Records Management and Requirements

Recordkeeping plays a vital role in any business, but especially when it comes to imports and exports. Records management is key not only to determine revenue, stay in legal compliance, and keep your goods moving, but because this information helps determine trade policy and how we gauge the success of trade agreements, programs, and the impact these things have on our economy and our citizens.

For these purposes, CBP defines records as:

any importation, declaration or entry;
the transportation or storage of merchandise carried or held under bond into
or from the customs territory of the United States;
the filing of a drawback claim;
the collection and payment of fees and taxes to CBP; and
any other activity required to be undertaken pursuant to laws or regulations administered by CBP.

The term “records” includes any information required for the entry of merchandise and other information pertaining to, or from which is derived, any information element set forth in a collection of information required by the Tariff Act of 1930, as amended, in connection with an activity described above. The term includes, but is not limited to:

statements, declarations, documents;
electronically generated or machine readable data;
electronically stored or transmitted information or data;
books, papers, correspondence;
accounts, financial accounting data;
technical data; and
computer programs necessary to retrieve information in a usable form

That’s a lot of information. Who is required to keep these records? CBP says:

an owner, importer, consignee, importer of record, entry filer or other person who:
imports merchandise into the customs territory of the United States;
files a drawback claim;
transports or stores merchandise carried or held under bond; or
knowingly cause the importation or transportation or storage of merchandise
carried or held under bond into or from the customs territory of the United
States;
an agent of any person described above; or
a person whose activities require the filing of a declaration or entry, or both.

How long must records be kept? CBP says:

Five years from the date of entry (which includes a reconciliation), if the record relates to an entry, or five years from the date of the activity which required creation of the record.

There are some exceptions to this general rule, however:

records relating to drawback claim must be retained until the third anniversary of the date of payment of the claim;
packing lists must be retained for a period of sixty calendar days from the end of the release or conditional release period, whichever is later, or, if demand for return to CBP custody (“redelivery”) has been issued, for a period of sixty calendar days either from the date the goods are redelivered or from the date specified in the demand as the latest redelivery date if redelivery has not taken place;
a consignee who is not the owner or purchaser and who appoints a customs broker shall keep records pertaining to merchandise covered by an informal entry for 2 years from the date of the informal entry;
records pertaining to articles that are admitted free of duty and tax pursuant to 19 U.S.C. §1321(a)(2) and 19 CFR 10.151-10.153 and carriers’ records pertaining to manifested cargo that is exempt from entry under the provisions of 19 CFR shall be kept for 2 years from the date of entry or other activity which required creation of the record; or
if another provision of the CBP Regulations sets forth a different retention period for a specific type of record, the other provision controls. For example:
10.137 sets forth a retention period of three years from liquidation for records of use or disposition for certain goods whose rate of duty is dependent upon actual use; and
181.12 requires that all supporting records relating to NAFTA Certificates of Origin for exports be maintained for five years from the date the certificate was signed.

You can check out CBP’s complete guide to recordkeeping requirements here.

Or you can contact your Future Forwarding representative. Put your cargo needs, including questions on recordkeeping and developing a records management system in our experienced hands and our knowledgeable, expert team will make sure you have the resources to keep your cargo moving and compliant.

The Importance of Supply Chain Mapping

With an increasing emphasis being placed by CBP on importers to know the source of every component and raw material in their supply chain, the agency now recommends that importers map their supply chain down to the fifth supplier level of raw materials to ensure that the product is free of forced labor. Beginning with the Customs Modernization Act in the mid-1990’s and now with a final rule published by CBP governing broker responsibilities in 19 CFR Part 111 and as part of their wider mission to update their regulations for today’s trade, there is a reinforcement and reiteration to importers – know where your goods are coming from.

According to the Global Slavery Index, the United States imports approximately $144 billion dollars worth of goods made with forced labor. These goods are, in fact, prohibited by Section 307 of the US Tariff Act and any goods that are reasonably suspected of being produced in such a way could be subject to a Withhold Release Order (WRO). A Withhold Release Order means that the goods will not be released for entry into the United States, and the goods could be subject to seizure and the IoR subject to steep fines.

It’s important to understand the definition of forced labor for these purposes. From the US Tariff Act: “All work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily.” Menace could be anything from verbal threats, to withholding pay, deception, retention of identity documents, debt bondage, and even excessive overtime to more insidious acts like physical violence.

If we all do our part, we can keep ethically produced goods moving while eliminating the demand for forced labor supply.

