The CBP Officer of the Future

 

by Janet.Labuda@FormerFedsGroup.Com

At the recent U.S Customs and Border Protection (CBP) west coast trade symposium, a panel titled “Global Innovation,” which included representatives from the Department of Homeland Security’s Office of Science and Technology, CBP’s National Targeting Center [It is not clear if this is one or two organizations.] discussed innovations in software applications and data usage that enhance supply chain security.

 

One question raised by the panel was, what would a future port look like?  The question I raised, in return, was what will a future CBP officer look like? The question remained unanswered, but is one that needs to be considered seriously.

 

As CBP continues to seek and use innovative technologies, it is the officer who needs to understand the technology as it will serve as his/her partner in both the agency’s enforcement and facilitation missions. Ultimately, the officer will need to become a savvy data analyst.

 

In addition, the operational personnel, i.e., Customs and Border Protection officers, import specialists, and trade analysts must be grounded in a solid understanding of the import and export dynamics of international trade. This includes production, sourcing, and logistics trends.

 

In order to be able to maximize the use of available technology, strategic and critical thinking skills must be in the officer’s tool box. Being able to identify, address and prioritize problems will be essential. The days of continuing to focus on low-hanging fruit that fails to bring positive returns to both the agency and the trade community will be over.

 

The mere accessing of data is a waste of time if the ability to evaluate it does not exist. Effective evaluation is critical to enabling supervisors and managers to make decisions on the optimal deployment of limited resources.

 

In general, the officer must be flexible and nimble as global trade trends shift along with the potential risk. Continuing to hold onto historic trends and patterns will only cause the officer to be reactive, instead of proactive, as new challenges emerge. In addition, quick communication by analysts to officers at the port is vital. There is nothing worse than acting on inaccurate or old data. If your efforts do not produce results you must swiftly react to make necessary adjustments.

 

Corporate compliance officers need to have the same skills and approaches to be effective and provide a value-added service across company operations.

 

Janet Labuda on Trade by the Numbers

By Janet.Labuda@FormerFedsGroup.Com

Recently, President Trump sent a memo directing Secretary of Commerce, Wilber Ross, to initiate an investigation of steel and aluminum products. The rarely used investigative authority found under section 232(b)(1)(A) of the Trade Expansion Act of 1962 (19 U.S.C. 1862(b)(1) determines any detrimental trade activity affecting U.S. national security.

In addition, the Presidential memo lists other “core industries such as…vehicles, aircraft, shipbuilding, and semiconductors. The administration considers these as “critical elements of our manufacturing and defense industrial bases, which we must defend against unfair trade practices and other abuses.”

The Secretary of Commerce reports to the President, within 270 days of initiating the investigation and focuses on whether the importation of the article in question is in such quantities or under such circumstances as to threaten to impair the national security. The President can concur, or not, with the Secretary’s recommendations, and take action to “adjust the imports of an article and its derivatives,” or other non-trade related actions as deemed necessary.

Another trade remedy is found in Section 301 of the Trade Act of 1974. This law provides the United States with the authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services. It is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices. When negotiations to remove the offending trade practice fail, the United States may take action to raise import duties on the foreign country’s products as a means to address the trade imbalance.

Under section 332 of the Tariff Act of 1930 (19 U.S.C. 1332), the U.S. International Trade Commission (USITC) conducts investigations into trade and tariff matters upon request of the President, the U.S. House Committee on Ways and Means, the U.S. Senate Committee on Finance, either branch of the Congress, or upon the Commission’s own initiative. The USITC has broad authority to investigate matters pertaining to the customs laws of the United States, foreign competition with domestic industries, and international trade relations.

The USITC can also conduct investigations using section 337, to determine whether there is unfair competition in the importation of products into, or their subsequent sale in, the United States. Section 337 declares the infringement of a U.S. patent, copyright, registered trademark, or mask work to be an unlawful practice in import trade. It also declares unlawful other unfair methods of competition and unfair acts in the importation and subsequent sale of products in the United States, the threat or effect of which is to destroy or substantially injure a domestic industry, prevent the establishment of such an industry, or restrain or monopolize trade and commerce in the United States.

