cargo damage, cargo claims, C-TPAT/CTPAT, customs law,

 
cargo damage, cargo claims, C-TPAT/CTPAT, customs law,
cargo damage, cargo claims, C-TPAT/CTPAT, customs law,

CUSTOMS AND INTERNATIONAL TRADE

TEXTILES

JUMP TEAM INTO HONG KONG
07/07

The Hong Kong Trade and Industry Dept. has notified exporters that a CBP JUMP team will be visiting textile factories in August. The purpose of these visits remains to validate the country of origin claimed on the entry documentation and since goods now generally go through multi-country production, it is becoming ever more difficult for Customs to distinguish between those garments legitimately made in a given country from those being transshipped. One estimate has the value of transshipped goods as high as $8 billion yearly.

In an atmosphere where 45% of all import duties collected by CBP relate to textile shipments, it is no wonder this remains a high priority area for the agency.

MORE TEXTILE HEADACHES
02/07
Despite the fact that textile quotas have been eliminated, except for countries which are not WTO members and the China safeguards which end in 2008, CBP has published TBT-07-001 reminding traders that CBP has the right to request additional documents when such goods are imported. Specifically, CBP mentions such a document request would focus on the usual country of origin proof and perhaps might ask for the document(s) issued by the foreign government which authorized exportation.

PROBLEMS WITH APPAREL IMPORTS CONTINUE
05/06
Customs has been touting its efforts in seizing goods which it characterizes as misdescribed so as to evade the China safeguards. In fact, Customs claims to have seized in excess of $10 million worth of such goods in FY 2006 alone. Usually this starts with Customs demanding production records. Often the importer is unable to provide those records, so the shipment is deemed to be of Chinese origin if subject to safeguards. Given enough lead time, Customs orders the goods redelivered. Liquidated damages follow when that does not happen (usually because the shipment was long ago delivered to the importer’s customer). If it is too late to order redelivery, Customs imposes a civil penalty on the importer relying on 19 U.S.C. 1595a(b) [aiding an unlawful importation], 19 U.S.C. 1481 [failure to properly invoice] and 19 U.S.C. 1484 [failure to exercise reasonable care.].

The time limit to order redelivery is generally thirty (30) days. However, when a question arises about the country of origin of textile goods, that time limit is 180 days, see 19 C.F.R. 141.113 for the exact text. 
 

MORE TEXTILE HEADACHES
02/06
In a recent press release, Customs announced statistics regarding enforcement activities focused around China and textiles. Also posted on Customs website are underlying details. For example, 195 Chinese factories were visited in November 2005. 70 were closed, 24 refused admission, 50 were considered high potential for transshipments and three showed evidence of illegal transshipments.  Textiles represent 43% of the revenue collected, so it is not surprising they account for so much enforcement activity by Customs and ICE. The press release talked in terms of $10 million worth of seizures. Audits resulted in nearly $5 million in collections! Stay tuned

INDONESIAN TRANSHIPMENTS
11/05
In recent press coverage, the point was made that Indonesia's Industry Minister has publicly acknowledged his country's need to end textile and garment transshipments through Indonesia. Those articles should have gone one step further. At least, if U.S. Customs is to be believed, the problem is not limited to one category of goods.
Beginning in October 2005, U.S. Customs notified most, if not all, the importers of shrimp from Indonesia that Customs suspects their shrimp is really from China. A formal investigation has been opened and demands have been sent for payment of the antidumping duty associated with Chinese shrimp, at the all others rate!

TEXTILE DECLARATIONS
11/05
Now that production of the Textile Declaration is no longer required, effective November 19th, Customs began enforcement of the requirement that the MID must be that of the entity which provided the origin-conferring process. The change in regulation actually took effect on October 5, but Customs agreed to allow the trade a short period of time to put reasonable care processes in place. Have you?

CHINA SAFEGUARD UPDATE
Effective November 5, 2005 
for a printable version of this article.

Serious reports are filtering out from the latest round of textile negotiations taking place in Washington, D.C. this weekend between the U.S. and China. It appears a deal is near. Certainly significant progress has been made. On November 2, 2005, the U.S. and China announced a resolution of pending safeguard actions regarding socks to allow a new quota of “slightly more than 10 million dozen pairs... of Chinese cotton, wool and man-made fiber socks” to be imported.  

The socks announcement came on the heels of CITA announcing it was extending until November 8, 2005 the period in which to decide whether to request consultations with China regarding imports of women’s and girls’ cotton and man-made fiber shirts and blouses (341/641), cotton and man-made fiber skirts (342/642), cotton and man-made fiber nightwear and pajamas (351/651) and cotton and man-made fiber swimwear (359-S/659-S). 

The latest word from the current negotiations is a final agreement could be reached and signed as early as Tuesday, November 8th. Depending on the source, the quota is reported to increase in 2006 by 8% or 10%, by 13% or 16% in 2007 and by 17% in 2008. The Chinese had hoped to shorten the safeguard period to 2007, but that was not accepted by the U.S. One of the most significant facts not yet known is the baseline on which these percentage increases will be figured. Some suggest that the USA-ITA lawsuit, which barred the Government from enforcing safeguards based on threat of market disruption until overturned on appeal, had a perhaps unintended benefit in that the quantity of textile products imported in the first few months of 2005 was significantly higher than it would have been had the case not succeeded before the lower court. If those import figures form the baseline on which the increases are calculated, that means more goods will be allowed entry than if the original 7.5% safeguard limitation applied.  
  

CHINA SAFEGUARD UPDATE
Effective September 14, 2005 
for a printable version of this article.

Our last update was issued at the end of May. Developments since then have been so fast and furious that each time we thought about issuing another edition, something else changed. Now that things have stabilized somewhat, we can provide a meaningful report as to where the various China safeguard actions stand. 