Some suggested resources to help with supply chain mapping and compliance from the Department of Homeland Security (DHS) are as follows:

The U.S. Department of Labor’s Comply Chain

The U.S. Department of State’s Responsible Sourcing Tool

National Action Plan on Responsible Business Conduct

CBP’s forced labor website resources

CBP’s Withhold Release Orders and Findings

The appearance of forced labor for raw materials extends beyond Xingang and its cotton and photovoltaic cell industries. CBP has WRO actions in place for products from around the world. The requirement of importers to comply or risk denial of entry means that is extremely important that, working with our clients, Future Forwarding keeps the goods in your supply chain moving from raw material to final delivery to the customer, whether business or individual.

A Recipe for Compliance

For the average consumer, there’s the cookbook and the shopping list that comes with following those instructions. Particularly now with the Fourth of July holiday this weekend, we’re probably all digging out those hand-written, handed-down books laden with summertime barbecue and boat favorites.

With grocery shelves having some gaping holes or old reliable ingredients no longer available, the need for clever last-minute substitutions and improvisation is quickly becoming the norm rather than the exception. If you’re good, you can ingredient swap without people even noticing the difference.

For buyers of finished goods, the quality and efficacy of the end product they receive has traditionally been sufficient. Needing to know not just the country of origin but the manufacturer, the source of the earliest precursor components and even the name and location of a farm are now all part of an importer’s responsibility. If Customs or a participating government agency like FDA or the EPA wants to know, not having an answer is not an option.

Years ago, CBP was focused on the country of origin of merchandise for both evasion of quotas (limitations on the quantity and type of a product which could be imported) and because USDA laws may permit the import of a product from one country but not another because of the risk to American agriculture. There are no shortage of invasive species which have now become ubiquitous such as the Longhorn Beetle or Asian Carp which threaten to destroy ecosystems.

Moving past quotas, CBP has been focused on the issue of forced and child labor, with an entire page devoted to products, manufacturers and countries from which items are prohibited entry ranging from latex gloves to peeled garlic and electric fans. These goods are tracked on a page with Withhold Release Orders maintained by the agency.

This month, the Uyghur Forced Labor Protection Act (UFLPA) came into law, and unlike any other mechanism preceding this statute, the presumption of innocence came first. Under UFLPA, the term being used is “rebuttable presumption”. As we wrote about in our last entry, CBP is looking not just to where a good was finished, but where any underlying component was sourced for a direct line to the affected region. The agency is using both public data sources and their own intelligence and targeting to identify shipments which may contain violative material from the Xinjiang Uyghur Autonomous Region, or XUAR.

What does this mean for US importers? Three well-known exports from Xinjiang are cotton, tomatoes and polysilicate (a precursor to solar cells).

For a textile or footwear importer, does any part of the garment or shoe contain cotton that was grown in Xinjiang?
For a food importer, does any part of the ingredient list contain tomatoes and can they go back to the manufacturer to provide verifiable records showing the source of the fruit?
For an importer of solar-powered lawn and garden lights, do the solar cells contain raw materials or components that could cause the shipment to be detained?

The level of detail that importers are required to maintain to remain in compliance has increased as governments have wanted to know more. A condition of importing, these agencies contend, is complying with a bevy of laws increasingly designed to follow a product from its earliest identifiable components, both to enforce trade laws and to protect consumers from fraudulent or harmful food, drugs or ineffective or dangerous medical devices.

Future Forwarding has been in the business of helping importers keep compliance for decades and our senior customs and compliance leaders have watched the evolution of these agencies and the granular level of detail they now require. Knowing what’s in a product isn’t just an importer’s legal responsibility, but can also open doors to classification changes that reduce or eliminate duties or provide information to support drawback claims at the time of export.

Let Future Forwarding help ensure your supply chain meets the requisite levels of transparency and compliance to prevent delays and provide savings opportunities. Contact us today.

Building a relationship with Customs through ACH

Importers with compliance programs understand that such a program includes multiple business activities. It starts with sourcing, moves through country of origin marking and proper classification, screening for potential trade remedy duties like AD/CVD, Section 301 or Section 232 inclusion and finally through to finance. For companies seeking to enhance their import compliance program, a direct relationship for the payment of duties and taxes with CBP is one that makes sense and is easy to implement.

