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U.S. and Japan Trade Deal: Tariff Reductions to Take Effect Jan 1

Japan-us-fta

An initial trade deal between the U.S. and Japan was officially signed on October 7. This new deal will reduce or eliminate tariffs on $7 billion worth of U.S. agricultural exports. The trade deal sets forth the same agricultural access in exports that the U.S. would have received in the Trans-Pacific Partnership. Tariff reductions are scheduled to take effect January 1, 2020.

According to the Office of the U.S. Trade Representative (USTR), tariffs will be removed from the following exports:

  • Almonds
  • Blueberries, cranberries and prunes
  • Sweet corn, broccoli and sorghum
  • Food supplements

The below exports will receive gradual reductions throughout the elimination process:

  • Wine
  • Cheese and whey
  • Cherries and oranges
  • Tomato paste
  • Egg products
  • Frozen potatoes
  • Specific beef and pork product

Japanese imports on machinery, musical instruments, bicycle parts, televisions and turbines will have duties either reduced or eliminated on January 1, 2020. A second round of reductions and elimination is currently scheduled to take place April 1, 2020. Import duties on these items could be reduced or removed either immediately, or over the course of 10 years.

Import restrictions of Section 232—which adds additional tariffs on steel (25 percent) and aluminum (10 percent) imports—on auto parts have not been discussed as part of the initial trade deal according to the USTR. The trade deal also includes a $40 million digital trade agreement that forbids certain customs duties.

As further negotiations continue, a comprehensive list of tariff lines effected by the trade deal is available.

If you have questions on how this will impact your business, please reach out.

U.S.-Japan Trade Agreement Negotiations

 

 

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Do I Need an Export License?

do I need an export license

As an exporter it is your responsibility know if you need an export license. On top of that, it is your responsibility to know who you’re exporting to and to watch for red flags. To help, the Bureau of Industry and Security (BIS) has published guidance for exporting to Pakistan, Saudi Arabia, and UAE. But what if you don’t export to those countries? Luckily, these guidelines apply to all exports.

Export Due Diligence

Research any new or unfamiliar customers. Exporters should exercise increased due diligence when vetting new customers. If you notice any of the following red flags, then those customers merit extra scrutiny.

  • A new customer places an unexpected and/or high-value order for sophisticated equipment.
  • The customer is a reseller or distributor. In such cases, you should always inquire who the end-user is.
  • The customer has no website or social media and is not listed in online business directories.
  • The customer’s address is similar to an entity listed on the U.S. Government’s Consolidated Screening List (CSL), or the address indicates the customer is located close to end-users of concern, including co-located with an entity listed on the Entity List.
  • Your customer places an order ex-works and makes all shipping arrangements through a freight forwarding service. In such cases, request that the freight forwarder provide you a copy of the Electronic Export Information (EEI) filing to ensure the information is accurate.

Assess the potential applications of your products. Whenever you identify red flags indicating a potential concern about your customer, or if you are unable to confirm the bona fides (i.e. legitimacy and reliability) of your customer, you should consider potential dual-use applications of your products.

File true, accurate, and complete export control information. True, accurate, and complete EEI must be filed in accordance with Sections 758.1 and 758.2 of the EAR, as well as the Foreign Trade Regulations (15 C.F.R. Part 30). In the case of exports made under the terms of a letter of credit (LoC), BIS has noticed that the parties to an export transaction may be inadvertently misrepresented on EEI filings due to differences between commercial document requirements and EEI requirements.

It is imperative for you to know who you’re exporting to. If you are still unsure, the BIS also has guidance on ways to ensure you know your customer. It is highly recommended that you check if your customer is on the Consolidated Screening List.

Need help identifying if your shipment needs an export license and if so, how to get one? Reach out to Mohawk Global Trade Advisors, we’ll walk you through it.

Helpful Resources:

How to Survive an Export End-Use-Check

My Goods are EAR99. Why Do I Have to Screen?

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What to Expect with New Chinese Tariffs: Our Expert Answers 3 Big Qs

10 percent 3 questions

President Trump announced that as of September 1, 2019, there will be 10 percent additional tariffs on everything imported from China that has not already been covered under Section 301. This has left companies brimming with unanswered questions.

Robert Stein, Vice President at Mohawk Global Trade Advisors, answers the three big questions on everyone’s mind.

 

Q: What is the likelihood that the 10% tariff will be applied September 1, 2019?

