Import controls on products produced with forced labor: a developing story

Most professionals involved in international trade compliance in the USA have heard of the recent Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), signed by President Obama on February 24, 2016. There was significant coverage of this both within our industry and outside of it, no doubt helped by the incredible coverage of the Republican and Democratic primaries. Some of the clauses in this act have been covered well, such as:

• The increase from $200 to $800 for Section 321 clearances
• Changes to the US Goods Returned program
• Minimum standards for Customs Brokers
• Changes to Duty Drawback procedures
• Etc.….

One aspect of this bill that has not been discussed as much, is the repeal of an old law called the “Consumptive Demand” clause. This clause was found in 19 U.S.C. § 1307[i] until the TFTEA repealed it.

What does this mean exactly?

Duty Drawback – benefits and challenges

Most US importers are familiar with duty. They pay duty (and applicable MPF/HMF) on many of their imported goods – particularly those that are not granted 0 duty by virtue of a free trade deal.

Unfortunately, too many companies consider this cost a “necessary cost of business” and simply plan for it in their budgets. These duties can represent anywhere from 1 or 2, up to double digit percentages of product value. This can have a serious impact on your bottom line! These costs could be reduced or eliminated, through a duty drawback program, if a significant amount of the imported product was subsequently exported or destroyed.

Why is it that so many companies fail to take advantage of this program? The reason is largely due to a perceived difficulty in the process, and an inability to comply with the requirements. The truth is, those companies are right! They are unable to comply, that is without an automation solution. Allow me to explain, using the drawback process.

“NAFTA Season” and the “inconvenient truth” of free trade compliance

It’s November, or “NAFTA season”, and that means most North American companies are knee deep in NAFTA certificate gathering. They are requesting certificates from all their vendors for 2016, and already receiving requests from their customers for the same. If you are involved in the supply chain for a North American goods manufacturer, you are likely familiar with what I’m talking about. The process is simple, but depending on the scale, can be very time consuming. Requesting and tracking the certificates of origin from hundreds or thousands of vendors, while simultaneously responding to requests from the same amount or more of customers.

Article 501 of NAFTA states that a certificate must be completed by the exporter, if the import in question is going to claim NAFTA status. Article 502 requires the importer to have this certificate in their possession at the time of declaration. Since most companies use a 1 year blanket period for their certificates, starting January 1, that means autumn of each year is a scramble to secure certificates for the coming year, so they are in possession by the earliest possible date of declaration (January 1).

That’s the certificate of origin process, but it’s only half the battle (if that much!)...

The hidden lesson in OFAC guidance on “false hit lists”

http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20151021.aspx

A recent OFAC press release, and guidance document, offers some good advice, but also risks misleading readers. A careful read of the case and guidance will reveal a hidden lesson to be learned. At first glance, the guidance simply reminds companies to ensure their SPL lists are updated and reviewed, and most readers will come away satisfied that they are compliant.  A primary message in the guidance refers to what they call “false hit lists”, and reminds readers to ensure entities on that list are reviewed as regulations change. Upon a deeper look, however, this Finding of Violation contains another lesson, one that may surprise readers and give them reason to review their compliance program. Before we explain that statement, let’s take a good look at the finding, and the guidance.