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Customs Providing Immediate Short-Term Duty Deferrals to Approved Importers Working to Provide Longer Term Relief to the Importing Community

customs

Customs Providing Immediate Short-Term Duty Deferrals to Approved Importers Working to Provide Longer Term Relief to the Importing Community

Short term case-by-case relief to approved importers: On Friday, March 20, 2020, Customs issued the following message:

Due to the severity of Novel Coronavirus Disease (COVID-19), U.S. Customs and Border Protection (CBP) will approve on a case by case basis additional days for payment of estimated duties, taxes and fees due to this emergency. Please note we are working on a future message that will provide further information. Please watch your CSMS messages.

NOTE: CBP has confirmed that the March 20, 2020 debit authorizations for the Periodic Monthly Statements and the daily statements have been transmitted to the Department of Treasury. Please work directly with your financial institution if you wish to prevent these funds from being withdrawn.

Requests should be directed to the Office of Trade, Trade Policy, and Programs at OTentrysummary@cbp.dhs.gov.

We are advised that companies sending requests for “additional days” are receiving responses from CBP such as the following:

Thank you for your message. Yes, you are approved for additional days for payment due to the COVID – 19 emergency. Please note we are working on a future message that may provide an additional timeframe for payment. Please watch your CSMS messages. Please let me know if you have any additional questions.

Based on the above CBP Message and anticipated response, our comments and suggestions for companies seeking “additional days” for payment of duties are as follows:

-CBP does not specify the number of “additional days” in its Message or the response; however, we are advised that for the time being Customs is granting an additional 10 days to specifically approved companies.

-The message does not specify the information to be provided in the request. At a minimum, companies requesting additional days for payment of duties, taxes, and fees owing should include the exact company name and their Importer of Record (IOR) number with the request. Additionally, it may be prudent to include a brief statement specifying the company’s need for the additional time requested and the harm that the company is currently facing.

-The CBP Message advises companies granted additional days to “work directly with your financial institution.” Even if CBP grants the additional days requested, Customs at this time does not have the ability to stop its automated system from requesting the transfer of funds (duties, fees, taxes) from designated bank accounts for specific companies. As such, the company responsible for payment of the duties and fees will need to coordinate with its bank (i.e., its financial institution) in advance so that the bank will block incoming funds transfer requests from CBP. We are advised that CBP’s system normally transmits electronic payment requests three times, so the bank should be prepared to block transfers in response to all three incoming CBP requests.

-CBP’s system automatically generates liquidated damages notices for non-payment and late payment of duties, fees and other amounts owing. Companies receiving “additional days” for payment of amounts owing should expect to receive such notices. We understand that providing the CBP authorization message to the approved party should be sufficient to cancel any such notices in their entirety (assuming that the amounts owing were fully paid within the extension period).

-The CBP Message covers “estimated duties, taxes, and fees.” We are not aware that it provides additional time for the payment of penalties, liquidated damages or other amounts that may be owing CBP.

-We are aware that industry groups have identified different parties for the “additional days” request other than the party identified in the CBP Message (OTentrysummary@cbp.dhs.gov). At this time, we recommend that companies seeking additional days should use the email address specified in the CBP Message.

Likelihood of longer-term (90-day) relief to the importing community: In response to ongoing discussions and requests by several trade organizations CBP is considering a 90-day extension that would be applicable to the larger importing community. Essentially, this would align duty payments with the 90-day extension currently granted by the IRS to tax filers. We expect CBP to issue a Federal Register concerning this broader extension policy in the near future and will provide updates accordingly.

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Robert Stang is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP. He leads the firm’s Customs group.

Julia Banegas is an attorney in Husch Blackwell LLP’s Washington, D.C. office.

trends

Global Shipping Trends: What to Expect in 2020

Now that the fireworks are over and New Year’s resolutions are set, it’s time to prepare for global shipping in 2020. And that means looking at ongoing trends and changing regulations. One thing’s for sure, freight forwarding never has a dull moment.

Recapping 2019’s top global shipping disruptors

Before we jump into expectations for this year, let’s set the stage by looking at some of the top events in 2019 that may have affected global shipping strategies around the world.

Geopolitical uncertainties

From the ongoing Brexit discussion to the China-U.S. trade war and the trade conflict between Japan and Korea, these and other disruptions caused serious challenges to the transportation industry.

Preparation for International Maritime Organization (IMO) 2020

While the latest revisions didn’t go into effect until January 1, 2020, preparation for the changing IMO requirements was well underway in 2019. The requirement to reduce sulphur oxide emissions from 3.5% to 0.5% was a drastic change that will likely continue to affect shipping costs and capacity availability.

E-commerce expectations

With the growth of e-commerce and high-tech products flooding our markets, air freight is a go-to mode of transportation for many shippers—any time of year.

To best understand how these and other mode-specific changes will affect your 2020 shipping year, let’s break them down by service.

