U.S. Customs and Border Protection Textiles

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U.S. Customs and Border ProtectionTextiles
Department of Homeland Security ? Customs
and Border Protection
July 2006
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The Textile Import Industry
Department of Homeland Security ? Customs
and Border Protection
Total Imports 1.9 Trillion Textile Products
43 of all Duties Collected Total Duties 25
Billion Average Duty Rate 16
K Thousand M Million B Billion
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3
Columbus Trade

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Columbus Trade


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Columbus Trade


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Textile Supplier Countries
Volume

• Value
• China
• Mexico
• India
• Hong Kong
• Indonesia
• Pakistan
• Canada
• Vietnam
• Honduras
• Bangladesh

• China
• Mexico
• Pakistan
• Canada
• India
• Korea
• Indonesia
• Bangladesh
• Honduras
• Taiwan

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January 1, 2005 and Beyond

• Quota Eliminated for all WTO Member Nations
  EXCEPT China
• Safeguard Mechanism Replaced by Comprehensive
  Quota Agreement
• Textile Bilaterals Expired
• Authority to Conduct TPVTs Expire
• MOUs (HK and Macao)
• Enforcement Focus Unchanging

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January 1, 2005 and Beyond

• Changes to the Regulations
• Elimination of the Paper Textile Declaration
• Allows Electronic Filing of Entries
• Changes to the Construction of the Manufacturer
  Identification Code
• The Entity that Performed the Origin Conferring
  Process
• Not the Trading House, the Shipper, etc.
• Remote Location Filing
• Working on the Informal Value Limits/Not Revenue
  Neutral

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Textile Enforcement Focus

• Textiles and Wearing Apparel Designated As a
  Priority Trade Issue for FY 06
• Enforcement Focus
• Origin Fraud Illegal Transshipment Quota
  Circumvention Inadmissibility of Merchandise
• Enforcement of Various Legislative Trade
  Initiatives and Free Trade Agreement Preference
  Claims
• Protection of the Revenue
• 5 Year Enforcement Strategy to Congress

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Textile Enforcement Focus

• Risks
• FTA and other Trade Legislation
• 22.4 Billion in Trade Preference Claims out of a
  Universe of 100.3 Billion in Imports
• China Quota
• Illegal Transshipment
• Misdescription of Merchandise
• Smuggling Unmanifested Goods
• General Misdescription to Avoid Duties and Quota
• 43 of Duties Collected Involve Textile Goods

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Textile Enforcement Focus

• FTA Activity
• Morocco Implemented on January 1, 2006
• CAFTA El Salvador Implemented on February 1
  Nicaragua and Honduras April 1, 2006 Guatemala,
  July 1, 2006
• Thailand, ANDEAN Countries, Panama, UAE and SACU
  in Negotiation
• Bahrain and Oman Completed
• South Korea and Malaysia Negotiations Started

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Enforcement Issues

• Free Trade Agreement Enforcement
• 2,164 Lines Valued at 66.4M Reviewed
• 563 or 28 Found to Be Non-Compliant
• 1.2 M in Additional Revenue Recovered
• NAFTA Accounted for 79 of Revenues Recovered
  CBTPA Accounted for 13
• Preference Claims Value 22.4 B in 2005

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Training

• Free Trade Agreement Training Initiative
• New York, Miami, Los Angeles and Atlanta
• 90 of Import Specialists Processing Textile FTA
  Goods Have Been Trained this Calendar Year
• Extensive Training Materials Have Been Prepared

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Textile Enforcement Focus

• Chinese Quotas
• U.S. Government Has Negotiated a Comprehensive
  Agreement which Became Effective on January 1,
  2006 Expires December 31, 2008
• U.S. and China Resurrected ELVIS Links
• China Issues a Paper Visa and a Certificate of
  Origin
• Will Only Be Provided to CBP Upon Making the
  Request to the Importer

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Textile Production Verification Teams

• Since October 2005 TPVTS Were Conducted in
• Hong Kong
• Macao
• Swaziland
• Vietnam
• Egypt
• Mauritius
• South Africa
• Thailand
• Kenya

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Textile Production Verification Teams

• November 2005 Visit to Hong Kong
• 167 Factories Targeted
• 65 Closed
• 24 Refused Admission
• 46 High-Risk Designation
• 3 Evidence of Transshipment
• December 2005 Visit to Macao
• 28 Factories Targeted
• 5 Closed
• 3 High-Risk Designation

