EXPORTING TO THE USA: ORIGIN & BEYOND

1. EXPORTING TO THE USA:ORIGIN & BEYOND Brian Staples Trade Facilitation Services Ottawa – Canada brianstaples@rogers.com

2. EXPORTING TO THE USA • Why? CAFTA • Why a Canadian? • Why rules of origin? • Why “beyond”?

3. EXPORTING TO THE USA • Getting into any market – what is required? • Even the smallest detail can lead to success or failure - nylon filament yarn 204 (b)(3)(B)(vi)(IV) • A short guide into the legal landscape and legal history of the United States: rule of law & the role of imports.

4. Exporting to the USA • The role and definition of importer in the USA. • Simple obligations: goods cannot be released unless bond has been posted. • 19 CFR Part 113: agreement to pay duties, taxes, charges, complete entry, produce documents, rectify non-compliance, reimburse Customs, use the goods in accordance with imported requirements, supply electronic information

5. The Role of the Importer • Importer has to supply a commercial invoice with each shipment in accordance with 19 CFR 141: • names and contact information of buyer, shipper and seller, detailed product description, product marks, weights, measures, detailed price information including currency, charges (insurance, container charges, freight, packing,),country of origin, drawback, all goods and services furnished for the production of the imported goods, inland charges where applicable.

6. The Role of the Importer & Customs • The Customs “Mod” Act (otherwise known as the North American Free Trade Implementation Act), legally introduced the doctrine of “informed compliance” and “shared responsibility” on December 8th, 1988. • Customs is responsible for clearly communicating and documenting the legal obligations of importing goods into the United States to the trade community and ensuring that these legal obligations are being met (they do!!).The importing community shares the responsibility to ensure that all legal and regulatory trade requirements are being satisfied.

7. The Role of the Importer • For example, under Section 484 of the Tariff Act, as amended (19 U.S.C. 1484), the importer of record is responsible for using reasonable care to enter, classify and determine the value of imported merchandise and to provide any other information necessary to enable U.S. Customs and Border Protection to properly assess duties, collect accurate statistics, and determine whether other applicable legal requirements, if any, have been met. CBP is then responsible for fixing the final classification and value of the merchandise. An importer of record’s failure to exercise reasonable care could delay release of the merchandise and, in some cases, could result in the imposition of penalties.

8. Reasonable Care CAFTA: Chapter 4 (Rules of Origin and Origin Procedures): Article 4.15 (Obligations Relating to Importations). 3. No party may be subject an importer to any penalty for making an invalid claim for preferential tariff treatment if the importer: • did not engage in negligence, gross negligence, or fraud in making the claim and pays any customs duty owing; or • On becoming aware that such a claim is not valid, promptly and voluntarily corrects the claim and pays any customs duty owiing

9. Reasonable Care • These expressions come right out of 19 USC 1592 (penalties) with extensive practice before the US courts. • “seeking guidance from the Customs Service through the pre-import or formal ruling program; consulting with a customs broker, a Customs consultant, or a public accountant or attorney; using in-house employees, such as counsel, a Customs administrator, or if valuation is an issue, a corporate controller, who have experience and knowledge of Customs laws, regulations, and procedures; and, when appropriate, obtaining analyses from accredited laboratories”

10. Reasonable Care • Informed compliance publications • Reasonable Care – Compliance Checklist • Around 50 questions!! (textile issues)

11. Reasonable Care • Importer responsibility for record keeping • 19 USC 1509 (a)(1)(A) = list of records • 5 ½ pages • Only for entry purposes (not drawback, bonded warehouse)

12. Importer Liability • Focused Assessment Program (1) For fraudulent violations, the domestic value of the merchandise; (2) For grossly negligent violations, (i) The lesser of the domestic value of the merchandise or four times the loss of duties, taxes and fees or (ii) If there is no loss of duties, taxes and fees 40 percent of the dutiable value of the merchandise; and (3) For negligent violations, (i) The lesser of the domestic value of the merchandise or two times the loss of duties, taxes and fees or (ii) If there is no loss of duties, taxes and fees 20 percent of the dutiable value of the merchandise. PRIOR DISCLOSURE

13. The Importer • In light of the above, certification by the importer, from the US perspective, is perfectly logical and natural. • They are already responsible • Procurement, marking, refunds • But there is a paradox here • CAFTA – Chapter 3- Article 3.24

14. Now….The Producer 3-The importing Party, through its competent authority, may assist in a verification conducted under paragraph 2(a), or, at the request of the exporting Party, undertake such a verification, including by conducting, along with the competent authority of the exporting Party, visits in the territory of the exporting Party to the premises of an exporter, producer, or any other enterprise involved in the movement of textile or apparel goods from the territory of the exporting Party to the territory of the importing Party. 4-(iv) an assessment of whether the enterprise’s production records and other documents support its claims for preferential tariff treatment for:

