customs procedures for imports with cafta-dr preferential...

Customs Procedures for Imports with CAFTA-DR Preferential Treatment

October 16, 2014

Guatemala City Copyright © 2014 BJ Shannon All Rights Reserved

ALSTON&BIRD LLP

Roadmap

1. CAFTA Origin Rules

2. CAFTA Enforcement

and Verifications

3. CAFTA Documentation

Requirements

4. Examples and Common

Pitfalls

5. Conclusions and

Suggestions

1. CAFTA Origin Rules

•Apparel origin rules

•Special rules for

certain materials

•Special rules for

certain garments

•Country-specific

programs

•Short supply

Originating Goods

• Originating goods qualify for CAFTA treatment

• Originating apparel articles are almost always duty-free in the United States

• Originating goods must meet CAFTA’s rules of origin

• All the CAFTA rules can be found at General Note 29 of the HTSUS

• The HTSUS is at: http://www.usitc.gov/tata/hts/bychapter/index.htm

http://www.usitc.gov/tata/hts/bychapter/index.htm



Originating Goods

•What does it mean to be

originating?

• One possibility: “Wholly

obtained or produced

entirely”

- All CAFTA origin

- Minerals mined in the United

States

- Coffee grown, harvested, dried,

milled, and roasted in

Guatemala

Wholly Obtained/Produced Entirely

• Cotton planted, grown, ginned, carded and combed in Guatemala

• Buttons and labels all originate in the United States

• Cotton fiber spun into yarn and sewing thread in Guatemala

• Yarn knitted into fabric and fabric dyed and finished in Costa Rica

• Fabric cut and sewn with Guatemalan sewing thread into shirt and shirt pressed and packed in Costa Rica

• Result: Wholly obtained or produced entirely (originating) shirt!

Originating Goods

• But most apparel contains at

least some non-originating

content

• Another possibility: Meeting

“specific rules of origin”

• Allows non-originating (foreign) inputs

• The specific rules of origin are

expressed as “tariff shift” rules

• Some rules include “regional value

content” requirements

- Textiles and apparel are never subject to

regional value content!

CAFTA Specific Rules of Origin

• Yarn forward: most common

tariff shift rule for CAFTA

apparel

• Chapter rules: sewing thread,

visible lining, narrow elastic

fabric, and pocketing

• De minimis: 10 percent; except

for elastomeric yarn

• Single transformation: boxers,

brassieres and now many others

• Short supply: designated yarns

and fabrics

• Special deals: Cumulation and

TPLs

Men’s Woven Trousers

• Tariff shift rules are based on the HTSUS

classification of the finished good and

specify the HTSUS classifications of

inputs that must be originating

• Example of yarn forward tariff shift rule:

A change to subheadings 6203.41 through

6203.49 from any other chapter, except

from headings 5111 through 5113, 5204

through 5212, 5310 through 5311,

chapter 54, headings 5508 through 5516,

5801 through 5802 or 6001 through 6006,

provided that the good is cut or knit to

shape, or both, and sewn or otherwise

assembled in the territory of one or more

of the parties to the Agreement

Yarn Forward Rules

• A change to subheadings 6203.41 through 6203.49

• from any other chapter, • except from headings 5111

through 5113, 5204 through 5212, 5310 through 5311, chapter 54, headings 5508 through 5516, 5801 through 5802 or 6001 through 6006,

• provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement

• A change to certain trousers • from any nonoriginating goods, • except from wool woven fabric,

cotton yarn or cotton woven fabric, some vegetable fiber woven fabrics, man-made filament yarn or man-made filament woven fabric, man-made staple yarn or man-made staple woven fabric, some special woven fabric (pile and terry) or knit fabric,

• provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement

Yarn Forward Rules

• Tariff shift rule applies to

component determining

classification - That component must be woven

or knit (or knit to shape) in the

Parties with yarn spun or

extruded in the Parties

- Staple fiber may be of any origin

• Garment must be cut or

knit to shape, or both,

and sewn or otherwise

assembled in the parties

But that’s not all . . . .

