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President Obama signed the bipartisan Trade Facilitation and Trade Enforcement Act of 2015 on February 24 2016. This is the first major customs legislation enacted since the Customs Modernisation Act.(1) The Trade Facilitation and Trade Enforcement Act focuses on facilitating legitimate trade and enforcing existing trade laws, such as those relating to intellectual property and trade remedies.

Trade facilitation

The Trade Facilitation and Trade Enforcement Act does not go so far as to implement a management-by-account system for customs entries. However, in an effort to streamline and modernise trade, the legislation:

  • provides support for the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS);
  • addresses trade partnership programmes;
  • statutorily authorises the Centres of Excellence and Expertise (CEEs); and
  • makes significant changes to drawback (simplifying what many consider to be archaic and complicated rules).

In keeping with the administration’s goals of implementing ACE and the ITDS, the act provides further funding for the development of ACE. It requires that the ITDS be implemented no later than ACE is fully implemented; further, no later than December 31 2016, the ITDS must be the primary means for other agencies to receive data and documentation required for entry. In addition, the act requires that US Customs and Border Protection (CBP) work with the participating agencies to ensure that they develop and maintain the infrastructure necessary to support the ITDS and identify and transmit to CBP admissibility criteria and data elements for incorporation into ACE by June 30 2016.

Trade partnership programmes
The act also addresses trade partnership programmes. CBP maintains two primary trade partnership programmes, the security-focused Customs-Trade Partnership Against Terrorism (C-TPAT) and the compliance-focused Importer Self-Assessment programme. The act requires CBP to:

  • consider consolidating partnership programmes;
  • ensure a transparent system of benefits and compliance requirements; and
  • coordinate with other federal agencies for qualified parties to receive immediate clearance for entries, absent information that the transaction poses a threat.

While the act requires CBP to provide participants in partnership programmes with “commercially significant and measurable trade benefits”, the only benefit specifically enumerated is the requirement for CBP to provide pre-clearance of merchandise for those that demonstrate the highest levels of compliance.


Miscellaneous customs provisions

The Trade Facilitation and Trade Enforcement Act addresses a number of miscellaneous customs matters, some of which present duty savings opportunities.

Increased de minimis value
The act raises the de minimis value – the value of goods that may be entered without payment of duty – from $200 to $800.

Amendments to Chapter 98
The act introduces a number of important changes to duty savings provisions in Chapter 98 of the Harmonised Tariff Schedule. First, it authorises the use of inventory management for commingled fungible articles under Subheadings 9802.00.40 and 9802.00.50, concerning articles exported and returned after repair or alteration abroad. The act does not go so far as to authorise the use of inventory management in other Chapter 98 provisions, such as Subheading 9802.00.80. Second, the new law expands the range of articles that may be potentially imported duty-free by amending Subheading 9801.00.10 (previously for US goods returned) to allow the duty-free entry of any article, regardless of origin, that is exported and returned within three years of export, provided that it is not advanced in value or improved in condition while abroad.

Voluntary re-liquidations by CBP
The act makes a technical correction to the pre-existing law which allowed CBP to re-liquidate an entry within 90 days of the date of notice of liquidation. The new law changes the statute to allow CBP to re-liquidate an entry within 90 days of the actual liquidation.

Residue of bulk cargo in instruments of international traffic
The act amends the Harmonised Tariff Schedule to exempt from entry requirements the residue of bulk cargo in instruments of international traffic previously exported from the United States. This supplants a CBP ruling from 2009 requiring the entry of such residue.

Textile and apparel products from Nepal
The act creates a programme to provide duty-free treatment for certain textile and apparel products produced in Nepal. The programme, based on rules established under the Generalised System of Preferences and African Growth and Opportunity Act and authorised until the end of 2025, is limited to about 60 tariff classifications, encompassing bags, carpets and accessory items such as hats and shawls.

Trade enforcement

With respect to trade enforcement, the Trade Facilitation and Trade Enforcement Act addresses issues with importer-of-record identification, IP rights and anti-dumping and countervailing duty evasion.

Importer-of-record identifying information
In the wake of increased concerns surrounding unscrupulous and ‘fly-by-night’ importers of record, the act authorises three key changes to how CBP manages importers of record.

First, the legislation requires the establishment of an importer-of-record programme. As part of the programme, CBP must:

  • establish criteria that importers must meet in order to obtain an importer-of-record number;
  • provide a process by which numbers are assigned; and
  • maintain a database of importer-of-record numbers and associated information on the importer.