15. The Producer • 4.15 - when a certification by a producer or exporter forms the basis for the claim, either provide or have in place, at the importer’s option, an arrangement to have the producer or exporter provide, on request of the importing Party’s customs authority, all information relied on by such producer or exporter in making such certification; • 4.16.3 - Each Party shall provide that a certification by the producer or exporter of the good may be completed on the basis of: (a) the producer’s or exporter’s knowledge that the good is originating; or (b) in the case of an exporter, reasonable reliance on the producer’s written or electronic certification that the good is originating.

16. 4.19 1. Each Party shall provide that an exporter or a producer in its territory that provides a certification in accordance with Article 4.16 shall maintain, for a minimum of five years from the date the certification was issued, all records and documents necessary to demonstrate that a good for which the producer or exporter provided a certification was an originating good, including records and documents concerning: (a) the purchase of, cost of, value of, and payment for, the exported good; (b) the purchase of, cost of, value of, and payment for, all materials, including indirect materials, used in the production of the exported good; and (c) the production of the good in the form in which it was exported. 2. Each Party shall provide that an importer claiming preferential tariff treatment for a good imported into the Party’s territory shall maintain, for a minimum of five years from the date of importation of the good, all records and documents necessary to demonstrate the good qualified for the preferential tariff treatment.

17. Producer versus Importer • A basic contradiction within CAFTA • Uniform Regulations • A flood of verifications? • Existing US parties • National “green light” program that rewards cooperative exporters (a condition for goods) • Deny entry (textiles only) • Jam ongoing negotiations • WTO/WCO/UCR/ • Education & Automation

18. Always the Producer • Whatever the origin system – the producer is always the core (new textile rules) • Convergence or car wreck? • WTO (no certification or verification) • EU GSP • ICC • FTA • Security Standards

19. E-ORIGIN & AIT • AUTOMATIC IDENTIFICATION TECHNOLOGY • BAR CODES AND RADIO FREQUENCY IDENTIFICATION - RFID • IDENTIFICATION FRIEND OR FOE – 194O’S WW II

20. E-ORIGIN & AIT • DEPARTMENT OF DEFENSE & WAL-MART • RFID TAG = TRANSPONDER AND DIGITAL MEMORY CHIP • TAG READER= ANTENNA, TRANSCEIVER AND DECODER

21. E-ORIGIN & AIT • PASSIVE TAGS & ACTIVE TAGS • PASSIVE TAGS ACTIVATED BY READER’S POWER SUPPLY (9/10) • DIFFERENT FREQUNCY BANDS UP TO MICROWAVE (ONSTAR)

22. E-ORIGIN & AIT • NO LINE OF SIGHT REQUIREMENT – NO UNLOADING AND LOADING • AUTOMATICALLY READS ALL TAGS • NO LABEL SPACE LIMITATIONS • ELIMINATES HUMAN SCANNING ERRORS • READ THROUGH PLASTIC, DIRT, MUD, PAINT – NOT LIKELY TO TO RIPPED

23. E-ORIGIN & AIT • LIBRARIES • SUB-DERMAL (PATIENTS, PRISONERS AND PETS) • COWS AND PHARMACEUTICALS • TOLLBOOTHS • VIP CLIENTS • POLICE IN MEXICO CITY - FILES

24. E-ORIGIN & AIT • 25TH ANNIVERSARY – UNIVERSAL PRODUCT CODES & OPTICAL BAR CODES • 23 INDUSTRIES – 140 COUNTRIES – 1 MILLION COMPANIES – 17 BILLION $ • WILL NEVER BE ELIMINATED BY RFID

25. GDSN • GLOBAL DATA SYNCHRONIZATION NETWORK • COMMERCIAL ENTITIES AND THEIR PRODUCT DESCRIPTIONS • GLOBAL LOCATION NUMBER = SECURITY AND COMMERCIAL RISK • GLOBAL TRADE ITEM NUMBER • EAN.UCC APPROVED – GS 1 • EPC GLOBAL & GS 1

26. EPC GLOBAL BENEFITS • TOTAL, REAL TIME, END-TO-END SUPPLY CHAIN VISIBILITY AND TRANSPARANCT (SECURITY/UCR & COMMERCIAL BENEFITS) • IN-STORE REPLENISHMENT • REDUCE 2% SHRINK REDUCTION • BETTER TRACKING • REDUCE DOCUMENTATION ERRORS • REDUCED INVENTEORIES AND LOGISTICS COSTS AND LABOUR COSTS