Trump on Trade/NAFTA’s Future – Part II

Dear Friends,

It is being widely reported this afternoon that President Trump is considering imposing a 20% tax on imports from Mexico in order to pay for the border wall (which would mean that U.S. companies/consumers will be paying for the wall, not Mexico. . . ). 

While nothing is imminent, this is a further example of how the rhetoric on renegotiating/withdrawing from NAFTA is being ratcheted-up.  Any company with meaningful investments in Mexico, or that otherwise imports meaningful volumes from Mexico, should be modeling different scenarios and developing contingency plans.  We are assisting numerous clients with this and would be happy to discuss the issues with you further.  If you would like to do so, please let me know.

Best regards,
Ted

Trump on Trade/NAFTA’s Future

Dear Friends,

Earlier today, I had the privilege of speaking at a seminar hosted by my colleagues in Toronto entitled “Trade and Business Strategies for a Post-Globalization World – CETA, Brexit, NAFTA and Preserving Cross Border Data Flows.”  I spoke on a panel entitled “NAFTA’s Prospects and Preserving its Benefits” with colleagues from the US, Canada and Mexico.  I thought that you might find the slides from this panel to be of interest.

If you have any questions about the future of NAFTA, or trade in general, in these interesting times, please let me know.  Also, please check out our “Trump on Trade” webpage for further updates.

Best regards,
Ted

 

Intersection of Transfer Pricing and Customs Valuation

Dear Friends,

Last week, I had the privilege to moderate a panel of highly-experienced speakers addressing the intersection between transfer pricing and customs valuation at the Bloomberg BNA 6th Annual Global Transfer Pricing Conference here in Washington, D.C.  It was a very interesting discussion that addressed the challenges commonly presented when an intercompany transfer price is used for customs purposes (e.g., documenting the acceptability of the transfer prices from a customs perspective, dealing with retroactive transfer price adjustments for customs purposes, etc.), as well as the customs implications of the OECD’s Base Erosion and Profit Shifting (BEPS) project.  I thought you might find the slides we used for the panel to be of interest.

If you have any questions, please let me know.

Best regards,

Ted

CBP Proposal to Require Personal Data from Importers

Dear Friends,

We are writing to provide an update on a U.S. Customs an Border Protection (CBP) proposal we first alerted you to last October regarding revisions to CBP’s Importer ID Input Record (CBP Form 5106).  As you may recall, CBP’s proposed revisions amounted to a significant expansion of Form 5106, requiring, among other things, significant personal data about corporate officers of importers of record.

CBP has now considered all comments it received (summarized and responded to here), and has issued a revised proposal (along with a revised version of the form), which are being sent to the Office of Management and Budget for final approval.  This process presents another 30-day window for public comments, which commences with the publication of today’s Federal Register notice.

The changes CBP made in response to the last round of comments are detailed in its revised proposal.  Among the most noteworthy new information/clarifications is that:

  • Providing certain information is now optional, including the DUNS Number for the Importer, and the most sensitive personally identifying information for company officers, including social security numbers and passport information.
  • CBP will allow form 5106 to be submitted through what it describes as a “secure” “mobile application”, eliminating the need to provide this sensitive data through a third party, such as a broker.
  • Existing importers will only need to file a new CBP Form 5106 when changes are made to the Importer’s Name, Identification Number, IRS Number/SSN, or Address; new forms will NOT be required for other changes to company information required in section 3 of the form.

While some of the concerns raised by our previous comments have been addressed in the revised proposal, others have not (e.g., our recommendation that CBP consider requiring different data from different entities on the basis of certain specified risk factors, with a view towards gathering more data from those entities which pose the most significant risk).

We would be happy to prepare an additional comment letter, in the same format as we did following CBP’s previous proposal, for submission in response to today’s Federal Register notice.  As before, the cost for participating in this effort will not be significant.  If you would like to participate, or have any further questions, please let us know.

Best regards,

Ted

CBP Offers Classification and Value Assistance to Exporters

Dear Friends, 

U.S. Customs and Border Protection (“CBP”) has a notice in today’s Federal Register that we thought you might to be of interest.  The notice, which is entitled, “Notice of Opportunity and Procedures to Request Assistance on Tariff Classification and Customs Valuation Treatment by Other Customs Administrations Affecting United States Exports” (copy available here), is aimed at companies that run into tariff classification and/or customs valuation disputes with foreign customs administrations.  

In short, the notice reminds the public that the rules for tariff classification and customs valuation are based on international/harmonized standards, there are international forums where questions/disputes as to how these rules should be applied can be addressed (e.g., Harmonized System Committee and the Technical Committee on Customs Valuation), and the United States government actively participates in these forums.  Accordingly, CBP encourages U.S. exporters who run into tariff classification and/or customs valuation issues in foreign countries (e.g., a country classifying a product differently than the U.S. exporter believes to be correct; a country requiring an impermissibly high customs value, etc.) to raise these issues with CBP.   CBP will review the issue, and if it agrees with the U.S. exporter’s position, it will intercede with the foreign government on the company’s behalf. 

