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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.

President Issues Executive Order Concerning Ukraine

This morning the White House issued an Executive Order blocking property, suspending immigrant and non-immigrant entry into the U.S., and prohibiting donations to those responsible for or complicit in threatening the sovereignty of Ukraine.  The Executive Order is broad in its scope and does not identify any particular individuals or entities that are subject to the sanctions.  The Executive Order was issued pursuant to the International Emergency Economic Powers Act (IEEPA) and other federal laws.

According to the Executive Order, all property and interest in property that are in the U.S. currently or come within the U.S. or possession or control of a U.S. person (including foreign branches) are blocked for any person determined to be “responsible for or complicit in, or have engaged in, directly or indirectly” actions or policies that undermine the democratic processes or institutions in Ukraine; actions or policies that threaten peace, security, stability, sovereignty and the territory of Ukraine; or misappropriate Ukraine state assets.  In addition, property is blocked for those determined to be a “leader of an entity that has, or whose members have” engaged in or materially assisted, sponsored, or provided financial, material, or technological support, or goods or services in support of such activities.

An entity is broadly defined as “partnership, association, trust, joint venture, corporation group, sub-group, or other organization.”

The Executive Order also suspends immigrant and non-immigrant entry into the U.S. of those determined to have participated in such activities.

Additionally, donations and other contributions of support to those determined to be involved in such activities are prohibited.

Lastly, the Executive Order prohibits any transaction that evades or attempts to evade or avoid the prohibitions, as well as any conspiracy to evade or avoid the prohibitions.

Noting that the transfer of funds and assets can be done instantaneously, the Executive Order also states that “no prior notice of a listing or determination made” pursuant to Executive Order shall be provided.

In light of this just released Executive Order, companies are urged to immediately review their business relationships in and with Russian and Ukrainian parties and take necessary actions to avoid possible violations of the Executive Order. Clearly, this is a developing situation and companies will need to actively monitor whether further sanctions will be imposed and their business relationships with individuals and entities that are or may be affected by this Executive Order.

For assistance with understanding and complying with this Executive Order, 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.), +1.216.928.3474, or Skype at jon.yormick.

Got Export Controlled Technology? Do not overlook Compliance with the Deemed Export Rule

The “deemed export” rule under the Export Administration Regulations (EAR) presents unique compliance challenges for universities, R&D centers, and any number of companies and organizations involved in high-tech fields. 

In short, under the EAR, the release of export controlled technology to a foreign national is deemed to be an export to the country of which the foreign national is a citizen. A “release” includes giving a foreign national access to the controlled technology. The deemed export rule applies to foreign national employees who may be authorized to work in the U.S. under an H1-B, O, L-1 or other visa, as well as foreign national visitors, those employed by business partners, graduate assistants and other researchers and student interns. The deemed export rule does not apply, however, to foreign nationals who have become naturalized U.S. citizens; those who are legal permanent residents of the U.S. (have “green cards”). The rule applies equally to organizations with overseas operations, such as subsidiaries, JVs, affiliates, and other partners.   

The sharing of or giving access to controlled technology, blue prints, formulations and the like with a foreign national during a meeting in a conference room, in an email or text message, in a Skype or phone call, are all considered to be a release under the deemed export rule. Therefore, just as an exporter of a commodity must determine whether its export controlled item is subject to licensing requirements or if it chooses to rely on an applicable export license exception, organizations that have controlled technology must similarly analyze whether a release of that technology, in whatever format and via whatever media, must also carefully analyze whether a deemed export license may be required before the release to the foreign national colleague can occur.      

This week, a civil penalty settlement announcement made by the U.S. Department of Commerce, Bureau of Industry and Security (BIS), Office of Export Enforcement (OEE) gave organizations with controlled technology another reminder (perhaps a jolt for some) that violations of the deemed export rule are detectable and costly. In a press release, BIS announced that it reached a $115,000 civil settlement with a Santa Clara, California company resulting from five violations of the EAR’s deemed export rule. 

The company’s violations included the unauthorized release of export controlled manufacturing technology to a Russian national engineer working at its U.S. headquarters. This occurred in 2007. The unauthorized release involved drawings and blueprints for parts, identification numbers for parts, and development and production technology. The information is used for a product in hard disk drive manufacturing. The controlled technology was stored on a server at the company’s headquarters. (Best Practice Tip: store controlled technology on U.S. servers only, not abroad and not in the cloud). The company “released” the controlled technology to its Russian national engineer by providing the employee with a login ID and password “that enabled him to view, print, and create attachments.” After that occurred, the company applied for a deemed export license from BIS, but continued to store controlled technology on its server and failed to take steps to deny access of the technology to its Russian national while the license application was pending.  This resulted in charges of knowingly violating the EAR on three occasions. Apparently, those applying for the license failed to inform the IT department to disable the engineer’s login or otherwise deny access to the controlled technology. In 2010, a similar release violation occurred when a Chinese national working in the company’s Shenzhen, China subsidiary accessed similar controlled technology on the company’s server in California using a login ID and password to open an attachment containing the technology. 

