Export Import Law Blog by GRVR AttorneysBloghttp://www.exportimportlaw.com/blog/2012-05-16T04:50:34ZSquarespaceBeware Enforcement Officials Bearing Gifts - The Dangers of Outreach Visitshttp://www.exportimportlaw.com/blog/2012/5/15/beware-enforcement-officials-bearing-gifts-the-dangers-of-ou.htmlOscar Gonzalez2012-05-16T04:49:28Z2012-05-16T04:49:28ZDon't invite vampires into your home.  It's a maxim that is surprisingly relevant to importers and exporters.  Vampires may be just observing otherworldly etiquette or may be afraid of some sort of sanction (although it's hard to imagine what would scare the undead, other than being forced to watch Jersey Shore reruns).  Unless you invite a vampire into your house, for whatever the reasons, the vampire cannot enter to do whatever vampires do.

What do vampires do?  Not to paint with too wide a brush, but vampires tend to run in monster mode most of the time.  Scuttlebutt has it that there are movies and books targeted at wide-eyed teenage girls that portray vampires in a sympathetic light, but it's doubtful that parents anywhere would allow their daughters to date a vampire, especially not one who sparkles.    

And what do federal enforcement authorities do?  Well, they enforce.  They are always in enforcement mode.  To invite them in to your place of business may open you up to all sorts of liability.  It is generally not the smart thing to do.

Now don't misunderstand.  This is not to suggest that anyone should obstruct or impede federal authorities from doing their job.  You should never do that.  However, you may want to avoid doing their job for them.   

Beware enforcement officials bearing gifts.  The government talks trade facilitation, but acts enforcement.  If a cop were to drop by your home and asked you to come in.  You'd ask why, and the cop would say, "we're doing community outreach and we just want to tell you what is legal or not legal.  While we're here, you wouldn't mind if we looked through your computer, would you?"   

You laugh, but US Customs and Border Protection (CBP) uses a similar approach in Significant Importer Reviews, a cryptic program of suspect provenance and design.  CBP claims that Significant Importer Reviews are informal, friendly outreach visits that allow importers of a certain size and volume and CBP to know each other without risk to either.  The problem is that these outreach efforts can easily devolve into fishing expeditions.  The other problem is that there are no formal guidelines or regulations regarding this program to restrain CBP from overreaching.  Indeed, CBP has not reduced any of the program goals or guidelines to writing, a red flag to importers if there ever was one.  

Outreach efforts from enforcement authorities can harm exporters as well as importers, of course.  Take, for example, Powerline Components Industries, a company that is currently featured by the U.S. Bureau of Industry and Security on its website (which is not a good thing).  Powerline shipped diesel engines to Syria without the requisite license.  The question for export enforcement authorities was whether the violation was intentional because if it was, then the penalty could be stiffer.  Just about the time it was about to ship, enforcement officers paid a friendly outreach visit to the exporter during which the officers described the nightmares that befall violators of US sanctions laws.  With that warning, Powerline knew or should have known that the export was illegal, i.e., it had the requisite intent.  Enforcement authorities had little trouble forcing the company to pay a hefty penalty.   

A vampire could not have done better.

]]>The Customs Broker Exam: Some Unappealing Aspects About Appealshttp://www.exportimportlaw.com/blog/2012/5/11/the-customs-broker-exam-some-unappealing-aspects-about-appea.htmlOscar Gonzalez2012-05-11T19:01:23Z2012-05-11T19:01:23ZLawyers (those worth their price) relish when they get to remind enforcement officials that they are as obligated to follow the law as they are to enforce it.  The government is constrained by due process considerations from manufacturing laws out of thin air.  We are watchdogs against tyranny.  

Take, for example, appealing a failing grade on the customs broker exam.  You might wonder how government overreaching can infect this seemingly esoteric area of the law, but a law is no longer esoteric when it affects you personally.  Imagine if you invest considerable time and money to studying the customs broker exam, but you come up short, missing passing by a couple of points.  Voilà!  There is an appeals process afforded you in Title 19 of the Code of Federal Regulations.  In fact, appeals are set out neatly in 19 CFR Sections 111.13 and 111.17.  It’s all there.  Just follow the regulations as officially set out by the agency, and you’ll get a fair and square review of your appeal.

If only it were that simple.

US Customs and Border Protection’s website has additional, and some (like me) would say different and arbitrary requirements.  Suddenly appellants face an additional layer of bureaucracy not found in the regulations.  CBP did not publish these new requirements in the Federal Register to allow the public to comment. 

