We recently sat down with Customs and International Trade lawyers Jessica Rifkin and Roy León, to get their take on the current environment with respect to the White House, Customs, and inter-agency cooperation using the ACE system.
Enforcement by Federal Agencies
“Even in 2016 we started seeing movement away from compliance towards enforcement in federal agencies like the FAA and TSA,” remarks Mr. León. And now the direction from Washington appears to be reinforcing that trend with Customs, FDA, and other agencies. From our experience, the agencies don’t need to (and won’t) wait for new regulations or agreements to step up enforcement. They just need to direct their existing resources toward enforcement of existing law.
Mr. León predicts, “There is going to be higher scrutiny put on all our clients. If there was wiggle room in the past, there will be less now,” and Customs is likely to quickly escalate enforcement to more serious measures. Already we see less willingness to grant extensions of time in administrative cases or less guidance for certain importing practices.
Custom’s new Automated Commercial Environment (ACE) is an excellent computer data-based enforcement tool for the government to cut across multiple federal agencies’ regulatory jurisdictions. ACE provides a single window through which the trade community must submit documentation for imports. ACE, which is mostly implemented now, allows “partner government agencies” (PGAs, such FDA and DOT) to access entry information more quickly and be able to exchange information within the trade community. ACE paved the way for greater leverage of more trade and commercial data by more inspectors, investigators and enforcement officers across many regulatory agencies.
Revenue Generation
Along with talk of renegotiating trade agreements and protecting American manufacturing, there is a need in the Government to increase revenue by any means necessary. Using Customs’ authority to collect duties that may be outstanding and follow the collection by issuing monetary penalties based on the deprivation of government revenue is as good as any. “Already a priority enforcement area for Customs, anti-dumping (AD) or countervailing (CVD) duties have been come even more important for sending a message to the international trade about generating revenue,” Ms. Rifkin said.
The Trade Facilitation and Trade Enforcement Act of 2015 established priority trade enforcement issues such as AD and CVD, intellectual property rights, and trade agreements. Further, it requires Customs to investigate allegations of duty evasion, which may have serious and immediate consequences. “If Customs determines there is a reasonable suspicion of duty evasion, they can impose draconian interim measures on the alleged evader even before they’ve completed their investigation, giving very little opportunity for a company to defend itself,” explains Ms. Rifkin.
Besides duties, Customs indirectly collects revenue from fines and penalties. Even if Customs determines no loss of duty (revenue) during an enforcement action, they may still penalize importers for trademark, reporting, and documentation violations, among others. “Documentation issues are the easiest violations for any of the agencies to catch especially in the new ACE trade environment. And Customs can assess penalties on its own behalf and other PGAs, such as the FDA, for such documentation violations,” Mr. León notes. Supporting documentation that is filed in the ACE portal is part of the entry packet and the importer of record may be subject to penalties if they are incorrect.
What should Importers do now?
“If importers haven’t taken measures to make sure that they are compliant before they import goods into the United States, they can really be exposing themselves to serious financial pain down the road,” cautions Ms. Rifkin.
Businesses should have a good compliance program in place, with procedures documented and followed, and conduct their own investigation of their supply chain and the documentation provided with each entry. For example, they should check (and document) the origin of goods to ensure they have not been transshipped from a country where those goods would be subject to AD or CVD.
It’s also advisable for importers to perform a self-audit now and find out where to make corrections, rather than have a federal agency come in after the fact to discover the errors. A federal agency audit (though free) always costs more in the form of legal fees, delays in shipments, and increased fees, duties and/or monetary penalties. Ms. Rifkin and Mr. León have put together a guide on what to include in a self-audit.
Click to download our Importers Guide.
This blog is provided for informational and educational purposes only and does not constitute legal advice, and is not intended to form an attorney-client relationship. Please contact your regular FDAImports representative for additional information.
