June 26 Customs Committee Draft Agenda


NCBFAA Customs Committee
draft Meeting Agenda – June 26, 2010
Atlanta Airport Marriott
4711 Best Road
Atlanta, Georgia 30337
Phone: 404-766-7900
Fax: 404-209-6808
Meeting Room: Salon "C"

NCBFAA Customs Committee Roster

Area 1 Amy Magnus Member Advisor Michael Dugan Senior Counselor
Area 2 Charles Riley Member Advisor Federico Zuniga Senior Counselor
Area 3 Ken Bargteil Chairman Yes Advisor Darrell Sekin Senior Counselor
Area 4 Myra Reynolds Member No Advisor John Peterson Senior Counselor Yes
Area 5 Joe Trulik Member No Automation Subcommittee Cindy Allen Chairwoman
Area 6 Gary Ryan Member LB&F Subcommittee Chip Bown Chairman
Area 7 Jerry Becnel Member Drawback Subcommittee Michael Cerny Chairman
Area 8 Neto Roser Member ISF Subcommittee Don Woods Chairman
Area 9 Dan Meylor Vice Chairman Yes Carrier Best Practices Subcommittee John Hyatt Co-Chairman
  Carrier Best Practices Subcommittee Melzie Wilson Co-Chairman
Non-Voting CESAC Representative Michelle Maslow Delegate
Advisor Alan Klestadt Customs Counsel No D.C. Counsel Jon Kent Advisor
Advisor Harold Brauner Senior Counselor President Jeff Coppersmith ex-Officio
Advisor Art Litman Senior Counselor Chairman of the Board Mary Jo Muoio ex-Officio

Meeting Agenda
08:30 – Call to order
08:30 – Opening Remarks and Introductions 
08:35 – Nike Lawsuits and PoA Validation
09:05 – Lacey Act Amendments Update
09:20 – CBP Visit Reports
09:30 – $20 de minimis for Quarterly PEA’s
09:45 – Cargo Examination Targeting

10:00 – CPSC Cargo Detention
10:10 – Break
10:30 – BSA Comments
10:55 – 1641 Penalties and Broker Management
11:10 – ITAR and Export Controls
11:20 – FDA Penalties
11:30 – RLF Guidelines
11:40 – Adjourn

08:30 – Call to order

08:30 (5 minutes) – Opening Remarks and Introductions 
(K. Bargteil)

       Welcoming remarks, housekeeping notes and introductions will be made. Note taking responsibilities will be assigned. A sign-in sheet will be circulated.

08:35 (30 minutes) – Nike Lawsuits and PoA Validation (K. Bargteil)

       Nike filed suit against several brokers who made entry for shipments which were found to contain counterfeit Nike products (see Attachment "A" and Attachment "B"  ). In each instance, the "client" was referred to the broker by a freight forwarder who, in some cases, also provided the power of attorney (PoA). The PoA was subsequently found to be fraudulent and each of the entries involved an instance of identity theft. None of the import documents referenced Nike product.
       The lawsuits allege that the brokers are liable under the Lanham Act, 15 USC 1124 (the federal trademark statute), and the Tariff Act, 19 USC 1526, for importing and distributing counterfeit merchandise. In conversations with Nike's counsel, they have expressed their belief that brokers have an obligation to confirm the identity of the party authorizing them to clear the goods and, further, that brokers have an obligation to verify the validity of the import documents and the physical merchandise in each shipment (see Attachment "C" ).
       Our Customs Counsel had previously spoken at length with Nike's counsel and expressed our concern with both the merits of the claims being raised against the brokers and the potential precedential value that a successful claim could have on the industry. While we fully understand Nike's desire to reduce the number of successful counterfeiting initiatives, our industry has a very limited ability to meaningfully impact the process. Except for those instances involving willful bad actors, Nike's allegations suggest that the brokers have a much greater control of the underlying transaction than is actually true. That having been said, rather than fight with Nike, we would rather work with them to develop a solution which helps us address their concern (to the extent that we reasonably can) while at the same time improving the professional standards of our industry. To that end, Customs Counsel suggested that we would support a regulatory amendment which requires PoA validation on an industry-wide basis for all new business.
Customs Counsel was advised that Nike agreed to unilaterally suspend the ongoing litigations for 45 days to provide the NCBFAA with an opportunity to develop a proposed regulatory solution to the identity theft issue which requires PoA validation
       We have previously expressed concern with the existing CBP "Validating the Power of Attorney" directive and its lack of regulatory support (see Attachment "D" ). The Nike litigation provides an impetus to address this issue and develop a uniform industry standard which will facilitate legitimate trade (see Attachment "E" and Attachment "F"). A regulatory amendment will also eliminate any uncertainty regarding the broker's obligations to validate a power of attorney and to require background information from new clients before filing entry on their behalf.
       The existing CBP directive on PoA validation can be accessed at http://www.cbp.gov/xp/cgov/trade/trade_programs/broker/validating_PoA.xml.