Section 337 investigations require formal hearings held before an administrative law judge. If a violation is found, the USITC may issue orders barring the importation of certain products into the United States. In addition to requesting long-term relief, complainants also may move for temporary relief pending final resolution of the investigation based on a showing of, among other things, irreparable harm in the absence of such temporary relief.

Subtitle A of title VII of the Tariff Act of 1930, as added by the Trade Agreements Act of 1979 (19 U.S.C. § 1671 et seq.) and subsequently amended, provides that countervailing duties will be imposed when two conditions are met: (a) the U.S. Department of Commerce (Commerce) determines that the government of a country, or any public entity within the territory of a country, is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of the subject merchandise that is imported or sold (or likely to be sold) for importation into the United States and (b), in the case of merchandise imported from a Subsidies Agreement country, the USITC determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise.

If Commerce determines that a countervailable subsidy is being bestowed upon merchandise imported from a country that is not a Subsidies Agreement country, a countervailing duty can be levied on the merchandise in the amount of the net countervailable subsidy without a USITC determination of material injury.

In addition, Subtitle B provides that antidumping duties will be imposed when two conditions are met: (a) Commerce determines that the foreign subject merchandise is being, or is likely to be, sold in the United States at less than fair value, and (b) the USITC determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise.

Sections 201 to 204 of the Trade Act of 1974 (19 U.S.C. 2251 to 2254) concern investigations conducted by the USITC to determine if a product is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to a domestic industry.

If the USITC makes an affirmative determination, it recommends to the President the action that will address the serious injury or threat and facilitate positive adjustment by the industry to import competition. The President makes the final decision on remedy, including the form, amount, and duration.

There is no doubt that the current administration will use every available tool to initiate investigations and take action where such investigations determine injury to U.S. domestic industry by foreign imports. Continue to keep track of the announcements by the White House, Commerce, the USITC and CBP, and don’t get tripped up on the numbers.

Labuda on Fake News and Trade

Former CBP Official, Janet Labuda at FormerFedsGroup.Com, provides us with her take on the importance of verifying the accuracy of news information in an emerging world news can longer be taken at face value.

 Janet.Labuda@FormerFedsGroup.Co

Over the last few months the fake news dilemma has featured prominently in the media. Day in and day out we receive bits and bytes of information through social media and other electronic sources that many read and take to be the truth, the whole truth, and nothing but the truth, regardless of how outlandish the claim or the source.

Such bits of information are rarely vetted either through our own personal “common sense” filters or through other reliable filters . This usually happens because we are pressed for time and simply can’t find the few minutes needed to verify and validate the information presented to us. What is even more problematic is that many of us pass on such unfiltered misinformation through broad electronic social networks thus perpetuating and exacerbating the problem.

The same holds true for the data we collect in the area of international trade. Customs uses data to drive every element of its trade facilitation and enforcement programs. Data collection and its subsequent crunching, dicing and slicing is the bedrock of their risk management processes. Decisions by Customs to focus on certain areas of potential non-compliance, on shifting resources to contain  perceived risk, and on pinpointing companies and their transactions for audit, and further scrutiny are made on what data is reported.

The key questions for companies are: how reliable is the data that is reported, and who is responsible to ensure that the data is accurate and reliable? In addition, what internal controls are followed to vet information. Compliance means reporting accurate information on the transaction to substantiate adherence to legal and regulatory requirements. U.S. Customs and Border Protection enforces strict record keeping requirements, which state “the accuracy of import (and export) information is important not only because it affects the revenue, but because accurate trade information and statistics are important in determining trade policy, the future eligibility of certain goods or goods from certain countries for special programs, the impact of imports on domestic industries, and the effectiveness of various trade agreements and programs.”