We begin with the situation in Europe. Whether meant as a face-saving explanation or not, the Europeans were startled to see the mountains of garments which stockpiled in the first month while implementation of the resolution between the EU and China was put into place. Some estimates placed the value of those stockpiled goods as high as US$973 million. Whatever their value, there were millions of garments (perhaps as many as 87 million units) not making their way to retail store shelves. The EU invoked its safeguard provisions and within a matter of weeks, the EU and China reached a deal. Apparently half the goods will be released by a unilateral increase in the agreed upon quota levels. The other half will be charged against next year’s quotas. The implementing regulations were adopted on September 12, 2005 and took effect today. They include authority for member states to issue import licenses for goods shipped before July 20th, but importers must apply by September 20th.  

Further, it appears the European Commission has placed ten (10) categories of products, including t-shirts, sweaters and bed linens, on a watch list. Investigations into the dumping of Chinese CDs and DVDs have also been opened. In addition, claims that India and China are dumping shoes has led to the opening of another investigation.  

In the U.S., the situation is quite different. There have been several rounds of negotiations between representatives of the two countries. Reports suggest the parties could not be farther apart. USTR announced earlier this week the hope to restart those negotiations the week of September 26th. Word has it that so far the U.S. has tabled more and more restrictive proposals, suggesting the U.S. aim may be to delay a resolution. The Chinese, on the other hand, look to the solution reached with the EU as the model to follow.  

In the meantime, quotas have again been imposed on brassieres (349/649) and synthetic filament fabric (620). At the same time, CITA has also extended the date, now to October 1, 2005, by which decisions will be made regarding categories 222 (knit fabric), 345/645/646 (cotton and mmf sweaters), 350/650 (dressing gowns and robes) and 447 (men’s and boy’s wool pants). Also pending is the renewal petition regarding socks (332/432/632), the period for public comments for which closed on September 2nd.  Safeguards are already in place for socks and have been for almost two (2) years, so unless an overall resolution is reached with the Chinese in short order, there is no reason to think these quotas will not continue in place. The comment period also recently closed for nightwear (351/651), women’s and girls’ blouses (341/641), skirts (342/642) and swimsuits (359-S/659-S). Can quotas on these items be far behind? 

If you are looking for resources from which to monitor the situation, we suggest you visit the OTEXA website at http://otexa.ita.doc.gov/Safeguard05.htm, and the U.S. Customs web page at

http://www.cbp.gov/xp/cgov/import/textiles_and_quotas/china/ 

Of course, since our last report, the Chinese imposed an export tax and then removed it. They also implemented a system of export licenses, but only apply them on exports to Europe, not the U.S. In the meantime, for good measure, the Chinese have also begun an  effort (some would say a too meager one) to float their currency. In the past, the yuan was tied to the U.S. dollar at a fixed rate of 8 to the $1. Following the Singapore and Israel model, the yuan will now be allowed to float, but at an increase of no more than 3%. One of the more closely guarded secrets was the identity of the currencies in the basket against which the yuan would float. One reliable report has that basket consisting of the currencies of Europe, U.S., Japan, Hong Kong, South Korea, Taiwan, Germany, Singapore, Malaysia and the Netherlands. 

Interestingly, the issue of textiles and China seems to have captured the imagination of the general press and so information may also be available in your favorite newspaper.


CHINA SAFEGUARD UPDATE
Effective May 29, 2005

 On Friday, CITA initiated consultations with the Chinese government regarding men's and boy's woven shirts (340/640), man-made fibers knit shirts (638/639), man-made fiber trousers and shorts (647/648) and combed cotton yarn (301). As a result, any such goods exported from China on or after the 27th are now subject to a safeguard limit. As with the safeguard actions initiated regarding Categories 338/339, 347/348, 352/652, 301, 340/640, 638/639 and 647/648 will be subject to quantitative limits from date of invocation to December 31st.

Any over shipments must be held until the "quota" reopens and then will only be released at 5% per month based upon a quantity which is 7.5% above the quantity imported in the previous year.

What happens now is there is a thirty (30) day period within which the consultations commence and ninety (90) day period in which to conclude them. The Chinese are signaling the government will drop its export tax on any goods subject to a safeguard action. As before, these safeguards are based on expected market disruption and are likely to fill before year end. Still pending are safeguard actions for all of these categories based on actual market disruption, plus cotton and man-made fiber sweaters (346/645/646) and reapplication of safeguards on brassieres (349/649) and dressing gowns/robes (350/650).

Importers are reminded to be sure they have accurate and complete documentation to support their date of export as Customs is expected to carefully review all transactions. Those importers shipping via freight consolidators should make sure their laden on board date matches that reported by the vessel operator.
 

Customs Update: Chinese safeguards
(Published in the Journal of Commerce Online May 17, 2005)
for a printable version of this article.

The United States on May 13 agreed to limit imports of cotton shirts, cotton trousers, and both cotton and man-made fiber underwear made in China.

The move comes as the Bush Administration faces increasing political and industry pressure to curb a surge of Chinese apparel imports after quotas were eliminated Jan. 1.

As part of the formal process, the Committee for the Implementation of Textile Agreements (CITA) on May 13 announced that by the end of this month, it will request consultations with China regarding cotton knit shirts and blouses (338/339), cotton pants (347/348), and cotton and man-made fiber underwear (352/652).

Once the request for consultations is presented, there is a ninety (90) day window for the discussions to be concluded. Quotas on these goods are expected to be reimposed as soon as the formal request is presented to the Chinese.

There is serious doubt as to the success of the negotiations in light of China's initial response castigating CITA's most recent actions and its less than welcoming attitude to earlier attempts to address what has been characterized by some as the glut of Chinese textile goods into the U.S. market since quotas ceased at the end of 2004. (The Europeans are facing the same complaint and have begun their consultation process as well.) On a more positive note, there is information to suggest what the Chinese are willing to do is raise their export tax, but whether that will be sufficient is highly doubtful.

