Shapiro to Host Customs Valuation Seminar August 14th
Shapiro’s popular summer seminar will be held August 14th in Baltimore at the Hotel Monaco. Our customers and industry professionals are invited to join us for this sought-after event. The topic this year will be Customs valuation. Under the law, importers are required to use Reasonable Care for the valuation of imported merchandise and must ensure all appropriate costs are reported to Customs. We will review valuation rules, what makes a good commercial invoice, and what charges can be deducted from the dutiable value. We will also discuss how Incoterms can impact your Customs valuation. Plan on attending our seminar in the morning and enjoying the crab feast in the afternoon! The Baltimore Crab Feast attracts thousands annually and is arguably the most popular industry event of the year. It draws participants from New York to Norfolk and beyond to enjoy all-you-can-eat steamed crabs and plentiful networking opportunities at Conrad Ruth’s Villa, a waterfront park on Middle River. The feast is a fundraiser for the Propeller Club, enabling the group to make significant contributions to various non-profit maritime organizations. We hope you don’t miss this opportunity for a day filled with learning and fun! Date: Thursday, August 14th, 2014 Time: 9:30-10:00: Registration and continental breakfast 10:00-12:00: Seminar Cost (includes continental breakfast and seminar materials): $90.00 per person $75.00 for each crab feast ticket Location: Hotel Monaco – Athens North Room 2 North Charles Street Baltimore, MD 21201 Venue Telephone: 443-692-6170 Registration: Available here.
Update on ILWU Contract Negotiations and Strike Contingency Plans
On May 12th, the International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) began negotiating a new contract covering West Coast dockworkers as the current contract is due to expire on June 30th at midnight. Details of the labor stoppage negotiations can be found in Shapiro’s Guide to ILWU Labor Negotiations, which provides a high-level overview of the current situation and alternate options in case negotiations don’t prove fruitful.
The best approach in this volatile environment is to stay informed and to proactively prepare. A strike could have direct, significant financial impact as rates with all carriers may be subject to port congestion surcharges should work stoppages occur at U.S. west coast ports. If necessary conditions arise, this fee may apply to all cargo destined to or shipping from any U.S. port/rail via any U.S., Canadian, or Mexican port. Effective dates may vary by carrier. This surcharge is filed in most carriers’ FMC tariffs to be used just in case port congestion occurs. Trade groups have asked the FMC to provide more transparency on the port congestion surcharges and to publish an FAQ.
At this time, it is essential to review the contingency plans for your cargo, which may include temporary rerouting via the East Coast or via Canada or Mexico. It is important to note that the New York/New Jersey ports are still recovering from this winter’s congestion; the East Coast, in general, will be heavily congested if a strike occurs. Trucking and rail capacity from Mexico and Canada will also be slow and limited.
Shapiro has been proactively negotiating alternate shipping opportunities with our vast Shapiro GlobalFlex™ network to ensure continuous service for all of our international transportation customers. Please contact your Shapiro representative if you have further questions or concerns about what a strike would mean for your company and how we can best prepare together.
Customs Issues Interim Procedures in the Event of West Coast Strike
U.S. Customs and Border Protection (CBP) has published interim procedures to be followed in the event there is a work stoppage on the west coast. Customs states that all port locations that could be impacted have developed business resumption plans to ensure rapid restoration of vessel operations and entry processing. Customs will advise when the interim procedures go into effect and when they are terminated and normal processing resumes.
Customs will be providing up to date information on its website’s Unified Business Resumption page.
The interim procedures include information on Importer Security Filing (ISF) and entry processing, including FDA declarations. The possible scenarios listed include:
- Vessel diverted to foreign port and discharged
- Vessel diverted to foreign port and not discharged
- Vessel diverted to another west coast port and discharged
- Vessel diverted to another U.S. port and not discharged
- Vessel diverted from intended west coast port to gulf or east coast for discharge
- Vessel rests at anchor and not diverted
More strike news may be found in this issue’s Transportation Update.
