Trade News Quarterly July 2014

ACE – Parker & Company has installed the ACE program of our Software vender Xtheta, we will begin testing with a few small volume accounts and add accounts as we develop procedures along with processing expertise with the new program. ACE still has limitations to only certain types of entries. CBP has committed to a date that ACE will be required to fall 2015.

New ACE Capabilities Implemented July 12 Affect Data Filing, Entry Summary Validations – U.S. Customs and Border Protection reports that the first release of Deployment D of new functionality within the Automated Commercial Environment was successfully implemented on July 12. Features in this deployment include the following.

Data Filing. Filers are able to submit importer security filing data together with their cargo release/entry data on the same record. Only six shipment types are allowed in conjunction with ACE cargo release (standard or regular filings, to order shipments, military or government, U.S. goods returned, international mail shipments and outer continental shelf shipments) and anything outside these types needs to be filed as a stand-alone ISF transaction. With the combined data submission, ACE will return notifications to the filer for the entry and ISF submission, and if either is rejected it will be handled individually and will not result in an automatic rejection of the other. CBP states that this capability will be initially launched through expansion of the existing ACE cargo release pilot and that after successful completion of initial processing this capability will be expanded to additional eligible ocean filers.

Validations. CBP has enabled additional entry summary system validations and users will now see new system error messages related to processing of validations for informal entry restrictions, charges restrictions, taxes and other fees. Friday, July 18, 2014 Sandler, Travis & Rosenberg Trade Report

DOT Rejects Third Carrier for Mexican Truck Pilot The Department of Transportation’s Federal Motor Carrier Safety Administration has reported the third instance of a Mexican motor carrier failing to successfully complete the pre-authorization safety audit required to participate in the ongoing pilot program to test and demonstrate the ability of such carriers to operate safely in the U.S. beyond specified border zones. This program has been upheld by a federal court and is slated to run through October 2014. While FMCSA is only required to publish comprehensive data and information on the PASAs of motor carriers that are granted operating authority under this pilot, the agency has committed to also publish information to show motor carriers that failed to meet U.S. safety standards.

CBP’s Interpretation of Deemed Liquidations and What it means for Importers– Recently U.S. Customs and Border Protection (CBP or Customs) denied a protest by an importer based on a new CBP interpretation of the deemed liquidation statute (19 U.S.C. 1501, 19 U.S.C. 1504). CBP relied on a 2004 change to 19 U.S.C. 1501 which allows for “re-liquidation” of deemed liquidated entries within 90 days of notice given to the importer. This article will discuss these recent developments, CBP’s interpretation of the deemed liquidation statute (19 U.S.C. 1504), and how importers may be affected. ( For more details go to end of newsletter)

CTPAT Services – Parker & Company continues to provide CTPAT consulting services: Parker will provide program guidelines and requirements, help you file with CBP and be on hand for site visit if necessary. Contact Abel Medina in our consulting department for service in this area amedina@parker-logistics.com Phone 956-831-2000

Cargo Congestion on West Coast of U.S., Canada – Cargo congestion prevails among U.S. and Canadian West Coast ports. Shippers concerned with U.S. West Coast labor negotiations between the International Longshore and Warehouse Union (ILWU) and their management have increased cargo throughput to U.S. ports, as well as rerouted freight to Canadian ports. A chassis shortage and labor unrest among striking truckers at the ports of L.A. and Long Beach have also increased congestion.

The congestion has pushed freight to the Canadian ports of Vancouver and Prince Rupert causing increased dwell times for inland destined cargo and pushing rail capacity. CN Rail has advised they are giving priority to customers with cargo traffic regularly routed through Canadian ports, meeting its service obligations to year-round customers first. Customers should continue booking freight early.

Parker & Company offers Mexican West and East Coast container freight services – Parker and Company Monterrey office handles all our Mexican clients Container freight services we offer Competitive Ocean rates via Manzanillo, Lazaro Cardenas, and also East coast Port of Altamira. We provide trucking services from Monterrey KCS rail ramp and Altamira port. We also have Mexican broker clearance services. Our service is provided through our large international network of WNA agents providing hands on service. Please contact Ben Rodriguez our Monterrey office benparker@prodigy.net.mx

Parker & Company Trucking- Parker & Company has trucks in Houston every day; we can pick up your freight at the airport cargo terminal or from many of the import warehouses in the Greater Houston area. Contact our Freight department for rates either

Xavier Cardenas xcardenas@parker-logistics.com or David Dubois ddubois@parker-logistics.com

100% Cargo Container Scanning Requirement Waived Again – According to press reports, the Department of Homeland Security appears to be signaling to Congress that the statutory mandate for 100% scanning of inbound cargo containers is not likely to ever be implemented.