There are some who think CITA acted because the White House wants to show Congress that President Bush is willing to get tough on trade issues, in the hopes the Central American Free Trade Agreement will gain the votes needed for passage. Others suggest this is an attempt to reach out to the South where much of the remaining textile manufacturing base exists, again a sort of naked grab for votes. Then, there is the festering issue of the Yuan and whether the Chinese will allow it to float freely or continue its artificial exchange rate against the U.S. dollar as a means to keep its economy robust.

There are also varying opinions as to how the quota will be calculated, but one thing is clear: this situation is going to get much more complicated before it gets resolved. American importers are cautioned to consider how they are sourcing their garments and textile products so as to limit the damage this reimposition of quotas is likely to cause.

TEXTILE SAFEGUARDS
05/05

Check our homepage for the latest in this ever evolving area – www.rorlaw.com

CHINA SAFEGUARD UPDATE
Effective May 21, 2005

 In a decision which was unexpected only as to its speed, the Committee for the Implementation of Textile Agreements (CITA), on May 18, 2005, announced it would invoke more safeguards against the importation of Chinese textile goods into the U.S. Given that the appellate court had stayed the injunction entered by the lower court, few felt there would not be more safeguards imposed. What was striking about this action is that it occurred so quickly, leading observers to conclude CITA had already made up its mind and would not seriously entertain the public comments it received.

CITA accepted claims involving cotton and man-made fiber shirts, not knit, (340/640), man-made fiber trousers (647/648), man-made fiber knit shirts and blouses (638/639) and combed cotton yarn (301), finding in each case there was a threat of market disruption. Categories 340/640, 647/648 and 638/639 are also the subject of actual market disruption claims, which remain for future consideration.

CITA will now request consultations with the Chinese and put quotas in place at the time its request is made, which is expected to be soon, with some suggesting it will come before the end of May.

One of the undercurrents to this situation is the practice of the Chinese government to peg the yuan to the dollar at an exchange rate of approximately 8.28, which, in the view of critics, means the cost of Chinese goods is artificially low. Secretary of the Treasury, John Snow, has just appointed a special envoy to negotiate this issue with the Chinese. Any relief, if it comes, is expected many months down the road, so things are likely to remain rocky for importers of Chinese goods for some time, not just importers of Chinese textile goods.

Traders are also reminded that CITA still has before it additional threat of market disruption claims involving cotton trousers (347/348), cotton knit shirts and blouses (338/339), cotton and man-made fiber underwear (352/652), other synthetic filament fabric (620), wool trousers (447), and knit fabrics (222). Right now, it is anyone's guess when those claims will be addressed by CITA, although given current history, it seems likely they, too, will be accepted and quickly become the subject of quotas, as well.

Putting more pressure on the Chinese, on April 26, 2005, the European Commission (EC) launched its own investigation into the need for safeguards regarding t-shirts, pullovers, blouses, stockings, socks, men's trousers, women's overcoats, brassieres, flax yarn, ramie yarn and woven flax fabrics. According to Commission rules, the investigation may last up to sixty (60) days and, like the US procedure, could result in quotas being reimposed. Not surprisingly, some EU-member countries are pushing for quicker action.

On May 17, 2005, the EC announced that China must take action to slow its trade or the EU will request consultations on t-shirts and flax yarns. At this stage, the request was informal so it does not trigger quota imposition - yet.

Stay tuned for more twists and turns as this situation changes with breath-taking speed in both the US and EU. Plus, for good measure, the Chinese have just announced they will quadruple their export tax effective June 1st - does anyone really think that is going to solve the dilemma?

TEXTILE INJUNCTION LIFTED
04/05

 Score one for the Government as the appellate court has lifted the injunction won by USAITA over the China threat of market disruption safeguard petitions filed last year. While the CIT found importers would suffer irreparable injury such as to warrant the granting of the injunction, the appellate court found the Government’s injuries were related to the public interest and so warranted greater protection, leading to the lifting of the injunction. Frankly, the longer this case played out, the more likely it became there would be petitions filed based on actual market disruption and that began in early April regarding Categories 340/640, 345/645/646, 349/649, 350/650, 620, 638/639 and 647/648.

EC TEXTILE ACTIONS
04/05

 Given what is seen as the glut of textile articles imported into the EU, the European Commission recently published guidelines for petitioning under its safeguard provisions. Making clear these safeguards only apply through 2008, the EC made clear that certain levels of increases were required before action could be taken, called Alert Zones, leading to an investigation.

Much like the U.S. provisions, once an investigation is launched, it leads to a 60 day period of consultation with the Chinese. If not resolved, further formal consultations follow under the Textiles-Specific Safeguard Clause which would be expected to lead to measures limiting exports. If constraints are not implemented, quotas could follow.

CHINESE SAFEGUARDS UPDATE
Effective May 16, 2005

 On Friday, May 13, 2005, CITA announced that by the end of the month, it will request consultations with China regarding cotton knit shirts and blouses (338/339), cotton pants (347/348), and cotton and man-made fiber underwear (352/652).

Once the request for consultations is presented, there is a ninety (90) day window for the discussions to be concluded. Quotas on these goods are expected to be reimposed as soon as the formal request is presented to the Chinese. There is serious doubt as to the success of the negotiations in light of China's initial response castigating CITA's most recent actions and its less than welcoming attitude to earlier attempts to address what has been characterized by some as the glut of Chinese textile goods into the U.S. market since quotas ceased at the end of 2004. (The Europeans are facing the same complaint and have begun their consultation process as well.) On a more positive note, there is information to suggest what the Chinese are willing to do is raise their export tax, but whether that will be sufficient is highly doubtful.

There are some who think CITA acted because the Administration wants to show Members of Congress and Senators that President Bush is willing to get tough on trade issues, in the hopes the Central American FTA will gain the votes needed for passage. Others suggest this is an attempt to reach out to the South where much of the remaining textile manufacturing base exists, again a sort of naked grab for votes. Then, there is the festering issue of the yuan and whether the Chinese will allow it to float freely or continue its artificial exchange rate against the U.S. dollar as a means to keep the Chinese economy robust.