Customs Announces Trusted Trader Test Program
U.S. Customs and Border Protection (CBP) is now accepting applications for the Trusted Trader program test phase. The program, in collaboration with the Consumer Product Safety Commission (CPSC) and Food and Drug Administration (FDA), aims to move toward a whole government approach to supply chain security and trade compliance. The goal is for participating importers to integrate security and compliance throughout all aspects of their supply chain by unifying the Customs-Trade Partnership Against Terrorism (C-TPAT) program for cargo security with the Importer Self Assessment (ISA) program for trade compliance internal controls. This will bring the United States more in line with Authorized Economic Operator programs elsewhere in the world that combine security and compliance initiatives.
Applicants must answer questions pertaining to their security program and their compliance program. If the applicant is already a member of C-TPAT, then only the compliance section will need to be completed. Companies accepted into the Trusted Trader program will receive the incentives currently provided to C-TPAT and ISA members, as well as additional incentives such as:
- reduced FDA targeting/examination risk score (FDA will now be able to see the C-TPAT status of the Trusted Trade partner)
- penalty offsets
- retroactive flagging for reconciliation
- reduced on-site Foreign Trade Zone inspections
- exemption from on-site visits from drawback specialists
- no more than one full desk review per year for drawback claims
- exemption from random Non-Intrusive Inspections
- quarterly submission of Chemical Abstracts Service (CAS) numbers
- Post Entry Amendment (PEA) processing within 90 days
- ability to choose an exam location
- in multi-container vessel shipments where an exam has been designated, the ability to take possession of all merchandise except the merchandise subject to exam
- for those who complete the Product Safety portion of the Trusted Trader application, additional incentives from CPSC
An applicant wishing to participate in the Trusted Trader program test must be an active U.S. importer or non-resident Canadian importer, have written policies and procedures pertaining to its import process, possess a valid continuous bond, have 2 years of importing history, and meet recordkeeping requirements. While one does not need to be a current C-TPAT member to apply for the program, the applicant must conduct an assessment of its supply chain according to C-TPAT criteria, designate a company officer as the primary cargo security officer responsible for C-TPAT, and create and submit a C-TPAT security profile demonstrating how the company meets C-TPAT security criteria. The program is not open to current ISA members at this time.
Customs will leverage the Centers of Excellence and Expertise (CEEs) to manage Trusted Trader accounts.
More information on the program and how to apply may be found in the June 16, 2014 Federal Register notice.
FDA Updates Food Facility Registration Policy Guide
The Food and Drug Administration (FDA) has updated its policy guide on food facility registrations in relation to section 415 of the Federal Food, Drug, and Cosmetic Act.
Under the Act, FDA requires the owner, operator, or agent in charge of a domestic or foreign food facility that manufactures, processes, packs, or holds food products, whether for human or animal consumption, to register their facility with FDA. The Food Safety Modernization Act (FSMA) also requires the submittal of the email address of the contact party of a domestic facility, or the email address of the US agent representing a foreign facility. Under the Act, FDA must also receive an assurance from the facility operator that the facility can be inspected in the manner authorized by the Act.
FDA considers a facility to not be registered if it hasn’t submitted the required registration, the registration isn’t complete, or it has expired because it failed to be renewed biennially, which is considered by FDA to be a prohibited act. Registration renewals are required during the period from October 1st to December 31st of each even numbered year.
If FDA determines that a facility is not registered as required by the Act:
- The Division of Food Defense Targeting (formerly the Prior Notice Center) would be advised for subsequent shipment targeting.
- The shipment will be held by FDA at the port of entry until the facility registers with FDA and the registration number is provided in the prior notice filing. The FDA may allow said shipment to move to a secure location, but normally it will not be allowed to be delivered to the importer, owner, or ultimate consignee. Such shipments may also be immediately exported from the arrival port upon approval from U.S. Customs and Border Protection (CBP).
- For domestic facilities FDA will determine whether the facility is registered, and whether the registration information is correct and current. If not, the facility may be directed to cease operations until a valid, correct registration is made.
If FDA determines that there’s a reasonable probability that a registered facility may cause serious health effects or death to humans or animals it may suspend the facility’s registration provided that the facility created, caused, or was otherwise responsible for the probability, or the facility knew or had reason to know that it was responsible for the probability.
Evidence for suspensions include:
- Evidence that the facility has significant violations of the Act and hasn’t corrected the problem(s) sources including evidence of food products associated with foodborne illnesses, or previous recall situations.
- The firm is a foreign facility that is subject to an Import Alert for detention without physical exam because the food product under the alert may cause serious adverse health effects or death.