• Watch out for: - Garments with two or

more components

- Special rules for certain

materials (“the chapter

rules” for sewing thread,

visible lining, narrow

elastic, pocketing)

Two or More Components

• Only the component of the

garment determining

classification is subject to the

applicable tariff shift rule

- Usually the component that gives the

garment its essential character

- But the whole garment must be cut or knit

to shape and sewn or otherwise assembled

in CAFTA countries

Foreign cut or knit to shape components are

forbidden

Special Rules for Certain Materials

• The Chapter Rules

• The CAFTA origin rules

for HTS chapters 61 and

62 (knit and woven

apparel) include additional

requirements for: - Visible lining

- Narrow elastic

- Sewing thread

- Pocketing

Sewing Thread

• Rules has always required

that covered sewing thread

of heading 5201, 5401 or

5508 (cotton, man-made

staple fiber or man-made

filament sewing thread)

must be formed and

finished in the CAFTA

Parties

Definition of Sewing Thread

For the purposes of headings

5204, 5401 and 5508, the

expression “sewing thread” means

multiple (folded) or cabled yarn:

(a) Put up on supports (for

example, reels, tubes) of a

weight (including support) not

exceeding 1,000 g;

(b) Dressed for use as sewing

thread; and

(c) With a final “Z” twist

Single Yarn Filament Sewing Thread

• Many producers use a single-ply filament sewing thread that is technically not classified as sewing thread and is classified as yarn in heading 5402, meaning that it previously could be of any origin under the chapter rule

• This practice was supported by a series of rulings obtained by importers who did the right thing to confirm their practice was compliant

• But some people considered this to be a loophole in CAFTA

Closing the Loophole: CAFTA Fixes

• The Parties agreed in February 2011 to make certain technical corrections, or “fixes”, to CAFTA

- Took effect October 15, 2012

• Expanded the chapter rule for sewing thread to cover yarn of heading 5402 used as sewing thread

• Also allowed any thread designed as short supply to be used where CAFTA sewing thread is required

• Additional fixes - Changed the rules for elastomeric yarn in

short supply fabrics and waistbands in short supply garments

- Allowed added uses of short supply fabric

- Added single transformation garments

What Kind of Yarn is This?

• Single, multifilament yarn

- NOT monofilament!

• It might have as many as 48 filaments in a strand of yarn; but it is not plied

• Plied yarn is only yarn made with two or more separate yarns twisted or plied together

Xungai and Shangyong, Yarn Technology and Quality

What About Embroidery Thread?

• Embroidery thread is also

often classified under

heading 5402

• Embroidery thread is

“contained in” a garment;

but is it “used as sewing

thread?”

• In other words, will

foreign embroidery thread

disqualify the garment

from CAFTA treatment?

Visible Lining Fabric

• Rule applies to specified fabrics used as visible linings in suits, suit jackets, skirts, overcoats, carcoats, anoraks, windbreakers, and similar articles

• Lining fabric must be formed from yarn and finished in the Parties

• Pursuant to the CAFTA fixes, short supply fabrics may be as used as visible lining in garments subject to the chapter rule

Narrow Elastic Fabric

• Narrow elastic fabric

- Fabric of either heading 6002 (knit) or

subheading 5806.20 (woven)

- Of a width not exceeding 30

centimeters and containing 5 percent or

more elastomeric yarn or rubber thread

• Commonly used in stretch

waistbands

• Must be formed from yarn and

finished in the Parties

• CAFTA fixes permit use of

narrow elastic fabric designed

as short supply

Pocket Bag Fabric

• Pocket bag fabric must be formed and finished in the Parties from yarn wholly formed in the Parties

• Unlike rule for visible lining, this rule is not limited to particular pocketing fabrics or pockets in particular garments

• CAFTA fixes allow short supply fabric to be used for pocketing

Exceptions to the Chapter Rules

• The chapter rules do not apply to:

• Single transformation garments

• Short supply garments

• Men’s and boys’ and women’s and girls’

woven wool suits, trousers, suit-type

jackets and blazers, vests, and women’s

and girl’s skirts, other than of carded

wool fabric or made from wool yarn

having an average fiber diameter of less

than or equal to 18.5 microns

• Nicaragua TPL garments

• Costa Rica “C” TPL

Men’s Woven Trousers, Again

• Main body fabric must be woven in the Parties with yarn spun or extruded in the Parties

• All components of the pants must be cut or knit to shape, or both, and sewn or otherwise assembled in the Parties

• Visible lining? Not applicable to trousers

• Narrow elastic? Not present

• Sewing thread? Must be formed and finished in the Parties

• Pocketing? Must be formed and finished in the Parties from yarn wholly formed in the Parties

Shirt Made with Egyptian Cotton

• Cotton fiber from Egypt is spun into yarn in Costa Rica, and the yarn is knitted into fabric in Costa Rica

• The fabric is cut and assembled into a shirt by sewing in Costa Rica

• Plastic buttons from China sewn on in Costa Rica

• Sewing thread formed and finished in the United States

• CAFTA result? Originating good!