The company voluntarily disclosed its violations to BIS. But it should be recalled that for many visa categories used to employee foreign nationals in the U.S. Part 6 of the I-129 requires the applicant to certify compliance with the EAR (and ITAR), including obtaining an export license when necessary and not releasing or giving access to the controlled technology to the foreign national employee. In other words, BIS and U.S. Citizenship and Immigration Services (USCIS) have information available to help detect and penalize deemed export violations in addition to information provided to BIS through a voluntary self-disclosure (VSD).    

In announcing the penalty, BIS stated that the company’s failure to prevent access while the deemed export license was pending was considered to be an aggravating factor in determining the penalty. There can be no doubt that BIS is serious about protecting U.S. technology that is subject to export controls, enforcing the deemed export rule, and penalizing violators. “Deemed export compliance is a top priority for the Bureau of Industry and Security,” said David W. Mills, Assistant Secretary of Commerce for Export Enforcement. “Today’s settlement highlights the need for companies to be vigilant to prevent the unauthorized release of U.S. technology and data.”

The BIS case documents can be accessed here, http://1.usa.gov/1jCWCEk.  

For assistance with understanding and complying with the deemed export rule, sections of the Export Administration Regulations (EAR) or other export controls and economic sanctions, as well as representation before BIS in investigations, civil penalty, and voluntary self-disclosure matters, please contact Jon P. Yormick, Esq., jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.) or +1.216.928.3474.

International Trade Presentations in Buffalo to Ring in the New Year!

International trade and business attorney, Jon Yormick, will discuss Export Control Reform (ECR) and economic sanctions in 2 separate presentations in Buffalo next month.

On January 15, the Law Offices of Jon P. Yormick Co. LPA is co-sponsoring a 2-hour workshop, Export Control Reform, Revisited, with Mohawk Global Trade Advisors and Daemen College. The event will be held at Daemen College, with check-in beginning at 8:30 am.  The program will run from 9:00-11:00 am. In addition to Jon, the workshop will feature Jim Trubits of Mohawk Global Trade Advisors, and Rae Perrott of Moog, Inc. They will discuss and share experiences with the recently implemented ECR from the perspectives of a global exporting company, a freight forwarder, and legal counsel. The focus will be on the transition of defense articles from the ITAR to the EAR, new AES documentation requirements, and tips for export compliance based on lessons learned from recent consent decrees. The cost is $35 and includes breakfast. For registration, contact Abby Frank at 315.552.3001 or at afrank@mohawkglobal.com.  

Also on January 15, Jon will give a presentation at the Buffalo World Trade Association’s monthly dinner meeting. The BWTA was founded in 1921 and has the mission of expanding international business knowledge and activity of U.S. and Canadian companies in the Buffalo Niagara region.  In his presentation, Navigating Economic Sanctions Successfully, Jon will discuss economic sanctions regimes, OFAC General Licenses and TSRA licenses that give companies certain business opportunities within the U.S. sanctions regimes, and emphasize economic sanctions compliance, including lessons learned from recent OFAC and BIS civil penalty cases.  The meeting will be held at the Millennium Hotel, 2040 Walden Ave., with cocktails beginning at 5:30 and dinner at 6:30 pm. For registration and membership information, visit www.bwta.us.

Firm Co-Sponsoring Lithuanian Trade Office Program in Buffalo

On October 25 in Buffalo, New York, the Law Offices of Jon P. Yormick Co. LPA, with the Erie County Industrial Development Agency (ECIDA), International Division, is co-sponsoring a lunchtime program  “Lithuania: Gateway to Europe.”

The program will feature presentations from the Co-Directors of the Lithuanian Trade Office who will discuss opportunities for trade and investment in Lithuania, as well as its logistics strengths that provide access to the mature European Union market.  Co-Directors, Ingrida Bublys and Linas Klimavicius, will highlight some of the strong sectors in Lithuania, such as biotech, medical devices, clinical trials, and lasers and electronics.  International business and trade attorney, Jon Yormick, will also discuss cross-border contract issues for U.S. and Canadian companies to consider when establishing business relationships with Lithuanian partners.

Erie County Executive, Mark C. Poloncarz, will welcome those attending the meeting and kick-off the program which will be held from 12:00-2:00 pm on the Buffalo Niagara Medical Campus, at the D’Youville Center for Profession Studies, located in The Innovation Center, 640 Ellicott St., Buffalo 14203.  Supporting organizations include the Binational Alliance, Buffalo Niagara Medical Campus, Empire State Development, U.S. Department of Commerce, Export Assistance Center.  Moog Medical Devices Group has also been invited to attend and share comments on the company’s investment and operations in Lithuania.

For more information and registration, please contact Maryann Stein at +1.716.856.6525 or email at mstein@ecidany.com, or go to http://tinyurl.com/8ggp8q2.