09:05 (15 minutes) – Lacey Act Amendments Update (J. Kent)

      The coalition and discussion group that has been negotiating policy and changes to the Lacey Act Amendments enacted by Sec. 8204 of the Food, Conservation and Energy Act of 2008 has agreed to next steps (see Attachment "G" ). Jon Kent will summarize these latest developments for the Customs Committee.

09:20 (10 minutes) – CBP Visit Reports (K. Bargteil)

      Currently CBP has a policy to provide instructions to a customs broker requiring that the customs broker take various steps to address deficiencies in the customs broker’s compliance status uncovered during an outreach or compliance visit, including, as indicated, the filing of an improvement plan. There is no corresponding policy to provide the customs broker with a visit report if no deficiencies are found. In the absence of an official policy it is left to CBP’s regional counsel’s office to provide guidance to the field offices. Miami and Cleveland have determined that no visit report will issue except upon receipt of a formal request under authority of the Freedom of Information Act. Aside from the fact that these two service ports are among the most zealous for enforcing customs broker penalties, this situation is both inequitable and intolerable. The Customs Committee Chairman publicly raised this issue with Brenda Brockman-Smith, Executive Director Trade Policy and Programs, Office of International Trade, at the conclusion of the NCBFAA 2010 Annual Conference panel session CBP Trade Enforcement – Role of the Broker. In a follow-up eMail exchange Executive Director Brockman-Smith agreed that an official policy requiring a visiting report should be established, but quizzically suggested that it must be prioritized in consideration of the many other "competing" CBP initiatives relating to customs brokers (see Attachment "H").

09:30 (15 minutes) – $20 de minimis for Quarterly PEA’s (D. Meylor)
      On the agenda for the TSN Legal Policy Committee meeting June 17, 2010 was a GIF referral from the Entry Committee for application of a de minimis provision for post summary correction (see Attachment "I" ). The discussion was summarized as follows, "The trade would like CBP to forgo payment of duties associated with Post Summary Corrections in line with 19 U.S.C. Sec. 159.6. Utilizing this method, importers would not be required to pay duty differences under the stated limit, or $20 at the time of this request." During the discussion the question arose as to whether the GIF also envisioned that a post summary correction would not be required at all when such a de minimisrule applied, and it was agreed that while a correction on the record would be required a tender of $20 or less would not.
      It is unclear whether or not the above mentioned policy bears on the parallel initiative to eliminate the requirement for a quarterly PEA if such a de minimis rule were to be agreed by CBP. Dan Meylor raised this issue in a recent eMail to the Chairman in the following terms. Over a year ago we approached Cynthia Whittenburg about having a de minimis rule for PEA’s so that if the change in duty is less than $20, an importer could make a note to their file for audit purposes and not have to report it. This would do away with the quarterly PEA. Cynthia Whittenburg appeared to be receptive to idea, but wanted to wait until CBP got closer to the ACE electronic correction to try to work it into the electronic correction instructions with the TSN. With the electronic correction, would CBP expect filers have to make the corrections on every entry that needed a change rather than file a quarterly PEA? Since the electronic Post summary Correction is looming, should we broach this again now?
       Do we have our answer? If so, should it be accepted as final?

09:45 (15 minutes) – Cargo Examination Targeting (D. Meylor)