The SAFE Port Act of 2006 requires all maritime cargo containers admitted into the U.S. to be scanned through non-intrusive inspection and radiation detection equipment in a foreign port prior to being loaded on a U.S.-bound ship. The original deadline for achieving this goal was July 1, 2012, but DHS invoked a two-year waiver on the grounds that compliance with available resources and technology was virtually impossible. Then-DHS Secretary Janet Napolitano explained to a Senate committee in 2009 that a pilot program designed to test the feasibility of 100% scanning revealed a number of serious challenges, including port layouts that would prevent all containers from being scanned without seriously hindering the flow of shipments and a lack of technology that could effectively and automatically detect suspicious anomalies within cargo containers that should trigger additional inspection. DHS estimated at the time that deploying scanning equipment would cost about $8 million per lane for the more than 2,100 shipping lanes at more than 700 ports around the world that ship to the U.S., a figure that did not include the substantial costs that would have to be borne by foreign governments or industry.

DHS officials have also pointed out for years that the 100% scanning requirement conflicts with the department’s general approach to risk management, which seeks to focus scarce inspection resources on the highest-risk containers. A 2009 Government Accountability Report said 100% scanning could reduce the incentive for participating in programs like the Container Security Initiative and the Customs-Trade Partnership Against Terrorism, which employ a risk-based approach based on international supply chain security standards. An April 2013 Congressional Research Service report added that if illicit cargo is estimated to be less than 1% of incoming containers, as DHS believes, the most effective enforcement strategy may be to focus on containers most likely to pose a threat, invest in intelligence to improve targeting, and/or increase personnel.

Parker & Company notes many Mexican carriers do not carry cargo insurance. Parker & Company does offer cargo insurance but for hijackings the deductible is fairly high. Please contact your local Parker office representative should you desire a quote. Our insurance program allows us to issues certificates for insurance quickly for our customers once a quote has been provided.

Trusted Trader Program Pilot Announcement Expected Soon – U.S. Customs and Border Protection Commissioner Gil Kerlikowske indicated recently that a Federal Register notice soliciting volunteers to help pilot test an integrated Trusted Trader program should be published in the near future. CBP has delayed the launch of this pilot, which was initially planned for last fall, amid efforts to make the Food and Drug Administration and the Consumer Product Safety Commission part of it.

The Trusted Trader program seeks to expand the Customs-Trade Partnership Against Terrorism, an initiative launched in 2001 to ensure the safety of imported goods, into a broader authorized economic operator-type program by unifying it with the Importer Self-Assessment program, which focuses on compliance with traditional customs issues such as classification, valuation, etc. CBP intends this change to be a step toward its long-term goal of a holistic, integrated trusted trader program across U.S. government agencies and believes it will also create an opportunity to enhance existing and future mutual recognition arrangements with foreign trading partners.

The Trusted Trader pilot is expected to have three phases, the first of which will combine C-TPAT and ISA application, review, validations and vetting. A senior CBP official recently said the agency is looking to run the first phase with three to four companies for 18 months. While this official indicated that ISA could eventually be discontinued in favor of the Trusted Trader program, other officials have emphasized that the Trusted Trader program would have no effect on C-TPAT or its benefits.

Continued from first page CBP’s Interpretation of Deemed Liquidations and What it means for ImportersMany importers are familiar with the procedure required when notifying Customs about their imports into the U.S. through the process of filing a CBP form 3461, known as an entry. Based on the specific entry information provided, Customs may then clear the entry for delivery, thereby triggering the importer’s responsibility to calculate and pay the duties and taxes it owes to Customs. (CBP form 7501). Customs then has one year from the date of such entries to review the importer’s calculations and either agree with them, or recalculate what is owed. This process is known as liquidation. Liquidation is legally significant because it triggers statutory time limits within which the importer or Customs must act if either party wishes to challenge the liquidation decision. For example, if an importer wishes to challenge CBP’s assessment of duties they must file a “protest” within 180 days of the liquidation of the entry.