There are also varying opinions as to how the quota will be calculated, but one thing is clear, this situation is going to get much more complicated before it gets resolved. American importers are cautioned to consider how they are sourcing their garments and textile products so as to limit the damage this reimposition of quotas is likely to cause.

UPDATE RE CHINA TEXTILE SHIPMENTS TO THE U.S.
Effective April 18, 2005

In our last textile phase-out memo, we advised about the injunction which was entered against the Government barring any activity regarding the threat of market disruption petitions which had been filed, see our memo dated December 30, 2004 for more details. Since then, there has been lots of activity, but only slight movement, until recently.

There has also been lots of jockeying with the pending litigation and so far the Government has lost at every turn. While the CIT case continues, the Government has also filed an appeal of the preliminary injunction. The Court of Appeals for the Federal Circuit has scheduled a hearing for May 7th. One of the forms of relief sought by the Government is a narrowing of the injunction so that discussions with the Chinese could take place, even though nothing could be negotiated or decided while the injunction remains in force.

In the meantime, importers are starting to receive Requests for Information from Customs asking about the PRC export tax now imposed on textile goods. Customs wants to know if the tax was included or excluded from the price of goods paid by importers. Frankly, if the importer is able to state no additional payment was made to compensate the exporter for the PRC export tax, reporting that fact alone should be the only response necessary. If there was a separate payment, it is most likely dutiable, but the final decision should be made in conjunction with your trade compliance adviser.

At the same time, China is being criticized from two sides, one, the huge influx of textiles since the end of the quotas (some reports rely on a figure as high as a 65% increase in sales to the U.S.), and second, the insistence of the Chinese government to fix the yuan to the dollar ratio and so, many contend, distort the cost of goods to an artificially low level. The China export tax imposed at the beginning of the year on 148 types of clothing has not stemmed the flow of goods, which has rather increased in dramatic numbers since the first of the year. China's headaches have only expanded as the EU has begun to evaluate its options since it, too, faces an onslaught of Chinese textile goods. In fact, a formal application has been filed by the European Apparel and Textile Organization seeking to apply the EU's textile safeguard provisions to twelve (12) categories of products. At the same time, Canada has eliminated its import permit requirements, except as to those goods subject to NAFTA's tariff preference levels, and goods subject to the Chile and Costa Rica trade agreements. Otherwise, no permits are required, even for Chinese goods.

Of course, all of this has taken time and so, in response to rising concerns about the quantity of Chinese textile goods being imported, the Commerce Dept. has announced it will institute a system to monitor textile and apparel imports. While even now few details have been released about this monitoring system, one specific step which will be implemented is quicker release of trade statistics. Exactly what more will be done or how that data will be used remains to be seen.

The pending petitions based upon the threat of market disruption deal with Categories 347/348 (cotton trousers), 638/639 (mmf knit shirts and blouses), 338/339 (cotton knit shirts and blouses), 647/648 (mmf trousers), 340/640 (cotton and mmf fiber shirts, not knit), 352/652 (cotton and mmf underwear), 301 (combed cotton yarn), 620 (other synthetic filament fabric), 447 (wool trousers), 222 (knit fabrics), 349/649 (cotton and mmf bras) and 350/650 (cotton and mmf dressing gowns and robes).

Given the passage of time and the influx of Chinese textile goods, on April 6, 2005, petitions were filed seeking safeguard action against Categories 340/640, 345/645/646 (cotton & mmf sweaters), 349/649, 350/650, 620, 638/639, and 647/648. In response, CITA has published notice in the Federal Register that it is soliciting public comments regarding Categories 338/339, 347/348, and 352/652 seeking to learn if actual market disruption has occurred.

The situation is obviously volatile and bears watching. Given how long court cases take to work their way through the system, it is entirely likely the original threat of market disruption petitions will be overtaken by actual market disruption claims which are not barred by the current preliminary injunction.

MEMORANDUM RE CHINA TEXTILE SHIPMENTS TO THE U.S.
Effective December 29, 2004

 The information in this memorandum is valid as of December 29, 2004. Traders are cautioned to check the OTEXA and Federal Register websites or contact us for the most current information about which quota categories are under safeguard petitions and the status of those actions.

    1)Quotas were reimposed on socks - categories 332, 432 and 632, consultations with China are generally requested within thirty (30) days of CITA's October 25th findings, but there is an additional ninety (90) day window for them to be accomplished. The safeguards were triggered by a surge in imports following the elimination of these categories in 2002 when China joined the WTO.

    2)At the end of 2003, CITA reimposed limits on 222 (knit fabrics), 349/649 (cotton and MMF bras) and 350/650 (cotton and MMF dressing gowns and robes) which expire on December 23, 2004. Reinstatement of these safeguard limits has been sought, see further details below.

    3)Domestic industry has several petitions pending which are based on threat of market disruption. The categories listed below apply to garments for men, boys, women, and girls as applicable. However, on December 30, 2004, the Court of International Trade entered a temporary injunction barring the Administration from considering these petitions and other petitions based on threat of market disruption. Petitions based on actual market disruption are outside the scope of the order.

      a)Cotton trousers - 347/348; CITA will make a determination by February 1, 2005 whether to request consultation with China;
      b) MMF knit shirts and blouses - 638/639; determination due by February 7, 2005;
      c)Cotton knit shirts and blouses - 338/339; determination due by February 7, 2005;
      d)MMF trousers - 647/648; determination due by February 7, 2005;
      e)Cotton and MMF fiber shirts, not knit - 340/640; determination due by February 7, 2005;
      f)Cotton and MMF underwear - 352/652; determination due by February 7, 2005;
      g)Combed cotton yarn - 301; determination due by February 21, 2005;
      h)Other synthetic filament fabric - 620; determination due by March 7, 2005;
      i)Wool trousers - 447; determination due by March 11, 2005; 
      j) Knit fabrics - 222; determination due by March 19, 2005;
      k) Cotton and MMF bras - 349/649; determination due by March 29, 2005;
      l) Cotton and MMF dressing gowns and robe - 350/650; determination due by March 27, 2005. 