      Notwithstanding current law [P.L. 107-210, Sec. 343(a)(3)(F)] provides that, "The information collected pursuant to the regulations shall be used exclusively for ensuring aviation, maritime, and surface transportation safety and security, and shall not be used for determining entry or for any other commercial enforcement purposes," CBP has been and continues to use this information for targeting cargo for commercial enforcement purposes. Setting aside the legality of this usage, questions remain as to whether this practice represents an effective and efficient use of CBP resources, as well as whether it subjects importers and their customs brokers to unwarranted cargo examination with the accompanying burdens.
      Customs Committee Vice-Chairman, Dan Meylor recently explored these questions with CBP Acting Deputy Assistant Commissioner, Office of Field Operations, Todd Owen and his June 7th report can be summarized as follows. With the announcement of the new targeting center the issue of manifest targeting gains importance. A transparent process is needed for other agency holds and multiple agency holds on the same merchandise. Customs brokers need to know where to direct questions. There must be accountability and controls in place. Todd Owen agreed that CBP should address this now rather than later. I also asked him about the Los Angeles IBET commercial enforcement examination designations based on manifest data, from a national policy view. He said that policy for this program originates with the Office of Trade, and that he would look into the procedures in L.A. before speaking with the policy makers.
      Our question is how can they do good examinations without entry documentation for the shipment? The Acting Deputy Assistant Commissioner agreed to review this as well. I also asked how C-TPAT benefits could be provided if those are contingent of entry filing and the cargo has already been targeted on manifest data long before entries are processed. Todd Owens volunteered that performance indicators need to be monitored closely to ensure that there are sufficient resources in place to complete examinations in a timely manner and without disrupting trade. That does not currently appear to be a problem in L.A. but it could become one in smaller ports as this program gains momentum. Todd Owen will revert with his findings in the next days. I think we should add CBP cargo examination targeting policy to the agenda for the next meeting.

10:00 (10 minutes) – CPSC Cargo Detention (D. Meylor)
      With CPSC commencing orders for cargo detention under their statutory authority (see Attachment "J") coupled with the inevitability that some detentions will be for partial shipments, the Customs Committee should engage with CBP about release process following CPSC detention. Will CBP issue their own release and then let the cargo be held for CPSC processes similar to FDA or will they not release the shipment until after CPSC has made a decision? If the latter, how will they allow part of a shipment to be released if CPSC detains only a part? Will filers be allowed to make adjustments to the quantity on the summary to pay duty only on the portion released? What other issues need to be resolved to provide for this development?.

10:10 – Break

10:30 (25 minutes) – BSA Comments (A. Magnus)
      At a meeting with Customs Counsel, Cindy Allen and the Committee Chairman on May 20, 2010 Cynthia Whittenburg asked for comments from NCBFAA on the Broker Self Assessment pilot in advance of the one-year evaluation to be published by her office (see Attachment "K" ). Participants in the program were also asked to answer several questions and comment on their experience (see Attachment "L" ). The BSA Committee’s insight into the pilot was minimal, and while some perspective could be derived from discussion at the above mentioned meeting and with two of the participating firms, the resulting comments were for the most part speculative in nature (see Attachment "M" ). 

10:55 (15 minutes) – 1641 Penalties and Broker Management (D. Sekin)

      In view of the BSA pilot experience, the recent CIT decision (Slip Op. 10-70) in the UPS case (see Attachment "N" ), and installation of Anita Harris as the new Broker Management Chief, the Customs Committee should review its strategy for engaging with CBP on rationalization of the 1641 Penalty regime and broker management, including preservation of the district permit requirement (see Attachment "K" ). 

11:10 (10 minutes) – ITAR and Export Controls (D. Meylor)

      Joe Trulik submitted a written report of recent activities of his subcommittee (see Attachment "O"  ). In addition to variable process requirements even within a particular port, the assessment of penalties for violation of unpublicized "rules" has also manifested. The NCBFAA Forwarding Committee has lately taken some of these issues onto its agenda, but it seems likely that the ITAR Subcommittee’s raison d’être must be expanded to include CBP’s role in export control and enforcement. In Joe Trulik’s absence, Dan Meylor will field questions regarding these developments.

11:20 (10 minutes) – FDA Penalties (D. Sekin)

      At this Committee’s April 10, 2010 meeting the 1641 Penaa NAMElties Subcommittee added FDA penalties to its scope and invited members of the RAC Committee to join with them in charting a course for engagement with both FDA and CBP to bring order, predictability and reasonable exercise of authority in the assessment of FDA penalties, and provision for the right to petition for redress with a published mitigation guideline. At this meeting a brief update and preparation for the July 8th meeting with CBP is in order. 

11:30 (10 minutes) – RLF Guidelines (J. Peterson)

       Since the April 10th meeting of the Customs Committee, NCBFAA filed comments with Cynthia Whittenburg on the draft RLF Guidelines (see Attachment "P" ), and there has been expansion of that program as a result of the elimination of the ITA Form 362P (see Attachment "Q" ). For a variety of reasons it is both important and pressing that this program expands to include all entry types and classes of merchandise. Customs Committee engagement with CBP must remain active and purposeful. The question for this meeting is, "(W)hat paths are currently open to us to advance this agenda item?" 

11:40 – Adjourn

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