- The firm is subject to a prehearing order to cease distribution under a mandatory recall.
For domestic facilities with suspended registrations that introduce food products into U.S. commerce, the FDA may pursue enforcement action including shipment detention, seizure, injunction, recall, prosecution, or any combination of actions.
While a suspension order is in effect no person can import, export, or offer to import, export any food product from the facility into the U.S., or into interstate or intrastate commerce in the U.S.
The policy guide finalizes a draft of the guide from May of 2013 without any significant changes. Food facility registration guides and information may be viewed by visiting the FDA website.
Cotton Fee to Decrease Effective August 25, 2014
The cotton fee will decrease slightly effective August 25, 2014 from $0.012876 per kilogram to $0.012728 per kilogram. The cotton fee is assessed on certain products for use by the Cotton Research and Promotion Program. A list of the applicable tariff numbers may be found in the Federal Register notice dated June 26, 2014.
Call to Repeal 100% Cargo Scanning Law
In a June 2nd letter to the Department of Homeland Security (DHS), numerous industry groups including the National Customs Brokers & Forwarders Association of America (NCBFAA) and 69 other organizations called on Congress to repeal the 100% scanning mandate on imported cargo containers.
DHS responded by stating that it intends on complying with the law, but that compliance has been extended for a 2 year period due to practical and financial considerations. The industry groups agreed with the proposed extension.
The DHS also delayed implementation in 2012 and currently is utilizing other methods to monitor high-risk containers such as the Customs-Trade Partnership Against Terrorism (C-TPAT) and the Importer Security Filing (ISF) programs.
The 100% scanning law was passed in 2007 based on the aftermath of the 9/11 terrorists attacks, but it wasn’t founded on a risk-based approach. The industry groups expressed concerns that the law is impractical, that it does not improve security, and that Congress should revisit the law and review and revamp the protocols based on effectiveness. The law lacks guidance on how it could be implemented as far as structural details and available resources. It also could have a significant negative impact on global commerce and could cause conflict with governments of trading partner countries; some of which have expressed their disagreement with the requirement.
Industry groups are also looking for guidance on:
- The definition of the word “scanned.” Does “scanned” mean to simply take an image or reading of a container without any further analysis to determine whether the container should be held for further inspection or released? The law isn’t explicit on this point and surely a scan would be useless without analysis.
- Who would perform such analyses and by what resources based on the traffic of approximately 10 million plus containers destined to the U.S. each year?
- What are the standards for the proposed scanning technologies and how are the costs for said technologies including purchase, maintenance, and operation to be covered?
- What protocols are to be utilized in foreign ports where the scanning takes place and does the DHS have the permission and cooperation of foreign governments to implement the plan?
- What would the U.S. response be to reciprocal programs mandated by foreign governments for U.S. exports to their countries?
Currently the DHS is inspecting all high-risk containers prior to admission into the U.S. and the DHS feels that this solution is a much more effective approach to increasing security than the 100% scanning mandate. 58 foreign ports are also affiliated with the Container Security Initiative (CSI), which inspects approximately 80% of total U.S.-bound cargo. 98% of cargo is being scanned with radiation technology, but U.S. Customs and Border Protection (CBP) lacks a plan to replace the outdated radiological devices that are currently used. It has reached out to terminal operators and ports to provide funding for new equipment, but the American Association of Port Authorities (AAPA) has expressed its disagreement that ports should be made liable to fund a federal government security mandate.
[Editor’s Note: Shapiro will be covering First Sale and other valuation issues at our annual August seminar. See our seminar announcement in this issue!]
First Sale Informed Compliance Publication Updates Being Misconstrued as Policy Change
The draft revision of the Informed Compliance Publication (ICP) on bona fide sales has stirred up much controversy in the import trade community. Customs and Border Protection (CBP) has been working to update the ICP “Bona Fide Sales & Sales for Exportation to the United States,” which hasn’t been updated since 2005. Recently CBP sought input from the industry leaders on the subject because of the misconception that the agency was working toward a change in policy. The Acting Assistant Commissioner for International Trade Rich DiNucci has stressed that CBP has no interest in changing policy concerning First Sale.