CBP offers importers the ability to pay duty directly by ACH and, if approved, using the agency’s Periodic Monthly Statement process where duties can be paid once per month like a credit card statement that has all of the entries from the preceding month. At a time when payments from customers are being stretched, the ability to have up to an additional 45 days’ time to pay Customs is a definite advantage.

The process is quite simple and presents an opportunity for an importer to further establish a relationship with CBP. The CBP Form 400 is available online here, and is quick and easy to complete. In order to qualify, an importer must:

File entries through the Automated Broker Interface (ABI) and paying via a US bank which is a National Automated Clearinghouse Association’s (NACHA) participant with electronic data interchange capabilities.
Have a Federal identification number such as a tax ID or a Social Security Number submitted to CBP via form 5106. Should this not be applicable or providable, a Customs-assigned alternative number will do.
Complete a separate application for each account should there be multiple ones or multiple importer IDs.
Match all blank information on the application to the Check Specification Sheet.
Confirm your bank’s routing number and account numbers are correct as CBP holds the filer responsible for any errors that result from any incorrect information put in.

For the most rapid processing, email the application to ACH-Customs@cbp.dhs.gov. If you prefer to mail in the application:

U.S. Customs and Border Protection

Revenue Division

ACH Debit Applications

6650 Telecom Drive, Suite 100

Indianapolis, IN 46278

New applications take up to 15 business days from the receipt date to process. For changes to an existing ACH account, filers should allow at least 3 business days for processing.

Once the account is created, CBP will assign the filer a unique Payer Unit Number (PUN), which is used as a security measure. CBP will only share the PUN with the point of contact listed on the ACH application. This will be used to identify the payer when attempting to submit payments.

If you need help completing the ACH application, or just need some clarification on the process, please contact your Future Forwarding representative to learn more today!

CBP SENDING LETTERS FOR UFLPA

CBP made news this week as the ramp-up to the enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) signed by the President late last year comes into force on June 21st.

CBP posted an announcement on April 12th of its intention to issue “Known Importer Letters” before June 21st, the effective date of the rebuttable presumption under the Act. As a reminder, goods that are mined, produced, manufactured wholly or in part in China’s Xinjiang Uyghur Autonomous Region (XUAR) will be considered by CBP to be in violation of the forced labor statute under the UFLPA and prohibited entry into the US by the Section 307 of the Tariff Act of 1930.

There are certain circumstances where exceptions will apply. In these cases, the CBP commissioner will determine if:

The importer has fully complied with guidance to be established under the UFLPA and has completely substantively responded to all associated CBP inquiries.
By clear, convincing evidence, that the goods were not produced, wholly or in part, by forced labor.

CBP will also be issuing letters to parties identified as having previously imported merchandise that could be subject to the UFLPA. Those parties are encouraged to examine and address any forced labor issues in their supply chains with due diligence.

Regardless if they received the letters, the announcement also states that all importers are expected to review their supply chains and institute reliable measures to ensure that imported goods fall under the UFLPA guidelines. So if any goods are wholly or partly made with convict labor, forced labor, and/or indentured labor, including forced or indentured child labor, these goods are to be examined and addressed accordingly.

Intending to strenuously enforce the UFLPA, CBP’s issuance of “Known Importer Letters’’ serves as the latest reminder to importers that they are expected to put into practice supply chain programs that address raw material acquisitions, including the production process.

The agency held a hearing and solicited testimony a week ago on April 8th, and June 21st is fast approaching. Importers who have not already done so should urgently communicate with their suppliers and ask whether or not the goods they are purchasing are manufactured, partly or in whole, with anything sourced from Xinjiang province and risk being detained or denied entry upon arrival.

If you are uncertain as to where to start this process, please contact your Future Forwarding representative today and we can help you get to the source and clarify anything that may be prohibiting you from getting answers.

Benefit ABC’s of the FTZ

When is a foreign country not a foreign country for the purposes of customs, manufacturing, and duty assessment? When it’s actually here in the United States, is called a Foreign Trade Zone (FTZ) and allows U.S. companies to perform a wide spectrum of activities, all of which can delay payment of duties, reduce costs through a single entry fee, and cap Merchandise Processing Fees. As a bonus, it allows goods of multiple classifications and ad valorem duties to be imported, manufactured, and be removed, or “exported,” as a different finished product at an even lower duty rate, or even potentially duty-free.