Companies need to established sound practices of filtering data received as well as   self-generated. If data is not regularly tested and validated it leaves your company in a vulnerable position. By reporting incorrect data to regulatory agencies, whether you yourself file, or you use a broker to file on your behalf, your company may be subject to unnecessary enforcement reviews, and penalties.

When it comes to data reporting, garbage in, garbage out is not acceptable anywhere in the supply chain. Only accurate and reliable data can help to keep your company insulated from risk.

Labuda on trade risks

Compliance: what are the trade risks (part 1)

by Janet.Labuda@FormerFedsGroup.Com

Over the last few weeks, I have written a series of short articles discussing the need for developing a compliance-based approach to transacting international trade. This will help to prepare your organization to effectively deal with the risks inherent in importing.

What are these risks that continue to be the focus of U.S. Customs and Border Protection (CBP)? There are various operational policies and programs that give insight into the agency’s concerns. The most important is the identification of Priority Trade Issues (PTIs). Currently, CBP considers the agency’s trade enforcement priorities to be:

Antidumping and Countervailing Duty case administration and enforcement;

Import Safety;

Intellectual Property Rights protection;

Revenue;

Textiles; and

Trade Agreements.

In CBP’s own words “Priority Trade Issues (PTIs) represent high-risk areas that can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people. They drive risk-informed investment of CBP resources and enforcement and facilitation efforts, including the selection of audit candidates, special enforcement operations, outreach, and regulatory initiatives.”

* * * * * Click here for the rest of the story * * * * * 

 

Compliance: it starts at the top

GeyerGorey LLP draws upon Janet Labuda’s contacts and experience to understand trade enforcement trends.  Here she is with her latest on the importance of compliance. Janet can be reached at the FormerFedsGroup.

By Janet.Labuda@FormerFedsGroup.Com

Whether you are a small to medium sized enterprise, or a large multinational corporation, creating a culture of compliance starts at the top. This compliance culture should permeate your entire organization starting with the Chief Executive, the Chief Financial Officer, and the corporate counsel.

Compliance is not something that can be compartmentalized, rather, it must be ingrained in the consciousness of every employee from the executive suite to the shop floor. This is one area where a top down driven process is vital. The compliance officer is responsible for implementing the compliance focused program that is established by the corporate ownership and top management.

However, all aspects of the company, whether sourcing, transportation, production, marketing, or sales must work together to support the compliance operation. Leaving just the compliance office to establish the ethic and carry the entire company is an accident waiting to happen.

I often hear that various departments in a company do not understand the compliance aspect of the operation, which sometimes leads them to negate the guidance of the compliance department.  This can lead a company down a slippery slope.

The corporate culture must embrace compliance across the entire company and all must understand the risk of potential regulatory violations.  A once a year training program is not going to cut it.  Compliance is something that everyone must  live, day in and day out.  Workplace evaluations should include a compliance segment for each and every employee. Every department head needs to understand and communicate compliance procedures to their direct reports.

The compliance department must keep a finger on the pulse of risk.  The compliance officer should be responsible for communicating these risks throughout the organization and information should be refreshed and disseminated as often as necessary.  To this end, the CEO must make time for compliance officers, and not leave this critical function on auto-pilot.

Once a vibrant internal compliance driven operation is rooted in the day-to-day operation, companies must push their ethic out to their entire supply chain.  This includes interaction with foreign suppliers, agents, and transporters.  Everyone in the supply chain needs to understand that by doing business with your company, they accept the strict standards that support adherence to the laws and regulations governing trade and all aspects of how the business conducts itself.  This should be reflected in all corporate negotiations, contracts, and purchasing agreements.

By taking this position, senior corporate management supports the highest levels of business ethics and integrity throughout the supply chain.  Compliance is not a skate on thin ice, or a fly by the seat of your pants exercise.  A culture of compliance provides that  sure footing needed when regul

Trade compliance–why bother?

by Janet Labuda

I worked in Customs for over thirty years and met regularly with importers to discuss trade risk, compliance, and enforcement. Often, companies would express their concerns about the cost of compliance–the proverbial cost benefit analysis. If money is spent to create a compliance department, what will the benefits be? Do the risks of possibly getting caught by Customs outweigh the investment in corporate trade compliance? How can there be an effective response to risk without the associated high costs?