 Here is the most alarming part.  CBP automatically rejects an appeal for any of the following:

  • An incomplete application.
  • The applicant’s name, examination site, examination date, and question appealed does not appear at the top of each page.
  • If each question appealed is not addressed on a separate page or pages (different questions must not be argued on the same page)
  • If the application includes any arguments written by another person
  • If the applicant contests an incomplete erasure or insufficient marking on the applicant’s answer sheet

How shall I begin?   

CBP reserves to itself the power to automatically reject your appeal for an infraction of any of the arbitrary requirements.  Automatically?  CBP fabricates arbitrary, vague rules, and people don’t even get to first base if they don’t follow those rules?  

CBP will automatically reject your appeal if it’s incomplete, which begs the question, what does a complete appeal look like?    

By “incomplete erasures or insufficient markings”, I assume that CBP is referring to the ovals on the standardized answer paper sheet that test-takers must fill in with a No. 2 pencil.  Ghosts of the hanging chads! CBP can’t be really asserting that people can’t confirm that CBP accurately recorded their test results.     

Here is the real kicker: “if the application includes any arguments written by another person.”  This requirement is an audacious arrogation.  CBP is saying that the person filing the appeal must not have anyone assist in preparing the appeal.  The appeal has to be in your own words.  

There is nothing in the regulations or under statute that forbids a person from having someone help you with your appeal.  There could not be.  The customs broker exam is over.  The person appealing is not obligated to prove additional mastery of customs brokerage, and especially not by drafting clever expositions to try to impress CBP.  The customs broker exam is standardized to remove all subjectivity from the process.  If one person gets credit for his or her answer, all other test-takers who answered the same automatically deserve equal consideration regardless of who wrote the appeal, and regardless of whether everyone uses identical arguments to appeal.   

I venture to guess that CBP conjured up this requirement to discourage people from collaborating on their appeals.  A group of smart people might punch holes in CBP’s carefully-crafted exam.  CBP may even want to discourage people from hiring lawyers to help with their appeal.  As I said earlier, lawyers tend to force honesty upon government officials.  If these unworthy motives are driving CBP, then the agency would do well to reconsider.  CBP should want would-be customs brokers to work with others to follow the laws as written, even when this kind of rare integrity inflicts a little discomfort upon a bureaucrat or two.  

]]>Tucker Rocky gets ISA certifiedhttp://www.exportimportlaw.com/blog/2012/4/26/tucker-rocky-gets-isa-certified.htmlOscar Gonzalez2012-04-26T15:52:14Z2012-04-26T15:52:14Z

]]>To PEA or not to PEA: Post-Entry Amendments vs. Prior Disclosureshttp://www.exportimportlaw.com/blog/2011/11/15/to-pea-or-not-to-pea-post-entry-amendments-vs-prior-disclosu.htmlOscar Gonzalez2011-11-16T04:03:22Z2011-11-16T04:03:22ZMy last sentence is a bit of a farce, isn't it?  Importers are pretty much expected to participate, and they are doing so in growing numbers with never a thought as to the risks involved.  Why worry?  You file and pay electronically.  CBP is happy and importers are happy.

For all I know, there is an iPhone/Android app on the horizon.    

You may ask, who, except a persnickety Luddite, would have a problem when an otherwise cumbersome bureaucracy uses technology to cut through red tape?  Me.  While I may not exactly qualify as a Luddite (a group not known to blog), I confess that I am alarmed by government programs that lack safeguards. 

PEAs are not the only CBP program that is both alluring and risky.

Take C-TPAT, for example.  It is a voluntary program from CBP of roughly the same age as PEAs, which means it’s been around for

]]>Should Importers Sign Statute of Limitations Waivers?http://www.exportimportlaw.com/blog/2011/9/21/should-importers-sign-statute-of-limitations-waivers-1.htmlOscar Gonzalez2011-09-21T12:07:43Z2011-09-21T12:07:43ZUS CBP often asks importers to sign a statute of limitations waiver (usually two years) in penalty and liquidated damages cases, or when the importer is filing a prior disclosure.  CBP is trying to preserve its rights to sue the importer before the statute of limitations runs out.  Once the deadline comes and goes, the Government will not able to sue unless there is some sort of equitable tolling.  

Should importers sign these waivers?

