CBP Official Discusses Textile and Apparel Enforcement (China Undervaluation Huge Problem)
At a November 4, 2009 trade association meeting, U.S. Customs and Border Protection officials discussed a variety of issues related to the importation of textiles and apparel, highlights of which include the following:
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CBP Enforcement Initiatives have Focused on China Undervaluation, Etc.
CBP has undertaken a number of special textile and apparel enforcement initiatives, one of which involved the undervaluation of China-origin textiles and apparel. This initiative resulted from a tip from the import community. After a sample was taken, Immigration and Customs Enforcement officers were called in to investigate.
The undervaluation of China origin textiles and apparel is thought to be a huge problem, in part because the textile and apparel industry represents 21% of all importers, 5% of the value of all imports, and 42% of all duties collected.
Other special enforcement initiatives have focused on the misuse of preference program short supply claims. In one investigation, CBP reviewed 110 entries and found $1 million in lost revenue. Inaccurate claims regarding the DR-CAFTA requirement to use U.S. pocketing fabric have also been found; in one investigation $70,000 in lost revenue was discovered.
Use of DDP/LDP Transactions of Special Concern and Can be a Red Flag to CBP
CBP discourages the use of Delivered Duty-Paid (DDP) transactions and Landed Duty -Paid Transactions (LDP) transactions, as these types of transactions can be abused.
CBP has found that DDP/LDP transactions can involve "nominal importers" that do not have the right to make entry. These nominal importers can also be involved (either knowingly or unknowlingly) in an attempt to import undervalued textiles and apparel.
Brokers must exercise "reasonable care". The official stressed the importance of "knowing the company you are doing business with", stating that Customs brokers have a responsibility to take reasonable care to know who their import clients are, and not take directions or documentation from freight forwarders that have no right to make entry.
(19 USC 1484 states in relevant part that entry information shall be transmitted either by the [actual] owner or purchaser of the merchandise, or when properly designated by that person, a licensed Customs broker.)
High Level of Noncompliance in Textile Trade Preference Programs
In CY 2008, textile trade preference activity was valued at $21 billion (down 7% from CY 2007). CBP states that it finds a consistent 35-37% rate of non-compliance for trade preference program textile activity (with a possible duty exposure of $1 billion).
CAFTA imports edged out NAFTA-Mexico in 2008. CBP officials also noted that in CY 2008, CAFTA represented the largest percentage of trade preference usage with 32% of the total value of trade preference imports. (NAFTA-Mexico represented 29% and NAFTA-Canada represented 12%.)
Comments on Verification of Trade Preference Claims
During the presentation, CBP officials made the following observations regarding its verification of trade preference claims:
verifications will not require the detention of the merchandise
a sample from the immediate shipment may be required (this required examination)
CBP will request the affidavit from the mill supplying the yarn and fabric
CBP will contact the mill regarding the veracity of the document and the information contained on the affidavit including the quantity and type of yarn and fabric.
CBP does not support the use of blanket certificates
affidavits must contain contact information
the yarn producer must prepare the affidavit
affidavits must contains specific information (type of yarn/fabric, should link to other supporting documents; contracts; invoices' purchase order numbers)
Copy of CBP presentation (dated 11/05/09) available by emailing documents@brokerpwoer.com.