Foreign Trade Zones (FTZ) are secure and cost-effective options for importers who need cargo held indefinitely or have cargo that will undergo an alteration such as manufacturing, mixing, assembly or repair. Most merchandise can be imported into an FTZ without formal customs entries or duties, which aren’t required until the goods enter the commerce of the United States. In a specifically designated location under FTZ rules, goods are still considered “international commerce” which means duty can be deferred until the goods leave.

There are a number of benefits of using an FTZ:

Duty deferral – Duties aren’t due until the goods leave the FTZ.
- Inverted tariff relief – if components or raw materials have a higher duty than finished goods, an FTZ allows manufacturers to pay the lower cost. Further to this, manufacturers won’t pay duties on waste, scrap, and loss as the finished goods are all that leave the FTZ as US consumer goods.
- Duty-free re-exports – If goods are entering the US just to be reexported to another country (Canada and Mexico being exceptions with their own rules and duties) an FTZ can act as an international point because technically the goods aren’t in the US and don’t have to pay duties.
- Single entry filings – using an FTZ means that an importer only needs to file a single Customs entry each week instead of filing one for each shipment.
- Inventory storage – Goods can be held at an FTZ for an indefinite period so cargo with quota restrictions is handled and duty is deferred permanently if the goods never leave.

Enhanced security and tracking – FTZ’s by their very nature are tightly controlled.

Easier identification and classification – this can be done at the FTZ and not at a port or Customs control location.

While there are exceptions to every rule, a Foreign Trade Zone offers a number of valuable solutions across 193 active FTZ programs across the United States, at approximately 3,300 businesses, and importing over $767 billion in shipments. If you’re interested in learning more about how your cargo can benefit from adding an FTZ to the routing, reach out to your Future Forwarding representative today to discuss the benefits available to you.

Unwelcome supply chain surprises: Withhold Release Orders

Importers need to add one more worry to their supply chains: detention orders issued by CBP for issues surrounding withhold release orders. Just as companies should perform due diligence before importing a shipment to look for antidumping or countervailing duties, questions should be asked of foreign suppliers whether or not the finished goods or component parts are the subject of withhold release orders and findings that would prohibit entry.

Every finished product begins with a bill of materials. The finished product, depending upon origin and parts, could need to undergo substantial transformation or meet minimum regional value contents to qualify for reduced or duty-free treatment under a bilateral or regional free trade agreement.

What happens, though, when one of those components turns out to be prohibited for entry? Importers of FDA regulated merchandise know about automatic detentions – if a product contains an ingredient deemed not safe for humans or animals, the agency detains and denies entry for consumption. CPSC regulated merchandise is the same. Fish & Wildlife prohibits improperly documented endangered species.

Importers of goods from China and other countries are becoming increasingly familiar with Withhold Release Orders – a determination made by CBP that goods from a country, manufacturer, or region are produced using forced or prison labor. When an entry is presented for release, Customs places the merchandise on hold and refuses to allow the importer to clear and receive the goods.

Recently, an apparel importer filed a protest challenging an exclusion of goods subject to a WRO. CBP excluded a shipment, claiming the cotton came from Xinjiang Production and Construction Corporation (“XPCC”) and its subordinate and affiliated entities who are the subject of a WRO.

CBP denied the protest.

The importer provided documentation showing the raw cotton was sourced from entities in the U.S., Australia and Brazil. What CBP demanded, and the importer could not produce despite the number and different types of records they presented, was no affirmative determination that at any point in the production forced labor was not used.

CBP maintains a list of active Withhold Release Orders that spans countries such as China, Brazil, India, Malaysia and others. Impacted industries include fishing, photovoltaic cells and even tomatoes.

Future Forwarding strongly encourages our clients to familiarize themselves with CBP’s Informed Compliance Publication on Forced Labor (available here) and also encourages requiring written answers about component sourcing and final point of manufacture locations. Companies should also lay out the expectation with vendors that production records can and will be produced on demand for either an internal compliance audit by the importer or in response to an inquiry from Customs and Border Protection.

For more information about Withhold Release Orders and whether your imports could be subject to this increasingly-used program by CBP, contact your Future Forwarding representative today.

Tag: CBP

Secretary Mayorkas’ Strategy to Protect American Textile Industry from Illicit Trade Practices

Records Management and Requirements

The Importance of Supply Chain Mapping

A Recipe for Compliance

Building a relationship with Customs through ACH

CBP SENDING LETTERS FOR UFLPA

Benefit ABC’s of the FTZ

Unwelcome supply chain surprises: Withhold Release Orders

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