    4)On December 23, 2004, CITA exempted the following items from the reimposition of limits: properly marked commercial samples valued at $800 or less and importations under HTSUS items: 9801.00.20, 9801.00.25, 9801.00.26, 9802.00.40, 9802.00.50, 9811.00.60, 9813.00.05, 9817.60.00.

    5)On December 17, 2004 CITA announced that visa and ELVIS requirements have been eliminated for WTO member countries for textiles exported on or after January 1, 2005. The following countries are affected: Bahrain, Bangladesh, Brazil, Cambodia, China, Colombia, Costa Rica, Dominican Republic, Egypt, El Salvador, Fiji, Guatemala, Haiti, Hong Kong, Hungary, Indian, Indonesia, Jamaica, Japan, Korea, Lebanon, Macau, Malaysia, Maldives, Mauritius, Macedonia, Nepal, Oman, Pakistan, Panama, Peru, Poland, Philippines, Qatar, Romania, Singapore, Slovak Republic, Sri Lanka, Taiwan, Thailand, Trinidad, Turkey, UAE and Uruguay and covers cotton, wool, manmade fiber, silk blend and non-cotton vegetable fiber textile and textile products subject to the Agreement on Textiles and Clothing. This change has no impact on non-WTO members.

    6)On December 13, 2004, CITA published notice of how it will handle shipments exported to the U.S. in excess of agreed upon quota limits. There are separate rules for Chinese goods on safeguard limits, see 7 below. For all other overshipped textile goods, entry will be denied until February 1, 2005. At that time and in each succeeding month, goods equivalent to five (5%) percent of the applicable 2004 base quota limit will be allowed to be imported.

    7)For China goods subject to safeguard limits (categories 222, 349/649 and 350/650) which are overshipped between December 24, 2003 and December 23, 2004, entry will not be permitted until January 24, 2005. At that time and for each period from the 24th of one month to the 23rd of the next month, goods equal to five (5%) of the safeguard limit will be allowed to be imported.

    8)None of these changes has any impact on goods shipped pursuant to AGOA, SGFTA, and NAFTA which continue to require visas and/or certificates of eligibility.

If you are interested in receiving copies of the list of textiles on which China will impose its export tax effective January 1, 2005, contact us. The latest word on those taxes is they will last three (3) years - from January 1, 2005 until December 31, 2007. There are also indications China is considering establishing a floor price for textile exports.

As to Europe, there exists two (2) reports which exchange information and recommendations between the European Commission and its High Level Group regarding textiles after January 1, 2005. Copies of these documents are also available from us. The only other action reported to have been taken by the EU is to streamline its procedure so that domestic textile firms will be able to file complaints and have them processed more quickly.

As we are only a couple of days from the end of the year, there is not likely to be much change until next week and so textile traders are cautioned to carefully monitor the situation in order to keep up with the latest developments. We will be doing the same and reporting any significant news. .

TEXTILE UPDATE
02/05

The Government has filed an appeal in the USA-ITA case seeking a stay or the overturning of the preliminary injunction barring it from considering any safeguard petitions based on threat of market disruption. CITA wants to resume consideration of these safeguard petitions at least to the extent of gathering information and meeting with interested parties, including the Chinese, supposedly strictly for the purpose of dealing with the “treat of market disruption issue.” 

TEXTILE UPDATE
12/04

It is clear that textile quotas  will expire on December 31st. What is less clear is what will happen with textile imports from China. There are a multitude of safeguard filings, all of which CITA has so far accepted for consideration. If you are trying to keep up and are confused about this complicated topic, feel free to contact us with a request for a memo which explains the affected categories and where things stand.

TEXTILE QUOTAS END?
10/04

As the end of the year looms, there are increasing efforts to reimpose quotas and/or impose safeguards in anticipation that China and India will take over the textile trade, especially with the U.S., after quotas cease. The issue is of such great concern to countries like Mauritius, the Dominican Republic, Bangladesh, Madagascar, Uganda, Fiji and Sri Lanka that these countries led recent efforts at the WTO for a serious discussion about the imposition of safeguards. 
It appears the goal of the objecting textile groups and countries is to postpone the elimination of quotas. Some suggest these groups also want a new quota agreement as part of the pending Doha Round. In the U.S., several domestic textile groups are in discussions about filing for relief before the I.T.C. on the grounds of what may happen. Many suggest this effort should fail as existing safeguards are triggered by market disruption and not speculation about possible future import surges. Stay tuned!

GOODBYE TO VISAS?
06/04

A key question on the mind of every textile/garment trader is how will year-end imports be handled in the U.S.? Goods exported from WTO member countries on or after January 1, 2005 are, of course, no longer subject to visa/quota restrictions, but what about shipments exported in late 2004?

In a June 25, 2004 Federal Register notice, CITA reminded traders that all textiles/garments shipped in 2004 must be accompanied by a proper visa.  Any shipped in excess of the 2004 limits may be denied entry or CITA may choose to stage the entries in 2005. 19 C.F.R. 12.130(i) makes clear it is the date of export and not the date of import which governs whether or not a visa is required.

CITA is rumored to be considering changing the rules. With goods shipped at year-end, will the importer be able to enter them into a warehouse or FTZ and then bring them out in 2005 without a visa? The way the law is currently written, that is not allowed. Whether CITA will hold any meetings on this topic or when those meetings might occur is anyone's guess. This uncertainty is creating quite a bit of difficulty for companies trying to plan product importations for year-end.  The only option allowed by law right now is holding goods until the first of the year to avoid the quota restrictions, hardly a practical solution. Whether anything changes remains to be seen.
 