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Textile Production Verification Teams

• Seizure of Goods from Closed Factories
• 2.6 Million to Date
• Production Records Being Requested on Previous
  Shipments Involving 38.3 Million in Value
• Penalties Being Pursued
• Since October 2005 More than 42 Million Seized

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Textile Enforcement

• Audit of Textile Importers FY 2005
• 42 Audits Completed
• 34 Had Positive Enforcement Findings
• 4.97 Million in Additional Revenues Collected
• Classification Errors 928,831
• Singapore FTA Findings 43,265
• Caribbean Basin Trade Partnership Act 510,944

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Common Broker Errors

• Incorrect ISO Codes
• Incorrect Construction of the Manufacturer
  Identification Code (MID)
• Incorrect Country of Origin
• Bras
• Incorrect Entry Types
• 01s Instead of 02s

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Common Broker Errors

• Just Because a Product Was Exported from an FTA
  or Trade Preference Country Doesnt Make It
  Eligible for Duty-Free Treatment
• Dont Rely Solely on the Bill of Lading/Review
  All Documents Presented For Entry
• Learn to Read

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Enforcement Issues

• A Search of Chapters 50-63, for Jan 2004 - July
  2005 Revealed 84 Million in Imports.
• 18.5 Million, or 22 of that Value Reveals a
  Mismatch between Country of Origin and Country of
  Export or MID Origin.
• Over 1 Million Shows Obvious Admissibility
  Issues.

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Enforcement Issues

• Filing of Incorrect Entries
• 02 Quota/Paper Entries Continue to Be Required
  for the Following
• AGOA Preference
• Tariff Preference Level Claims in NAFTA, CAFTA,
  Chile, Singapore and Morocco FTAs
• China Comprehensive Quota Agreement
• CBTPA ATPDEA Claims under the Cap
• Non-WTO Country Imports e.g. Vietnam
• Worsted Wool (Chapter 99)

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Textile Enforcement

• Operation X
• 5 Days over a 5 Week Period (Nov-Dec. 2005)
• 2,121 Additional Examinations of Goods Claiming
  Country of Origin China Focus on Misdescription
• 131 Violations Found
• 63 Incorrect Country of Origin Declared
• 23 Incorrect Information on Manifest
• 22 Incorrect Classification of Goods
• 4 Intellectual Property Rights Violations
• 4 Health and Safety Violations
• 3 Incorrect Quantities Declared
• 1 Smuggling, etc.
• Violations Totaled 2.5 Million in Value
• 5 Seizures Totaling 88,441
• 7 Penalties Being Pursued

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Enforcement Issues

• Misdescription/Misclassification of Imported
  Products
• Ramie vs. Cotton and Manmade Fiber Products
• Circumvents Chinese Quota Restraints
• Ramie 0-2 Duty Rate
• Cotton 16 Duty Rate
• Manmade 32 Duty Rate
• Loss in Duties Exceeds 12 Million
• 68 Bogus Companies in the Mix to Defraud the
  Government and Evade Quotas

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Detentions

• Policy Is Not Set In Stone
• Each Transaction Stands on Its Own
• Generally
• 4 Compliant Reviews and the Manufacturer is
  Removed from Scrutiny
• Manufacturer May Have Problems with One Importer
  and Not Another Compliant Importer May Be
  Removed From Further Scrutiny
• Information from other Sources e.g. Foreign
  Government May Cause Removal of Manufacturer
  Immediately from Further Scrutiny

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CAFTA Implementation Issues

• USTR Announced El Salvador Receiving CAFTA
  Retroactive Benefits on March 6, 2006 Ref. 71 FR
  11235 Honduras and Nicaragua Added in April
• CBP Publishes Interim Regulation on March 7, 2006
  Ref 71 FR 11304
• Required Documents
• Pursuant to the Legislation
• CBP Can Locate the Entry or the Entry Can Be
  Reconstructed
• Satisfies the Conditions of Preferential
  Treatment Under CAFTA

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CAFTA Implementation Issues

• Time Limits
• By December 31, 2006 , or 90 Days after the Date
  of Entry into Force for that Country
• Being Changed to 90 Days after Last Country
  Enters into Force.