A: I would say the likelihood is very high. President Trump appears to feel that increasing tariffs is a winning strategy and nothing in his recent actions make me feel like he will not follow through. Also, it does not appear that the Chinese will capitulate anytime soon, so a badly needed trade agreement is not likely to materialize.

 

Q: Will 10% be applied across the board to all items?

A: You can review the HTS codes on list 4 in the Federal Register Notice. The 10 percent will be applied to all affected HTS codes, except for any exclusions that might be granted in the future. We don’t know if an exclusion process will be allowed, but my guess is that they will only allow exclusions if and when the duty rate moves from 10 to 25 percent.

 

Q: Will it be applied by entry date? Or all entry’s after a certain date? Or will the government use a ship date?

A: This is the big unknown right now. We are going on the assumption that this will be based on entry date, since it appears the impact of this move was designed to hit goods already on the water. However, there has not been any indication from the Office of the U.S. Trade Representative (USTR) regarding how they will want this to be handled.

If you have further questions, don’t hesitate to contact Mohawk Global Trade Advisors.

 

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Get BIS’s Annual Export Controls Conference Presentations

BIS Presentations

Looking for an information packed resource for export controls? Look no further, the Bureau of Industry and Security (BIS) has published the presentations from its annual conference, which was held July 9-11 in Washington.

The presentations include the following topics.

  • “600 series”
  • Air and Space (BIS)
  • Air and Space (NASA)
  • Air and Space (NOAA)
  • Census—ACE Export Reports
  • Census—Global Market Finder
  • CFIUS—BIS
  • CFIUS—ITA
  • Compliance—BIS
  • Compliance—DDTC Compliance Program
  • Compliance—OFAC
  • DDTC Update
  • Deemed Exports
  • Encryption
  • Freight Forwarders and Routed Transactions
  • Proscribed Parties and Catch-All Controls
  • Regulatory Update
  • Sanctions
  • Section 232
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Why the Court of International Trade Punished a First-Time, Small Importer with Over $250K in Fines

antidumping

Importers are facing ever-evolving constraints from U.S. Customs and Border Protection (CBP) decisions now more than ever. Achieving and maintaining compliance through Reasonable Care and proper documentation is pertinent to avoid penalties, seizures of cargo, or criminal charges.

“A Tangled Web of Changing Stories and Disputed Consequences”

On April 22, 2019 the Court of International Trade (CIT) found a one-time importer, Titan Metals, liable for $141,984.98 in penalties plus $146,368.64 in unpaid duties. The case examined the Government’s claims that the small business based in Houston, Texas made false statements and omissions on entry documentation to avoid antidumping duties on imports of steel flanges from India.

In 2003, Titan Metals first imported steel flanges from India with documentation that the goods originated from India and were eligible for the Generalized System of Preferences benefit (free of antidumping duties). Six years later, in response to a CBP penalty notice, the company’s lawyer then claimed the goods were “U.S. goods returned,” to avoid further penalties.

While the CIT acknowledged that Titan Metals is a first-time offender with limited resources as a five-employee company, the falsified documentation and resistance to cooperate with the CBP lead to the penalty of 50% of the legal maximum.

What are Antidumping duties?

Antidumping duties (ADD) were created under the Antidumping Act of 1974 to prevent the sales of goods at a lower price than what the goods would be valued in the country of origin. If it is determined that an imported product is being sold at a less than fair value in the U.S., and an antidumping duty is imposed.

How Do I Avoid These Penalties?

As an importer you must truly understand the scope of the ADD order and cannot only rely solely on the HTS classification to determine if the product imported is subject to antidumping duties.

CBP is dedicated to conducting targeted antidumping analysis and auditing of imported products. Mohawk Global Trade Advisors provides import compliance programs to ensure you are abiding by the expansive CBP regulations. Our experts create customized programs for importers which include:

  • Helping you to understand your responsibilities under Reasonable Care
  • Review and analysis of your existing import compliance program and tariff classifications, including discovery of gaps.
  • Written import compliance manuals customized to your business model.
  • Individual policies and procedures for classification, documentation, valuation, recordkeeping, free trade agreements, and more.
  • Checklists, templates, forms, and other tools to help your staff easily manage and maintain standard processes.
  • Training your key import staff in all aspects of import compliance.

Contact Mohawk Global Trade Advisors today to start building a better import compliance program.