CHINESE TEXTILES GIVE CBP HEADACHES
10/03

In the last few years, U.S. Customs and Border Protection has seized millions of dollars worth of Chinese-made garments on the grounds they are going to be or have been smuggled into the U.S. The scheme generally involved importing the goods to Los Angeles and then moving them in-bond supposedly to Mexico. However, according to CBP, these goods were actually being diverted upon arrival in Texas. Allegedly this was accomplished either by corrupting the trucker or the warehouse, but in either case, millions of dollars of goods are said to have made their way into the U.S. without properly clearing Customs or paying duty, plus, of course, no visa was obtained from Chinese authorities allowing importation into the U.S. The result is several criminal cases and hundreds of seizure cases.

This complete distrust of the in-bond system by the government has bled over to FDA which as part of its new bioterrorism regulations requires full disclosure of food stuff which is transiting the U.S. for shipment elsewhere! 

 

TEXTILE AND APPAREL SHORT SUPPLY DETERMINATIONS UNDER AGOA & CBTPA
06/03

Federal Register September 25, 2001

    AGOA: Certain fabrics for use in blouses and nightwear determined to be in short supply. Duty and quota benefits available under HTSUS 9819.11.24.

    CBTPA: Crushed panne velour fabric of circular knit construction classified in subheading 6001.92.00 (reported under statistical number 6001.92.0030) determined to be in short supply.  Apparel articles may receive duty and quota benefits under HTSUS 9820.11.27 provided the outer shell is of a crushed panne velour fabric wholly of polyester, of circular knit construction.

Federal Register November 19, 2001

    AGOA/CBTPA: Rayon filament yarn classified in subheading 5403.31 and 5403.32 determined to be in short supply.  Apparel articles containing rayon filament yarn eligible for duty and quota benefits under HTSUS 9819.11.24 (AGOA) and HTSUS 9820.11.27 (CBTPA).

Federal Register April 10, 2002

    AGOA/CBTPA: Cuprammonium rayon filament yarn classified in subheading 5403.39 for use in apparel fabric determined to be in short supply.  Apparel articles containing cuprammonium rayon filament yarn eligible for duty and quota benefits under HTSUS 9819.11.24 (AGOA) and HTSUS 9820.11.27 (CBTPA).

Federal Register May 28, 2002

    CBTPA: Yarn of combed cashmere, combed cashmere blends, or combed camel hair classified in subheading 5108.20.60 determined to be in short supply.  Apparel articles containing combed cashmere, combed cashmere blends, or combed camel hair eligible for duty and quota benefits under HTSUS 9820.11.27.

Federal Register September 5, 2002

    AGOA: Certain fabrics for use in non-knit (i.e. woven) trousers, shorts, skirts, dresses, handkerchiefs, dressing gowns, boxer shorts, and certain other apparel determined to be in short supply.  Duty and quota benefits available under HTSUS 9819.11.24.
     

Textile Transshipments Continue
02/03

Despite the fact that textile quotas end in 2005, game-playing continues in some quarters. It is understood Customs is conducting criminal investigations into illegal transshipment and quota circumvention schemes. It is thought the Los Angeles U.S .

Attorney's Office leads the investigation which allegedly includes Chinese origin goods entered under bond for transit to Mexico being instead delivered in the U.S. with empty containers being exported. This scheme is particularly troubling for those companies which purchase on an DDP or LDP basis because they think they have purchased legitimate goods, but instead may be receiving smuggled cargo.

Another scheme supposedly involves Chinese goods being shipped through Russia and Korea. There are also goods being illegally transshipped through Saudi Arabia but it is not clear whether those goods originate in China or Pakistan.

We are also hearing about delays in the release of goods coming from the Philippines and other select Asian, South American and Caribbean countries but it is thought the problem there is not quota circumvention but rather security concerns which are also causing delays when it comes to goods transshipped through ports considered to be high risk, e.g. Kingston, Buenos Aires, and Freeport. Further complicating things is intelligence information which suggests that Al Qaeda has control over about 15 cargo ships. 

EU Textile Symposium
02/03

"The Future of Textiles and Clothing Trade After 2005" is the title of a symposium hosted by the EU which will take place in Brussels on May 5 and 6, 2003 and will allow a dialog about what is likely to happen after the textile quotas end.
For more information, see
http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/02/1917(0)R APID&lg=EN&display

Textile Marker Meeting
12/02

Given the requirement in many U.S. trade programs that reduced duty rates be tied to the use of U.S.-made yarns and fabrics, the Commerce Dept. entered into an agreement with the Energy Dept. (DOE) to explore ways in which to create a textile marker system, i.e., one which would
readily identify the presence of U.S.-made yarns and fabrics through the use of technology. On December 10, 2002, DOE will present its report regarding the available technologies. The meeting is open to the public and is intended to generate a dialog about cost effectiveness, compatibility with U.S. manufacturing processes, survivability through foreign fabrication techniques, and compatibility with U.S. Customs processes and procedures. DOE is also interested in the opportunity for      plant visits and other possible areas of dialog. For more information, contact Don Niewiaroski, Jr. at 202-482-4058.

WTO Quotas Integrated, including China and Taiwan -
06/02

 Given the quota phase-outs agreed to as part of the Uruguay Round, CITA and Customs have published the Stage III integration list which clarifies the quota categories and countries which are eliminated as of January 1, 2002.

A copy of the Federal Register Notices, "Issuing a Directive to the
Commissioner of Customs Establishing the 2002 Limits and Amending Visa Requirements", (Volume 66, Number 249 - Pages 67229-67232, China) and (Volume 66, Number 249 - Pages 67232-67234, Taiwan) can also be accessed on-line at
http://www.access.gpo.gov/su_docs/aces/aces140.html Issue

A full listing of products scheduled for integration under GATT can be accessed at http://otexa.ita.doc.gov/fedreg/finalfr.stm .