Lined Blazer with Elbow Patches

• All of the other fabric making up the outer shell of the blazer (the component determining classification) meets the yarn forward rule

• Elbow patch fabric from Taiwan is imported into Costa Rica

• Visible lining, narrow elastic fabric and sewing thread meet the chapter rules

• All of the fabric components (including the elbow patches) are cut and assembled in Costa Rica

• CAFTA result? Originating good!

http://images.google.com/imgres?imgurl=http://www.snowissfur.com/garments/ElbowPatch4_edited.jpg&imgrefurl=http://www.maximumfun.org/blog/2006/02/keep-it-up-elbow-patches.html&h=348&w=300&sz=20&hl=en&start=1&tbnid=DpKZf2KuWNysnM:&tbnh=120&tbnw=103&prev=/images?q=elbow+patch&gbv=2&ndsp=18&hl=en&sa=N

Permitted Foreign Inputs

• Yarn forward rules are

written so that some yarns

and fabrics can always be

non-originating

• Yarn forward rules never

except

- Silk yarn or fabric (chapter 50)

- Linen fabric (heading 5309)

- Coated fabric (heading 5903)

Fabric Forward for Wool Garments

• Special treatment

for any wool yarn in

any garment - Wool yarn may originate in

a country outside the

CAFTA territory

- Fabric must be formed in

CAFTA parties

- Garment remains subject

to chapter rules

De minimis

• CAFTA’s de minimis rule allows the component determining classification to contain non-originating fibers or yarns if their weight does not exceed 10 percent of the component determining classification

• An exception says that apparel articles containing elastomeric yarns in the component determining classification will originate only of those yarns are wholly formed in CAFTA countries

Special Rules for Certain Garments

• Single Transformation - Also called “cut and sew” rules

- A garment subject to a single transformation rule only needs to be cut (or knit to shape) and sewn or otherwise assembled in the CAFTA Parties

• The fabric (or yarn) can be from anywhere in the world

• And the chapter rules do not apply!

Single Transformation: Boxer Shorts

• The tariff shift rules requires that foreign materials undergo the following change:

- A change to boxer shorts of subheading 6207.11 or tariff items 6207.19.90 (of man-made fibers only), 6208.91.30 or 6208.92.00 from any other chapter, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or more of the parties to the Agreement

Single Transformation Garments

• In CAFTA’s original text

- Woven boxer shorts

- Brassieres

- Pajamas

- Negligees

- Certain girls’ dresses

Additions to Single Transformation

• “Pocketing Letters” - The United States negotiated the

pocketing chapter rule to secure necessary votes for CAFTA in the U.S. House

- In exchange, CAFTA countries obtained concessions, most of which were new single transformation rules

Other concessions were duty reductions, changes to the Nicaragua TPL, and changes to the Costa Rica wool garment rules

Pocketing Letters Added

• Babies’ cotton dresses (6209.20.10)

• Certain women’s and girls’ coats and jackets (cat. 335 and 6202.93.45 and 6211.41.0055)

• Women’s and girls’ MMF suits (Cat. 644)

• Men’s cotton yarn dyed dress shirts (specifically identified within subheading 6205.20.20)

• Men’s MMF yarn dyed dress shirts (specifically identified within subheading 6205.30.20)

• Women’s wool anoraks (6202.91.2011)

• Men’s other fiber suit-type jackets subject to wool restraints (6203.39.9020)

• Women’s and girls’ ensembles (6204.23 and 6204.29)

• Women’s and girls’ suit-type jackets and blazers (6204.33.20 and 6204.39.80)

CAFTA Fixes Clarified

• Certain women’s and girls’