Ocean service in 2020

In the past, ocean shipping followed the basic law of supply and demand. When demand increased, rates went up. When demand decreased, rates dropped. This often occurred regardless of carrier profitability. But that is changing, which could reshape expectations for 2020.

Carriers controlling capacity

Today’s ocean carriers are quick to withdraw capacity when demand changes. By adjusting the amount of equipment available, ocean carriers are better able to ensure demand remains tight enough to protect their profits. This is a successful technique because there are fewer ocean carriers than in the past, allowing for a quicker reaction when supply and demand shifts.

Increasing carrier costs

While ocean carriers can control capacity to help ensure rates remain compensatory, we can still expect some level of imbalance due to the IMO 2020 mandate, which increases carrier costs.

Driver and drayage capacity shortages

California Assembly Bill 5 (AB-5) went in effect on January 1, 2020, which limits the use of classifying workers as independent contractors rather than employees by companies in the state. This may affect the availability of the number of dray carriers in the busiest ports. This, in turn, can drive drayage costs up.

Air service in 2020

Last July, we posted about ongoing uncertainty in the air freight market. The good news is that air freight service has stabilized a bit since then. While we’re predicting a somewhat stable air freight market for the year, this could obviously change if there is some catalyst that changes the speed products need to come to market.

Stable demand expectations

We expect demand for air freight to remain stable for the time being. Many organizations continue to focus on managing expenses and are looking for cost-effective, efficient options for delivering on short timelines without breaking the budget.

Capacity to hold steady

Capacity will also likely remain stable. Most new capacity is coming in the form of lower deck. Pure freighter capacity will continue to move based on market yields that make sense from a carrier standpoint. There may be some capacity growth in off-market locations, based on passenger demand.

Customs compliance in 2020

It’s always smart to have a customs compliance program that aligns with your business goals, which is especially true this year. Customs and Border Patrol (CBP) has several customs changes slated to take place in 2020, and now’s the time to prepare. If you haven’t reviewed your customs program recently, our customs compliance checklist may help.

CBP moving away from ITRAC data

According to CBP, they will be eliminating Importer Trade Activity (ITRAC) reports in favor of the Automated Commercial Environment (ACE) system. If you don’t already have an ACE portal account, now is the time to get one to ensure all your customs data is available to you when you need it most.

CBP’s continued focus on compliance and enforcement

CBP will continue to scrutinize tariff classification and valuation in an increasing post-summary environment. As the United States Trade Representative (USTR) continues to provide exclusions, many importers will depend on brokers to submit refund requests via post summary corrections (PSCs) or protests. CBP often requires additional data and/or documentation to ensure that tariff classifications and valuations are correct. It is imperative that you maintain a high degree of confidence in your compliance program and can substantiate any post summary claims with CBP.

Increasing Importer Security Filing (ISF) penalties

Throughout 2019 we saw CBP issuing more ISF penalties for inaccurate and/or untimely submissions. This will likely continue and could become a growing issue in 2020.

Disruptors affecting the industry in 2020

While certain trends and regulations only directly affect a single mode or service, there are still plenty that affect freight forwarding in general. Looking at 2020, it’s probably safe to say that the following disruptors will continue to affect the year ahead.

Broadening of sourcing locations

While there may be an end in sight to some of the trade war uncertainties, the initiative to broaden sourcing locations beyond China will likely continue. Southeast Asia has already seen clear benefits of this and will likely continue to see manufacturing growth in 2020.

Switching sourcing strategies can also bring risks, including capacity availability, infrastructure support, and geopolitical stability. While China will continue to be the largest exporter into the United States, we simply cannot deny the trends that continue to show volume shrinkage from China.

Accelerated evolution of technology

Significant investment in technology and transportation platforms continues to accelerate across the industry. Beyond private equity groups, well-respected and established providers like C.H. Robinson are making investments that will reshape logistics. These growing technological investments will continue to create value across the supply chain.

While this opens new options for shippers and carriers alike, you may likely need to spend more time researching which technology option is the best fit for your own organization. After all, the right technology offers tailored, market-leading solutions that work for supply chain professionals and drive supply chain outcomes.

Prepare for the year ahead

Overall, 2020 will be a great year for strategizing. Continuous improvement efforts—including a close look at service levels and mode choices—will help reach your short- and long-term supply chain goals.

Looking for a provider that can help in the coming year? C.H. Robinson has a global suite of services backed by technology and people you can rely on that will make 2020 preparations smooth and effective. Connect with an expert today.

newtrend

NEWTREND USA VINDICATED BY CBP’S FINDING OF NO EVASION

City of Industry, California-based Newtrend USA Co. Ltd., a leading producer of fine chemical products, announced Sept. 30 that U.S. Customs and Border Protection (CBP) found no merit to the transshipment allegations made against it by its competitor, Salvi Chemical Industries Ltd. 