Second, the act requires CBP to establish an importer risk assessment programme to review the risk associated with certain importers – particularly new importers and non-resident importers – to determine whether to adjust an importer’s bond amounts and increase screening for the importer’s entries. Tier 2 and Tier 3 C-TPAT members are excluded from this programme.

Finally, the act requires CBP to prescribe minimum standards for identifying information that brokers must collect and maintain on importers of record, particularly non-resident importers. In addition to collecting and maintaining the information, the law requires that these standards include procedures that a broker must follow to verify the authenticity of the information and provides for monetary penalties and the potential revocation or suspension of a broker’s licence or permit for failure to comply with the standards.

IP rights enforcement
In an effort to combat the import of merchandise that infringes IP rights, the act provides CBP with enhanced enforcement tools and establishes an administrative framework for managing IP issues. Prior laws allowed CBP to share unredacted images and samples with rights holders; however, the act now requires CBP to share information about merchandise that potentially infringes trademarks or copyrights with the rights holder, if CBP believes that this would assist in determining whether a violation has occurred. The act also adds circumvention devices (ie, devices designed to circumvent a technological measure to control access to protected work) to the list of items that CBP is authorised to seize and requires CBP to enforce copyright for which registration is pending. The act also provides statutory authorisation for:

  • the National IP Rights Coordination Centre;
  • the dedication of certain CBP and US Immigration and Customs Enforcement employees to IP rights issues; and
  • enhanced training for CBP employees on IP rights issues, including though coordination with the private sector.

Trade remedies enforcement
Title IV of the act (separately titled the Enforce and Protect Act of 2015) makes significant changes to how CBP enforces anti-dumping and countervailing duty orders. In addition to requiring the creation of a trade remedy enforcement division within CBP’s Office of Trade, the newly enacted legislation establishes a mandatory procedure for CBP to investigate allegations of duty evasion. Title IV borrows heavily from the Senate’s previously proposed Enforcing Orders and Reducing Customs Evasion Act, with some amendments.

Under the newly defined procedures, investigations into allegations of evasion must occur as follows:

  • Where CBP receives an allegation (or referral from another federal agency) that a person has imported covered merchandise into the United States through evasion, and it determines that the information provided reasonably suggests that evasion has occurred, it must initiate an investigation no later than 15 business days from notification.
  • Not later than 300 calendar days after CBP initiates an investigation, it must make a determination – based on substantial evidence – regarding whether such covered merchandise entered the United States through evasion. This deadline may be extended by 60 calendar days if CBP determines that the investigation is extraordinarily complicated and additional time is necessary to make a determination.
  • In making its evasion determination, CBP may collect additional information, including by issuing questionnaires (to the party that filed the allegation, the person alleged to have entered the covered merchandise through evasion and the foreign producer or exporter) or by conducting verifications. If CBP finds that the party alleged to have imported covered merchandise through evasion has failed to act to the best of its ability to comply with a request for information, CBP may use an inference that is adverse to that party’s interests in selecting from the facts otherwise available to determine whether evasion has occurred. An adverse inference may include:
    • reliance on information derived from the allegation of evasion of the trade remedy laws submitted to CBP;
    • a determination by CBP in another investigation, proceeding or other action regarding evasion of the unfair trade laws; or
    • any other available information.
  • If CBP makes a determination that covered merchandise was imported into the United States through evasion, CBP will:
    • suspend the liquidation of unliquidated entries of the covered merchandise that enter on or after the date of the investigation’s initiation;
    • extend the period for liquidating unliquidated entries of the covered merchandise that entered before the date of initiation;
    • notify the Department of Commerce of the determination and request it to identify the applicable anti-dumping/countervailing duties rates; and
    • require the posting of cash deposits and assess duties on imports.
  • The party found to be evading duties may file an administrative appeal of CBP’s determination within 30 business days, which must be decided de novo within 60 days. The appeal is subject to judicial review at the Court of International Trade.

Title IV also eliminates the ability of an importer of a new shipper’s merchandise to post a bond or security instead of a cash deposit for imports of that merchandise while the Department of Commerce is determining the new shipper’s individual weighted average dumping margin or individual countervailing duty rate. This provision is intended to prevent unscrupulous importers from importing large quantities of dumped or subsidised merchandise during the review period and then disappearing or otherwise failing to pay the proper amount due.