Liquidation is defined by Customs regulations as the “final computation or ascertainment of duties on entries for consumption,” (19 CFR 159.1). According to 19 U.S.C. 1504 imported goods subject to anti-dumping and countervailing duties are deemed liquidated if CBP fails to affirmatively liquidate the goods within one year of their entry. The goods are deemed liquidated at the rate of duty, value, quantity, and amount, as asserted by the importer of record. (19 U.S.C. 1504(a)(1)). If the imported goods are subject to anti-dumping or countervailing duty proceedings, and suspension of liquidation is required, the statute further stipulates that CBP must liquidate entries within six months after receiving notification of suspension. (19 U.S.C. 1504(d)).

In a recent CBP case (HQ H215035, April 2014) Customs relied on a 2004 amendment (19 U.S.C. 1501) to the deemed liquidation statute permitting re-liquidation of “a liquidation made in accordance with section 1500 or 1504.” Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. No. 108-429, 119 Stat. 2598. The importer in this case, Consolidated Fibers, made an entry of polyester staple fiber in 2005 from South Korea that was subject to an anti-dumping duty order. At the time of the import CBP required cash deposits of 7.91 percent for the goods, using the “all-others” rate because the exporter in Korea did not have its own cash deposit rate. However in 2007, the Department of Commerce (DOC) reviewed polyester staple fiber imports and subsequently assigned a 48.14 percent assessment rate. In 2008 the DOC notified CBP to liquidate all entries by the Korean exporter during the period of Consolidated Fibers import.

Six months after the notice to CBP the import was deemed liquidated (as per 19 U.S.C. 1504(d)). In 2011, almost four years after the deemed liquidation due to CBP’s inaction, CBP re-liquidated the entry at the much higher 48.14 percent rate, causing Consolidated Fibers to file a protest. Three years after the entry had been deemed liquidated CBP notified Consolidated Fibers that it had re-liquidated the entry at the higher rate. CBP asserted that because they re-liquidated within 90 days of discovering the deemed liquidation and notified Consolidated Fibers the protest was rightfully denied. (HQ H215035).

The court ruled that CBP was allowed to take this action because they had abided by the 2004 amendment of 19 U.S.C. 1501, whereby Congress gave Customs the authority to re-liquidate entries within 90 days from the date of notice of deemed liquidation. CBP’s new twist on this language is that it can re-liquidate within 90 days of finding out about the deemed liquidation. This essentially means that the most important date is the one in which CBP learns of deemed liquidation, and from that date they are granted 90 more days to re-liquidate.

The issue with CBP’s interpretation is not the lack of authority to generally re-liquidate after deemed liquidation occurred, but rather the interpretation of Section 1501, which makes the start date for the 90 day extension the date that they learned of the deemed liquidation and provided notice to the importer, rather than 90 days from the date of the deemed liquidation. This interpretation creates a great deal of uncertainty for importers with respect to their import transactions. Some speculate that CBP’s interpretation of the statute will be overturned in a matter of time, but in the meantime, what does this all mean for importers?

Importers should be wary of the CBP’s power to re-liquidate their entries at any time. Because of this, importers will feel less secure in the finality of deemed liquidation and should prepare for the possibility of re-liquidation.

Some critics of the liquidation system point to the fact that there aren’t enough incentives for U.S. government agencies to timely collect preliminary and final duty rates. (Lundberg). They warn that the delay in government action to liquidate imports may injure importers and threaten U.S. multi-lateral trade relations. (Denver University Law Review Vol 83:2, Lundberg). Does deemed liquidation occur because of the Commerce Department and Customs’s failure to take action, or mistakes made in taking action? Should Customs be allowed to take an extra 90 days after learning of deemed liquidation to re-liquidate, or should the laws be amended to impose stricter deadlines within which these government agencies should act? These are all questions that have been raised by Customs’ recent interpretation of re-liquidation authority. By Olga Torres, Partner and Kelley Reslewic, Summer Associate 

Foot notes – Articles in this newsletter are taken from variety of sources. Including Journal of Commerce, Sandler and Travis newsletter, and NCBFAA Monday morning briefing. Other articles are personally written by the newsletter publisher Frank Parker.

The publisher has taken all reasonable steps to verify the accuracy of the content of this site. However, Parker & Company shall not be responsible for errors or omissions. Any advice in this newsletter is general and we recommend you contact Parker & Company licensed brokers or your customs council with specifics on your import or export transactions.