10 September 2008

Customs Update: New changes bring headaches

The following was written by Susan Kohn Ross, International Trade Counsel at Mitchell Silberberg and Knupp LLP, for the “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 o