U.S. Customs plans for the future, based on recent discussions within Customs as well as with the trade are based on two concepts:

1. treating importers as "accounts" to be rated for risk or trustworthiness and managed accordingly, and

2. tying in various Customs programs, such as the C-TPAT (the Customs-Trade Partnership against Terrorism), ISA (Importer Self-Assessment), ISF (Importer Security Filing--for sea shipments only) and FAST (the Free and Secure Trade Program--which relates to trucking goods from Canada and Mexico.)

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The “First Sale Rule” saves importers very significant duties when merchandise is purchased from a middleman rather than directly from the factory. It allows the goods to be appraised at the lower factory price and eliminates duties on the middleman’s mark-up. The claim must be backed up with such documents as the factory invoice and proof of payment by the middleman to the factory. While the middleman might be reluctant to reveal its mark-up, this should be no problem where it is an affiliate of the importer or where there is a well established relationship with it.

Customs never liked this rule and accepted it only after two court cases forced it to do so. Some months ago it announced it was again reviewing the rule with an eye towards its revocation but in the face of stiff resistance, suspended its review. It recently infomarly announced that it would no longer seek to change the rule, but proper support would continue to be required.

Interestingly, the EU has traditionally used the "First Sale Rule" but ma countries in Europe are reconsidering as the thought is that using a "Last Sale Rule," Considerable Customs duties could be assessed.

Within the 688 page “Farm Bill of 2008” which was passed in June, 2008, is a provision that requires importers to file a new form covering the importation of wood, plants and products made with wood or plants. The declaration, which can be filed electronically, must list the species and country of origin of the plant or wood from which the product was made. The provision went into effect on December 15, 2008 but enforcement has been delayed and will be in stages. The Department of Agriculture recently announce the first four initial phase-ins. All the items covered in these phases are classified in Chapters 44, 47, 48 and 94 of the US Harmonized Tariff. Enforcement will begin May 1, 2009, with regard to products classified under the following tariff headings;

4401--Fuel wood
4403-- Wood in the rough
4404--Hoopwood, poles, posts, stakes
4406--Railway and tramway sleepers
4407--Wood sawed or chipped lengthwise
4408--Sheets for veneering
4409--Wood continuously shaped
4417--Tools, tool handles, broom handles
4418--Builders' joinery

First Phase: Until March, 2009, importers will at their option be allowed to file thee declaration. This period should be used as an opportunity to develop systems for obtaining and filing the required information.

Second Phase: Commencing September 30, 2009, declarations will be required for for plant and wood products that that are minimally processed or of less complicated composition such items as lumber, tools and wood carpentry;

Third Phase: Commencing March 31, 2010, filings will be required for the above plus products that are more processed or complex, such as particle board and wooden tableware.

Fourth Phase: Commencing commencing September 30, 2010, this phase covers the above plus more highly processed articles, including paper, paperboard, and wooden furniture.

Agriculture has stated that declarations will not be required for goods covered by infomal entries, goods covered by carnets or imported under Transportation and Exportation entries, and goods covered by foreign trade zone and warehouse entries, among others.

On June 1, 2010, settlement was reached in California with a number of larger and smaller retailers, including Macy's, Bloomingdales, T.J. Maxx, and Target, among others, regarding acceptable levels of lead in handbags, purses, clutches, wallets, belts and footwear. Companies not parties to the suit were allowed to "opt-in" to receive the same benefits under the settlement but no later than August 11. Those who have not,

Other articles containing lead are still subject to the full force of this law.

Opting-in was expensive--$40,000.00 for the first category, a little lower for additional ones. Opting-in gives a company the benefits of the settlement, which includes extended compliance dates for non-conforming merchandise and lower penalties when non-compliance is found.

If there is no opt-in, and non-compliance with maximum lead content is found for the specified products, companies will be exposed to lawsuit and significant penalties, and exposure extends to goods presently on the shelves. The option for non-conforming goods that they bear a label that states essentially that the product contains lead, which the State of California deems to be a known carcinogen, and that users are advised to wash after using. Placeing the label on after a violation is found is no remedy.

Prop 65 applies only in California and is separate from the federal requirements. the latter a the date of this posing as to lead content relate primarily to children's articles but which we expect to be expanded.

It is likely that nationwide retailers will insist on conformity with the California established lead limits, if not the opt-in, as the retailers cannot segregate inventory by state of destination.

This informational statement and is not to be used as legal guidance as there are many significant details that are not encompassed in this alert. See following page for the acceptable lead limits per the settlement.

When you return from a trip abroad, you have no right to confidentiality when it comes to data contained in your laptop .