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MSC Suspended from CTPAT for 90 Days

MSC CTPAT Suspended

As of June 18, 2019 MSC Mediterranean Shipping Company has been suspended from the Customs Trade Partnership Against Terrorism program (CTPAT). At this time, the suspension period is set to last for 90 days. The suspension comes as a result of this week’s incident, where shipping vessel MSC Gayane was discovered to be carrying over 16 tons of cocaine. U.S. Customs has not provided any additional information at this point regarding the status of MSC’s CTPAT certification and is continuing its investigation.

For any questions regarding this incident, please contact your Mohawk customer service representative.

MSC’s official press release.

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New Minimum Security Criteria in CTPAT Portal

New CTPAT MSC (1)

As of May 3, 2019, U.S. Customs and Border Protection (CBP) has released the CTPAT program’s new minimum security criteria (MSC) in the CTPAT portal. Companies are expected to implement the new criteria by their annual review date in 2020. CBP has mentioned that there will be a phased roll out, although the details are still unclear.

The new MSC include:

  • Cybersecurity
  • Protection against agricultural contaminants and pests
  • Prevention of trade-based money laundering and terrorism financing
  • Security technology used to fortify existing physical security requirements

So far, no specific dates or guidelines have been announced but we will provide updates as they become available. If you have any questions, reach out to Mohawk Global Trade Advisors.

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5 Building Blocks to an Effective Sanction Compliance Program

Santions compliance guidelines

How do you ensure your company is compliant when dealing with sanctions? Need guidelines on how to put a sanction compliance program together? You’re in luck. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has published framework for developing an effective sanctions compliance program (SCP). This framework outlines five essential components.

  1. Senior management commitment
  2. Risk assessment
  3. Internal controls
  4. Testing and auditing
  5. Training

Senior Management Commitment

  • Senior management reviews and approves the organization’s SCP.
  • Senior management ensures that its compliance units have sufficient authority and autonomy to deploy effective policies and procedures. As a part of this, senior management ensures direct reporting between senior management and compliance units, including routine and periodic meetings.
  • Senior management ensures that compliance units have adequate resources.
  • Senior management promotes a “culture of compliance,” throughout the organization. This includes:
    • The ability of personnel to report sanctions related misconduct by the organization or its personnel to senior management without fear of reprisal.
    • Senior management messages and takes actions that discourage misconduct and prohibited activities and highlight the potential repercussions of non-compliance with OFAC sanctions.
    • The ability of the SCP to have oversight over the actions of the entire organization, including but not limited to senior management, for the purposes of compliance with OFAC sanctions.
  • Senior management demonstrates recognition of the severity of apparent violations and of the laws and regulations enforced by OFAC.

Risk Assessment

OFAC recommends that organizations take a risk-based approach when designing or updating an SCP. One approach is for organizations to conduct a routine “risk assessment” for the purposes of identifying potential OFAC issues. While there is no “one-size-fits all” risk assessment, the exercise should generally consist of a holistic review of the organization from top-to-bottom and assess its touchpoints to the outside world. For example, an organization’s SCP may assess the following:

  • Customers, supply chain, intermediaries, and counter-parties.
  • The products and services it offers, including how and where such items fit into other financial or commercial products, services, networks, or systems.
  • The geographic locations of the organization, as well as its customers, supply chain, intermediaries, and counter-parties.

Internal Controls

According to the framework, an effective SCP should include policies and procedures to identify, interdict, escalate, report, and maintain records of potential OFAC violations. The criteria for effective internal controls are based on the following:

  • The organization maintains written policies and procedures outlined by the SCP.
  • The organization implements internal controls that adequately address its risk profile. These internal controls should enable an organization to identify, interdict, escalate, report, and maintain records of potential OFAC violations.
  • The organization enforces the policies and procedures that it implements through internal and/or external audits.
  • The organization ensures that it adheres to adequate OFAC-related recordkeeping policies and procedures.
  • The organization ensures that upon learning of a weakness in its internal controls, it takes immediate and effective action to identify and implement compensating controls, including determining the root cause of such weakness and remedying the root cause.
  • The organization clearly and effectively communicates the SCP policies and procedures to relevant staff, including gatekeepers and business units operating in high-risk areas (e.g., customer acquisition, payments, sales, etc.), and to external parties performing SCP responsibilities on behalf of the organization.
  • The organization appoints personnel to integrate the SCP policies and procedures into the daily operations of the organization.