Just as with most things, there are rules that govern our behavior. When we drive to work there are lane markings on major thoroughfares, and traffic light systems, and posted speed limits to guide us in an orderly fashion. The same can be said for international trade rules. They are meant to make order out of potential chaos. No person or company can operate successfully in an atmosphere of chaos. Business seeks out predictability, and stability. The rules and regulations governing trade provide a needed stable structure that can help companies weather shifts in the global economy or changes to the legal or regulatory framework.

More importantly, the rules help to level the playing field, and enhance and improve the competitive business dynamic. When companies fail to operate using these rules the underpinnings of trade policy collapse. Trade preference program become endangered, national economies become threatened, sourcing models get upended, business relationships are uprooted.

In addition, companies can get swept up in enforcement actions. Customs assesses risk using somewhat broad parameters. It could be driven by product, country of origin, manufacturer, preferential trade program usage, or combinations of these elements. There are also those instances when very specific information reaches the agency.

The better question to ask is what price is paid if my company does not invest in a culture of compliance? Getting enmeshed in Customs or other regulatory enforcement actions can tarnish your brand, lead to expensive law suits and penalty actions, and divert your resources away from your corporate mission and goals.

Ensuring a strong compliance structure in your organization ensures greater facilitation of product entering the commerce which supports just in time inventory practices. Costs are reduced for both government and business by focusing limited resources to enhancing productivity. A compliance driven operation is a win-win.

Who’s driving your trade compliance bus?

We are including a column by Janet Labuda of the FormerFedsGroup which has supported GeyerGorey LLP with investigative and compliance resources and helps FormerFedsGroup clients on compliance issues involving international trade and Customs matters. I will oversee FormerFedsGroup trade compliance training programs and set the protocols of the PerfectShield (TM) certification process.

By Janet Labuda

The short answer to the question who’s driving the compliance bus is your corporate compliance department. The driver’s seat, should not be filled with personnel from your transportation and logistics operation, the sourcing, or import management groups. All parts of your organization need to be involved in your culture of compliance, but the compliance department is where the rubber meets the road, so it should be staffed with highly focused compliance experts. Companies also should ensure that Customs is not in your driver’s seat.

In 1993, the U.S. Congress amended the Tariff Act of 1930 by enacting, as part of the North American Free Trade Agreement, the Customs Modernization Act (Mod Act). Inherent in the legislation was a shift of responsibility, to the importer, to ensure that imports are compliant. In addition, a series of recordkeeping requirements with tough penalty provisions were established. The Mod Act also introduced the two concepts of informed compliance and reasonable care into the legal and trade lexicon. Customs must explain the rules, and importers, and others in the trade community, must take care to understand and follow the rules.

The legislation gave the bus key to the importers. But, an important thing to remember is that although, the importers are driving the compliance bus, the route is dictated by Customs. Most times importers find that they do not travel on the most direct route. Often, there are bumps in the road and unexpected detours. You must be prepared for these inevitabilities.

Over the last few weeks, it has become obvious that international trade will be a priority for U.S. policy makers. The trade community can expect a greater emphasis on the enforcement of laws and regulations, and possible changes to current trade legislation, especially as it relates to preferential access to U.S. markets. Our traditional trade relationships will be tried and tested, and may see unexpected changes to the current norm.

From past experience, the federal government pendulum tends to swing in wide and sweeping arcs. Establishing a predictable balance can be difficult to achieve as guidance and focus shift. Often, the importing community gets caught in the middle.