In an effort to police the trade in child pornography, US Customs has for years been detaining laptops carried by returning business travelers as well as vacationers, often targeting middle age men. The courts have upheld the right of US Customs to detain and review laptop contents on a random basis, without the need to obtain a search warrant or otherwise justify its action. Computers can be detained for months, often long enough to render their contents untimely and useless. They are often confiscated without meaningful judicial review, as contesting the seizure can often be prohibitively expensive.

Recently, a federal court in Northern California limited Customs' authority to review content, but only slightly. In a case where Customs detained a laptop in January, the Court ruled that it needed a warrant if it waited until June to review its contents.

We suggest you be sure to back up all data in your laptop before going abroad and be sure that important business data and plans developed abroad will not be lost or be unavailable when needed should your laptop be detained.

The House passed a bill that, effective 90 days after enactment--and it has not been enacted yet--removes the existing labeling exemption for garments (defined to include clothing or any article that covers a part of the body, such as shoes) that contain small amounts of fur.

The Fur Products Labeling Act currently requires articles of apparel containing fur to be labeled with the name of the species used, the manufacturer, the country of origin and other information on a label for specified size and in type of a specified font size but exempts products containing less than $150 worth of fur.

The exemption will not apply if you trap the animal yourself!!

On November 24, 2008, Customs published in the Federal Register a 64 page notification of the long awaited implementation of the 10+2 rule. This refers to the two items of information regarding the cargo that must be supplied by the carrier and the 10 items of information that must be supplied by the importer at least 24 hours before lading of goods bound for the US. The information must be supplied via a Customs' approved electronic data interchange system and this will generally involve your Customs broker, who has access to the computer program. (The currently approved system for importers is ABI; for vessels, it is AMS.) The security filing is mandatory on and after January 26, 2010.

Customs has delayed enforcement of the penalty provisions of the regulations through the end of the third quarter or 2010 and there is talk of a further extension to the end of 2010, but companies must be able show that they are actively getting systems in place to assure conformity to benefit from preferential treatment should deficiencies be found

Penalties are to be reduced for Tier II an Tier III members (see section on C-TPAT) in our home page.

More details follows:

Customs is increasingly targeting LDP and DDP shipments. Such goods are sold by a foreign manufacturer or middleman, or through a US selling agent. They are imported by a US-based company, generally but not always an affiliate of the shipper or seller, and are usually drop-shipped to the customer. The import invoice amount is well below the price paid by the customer.

Administrative requirements under the Consumer Product Safety Improvement Act of 2008 (CPSIA) have been, for the better part of a year, promulgated, modified, and stayed at an unprecedented rate. Yesterday's absolute requirements and implementation dates may no longer be in effect; coverage may have been limited or broadened. Before continuing on an existing or embarking on a new program involving the purchase and sale of any covered item,it is imperative that you consult with counsel or other advisor to be sure you are up to date.

OVERVIEW

Products subject to Consumer Products Safety Commission (CPSC) rules, regulations, testing requirements, bans and standards and of those of other agencies that it enforces must be covered by a new certification of compliance. The categories of merchandise covered is broad, with those covering infants', children's and toddlers' products being particularly stringent. The law covers consumer products manufactured, both domestically and abroad, on and after November 12, 2008 but implementation has been repeatedly delayed for many products, most recently for a wild variety of (but by no means all) products, per an announcement dated December 18, 2009, just about two months before the previously announced cut-off date. This certificate must "accompany" the goods at the time of importation or, for domestic goods, their introduction into commerce. The certificates must also be "furnished" to distributors and retailers by the importer or domestic manufacturer. The law requires the destruction of imports that are not covered by a certificate prepared before importation. Failure to furnish them to a distributor or retailer will result in equally onerous penalties. As having the certificate gives some protection to the distributors and retailers, they can be expected to demand them.

Customs and Border Protection announced on October 22rd that it can opt to employ sampling techniques during its audits in order to determine if there are any deficiencies in Customs declarations or if there are duties (and penalties) owing. The new proposed regulations for the most part embody existing practices. For example, they allow for offsets against duty underpayments for overpayments uncovered during the course of an audit, but regulations or not, this allowance has been in effect by statute since 2002. Major changes are that once a sampling technique is agreed upon by the importer, it will lose the option to request an entry-by -entry review should it later find that the sampling works to its disadvantage. Also new is the adoption of sampling for "prior disclosure." Under prior disclosure, penalties are eliminated or greatly reduced should an importer declare an underdeclaration before Customs initiates a formal investigation into the matter. There had been no authority to allow offsets for overpayments in a prior disclosure.