At a recent speech, DiNucci assured the trade community that he has no interest in changing anything to do with First Sale. He stated that the agency has no objection to its legitimate use. CBP would like to add uniformity to the process and remove interpretation from the issue, he said. Essentially DiNucci is trying to determine “what is required.” The agency’s security side is concerned with outlining very clear requirements. DiNucci stated, “If you want people to be compliant, give them something to comply with, besides an interpretation.”
The First Sale rule basically states that when there are multiple transactions prior to importation into the U.S., the importer is allowed to use the price paid in the first or prior sale as the basis for the Customs value of the goods rather than the price the importer eventually paid for the goods. Apparently the current requirements for First Sale aren’t very clear and have needed updating for some time. DiNucci said that CBP’s thought was that they would circulate a proposed document list among the industry to gather broader insight on the issue. He said, “If you come back and tell me this documentation doesn’t make sense, it’s not something that we have access to, we are going to consider that and probably take it off the list.” DiNucci states that through this process they’re hoping to establish a better understanding of the business realities related to the issue.
Intellectual Property Rights – Export & Import
Intellectual property rights (IPR) are common law and the legally recognized exclusive rights to property of others. Intellectual property is the area of law that deals with protecting the rights of those who create original works. It covers such things as original plays and novels, inventions, symbols, word phrases, designs and company identification marks. Common types of intellectual property rights include industrial design rights, designer dress, and trade secrets. Copyrights, trademarks, and patents are means to protect IPR.
Intellectual property rights give the owners of these ideas, inventions, and products the right to exclude others from access to or use of their property for a certain period of time. International treaties and the laws of the various countries differ significantly in terms of the degree of protection and enforcement available.
We are often asked if a certain item that bears a well-known trademark or a copyrighted product can be imported or exported. Our answer to this is yes, as long as you obtain permission or authorization from the owner of that particular product.
If the company didn’t create what they are selling, someone did and it is up to the company purchasing the product to be sure they can legally sell the IPR item.
If you are an importer or exporter and you don’t obtain permission from the owner to import or export their product, you are risking the possible delay or seizure of your goods.
If you are the IPR owner, it can get really complicated as far as registering your product with a particular country. IPR enforcement is difficult, and enforcement may vary depending on if the product is registered with Customs at the destination country. Enforcement may also depend on who is looking at the shipment. U.S. Customs and foreign Customs services may not always be consistent in requesting authorization letters from IPR owners, or may overlook an IPR item.
Unfortunately, we have seen importers and exporters scramble at time of entry to obtain authorization from the owner of registered product. Sometimes, the owner and importer/exporter enter into an agreement and the letters are provided to Customs for subsequent release. This is not without a significant delay and payment of storage fees. On the other hand, we have seen shipments seized by Customs in the U.S. and other countries and the importer/exporter is out of luck and saddled with the cost of the transaction and no revenue to offset their costs. Customs employs different measures depending on the country. They can demand immediate export of the merchandise where the importer/exporter would be responsible for the additional shipping charges. Enforcement actions can vary from country to country.
No matter how you look at this, the smart thing to do is to ask for permission up front from the IPR owner at time of purchase so if you are asked by a customs authority to show proof of authorization, you can supply this immediately. Even better is to submit these authorizations to your broker in the U.S. or destination country so they have them on hand and can deliver them with the entry or when there is a request made by Customs.
There has been an increased push lately in many countries to protect IPR rights. The EU has an IPR eLearning course on its website, and Export.gov has an IPR resource section for U.S. exporters. IPR has long been a priority trade issue for U.S. Customs. The value of IPR seizures in fiscal year 2012 was over one and a quarter billion dollars.
If you are an importer or exporter and are not familiar with Intellectual Property Rights, we hope this article has helped you understand what may happen if you are importing or exporting another company’s merchandise without proper permission.
If you are an importer or exporter that is concerned about protecting your rights, we suggest that you become familiar with the laws in the U.S. and destination countries where your products may be ending up without your knowledge and consent, and consult a lawyer specializing in IPR to protect your investment.
ILWU Talks Prompt Cargo Diversions through Canadian and East Coast Ports
In the final days prior to ILA and Warehouse union coming together on an agreement for a new contract, shippers have already prepared themselves for the worst with new contingency plans. If the U.S. west coast ports shut down, the carriers will most likely need to divert cargo to other ports. Two thirds of the 221 shippers from a recent poll have decided to divert cargo to the U.S. east and Gulf Coast. So where are the other one third of the container moves going to go? Most likely through the Canadian west coast ports of Vancouver and Prince Rupert.