]]>Saving Money By Challenging CBP’s Tariff Classification Rulingshttp://www.exportimportlaw.com/blog/2011/7/8/saving-money-by-challenging-cbps-tariff-classification-rulin.htmlOscar Gonzalez2011-07-08T12:37:55Z2011-07-08T12:37:55ZChallenging CBP’s Tariff Classification Rulings To Make Money
One of the best ways for an importing company to save money is to reduce the duties it pays on imported merchandise to US Customs and Border Protection (CBP).  A company can save thousands or even millions of dollars by classifying its merchandise under a heading with a lowest duty rate possible under the Harmonized Tariff Schedule of the US (HTSUS).
Importers commonly request that CBP classify items using the binding ruling request process.  CBP publishes its rulings online (CBP’s Customs Rulings Online Search System or CROSS), an extraordinarily convenient and helpful service to the trade community, especially given the size of CBP’s electronic database (which consists of tens of thousands rulings).  However, often CBP’s classification rulings can read like perfunctory edicts with little or no rationale.  Sometimes rulings contradict each other, and it is not at all clear which ruling wins (although interested parties are allowed to report and challenge inconsistent rulings).  Importers are often left to guess at CBP’s logic, to seek a pattern, to argue the merits of a preferred tariff classification, and to hope for the best.
There is also an unstated but obvious clash of interests between importers and CBP.  Importers seek to classify their imported merchandise under HTSUS headings that impose the lowest duty rate possible.  CBP is generally motivated in the opposite direction and, as a result, it can produce rulings that do not always correspond to the clear intent of the HTSUS or court precedent.   
]]>Recent NAFTA Developmentshttp://www.exportimportlaw.com/blog/2011/5/24/recent-nafta-developments.htmlOscar Gonzalez2011-05-24T23:18:29Z2011-05-24T23:18:29ZRecent NAFTA Developments

Tomorrow I am giving a speech at the International Trade Center of San Antonio, Texas.  It is part of the NAFTA Audits Conference featuring leading NAFTA audit experts from all three countries. My topic is Recent NAFTA Developments.

Here is a preview: 

I will go over NAFTA developments over the past year or so, starting with federal initiatives and finishing with court cases.

New Online Free Trade Agreement/Tariff Tool

Don’t know whether your item qualifies for a Free-Trade Agreement (FTA), including the NAFTA.  The US Trade Representative has created an online tool that it claims will allow you to easily find whether your items qualify for any of the seventeen FTAs, including imports into the USA, and will even help you classify your item.  There is even an 8 minute video describing the online program.

]]>More thoughts on Incoterms and International Sales Contractshttp://www.exportimportlaw.com/blog/2011/5/19/more-thoughts-on-incoterms-and-international-sales-contracts.htmlOscar Gonzalez2011-05-19T12:34:08Z2011-05-19T12:34:08Z]]>Incoterms and International Sales Contractshttp://www.exportimportlaw.com/blog/2011/5/18/incoterms-and-international-sales-contracts.htmlOscar Gonzalez2011-05-18T21:10:42Z2011-05-18T21:10:42ZIncoterms and Internationals Sales Contracts

 Incoterms are all the rage right now because the International Chamber of Commerce issued its latest version called Incoterms 2010.  Incoterms are shorthand in international sales contracts, namely risk of loss and responsibility for delivery.  If the merchandise is lost at sea, for example, who bears the loss?  Where are you supposed to deliver the merchandise to?  Who is handling export and customs clearance, and things like that.  These issues are important, but they are seldom litigated because Incoterms do not deal with the transfer of title of the goods.  They do not deal with who owns the goods or issues like whether the goods are conforming or whether you even get paid.  These issues are dealt with by the sales contract, which can and should include Incoterms if you have them.   

Incoterms are also not law.  They are not treaty.  They are conventions or suggestions.  You are allowed and encouraged, when you do use them, to modify them and supplement

]]>Court Decisions Reveals The Dangers of Haggling Over International Sales Contractshttp://www.exportimportlaw.com/blog/2011/1/26/court-decisions-reveals-the-dangers-of-haggling-over-interna.htmlOscar Gonzalez2011-01-27T02:51:29Z2011-01-27T02:51:29ZThe Federal District Court, Southern District of New York, just decided a lawsuit called

Hanwha Corp. v. Cedar Petrochemicals (January 18, 2011) by applying the U.N. Convention on Contracts for the International Sale of Goods ("CISG").  This case reveals the dangers to parties of a contract when they fail to agree on terms, especially when the court relies on the CIGS.  Often a court will look to industry standards or how the parties reached a meeting of the minds in the past in order to achieve a reasonable resolution in the present, to fill in the blanks, if you will.  But sometimes, the court will find that the parties did not even have a contract and, of course, if there is no contract, the parties cannot sue, and certainly cannot collect, for breach of contract.  

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