Testing and Auditing

OFAC recommends a comprehensive, independent, and objective testing or audit function as part of the SCP. This function should enable organizations to be aware of how the SCP is performing and when updates, enhancements or recalibrations may be needed to account for a changing risk assessment or sanctions environment. A testing and auditing function should adhere to the following guidelines:

  • The organization commits to ensuring that testing or auditing is (i) accountable to senior management, (ii) independent of the audited activity or function, and (iii) endowed with sufficient authority, skills, expertise, and resources.
  • The organization commits to ensuring that it employs testing and auditing procedures that are sufficiently sophisticated and that such procedures are comprehensive and objective.
  • The organization confirms that upon learning of a negative testing result or audit, it will take immediate and effective remedial action to identify and implement compensating controls that correct the root cause of the shortcoming.

Training

OFAC stresses that providing an effective training program to all appropriate employees and stakeholders is an integral component of a successful SCP. An effective training program will consist of the following:

  • The organization commits to ensuring that its OFAC-related training program provides adequate information and instruction to employees and relevant stakeholders (e.g., clients, suppliers, business partners, and counter-parties).
  • The organization commits to providing OFAC-related training with a scope and frequency that appropriately reflects the risk profile of the organization.
  • The organization commits to ensuring that upon learning of a negative testing result or audit, it will take swift and effective action to provide training or other corrective action with respect to the relevant personnel.
  • The materials and resources that are part of the training program are easily accessible to applicable personnel.
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The ABC’s of Tariff Classification

ABC

When it comes to classifying your imports or exports, the tariff book can appear daunting and much too complicated to approach. How do you classify a part? What about a set with several products? Fear not, the experts at Mohawk Global Trade Advisors are here to break down the process of tariff classification to the basics.

Why is classification so important?

Classifying commodities under the correct tariff codes for both export and import shipments is essential to avoid a jump in duty rates, antidumping duties and most importantly, penalties for careless or negligent behavior. Correct classification is also important to determine if the use of a free trade agreement for preferred duty rates is possible and in assuring compliance with customs reporting.

Why is classification so tricky?

General Rules of Interpretation – the rules that establish how correctly choose tariff codes – can be very difficult to understand and use, especially for products that are considered parts or sets. Relying on internal company classifications that may be outdated and inaccurate is extremely risky, so it’s important to understand how the tariff book works and to maintain the most updated classification resources.

How Mohawk Global Trade Advisors can help

Our experts provide seminars to take you through each step of the classification process. The seminar workbook acts as a guide to decoding the tariff book and classification process. Each seminar concludes with a hands-on workshop to give participants the opportunity to practically apply the skills they’ve learned, which we believe is critical for proper training. While tariff classifications may not be as simple as your ABC’s, our advisors are here to make sure you know the best way to classify your commodities and understand what tariff classification is all about.

Contact us today to schedule a training session or to learn more about our training services.

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Do You Ship to India? Here are the New India Invoice Requirements

The India flag overlooking an Indian city.

Shipping to India? A new regulation has gone into effect, as of February 18, 2019, that requires invoices to have the unit of measurement for each line item. Per Indian regulations, this unit of measurement must declare the Standard Unit Quantity Code (SUQC), which is the unit mentioned for each Harmonized System of Nomenclature (HSN) code under the Indian Customs Tariff Headings (CTH). Some examples of these units are number (NOS), kilograms (KGS), and square meter (SQM).

To prevent delays in your shipments, it is important to comply with these new requirements. If you have any questions, please reach out to Mohawk Global Trade Advisors.

 

Unit Quantity Codes for all Customs tariff headings.

 

By Danielle Leonard

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Beverley Seif—Best Wishes on Your Retirement

Bev Seif Retirement

We are both sad and happy to announce the well-deserved retirement of Beverley Seif, our Vice President & General Manager of Mohawk Global Trade Advisors (MGTA). Sad, because we are losing a remarkable member of our company and Mohawk family. Happy, because she will be free to focus on family, friends, traveling, and more, as she embarks on this new chapter.

Beverley has been an integral part of our company for the last six years and has led MGTA with passion, grace, and professionalism. Under her leadership, MGTA has doubled its consultants and expanded its services by adding experts on Customs Trade Partnership Against Terrorism (CTPAT), Duty Drawback, and Foreign Trade Zones (FTZ). Beverley, herself, is one of the country’s leading experts on CTPAT and is a member of the COAC CTPAT Minimum Security Criteria working group.

We wish her the all the best on her future endeavors and hope she knows how greatly she will be missed.

