Archive | August 2014

CBP Clarifies Post-Importation Claims under Trade Preference Programs

Last Friday, U.S. Customs and Border Protection (CBP) issued guidance regarding proper procedures for submitting claims for preferential tariff treatment under NAFTA, a host of other U.S. Free Trade Agreements, and other preference programs.  It is important that U.S. importers (as well as Canadian and other non-resident importers to the U.S.) know which procedures are available under these different programs in order to preserve their rights to make preferential claims and the timing of when those claims can be made.

In issuing its guidance, CBP noted that importers have historically used a variety of post-importation methods to submit an initial claim for preferential duty treatment, including Post-Entry Amendments (PEAs), Post Summary Corrections (PSCs), Protests filed under 19 U.S.C. § 1514 and post-importation claims submitted pursuant to 19 U.S.C. § 1520(d).

Citing to a pair of court decisions from the Court of Appeals for the Federal Circuit, CBP explained how not all trade preference programs are identical in allowing post-importation preference claims. The court has held that a Protest may not be used to make a preference claims because liquidation of an entry without a claim is not a “protestable decision”.  CBP also cited to Headquarters Ruling Letter (H193959, dated July 30, 2012) that also discussed the limitations on using Protests as a viable procedure to assert a duty preference claim.

CBP’s guidance noted, however, that the law implementing certain preference programs expressly provides for post-importation claims pursuant to 19 U.S.C. § 1520(d).  This allows for a post-importation claim to be made up to one (1) year after the entry date.  This method of submitting a post-import duty preference claim is limited to: NAFTA, CAFTA-DR, Chile FTA, Colombia FTA, Korea FTA, Oman FTA, Panama FTA, Peru FTA.  The guidance goes on to state that for these preference programs, post-importation preference claims can only be submitted under 19 U.S.C. § 1520(d).  PEAs and PSCs are not a valid procedure to submit an initial post-importation preference claim under these Free Trade Agreements.

Where a preference program does not have a post-importation provision under 19 U.S.C. § 1520(d), CBP will continue to accept PEAs and PSCs for initial post-importation preferential duty claims on unliquidated entries.  These procedures will apply to numerous preference programs, including: African Growth and Opportunity Act (AGOA), Australia FTA, Bahrain FTA, Civil Aircraft Agreement, Generalized System of Preferences (GSP), Insular Possessions, Israel FTA, Jordan FTA, Morocco FTA, Pharmaceutical Products Agreement, Singapore FTA, and others.

In reviewing which post-importation procedures can be used to submit an initial preferential duty claim under the different programs, CBP importantly noted in its guidance that the court decisions held “failure to claim preference timely does not give rise to a right to protest[,]” meaning Protests filed under 19 U.S.C. § 1514 as an initial claim for preferential duty treatment will be “rejected as non-protestable” by CBP.  Therefore, importers will need to submit preference claims prior to liquidation.

For assistance with understanding and complying with U.S. Customs laws and  regulations, due diligence support in merger and acquisitions and other strategic alliances, as well as representation before CBP on Protests, in investigations, civil penalties, prior disclosures and other matters, please contact Jon P. Yormick, Attorney and Counsellor at Law, jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or +1.216.928.3474.

U.S. Imposes New Export Controls on Russia’s Energy Sector and Adds Russian Shipbuilder to Entity List

On 1 August, Under Secretary of Commerce for Industry and Security, Eric L. Hirschhorn, signed a rule amending the Export Administration Regulations (EAR) to “impose additional sanctions implementing U.S. policy toward Russia,” and address the ongoing developments in Ukraine. Under the rule, the Bureau of Industry and Security (BIS) imposes export controls on items used in Russia’s energy sector, including exploration and production from deepwater, Artic offshore, and shale projects. The rule also adds state-owned shipbuilder, United Shipbuilding Corporation, to the Entity List. On 31 July, the Office of Foreign Assets Control (OFAC) added United Shipbuilding Corporation, to the Specially Designated Nationals and Blocked Persons (SDN) List.

The new rule adds 15 CFR § 746.5 to the EAR, “Russian Industry Sector Sanctions,” and imposes export, reexport, and transfer controls on items classified under the following Export Control Commodity Numbers (ECCNs): 0A998 (Oil/gas exploration equipment, software, and data ), 1C992 (Commercial charges and devices containing energetic materials ), 3A229 (Firing sets and equivalent high-current generators), 3A231 (Neutron generator systems), 3A232 (Detonators and multipoint initiation systems), 6A991 (Marine or terrestrial acoustic equipment ), 8A992 (Vessels, marine systems or equipment, “specially designed” “parts” and “components” therefor), and 8D999 (“Software” “specially designed” for operation of unmanned submersible vehicles used in oil/gas industry). These new controls apply “when the exporter, reexporter or transferor knows or is informed that the items will be used directly or indirectly in Russia’s energy sector” for exploration and production from deepwater (more than 500 feet depth), Artic offshore, and shale oil/gas projects. The rule goes on to identify, without limitation, examples of items that are specifically covered by the new Russian Industry Sector Sanctions, as follows: drilling rigs, parts for horizontal drilling, drilling and completion equipment, subsea processing equipment, Artic-capable marine equipment, wireline and down hole motors and equipment, drill pipe and casing, software for hydraulic fracturing (“fracking”), high pressure pumps, seismic acquisition equipment, remotely operated vehicles, compressors, expanders, valves, and risers. The rule makes clear that “[n]o license exceptions may overcome the licensing requirements under new § 746.5,” except for license exception GOV, and that the license review policy is a presumption of denial.

The rule also adds Supplement No. 2 to Part 746, Russian Industry Sector Sanctions List. This new supplement includes the ECCNs referenced above, but also includes more than 50 “Schedule B” numbers. Schedule B numbers are a commodity classification number used for exports, administered by the U.S. Census Bureau and used for reporting foreign trade data. The following main Schedule B numbers and items are listed: 7304, 7305, and 7306 (line pipe, drill pipe, casing), 8207 (rock drilling or earth boring tools and bits), 8413 (oil well pumps and elevators), 8421 (industrial gas cleaning and separation equipment), 8430 (offshore drilling and production platforms and boring/sinking machinery), 8431 (oil/gas field machinery parts), 8479 (oil/gas field wire line and downhole equipment), 8705 (mobile drilling derricks), and 8905 (floating or submersible drilling or production platforms and floating docks).

For U.S. companies and foreign companies that are subject to U.S. export controls and the jurisdiction of BIS, these new Russian energy sector sanctions pose new compliance challenges and risks. As with any economic sanctions and export controls, but particularly with the progressing multilateral Ukraine-related sanctions, companies are urged to exercise enhanced due diligence in their compliance efforts. U.S. and foreign companies that currently export, reexport, or transfer commodities, technology, and software covered by the ECCNs and Schedule B, should be alerted to this new rule and its compliance requirements. U.S. companies and foreign companies that are subject to U.S. export controls that might only sell or transfer such items domestically should also undertake additional due diligence and not “self-blind” on determining whether Russia is the ultimate destination of the items.

The new rule can be found at this link, http://1.usa.gov/1okGBSH.

For assistance with understanding and complying with this new BIS rule, Ukraine-related and other economic sanctions laws, regulations, and Executive Orders, as well as representation before BIS and OFAC in investigations, civil penalty, and voluntary self-disclosures, please contact Jon P. Yormick, Attorney and Counsellor at Law, jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or +1.216.269.5138 (mobile).