This is a well-intentioned gesture by CBP.  As any company which has experienced this sort of dispute knows, it could be quite helpful to have CBP on your side.  The same argument advanced to a foreign customs administration may carry more weight if it came from CBP, than if it came from the importer/exporter alone.  That said, it will be interesting to see if CBP will be able to respond to requests for assistance in a timely manner.  The notice states that CBP will “endeavor to provide an initial response” within 60 days.  Given the current backlog on requests for rulings on imports (CBP’s primary mission), that seems to be an ambitious target.  Nevertheless, any company that runs into a customs-related dispute with a foreign customs administration should keep this notice in mind as another potential avenue to resolve it. 

We hope this is helpful.  If you have any questions, please let us know. 

Best regards,
Ted

Trade Legislation Update

Dear Friends,

I am writing to let you know that there is a good chance that Congress will take some sort of action on trade issues in the near future.  Given the gridlock we have been living with in recent years, this is a positive (potential) development that companies should be ready for (in case it does not come around again).

The linchpin to the efforts is Trade Promotion Authority or TPA.  Trade Promotion Authority (also known as “fast track”) gives the President the ability to negotiate international trade agreements and then have them subject to only an up or down vote by Congress (i.e., Congress cannot amend or modify the international agreement).  This is seen by many as a prerequisite to concluding the Trans-Pacific Partnership Agreement negotiations.

Congress is currently considering whether to provide TPA to the President.  If they do, then I expect we will see the TPP negotiations brought to a swift conclusion and the agreement presented to Congress for a vote.  The TPA legislation (if it is passed) may also present an opportunity to address other pending trade issues, such as renewal of the Generalized System of Preferences program and possibly tariff suspension bills (or miscellaneous tariff bills).

If you have not been paying much attention to trade legislation lately, it is time to start doing so again.  There is a realistic chance that some sort of trade bill will be coming down the pike soon.

If you have any questions about TPA, TPP, MTB or other similar issues, please let us know.

Best regards,

Ted

The State of Trade

Dear Friends,

U.S. Customs and Border Protection Commissioner R. Gil Kerlikowske spoke at the U.S. Chamber of Commerce earlier this week and his remarks contained a number of interesting points, particularly with regard to increased trade enforcement.

The Commissioner’s remarks were entitled “The State of Trade:  Commissioner’s First Year and Look Ahead” and contain the usual bevy of statistics (e.g., in FY2014, CBP cleared $2.5 trillion in imports, $1.6 trillion in exports, processed approx. 26 million cargo containers, etc.).  The remarks also tout CBP’s efforts to modernize and streamline the import/export process.  The remarks are worth a quick read (copy available here).

One of the comments of particular note was the reference to CBP’s “trusted trader” programs.  As you know, CBP is merging the C-TPAT and ISA programs into a single program.  This will save CBP resources, as well as align the U.S. program more closely with other countries’ AEO programs (which generally include both supply chain security and trade compliance already).  Importers who participate in C-TPAT, or in C-TPAT and ISA should be aware of (and be tracking) this development.  Since neither program is governed by statute or regulation, CBP is free to modify the rules regarding participation at any time and without any advance warning.  Given CBP’s history of actually doing so, participants should be expecting changes sometime in 2015.

Another comment of interest related to the agreements reached with Canada and Mexico, respectively, on supply chain issues.  The agreement with Mexico provides reciprocity between the C-TPAT program and Mexico’s NEEC program.  This agreement could help expedite shipments both ways across the border.  Similarly, the agreement with Canada holds the promise of expediting shipments, by allowing all clearance-related checks to occur in the country of export (i.e., clearing the goods for import before they actually get to the border).  While the ‘devil is in the details,’ these are potentially significant developments.

Finally, the comments touch on trade enforcement issues.  As you know, CBP does not publish individual commercial penalties and stopped regularly publishing annual trade enforcement statistics a couple of years ago.  As a result, it was somewhat surprising to learn that trade penalty assessments increased 140% between FY2011 and FY2014.  According to the Commissioner, CBP issued $385.4 million in penalties in FY2011 and $925.9 million in penalties in FY2014 (interestingly, he does not mention how much of either amount CBP actually collected).  He also specifically mentioned increased collection/enforcement of antidumping & countervailing duty orders.  Given Commissioner Kerlikowske’s enforcement background, and the fact he specifically mentioned it in his brief remarks to the Chamber, it means that we are likely to see this upward enforcement trend continue for the foreseeable future.

We hope this is helpful.  If you have any questions, please let us know.

Best regards,

Ted