The time for doing some critical introspection is now. Do not allow your company to be caught off guard. The following recommendations are ways your company can engage in upgrading your bus’s safety and navigation systems:

  1. Put yourself in Customs shoes and do a complete review of your operations and document how you believe your company is meeting a reasonable care standard.
  1. Enhance your corporate internal controls, as needed.
  1. Ensure a transparent and understandable supply chain for all phases of your overseas production.
  1. Don’t fly under the radar screen. Develop a regular outreach to Customs and other federal regulatory agencies.
  1. Review your business relationships to guarantee that there is an understanding that compliance is key to working with your company.
  1. Become a CTPAT tier three partner or an Authorized Economic Operator, and keep abreast of Customs Trusted Trader programs.
  1. Work closely with a professional broker to navigate complex trade issues. A broker dedicated to compliance is a force multiplier for your company.
  1. Understand the nature of any perceived risk, e.g., forced labor, anti-dumping circumvention, trade preference non-compliance, and how your products and partners might be affected by such risk.
  1. Review your sourcing strategies in light of the potential risk you identify.
  1. If you uncover a problem seek legal advice on the best way to move forward to mitigate any potential downstream penalties.
  1. Ensure that all corporate departments are pulling in the compliance direction.
  1. Provide regular compliance training throughout the company.
  1. Work through industry associations to have your voice heard when changes in government policies and procedures affect your business model.

Start your engines, buckle up, and try to enjoy the ride.

Labuda on The Role of Customs in National Economic Growth

The Role of Customs in National Economic Growth

By Janet Labuda**

Traditionally, Customs Services have  been tasked with the collection and protection of revenues generated from the importation of goods into their respective countries. Declared valuation of the imported goods is the basis for the collection of duties and value added tax for the national budgets. However, as the global economy is gravitating toward various free trade and duty-free preference partnerships and regional economic integration the traditional role of Customs is evolving.

Most Customs Services will readily admit that the growth of import trade and resulting complexities are often overwhelming for current personnel numbers, training, and abilities. The World Customs Organization has advocated the use of various risk management programs to identify the highest risk transactions, and therefore direct limited resources to addressing only these risks, while absorbing lower risk situations. Various countries have also established trusted partnerships with members of the supply chain using the business community as a force multiplier for compliance. Modern Customs Services must be on the leading edge of building a culture of compliance within the global trade community.

The international trade community has embraced the concept of just in time inventory procedures and Customs must embrace a just in time response to the needs of business. The lack of timeliness in regulatory decisions, and addressing legal issues, e.g., protests, the inability to create clear and concise regulations to elucidate new legal requirements, and failure to understand the business of business has a detrimental effect on corporate prosperity and subsequently a nation’s economic growth. Customs must see itself as an economic growth engine and compliance partnerships need to be expanded to include economic growth partnerships.

Generally, companies that reach out to Customs are seeking to enhance their compliance footprint, not to engage in questionable trade practices. There is no doubt that there are those in the trade community who engage in undervaluation, circumvention of anti-dumping duties, the introduction of goods that violate intellectual property rights, and in introducing products that adversely affect the health and safety of consumers. In these situations, Customs should take swift and effective enforcement action. Violations such as these also have a dampening effect on economic growth. However, for those companies seeking to be compliant players in the global economy, Customs Services need to step up and engage in collaborative solutions and ways forward.

Customs has a duty to remove unnecessary roadblocks affecting international trade transactions. Creating policies that are the antithesis of global economic partnerships is unacceptable. Customs Services should recognize their role in national economic growth by taking steps to ensure that Customs officials are trained in the complexities of international trade and the legal requirements necessary for a seamless facilitation of legitimate trade. Customs needs to develop programs that enable the highest level of integrity among Customs human resources and to develop strong risk management programs that address serious violations, rather than just seeking to pluck low hanging fruit which have little risk to compliance or which impede the flow of compliant trade. Of course, it is critical to ensure that adequate resources are in place to quickly address requests from the trade community regarding legal advice and rulings. Mutually developed compliance programs must take into account business needs, and provide quick and effective communication with the trade community. Customs must guarantee consistent and uniform treatment of issues across various ports and government agency offices to ensure predictability.

For import/expert issues, Janet can be contacted at Vandegrift Inc.  Janet can also be contacted at FormerFedsGroup.