Though filling her shoes will be virtually impossible, we are on the search for the right person to take over her role.

In the meantime, Gar Grannell, President, will handle leadership and administrative matters, while Robert Stein, Vice President, will handle business development—including sales, marketing, events, and FTZ business.

“Bev leaves an indelible mark on our company and because of her extraordinary leadership, the MGTA team is set on a course for continued growth and success. She will always be part of the Mohawk family.”
-Gar 

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Is this Underwriters Laboratories (UL) Trademark Authentic? The Onus is on Importers to Know for Sure

UL Mark

If you purchase and import products that bear the UL trademark, the onus is on you as the importer to ensure the supplier applied for and received UL certification for these products prior to import. With certification also comes the authorization, or license, to use the UL mark on said products. Importers bear all the risks here and must make this determination before these products reach U.S. borders.

The importance of this is highlighted here in a recent court case, ICCS USA v. United States. Briefly, ICCS USA imported products which were released to them by Customs and Border Protection (CBP). Subsequent to release, ICCS USA received a notice from CBP directing them to redeliver those products as they were UL marked but found not to be on the UL list of verified products. As one of their Priority Trade Issues (PTI), CBP enforces certification marks at our borders. Because ICCS USA was unable to redeliver the entire shipment, CBP assessed thousands of dollars in damages for those products not redelivered. ICCS USA challenged the notice in the Court of International Trade (CIT), which sided with CBP. 

How Can Importers Be Sure?

Importers can gain assurance by working closely with all their suppliers to ensure products not only bear the UL mark, but also that the products are UL certified, giving the supplier authorization to use the mark. Importers can request a copy of the UL certificate from suppliers as proof. However, this is not enough. Importers must take additional steps to verify the authenticity of the certificate being provided since counterfeit markings and certificates are known to exist. It stands to reason that any products with unauthorized or counterfeit markings did not go through the rigorous testing standards followed by UL. As a result, the potential to expose consumers to dangerous, unsafe products can be high. 

Also, it is important to note that UL certification for one product does not necessarily extend to other similar products that the supplier sells. Importers must ensure suppliers submit a certificate for each different product – no matter how similar they may be. Ensure the UL certificate is for the exact product being imported. 

Underwriters Laboratories (UL) Markings and Why They’re Important 

According to its website, UL has been empowering trust dating back to 1894. Trust is the foundation of its business model. 

UL is a global organization that operates independently, setting strict safety standards and ensuring products are safe from potential risk to consumers for personal injury. UL subjects products to rigorous testing and evaluations based on these strict safety standards. Products are not certified until they meet these established standards. 

The primary focus of UL is rooted in connecting people around the globe to safer, more secure products. Consumers have come to rely on and trust in the safety and security of products that display the UL mark when they arrive at our seaports. 

UL, Customs and Border Protection & Zero Tolerance 

Importers bear all the risks. Not taking the proper steps to ensure compliance can be very problematic for importers and detrimental to their business. The highly regarded UL mark is synonymous with trust – the foundation of UL’s very existence. UL protects this marking vigorously and has a zero-tolerance policy for its misuse – intentional or not.

It’s important to keep in mind that other markings on the product are certifications as well. For example, Bluetooth, HDMI and Non-GMO to name a few. It’s a good idea to verify all markings displayed.

Again, this is a PTI for CBP and, as such, they support and enforce UL’s zero-tolerance policy as well.

Once products arrive in a U.S. port, and if they are subsequently deemed to have unauthorized UL marks, the products will be destroyed, and importers will not be reimbursed. Importers can also be fined and, worse yet, find themselves the subject of an unfavorable press release. We cannot stress it enough – Zero-Tolerance. Take adequate steps to ensure UL marks are approved and certified.

Steps to Take to Compliancy

  1. The first step is for importers to work closely with their suppliers and ask them to provide a UL Certificate for the exact products they are importing. Keep in mind other markings on the products should have certifications as well.
  2. The next – and most important – step for importers to take is to verify the certificate using a freely available, public tool.

To learn more about our import compliance services, contact Mohawk Global Trade Advisors.

 By Yvonne Scott-Younis

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Section 301 Tariff Increase Delayed

301 delayed mgta

President Trump has announced that the Section 301 tariff increase will be postponed again. This is due to “substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.”

The tariffs were scheduled to increase from 10 percent to 25 percent on January 1 and were delayed to March 1. Now, they have been delayed further but a new effective date has not been set.

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