Textiles Clog Up Fast Track
06/02

 Even though quota categories will end in 2005, textiles and their products continue to play a major role in vote haggling on Capital Hill. To gain the vote of Rep. Jim DeMint (R-NC) in favor of fast track/trade promotion authority, the Republican leadership agreed that no more trade related bills would be brought to a vote until the Trade and Development Act of 2000 (AGOA and CBTPA) was corrected to provide that U.S. knit and woven fabric would qualify for CBTPA benefits only if dyed, finished and printed in the U.S.

Perhaps falling into the category of unintended consequences, the Customs authorization bill and others are being held up as a result.

TEXTILE SHIPMENT PROBLEMS CONTINUE
5/00

In 1997 U.S. Customs was mandated to release the names of companies convicted or fined for transhipment violations every six (6) months. Importers are reminded to check the Customs web site for an uptodate list. However, Customs also has a "watch" list of companies, those companies it suspects of transhipment but has not yet fined. As a result, many importers are finding themselves the recipients of requests from Customs for a laundry list of documents from their suppliers. There are many instances where the supplier provides all the documentation but the goods are still barred from entry.

CITA CHANGES ITS TUNE
11/99

Effective September 1, 1999, CITA instructed Customs to exclude goods from named textile manufacturers because they were found to tranship textiles and/or textile products.  One criticism of CITA’s action was it failure to provide any mechanism for reconsideration of CITA’s decision regarding an individual company.  CITA has since published a petition procedure to challenge its decisions. Companies wanting to be removed from the list should file petitions which enumerate their reasons. In making the final decision, CITA will consider information from the company as well as that received from Customs, including production records and information from authorities in the country of exportation regarding the exporter. Exporters making such requests may also find themselves again visited by Customs.

CITA EMPOWERS CUSTOMS TO BAN IMPORTATIONS
9/99

In a highly controversial move, on Sept. 2, 1999, Customs issued new regulations which ban certain foreign suppliers from importing into the U.S. If CITA targets a company as a transhipper, Customs now has the power to ban that company from importing in accord with CITA's decision. CITA has labeled 77 Macao suppliers for inclusion on this new list. The concern is what other country's suppliers may be next?

It is not clear this new approach is in accord with the WTO Agreement on Textiles and Clothing. As these regulations were issued without opportunity for public comment or input and because they do not provide a way for a company to challenge its inclusion on the list of banned entities, a court challenge to these regulations is expected in the near future.

VISA QUANTITIES
5/99

In a recent announcement the Committee on the Implementation of Textile Agreements amended its rules to require that all visa quantities be reported in whole numbers. An exception has now been carved out for Bangladesh, Egypt, Peru, and Trinidad and  Tobago. Visas from those countries may reflect fractions or decimals and still be accepted to accomplish Customs clearance,  although Customs will continue to charge their quota restraints in whole numbers.

VISA QUANTITIES
5/99

CITA has changed its mind and announced that visa quantities from Turkey, Egypt and Bangladesh must now be in whole numbers. Previously CITA advised fractions could appear on a visa but the quantity would be counted in whole numbers.

SAMPLES VALUE INCREASED BY CITA
7/98

In the Federal Register on July 9, 1998, CITA made official that the value of properly marked samples is raised so that samples valued up to $800.00 are now exempt from import quota/visa requirements.

TEXTILE IMPORTER ALERT
5/98

Customs continues its focus on textile transhipments. To lessen the problem of different ports requiring different documents to prove origin, Customs recently issued TBT 97-049. An importer must be able to produce the following documentation if requested in order to support an origin claim: sufficient production records, understandable to the Customs officerevaluating them; a time line of the processing steps substantiated from the records produced; a factory evaluation or a listing of the machinery used in the production of the imported shipment; documentation about the number of workers; records which allow the tracing of the imported goods through the production records, including a quantity reconciliation; any work done outside the factory must also be documented.

In the face of a Customs' inquiry, an importer will be able to succeed only if the factory cooperates.

TEXTILE/GARMENT IMPORTERS GUIDELINES SET PRECEDENT FOR ALL IMPORTERS

For the last few years U.S. Customs has made as one of the focuses of its activities the issue of textile transshipments, i.e. goods which are manufactured in one country are shipped to another country, relabeled, shipped to the U.S. and claimed to originate in the second country. The matter first came to public attention about four years ago when massive criminal raids were conducted in the New York garment district, with substantially fewer companies raided in Los Angeles. Several criminal indictments followed with minimal convictions. Many civil penalty cases are thought to have resulted as well. However, their results are confidential. For many engaged in importing, there have been questions about the full extent of the transshipment problem. As the vast majority of importers are honest, the trading community has been pushing for more detailed information from Customs about the "bad apples" beyond just the occasional call from one’s factory advising a Customs team had just visited or the usual industry rumor mill.

The result was Section 333 of the Uruguay Round Agreements Act (Pub.L. 103-465, 108 Stat. 4809, signed on December 12, 1994), entitled Textile Transshipments. It amended Part V of Title IV of the Tariff Act of 1930 which was enacted into law as 19 U.S.C. §592a. It authorizes the Secretary of the Treasury to publish a list in the Federal Register twice a year of companies outside the U.S. which have been issued penalty cases under the provisions of 19 U.S.C. §1592 [making a material false statement or a material omission as part of the entry process; extends to exports under NAFTA] involving one or more of the following violations: 1) using or providing documents which indicate a false country of origin or source; 2) using or providing counterfeit visas, licenses, permits, bills of lading, or similar documents used in the entry of goods; 3) manufacturing, producing, supplying or selling goods which are falsely or fraudulently labeled as to their origin or source; 4) aiding or abetting the transshipment of goods in a manner which conceals their true origin or permits evasion of quotas or voluntary restraint agreements regarding textiles.