The time for the contract negotiations has not expired yet, but the Canadian west coast is already seeing volumes increase. As of May 2014 the port of Vancouver saw an increase of 14.6% in container volume. This is a great achievement after the bumpy winter because of a port strike earlier this year. Even more impressive is that Prince Rupert saw a 24.6% increase in container volume.
Shaun Stevenson, VP of trade development and public affairs at the Prince Rupert Port Authority, said he’s seeing great growth for Prince Rupert with the upcoming peak season. Stevenson also stated, “We have certainly seen shippers over the past 12 months who are looking to diversify port selection….We’ve heard from a lot of BCOs as they were making plans and choosing routes for their cargo while concerned about delays.”
While most shippers are taking proactive measures, last minute shippers will have to look at other options such as air if a work slowdown or a strike should occur with ILWU labor on the U.S. West Coast.
Shippers and FMC Seek Clarity on Carrier’s U.S. West Coast Port Congestion Surcharges
In preparation for a potential work stoppage, trans-Pacific carriers have begun the process of filing congestion surcharges with the Federal Maritime Commission. Carriers are required to file these charges 30 days before they are allowed to be levied. It is not sure whether the carriers will be implementing new charges or reactivating previously filed surcharges. Because carriers have the ability to reactivate previously-filed strike related surcharges and implement them immediately without a new filing, the FMC is asking for clarity and specific details. Shippers are also asking the FMC to provide more transparency on the congestion surcharges and to post an FAQ.
In addition to clarity on the actual charges, the National Customs Brokers and Forwarders Association of America has been pushing the FMC to require the carriers to publicize how they would provide services to and from U.S. ports if work stoppages on the West Coast occur. The NCBFAA is also asking for specific plans on how the carriers plan to divert cargo from congested ports.
P3 Carrier Alliance Plans Scrapped
In a somewhat surprising move, China’s Ministry of Commerce has rejected the proposed P3 Vessel-Sharing Agreement (VSA), an alliance that suggested major changes to the world’s shipping industry. Comprised of 3 of the world’s top carriers (Maersk, MSC, and CMA CGM), the P3 would have accounted for approximately 42-47% of the Asia-Europe capacity, at least 40% of the trans-Atlantic capacity, and approximately 24% of the trans-Pacific capacity. The VSA, slated to be in operation this coming fall, would have represented 2.6 million TEUs worldwide. According to the Ministry, P3 participants “failed to demonstrate that the alliance would bring more benefit than harm or that it is in line with the public interest.”
Primary objectives of the alliance included cost reduction, improved efficiencies, and stronger service offerings.
Maersk, whose share price fell more than 6% the same day this decision was announced, has released a statement indicating that the P3 partners “have agreed to stop the preparatory work on the P3 Network and the P3 Network as initially planned will not come into existence.”
Peak Season Surcharge for Transpacific Cargo Delays until July 1
Carriers have filed a Peak Season Surcharge (PSS) with validity of 15 June 2014 with a general quantum of $320/20’, $400/40’, and $450/40’HC for U.S. east coast cargo and $160/20’, $200/40’, $250/40’HC for U.S. west coast cargo. (There are some irregularities on the actual amount between carriers so please check with your Shapiro representative.) Implementation has been delayed until July 1st. Historically there has been a rush of cargo to the U.S. east coast in the weeks leading up to peak season, so this is why the PSS will take hold at a higher rate to the U.S. east coast and the PSS is mitigated down for shipments to the U.S. west coast. It is expected that the peak season could be short-lived as long as there is not a substantial work slowdown at the U.S. west coast ports
Work Slowdown at Los Angeles/Long Beach Causes Congestion and Delays
Less than Container Load (LCL) consolidators and local truckers are already reporting extreme congestion at the Port of Los Angeles and the Port of Long Beach. This is causing some containers to be delayed for several days. Truckers report missing appointment times due to the congestion and often leave the port area without getting the desired container picked up at all. Besides congestion at the ports the truckers are also claiming that they are seeing chassis shortages and further issues are expected as we get closer to the deadline of the ILWU negotiations on June 30. Importers and Exporters will need to be patient during this time of uncertainty and work slowdowns.