In September 2018, Salvi alleged to CBP that Newtrend evaded payment of antidumping duty cash deposits by transshipping Chinese-origin glycine through Thailand. That complaint initiated a CBP Enforce and Protect Act (EAPA) investigation in which the government required Newtrend Thailand to prove that it was not transshipping glycine produced in China.

The EAPA probe confirmed that Newtrend only manufactures and ships glycine to the U.S. manufactured at its affiliate in Thailand, Newtrend Food Ingredient Co., Ltd. 

“Newtrend is gratified with the outcome,” says Douglas Heffner, chairman of the U.S. Customs and International Trade practice at Drinker Biddle & Reath, LLP, who represented the company. “They were confident they had operated in complete compliance with all regulations and are pleased to put this behind them.”

Goods

Is Your Supply Chain Prepared for Potential U.S. Tariffs on EU Goods?

Transatlantic tariffs came closer to reality in recent months after the United States Trade Representative (USTR) proposed tariffs on a list of products from the European Union (EU). 

Unfortunately, even if you’ve already gone through something similar with goods imported from China, the same strategy may not be effective for the tariffs on EU goods. This is due in large part to the types of proposed commodities from the EU.

The good news is there are things you can do today to adjust your import strategy to maintain compliance while insulating your company from the proposed tariffs.

Up to $25 billion worth of EU goods at stake

The USTR announcements in April and July proposed tariffs targeting up to $25 billion worth of goods. This includes items such as new aircraft and aircraft parts, foods ranging from seafood and meat to cheese and pasta, wine and whiskey, and even ceramics and cleaning chemicals. 

To date, the USTR has only provided a preliminary commodity list for the proposed U.S. tariffs on EU goods. No percentages have been announced, leaving many to wonder if the tariffs will be manageable—in the 5-10% range—or more substantial, like the 25% tariffs applied to China imports. 

On top of the tariffs, when the French Senate announced a 3% tax on revenue from digital services earned in France, President Trump threatened a counter-tax on French wine. But it’s unclear if this tax will come to fruition or fizzle out—especially since the USTR’s tariff list already includes many types of wine. 

5 key questions to insulate your supply chain

Looking for the best way to prepare your business from the potential tariff increases? Answering these key questions may help you adapt and insulate your company. 

-Do you have a plan to cover the costs? 

You may not be able to avoid paying the tariffs, but there are various strategies you may consider to help cover their costs. 

While not ideal, you could increase prices to end consumers. It may not be feasible to recover the entire cost of an added tariff, but you can at least offset a small portion of the tariff this way.

You can also adjust the cost of the goods with suppliers and manufacturers to cover a portion of the tariff. Just remember: pricing changes still need to meet the valuation regulations with U.S. Customs and Border Protection (CBP). 

-Will you need to increase your customs bond? 

The smallest customs bond an importer can hold is $50,000. That used to be enough for many importers to cover generally 10% of the duties and taxes you expect to pay CBP. 

Unfortunately, as many importers from China are learning, a 25% tariff on products can quickly exceed your bond amount. And bond insufficiency can shut down all your imports while resulting in delays and added expenses. 

To help avoid bond insufficiency, consider any increased duty amounts in advance of your next bond renewal period. And don’t wait to do this until the last minute, because raising your customs bond with your surety company can take up to four weeks. 

-Do you re-export goods brought into the U.S.? 

Duty drawback programs can’t be used by every importer. But if you can take advantage of them, they can result in big savings for your company.

In fact, you can get back 99% of certain import duties, taxes, and fees on imported goods that you re-export out of the U.S. Just be aware that you still need to pay the duties up front. And you might need to wait up to two years to get your refund. 

-Are your product classifications current and accurate?

With potential tariffs looming, consider reviewing your product classifications and make sure they’re accurate. If you find an issue, discuss it with your broker or customs counsel to discuss how you can properly rectify the issue, and avoid penalties from doing it incorrectly.

And while we’re on the topic of product classifications, never change them to evade tariffs. CBP will be on the lookout for this kind of activity, and the penalties for noncompliance can be steep.

-Do you have the support you need?

Changing your customs brokers may not sound appealing, but ensuring they provide all the services you need to stay compliant should be your top priority when working with them.

Your provider should help make sure you pay the appropriate duty rates for your products. And they should have people and services available globally to support your freight wherever it is located throughout the world. 

Also, consider simplifying your support by working with one provider that offers not only customs brokerage and trade compliance services but also global ocean and air freight logistics services. 

If you only employ one strategy…

Discuss your import strategy with your customs attorney or customs compliance expert. Bringing in specialized expertise is the most effective way to analyze how these tariffs could affect your products, your supply chain, and your business. 

If you don’t yet have a customs broker who can meet all your needs in today’s changing environment, consider C.H. Robinson’s customs compliance services. With over 100 licensed customs brokers in North America, and a Trusted Advisor® approach, our experts are ready to help.

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Ben Bidwell serves as the Director of U.S. Customs at  C.H. Robinson