For U.S. importers, a supplier company’s name being published on this "black list" imposes a higher burden regarding reasonable care. The requirement to act with reasonable care arises from the Customs Modernization and Informed Compliance Act [the Mod Act] (Pub.L. 103-182, 107 Stat. 2186 (1993), Title VI). Simply relying on what these suppliers provide by way of documents is specifically NOT reasonable care according to Customs. For the period ending March 1995, no companies were listed. However, for the period ending September 1995, nine companies were named with Customs seeking information about another forty. The nine listed are located in either India or China. The forty being sought have last known addresses in Australia, China, Dominican Republic, Fiji, Hong Kong, India, Jamaica, Mongolia, Malaysia, Taiwan or Togo.

In a September 28, 1995 Federal Register notice, U.S. Customs listed some suggested steps importers should take to verify the information provided by these suspect suppliers:

is there a prior relationship between the parties;
are there prior detentions or seizures of products directly or indirectly produced, supplied or transported by the named supplier;
has the importer visited the supplier’s premises and ascertained a capacity to produce the goods;
if applicable, has the importer independently established that the supplier substantially transforms (i.e. manufactures) his goods;
is the supplier located in the same country as the goods are sourced;
are quotas about to close for the goods in question or are they nearing closure from the main producer countries;
what is the country’s history regarding the goods;
has the importer asked questions regarding origin; and 9) if there is a visa, permit or license, has the importer verified its validity and accuracy with the supplier and scrutinized the document for irregularities which would call its authenticity into question.
How many of these suggested steps are practical is open to question. For example, a long history of conforming goods does not give notice of a potentially problematic shipment. Likewise, should every shipment from China involving a Hong Kong seller be suspect? Does quota closing in one country really have any bearing on goods sourced from another? What good does it do to visit the plant if the supplier conceals his activities from the visiting importer? [Just ask the folks at China Diesel how much it helped them - see China Diesel Imports Inc. v U.S., 18 C.I.T., Slip Op. 94-185 (December 7, 1994).] Does domestically buying goods which were actually manufactured by a suspect supplier [but not knowing of his existence] put an importer on notice of a potential problem if he subsequently buys goods directly from that supplier?

If the supplier is providing counterfeit documents, is he really going to divulge that to his innocent supplier? What does it mean to "scrutinize" the visa? Is it enough to determine that the details in it match those of the shipment?

The thornier issues this recommended list raises are the consequences if the importer has not taken these steps. Should the importer hold his goods from entry until he undertakes each step? Should his broker decline to enter the goods until each step is undertaken? Should application of these recommended steps differ depending on the size of the company and/or whether or not the importer employs an agent in the country of export? While Customs is to be commended for its attempt to provide the importing community with reasonable care guidelines, those guidelines need to be practical and commercially possible. Whether the current list proves to be helpful remains to be seen.

Publication of this listing of nine recommended steps could also be an indicator of steps Customs might recommend in other contexts. As a result, how Customs approaches reasonable care regarding textile imports should be monitored by all importers, especially since we still await publication of the regulations implementing the Mod Act.

MORE TEXTILE PROBLEMS
8/96

As part of its continuing effort to insure accuracy of import declarations, Customs has extended its audits of major importers to include transshipment issues. As a result, 18 importers of textiles and wearing apparel which are large in size and import from Macao and Hong Kong are rumored to be selected for Customs audits. It is understood that Customs will include in its audit questions about whether the importer has visited the factory. If so, how often? What special training regarding textile rules of origin does the importer provide to its employees? Another area of inquiry has to do with agents. How are agent payments handled? What sort of background and factory investigations are conducted? Is there a written agency agreement? Does it include language prohibiting transshipment?

Can importing textiles or wearing apparel get any more difficult?

NEW U.S. TEXTILE RULES OF ORIGIN TAKE EFFECT
7/96

The new U.S. rules of origin for textile products and wearing apparel took effect on July 1, 1996. No longer does the place of manufacture or assembly confer origin. In addition, goods not previously considered textile articles are effected, e.g. umbrellas, watch straps, car seat belts, parachutes and doll clothing. The new rules are process driven and apply to all textile articles and wearing apparel except those from Israel plus these new rules REPLACE the NAFTA marking rules. The rules are divided into three areas: 1) general rules, 2) special rules and 3) multi-country rules.

The general rules confer origin if the good is wholly produced in the country where it is produced. With yarn, origin is conferred by spinning or extrusion. For fabric, origin is conferred by formation. Another process which confers origin is assembly. Minor subassemblies do not change origin, e.g. collars, cuffs, plackets and pockets. Minor embellishments also do not change origin, e.g. appliques, beads, spangles and buttons. Assembly occurs only when at least two pieces of fabric are involved which existed prior to assembly in essentially the same condition as is found in the final article.

The special rules deal with knit to shape, major parts and specially listed commodities. Knit to shape is defined as 50% or more of the exterior surface area is formed by major parts which have been knitted or crocheted directly to the shape used in the good. Major parts exclude collars, cuffs, pockets, placards, paddings and linings. Where these minor parts cover the exterior surface, the concealed surface will still be considered to determine whether the 50% requirement has been met. There are 16 types of goods specifically mentioned which are exempted from the rule of assembly confers origin approach. These goods include diapers, handkerchiefs, scarves, quilts and household furnishings. In this category, origin is conferred either by where the yarn is spun or extruded or where the fabric is formed.

The most complicated rules apply in the multi-country situation. Origin is determined by where the most important processing or assembly operation took place. Customs will NOT consider time, cost, value added or complexity in making its decision. If application of this rule still does not provide an answer, the final rule of origin is determined by the country where the last important processing occurred. Unfortunately Customs has yet to provide any criteria by which to make such a determination.

If application of the fabric formed rule leaves an importer in the position of not being able to get his visa from the country where the fabric was formed, he might consider having his good made from fabric formed in more than one country in order to trigger the multi-country rules. But what happens with the Federal Trade Commission requirements regarding U.S. made garments which remain unchanged? Customs is also trying to address the foreign assembly implications under 9802.

cargo damage, cargo claims, C-TPAT/CTPAT, customs law,