Asian Export Growth Rate Slows
Exports from Asia are expected to grow approximately 7 percent from 2015 through 2020 which is about half the rate achieved between 2002 and 2008.
Growth of Asian manufactured exports has slowed for three major reasons. 1) Weaker demand from USA to Asia which is expected to expand 7 percent between now through 2020. 2) Weaker demands from Europe to Asia; the gains will be smaller than that of USA to Asia but should still grow through 2020. 3) Some Asian exports were lost due to production being shifted, namely to Mexico and USA. A quarter of shippers surveyed said they plan to shift sourcing to the U.S., while 18 percent plan to move production to Mexico in order to reduce transportation costs and to help offset the rise in Asian labor costs.
Despite the above, logistic consultants indicate, with thirty years of aggressive infrastructure investment and a huge supplier base, China will sustain its reign as the world’s factory for years to come.
China expects to become the world’s largest importer of manufactured goods by the end of the decade which will prove to be a boon to U.S. and European exports.
EU Sea and Air Freight Markets Decline As Result of Overcapacity and Rate Volatility
The Logistics Confidence Index (LCI) is showing continued declines in the Asia to EU and EU to Asia trade lanes. The declines are blamed on overcapacity and rates volatility in the industry. Many were counting on the 3P alliance to bring much needed stability in pricing and alleviate the excess capacity.
The U.S. market fared much better on the ocean side, but growth has declined in the air market. Despite a drop in June of 2.7 points, the LCI covering four major trade lanes - EU to Asia / Asia to EU / EU to US / US to EU – is still over the 50 point mark for sea at 57.4 and at 49.9 for air. Index level of above 50 represents positive growth. Not much growth is expected for the next six months.
CMA Launches First of Twenty Three New Megaships
France’s CMA CGM Lines has finally taken delivery of the first in a series of twenty three megaships that range from 9400 TEUS to 10900 TEUs that are all scheduled to start sailing through the third quarter of 2016.
The CMA CGM Danube with a capacity of 9400 TEUS is scheduled to depart on its maiden voyage from China on a direct service between Asia, Turkey, and the Black Sea. As these ships start sailing, the cascading effect of larger vessels to come to the USA market will likely bring excess capacity to the USA market from Asia.
Hamburg Sud Looks to Expand Routes to and from South America
As reported in the Journal of Commerce, Hamburg Süd has announced that it will continue to focus on cutting costs and expanding its core routes to and from South America through 2014. The line is also continuing to explore options after failed merger talks last year with rival domestic carrier Hapag Lloyd and Hapag's recent acquisition of CSAV creating the world's fourth largest carrier. Officials at Hamburg Sud declined to provide details of options being considered at this time.
China Airfreight Market Heats Up with Electronics Boom
In spite of extra summer capacity, get ready for airfreight volumes to surge up. New electronics such as the iPhone 6 are rumored to be hitting the market in the very near future, expected freighter cancellations, and ILWU strike concerns are pushing the China airfreight market to the hot side. These factors are driving up rates whether capacity is there or not.
Port of Baltimore Happenings
The Port of Baltimore is currently undergoing some changes and upgrades with the hope of continuing growth plans and improving efficiency. The reconstruction of Broening Highway, one major port initiative, is not simply a resurfacing project, but rather a major project with an estimated completion date of December 2014. The goals of the project, with a current estimated cost of $10,000,000, include increased velocity and efficiency. Additional terminal improvement plans include an increase in inbound truck lanes from 8 to 13, which will increase capacity to 4,000 transactions per day, enhancing outbound gates through security automation (pending U.S. Customs and Maryland Port Administration review), a possible additional “back gate”, and the addition of 4 new Rubber-Tired Gantry (RTG) cranes.
Employee of the Month
As previously featured in Shap Talk, Shapiro has been sharing with you the names of employees who have been recognized for their exceptional efforts and contributions to our Company. At Shapiro, we continually work to develop, challenge, and inspire all of our employees to grow individually and with the Company. This month, we would like to recognize Corey Wagner, Regional Director, Commercial Development, for his outstanding performance and contributions.
We encourage you to provide us with employee feedback! Please email us at email@example.com.