhaps made sense, but tomatoes were convicted as the culprits without any meaningful evidence.

Then, it went from tomatoes to jalapeño and serrano peppers. Eventually, contaminated peppers were found in a victim’s home and a Texas distribution center, but again this occurred after further handling. In the end, the best FDA could do was to say it found contaminated water at one farm in Mexico, which was later cleared by Mexican authorities. In the process, the damage to the tomato industry has been put at between $130 million and $250 million!

It is fair to ask about this incident, too, where was the political leadership? Certainly the American public wanted answers and was entitled to them, but rather than work with industry to identify the problem and fix it, FDA decided, yet again, to go it alone. How can the American consumer have confidence in an agency which can’t perform its most basic job -- protecting the food supply? Given its notorious lack of funding and staffing shortages, you would think FDA would welcome assistance from industry, which would, of course, be subject to validation. Instead, FDA blew it again!