Tuesday, April 29, 2014

Customs Brokers are Critical to a Successful International Supply Chain

Peter Quinter 

Most cargo imported into the United States is cleared by a customs broker through U.S. Customs and Border Protection, and not by the importer directly. Customs brokers are professionals who are licensed by U.S. Customs and Border Protection (hereinafter "CBP") after passing both a very difficult written examination and an exhaustive background investigation. Part 111 of the CBP Regulations (19 CFR Part 111) detail numerous "duties and responsibilities of customs brokers" and establish the grounds for imposition of monetary penalties against customs brokers, as well as procedure for cancellation, suspension, or even revocation of a customs broker license, for various and numerous violations. In recent years, CBP has been more aggressive in assessing penalties against customs brokers for allegedly "failing to exercise responsible supervision and control", taking away licenses from brokers who violated the CBP regulations, and even pursuing criminal prosecutions against customs brokers for aiding or abetting persons or companies which commit import violations. This article appeared in International Trade Magazine on Monday, April 28, 2014.

The maximum monetary penalty that may be assessed by CBP against customs brokers is $30,000 per violation. CBP may stack penalties for repeat violations against a licensed customs broker, so if the same violation was committed each time on four separate shipments, the total penalty assessed by CBP's Fines, Penalties, and Forfeitures Offices may be $120,000. Fortunately, there is an opportunity for the broker to respond in writing to any pre-penalty and the penalty assessed by CBP, in an attempt to mitigate or cancel the penalty through the administrative petition process found at Part 171 of the CBP Regulations. Customs brokers convicted of most crimes will have their licenses revoked automatically, but again, brokers may choose to challenge that process administratively before CBP and the U.S. Department of Homeland Security in a complex process that involves CBP's Office of Chief Counsel, CBP's Broker Management Branch, and the local CBP Port Director where the violation(s) took place.

Separate for criminal prosecution and monetary penalties, it is now very common for CBP, through its Broker Management Branch and Import Specialist Division offices at the port level, to counsel customs brokers who appear to fail to exercise responsible supervision and control. Examples of failing to exercise responsible supervision and control may be repetitively and incorrectly classifying imported merchandise according to the Harmonized Tariff Schedule of the United States (HTSUS), failing to keep its employee list current, failing to maintain the proper entry records for each shipment for the required five year period, failing to timely make an entry or pay the required customs duties, failing to declare imported merchandise with the proper country of origin, or failing to properly declare that the imported merchandise is subject to antidumping or countervailing duties.

All too often, when CBP pursues a penalty pursuant to 19 USC 1592 against an importer for some wrongdoing, the importer blames its appointed customs broker. The actions by CBP may be pursued against a customs broker who violated the CBP regulations, and, interestingly, CBP may simultaneously pursue an investigation resulting in monetary penalties against the importer whom the customs broker represented. Even admitted failures by the customs broker do not absolve the importer of any wrongdoing. For example, if customs duties are not timely paid to CBP by a customs broker which had received payment for those duties from the importer it represents, CBP will always demand the payment from the importer as it always remains the importer's responsibility to pay any applicable customs duties, and comply with all relevant CBP regulations. Separate from monetary penalties, liquidated damages claims are often pursued by CBP against an importer for committing CBP violations because all importers must have an import bond as security for customs duties .

On top of all this, the new CBP Commissioner has recently announced that there will be significant changes to Part 111 of the CBP Regulations to add more responsibilities to customs brokers, including required annual, continuing education. Customs brokers remain critical to a successful international supply chain for U.S. importers in arranging for the international transportation of cargo to the United States, and clearance by CBP and other Federal agencies.

Peter Quinter, Chair
Customs and International Trade Law Group
1221 Brickell Ave.
16th Floor
Miami, FL 33131

office 305 416-6960
mobile 954 270-1864


Friday, April 4, 2014

Importing Counterfeit Merchandise and U.S. Customs and Border Protection

Every day, counterfeit merchandise of all kinds attempts to enter the United States. Whether it be handbags, jewelry, clothing, electronics, or medicines, it amounts to a worldwide phenomenon totalling billions of dollars. Fortunately, U.S. Customs and Border Protection (CBP) officers at the air, ocean, and land borders have the legal authority to stop, examine, and seize suspected counterfeit merchandise. That is why companies as diverse as Rolex, Gucci, Apple, Ford, and Disney register their trademarks with the U.S. Patent and Trademark Office, and then take the additional, important step of recording those trademarks with CBP.

CBP just issued its Fiscal Year 2013 seizure statistics for counterfeit merchandise that attempted to illegally enter the United States. You guessed right, the country of origin for the most counterfeit merchandise was again China, and the seizure statistics continue to climb year after year in both the number of seizures and the value of the seized merchandise.

On Thursday, April 11, 2014, in Las Vegas, at the 40th Annual Conference of the National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA), I will provide a lecture on "Intellectual Property Rights: How to Detect and Avoid the Scammers". In other words, how, why, and when CBP targets and seizes suspected counterfeit merchandise, how trademark owners may assist CBP to enforce the intellectual property rights laws, and how owners of merchandise wrongly seized by CBP may attempt to get their merchandise released through the administrative petition process with the CBP Fines, Penalties, and Forfeitures Offices. My fellow presenter at the Conference on this topic is Robert 'Bob' Crane, U.S. Customs Program Manager, Global Security and Brand Protection, Underwriters Laboratories.

Too often, CBP officers seize merchandise that is suspected of being counterfeit or otherwise infringing a trademark or copyright, but really does not. The concept of gray-market, genuine merchandise still seems to be a challenging one for CBP. Moreover, when suspected counterfeit merchandise is seized by CBP, the current administrative petition process described at 19 CFR Part 171 takes far too long to resolve, especially when the value exceeds $100,000, and the case must be referred from the ports to CBP HQ in Wshington, D.C. By the time CBP realizes and agrees that the merchandise is not counterfeit, and releases it back to the importer, it could be a year later. The merchandise no longer has the same value, and the contract for the resale of the merchandise has likely been cancelled, so the importer who did (or tried to do) everything right, but the merchandise has been seized anyway, either because CBP or the importer made an error. In those situations, the importing company is royally you know what. These situations do not show up in the annual CBP statistics, but is an unfortunate reality for many.

Peter Quinter, Shareholder
Customs and International Trade Law Group
GrayRobinson, P.A.
Miami, Florida
Office (305) 416-6960
Mobile (954) 270-1864

For questions or comments about this post, please add below.