“pajamas and nightwear” were

already subject to a favorable

single transformation rule

• The word “nightwear” was

changed to “sleepwear” to avoid

an interpretation that would

give single transformation to

certain evening wear not

intended for sleeping

CAFTA Fixes Added

• The types of pajamas and

sleepwear eligible for single

transformation was

extended to include certain

women’s and girls’ woven sleep

pants, which were previously

subject to yarn forward

rules

Special Rules for Certain Garments

• The Pocketing

Letters also resulted

in partial duty

reductions for

certain non-

originating suits,

jackets and trousers

0.5 Percentage Point Duty Reduction

• Covered Garments - Women’s wool overcoats (6202.11.00)

- Men’s wool suit jackets (6203.31.90)

- Men’s MMF suit jackets (6203.33.10)

- Men’s wool trousers (6203.41.18)

- Men’s cotton trousers (6203.42.40)

- Men’s MMF trousers (6203.43.30)

- Women’s cotton trousers (6204.62.40)

• Requirement: Must be cut or knit to shape and sewn or otherwise assembled in Parties (still not originating)

• These garments remain subject to the chapter rules

2.0 Percentage Point Duty Reduction

• Covered Garments

- Boy’s MMF suits (6203.12.2020)

- Men’s MMF trousers (6203.43.40)

- Women’s MMF trousers (6204.63.35)

• Requirement: Must be cut or

knit to shape and sewn or

otherwise assembled in Parties

(still not originating)

• These garments remain subject to the

chapter rules

Country-Specific Programs

• Costa Rica - Two wool TPLs (“A” and “C”) and

a third TPL for prosthesis swimwear

- Negotiated in exchange for pocketing rule

• Nicaragua - TPL primarily for cotton and

manmade fiber apparel

- Included in original agreement but modified by the Pocketing Letters

• Dominican Republic - Permits duty-free U.S. import of

certain non-originating cotton apparel (in exchange for DR import of yarn forward fabric)

- Negotiated in exchange for the pocketing rule

Two Costa Rica Wool TPLs: “A” and “C”

• Coverage: certain men’s and boys’ and women’s and girls’ wool garments

• Requirement: Single transformation

• Limitations - Annual sublimit of 500,000 SME each

- Expire at the end of 2018

• The notes are at chapter 99, subchapter XV, US note 16 of the HTSUS

• Beware: the coverage of these TPLs is enormously complicated – careful scrutiny of the HTSUS notes on which they are based is critical to their proper use

Costa Rica Wool TPL “A”

• “A” applies to certain garments

containing 36 percent or more

by weight of wool or subject to

wool restraints

• Garments are subject to wool

restraints if they are not subject

to cotton restraints and the

wool exceeds 17 percent by

weight of all component fibers

• “A” is subject to the chapter rules for

visible lining, sewing thread, narrow

elastic fabric, and pocketing

Garments in “A”

• “A” includes specified men’s,

boys’, women’s, and girls’ suits,

suit-type jackets and blazers,

trousers, breeches, shorts, and

skirts

• Many but not all of the covered

classifications are for fine wool

fiber having an average fiber

diameter of 18.5 microns or

less

Costa Rica Wool TPL “C”

• “C” applies to certain garments

made from fabric of wool except

for fabric of carded wool, or

made from wool yarn having an

average fiber diameter of less

than or equal to 18.5 microns

- In other words, “C” cannot be used for

garments of carded wool or of fine fiber

• “C” is not subject to the chapter

rules for visible lining, sewing

thread, narrow elastic fabric, and

pocketing

Garments in “C”

• “C” includes men’s, boys’,

women’s, and girls’ suits, suit-type

jackets and blazers, waistcoats

(vests), trousers, breeches, and

skirts; but they can’t be of carded

or fine wool

• Notice the types of garments in

“C” aren’t quite the same as “A”

- “A” includes shorts and “C” does not

- “C” includes vests and “A” does not

Garments in Both “A” and “C”

• Many garments of other than

carded wool or of wool fiber

exceeding an average diameter of

18.5 microns are covered by

both “A” and “C”

• In such cases, the garments are

first counted against “C” until it

fills and then counted against

“A”

• Beware: “A” is subject to the chapter

rules while “C” is not

Prosthesis Swimwear TPL

• Only applies to post-mastectomy

breast prosthesis swimwear, with

features accommodating prostheses

• Requirements:

- Cut and sewn in Costa Rica with fabric of any

origin

- Not subject to chapter rules

• Limit: 133,823 SME in each year

2014 through 2018

• Expires: December 31, 2018

Nicaragua TPL

• Originally applied only to cotton and man-made fiber apparel

- Required

Cut or knit to shape, and sewn or otherwise assembled in Nicaragua with fabric or yarn of any origin

The chapter rules do not apply

- Cap: 100 million SME per year

• Effect of Pocketing Letters - Added a new sublimit for 1.5 million SME of men’s

carded wool sport coats

- Eliminated the decreasing cap for TPL

- Added a “one-for-one rule” for cotton and manmade fiber woven trousers of U.S.-formed fabric of U.S.-formed yarn

In 2014 the one-for-one rule applies only to the first 50 million SME of cotton trousers

If the one-for-one-rule is not met, the United States can reduce the overall TPL for the subsequent year

• The TPL expires at the end of 2014!

A New TPL for Nicaragua?

• Last summer, Sen. Feinstein

(D-CA) introduced legislation

to extend the TPL through

2024

• Opposition

- Producers in other CAFTA countries

and their U.S. customers, who enjoy

no similar advantage

- U.S. textile interests who say

Nicaragua has sufficiently developed

its apparel exports so that it no longer

needs this benefit


• Sen. Hagan (D-NC) introduced a more modest bill in December that would extend the TPL for ten years only as to woven trousers and shorts, subject to an earned import allowance program

• Participating producers or entities controlling production would establish accounts with U.S. Commerce and would get credit for exports of fabric wholly formed in the United States of yarns wholly formed in the United States


• The SMEs of eligible

apparel the producer or

entity could receive each

year could not exceed the

credits in his account

• The program would be

limited to 50 million SMEs

per year; but it could

generally be increased in 10

percent increments per year

if 90 percent utilized in the

previous year


• Prospects for passage of

either the Feinstein or

Hagan bill are uncertain

• In some ways the damage

of expiration has already

been done because

participants can’t plan past

2014 with confidence

• And uncertainty is the last

thing Nicaraguan producers

need right now with TPP

looming in the future

Dominican Republic 2 for 1 Program

• Qualifying Apparel Articles - Trousers, bib and brace overalls, breeches

and shorts, skirts and divided skirts, and pants, all of cotton, but not including denim

- Wholly assembled in and imported directly from the DR

- Fabric or yarn may be of any origin

• Duty free with earned import allowance certificates

- Qualifying apparel producers earn one SME of credit for every two SMEs of qualifying woven fabric purchased for the manufacture in the DR of eligible articles


• Qualifying woven fabric is fabric of cotton, wholly formed in the United States from yarns wholly formed in the United States, suitable for the production of qualifying apparel, and purchased on or after August 1, 2007, for roduction of apparel in the DR

- Exceptions for certain Israeli nylon yarns, 10 percent de minimis yarns (except elastomerics), and short supply yarns

• Qualifying apparel articles are subject to the chapter rules concerning pocketing, sewing thread, narrow elastic fabric, and visible lining


• Wholly assembled - All components, of which there must be at

least two, pre-existed in essentially the same condition as found in the finished good and were combined to form the finished good in the DR

- Minor attachments and minor embellishments (appliqués, beads, spangles, embroidery, and buttons), not affecting the identity of the good, and minor subassemblies (cuffs, plackets, and pockets) will not affect whether a good is “wholly assembled” in the DR


• The Dominican Republic

program is unlimited – there is

no cap

• The definition of “wholly

assembled” has no counterpart

in CAFTA’s origin rules,

particularly to the extent that it

allows “minor subassemblies” to

take place outside of the DR

• Why don’t they give this deal to

other CAFTA countries?

Mexican Materials: Cumulation

• Allowed for Chapter 62 woven

garments containing materials

produced in Mexico, if the Mexican

components would qualify as

originating if they had been

produced in a CAFTA country

- Annual limit of 100 million SME

- Sublimits for cotton or man-made fiber

trousers and skirts (other than blue denim);

blue denim trousers and skirts; and certain

wool garments

- Certain wool garments, not of carded wool

fabric or made from wool yarn having an

average fiber diameter of not over 18.5

microns, are not subject to the limit

Mexican Materials: Cumulation

• DR lost its eligibility to use

the CAFTA cumulation

provisions, effective March

1, 2012

• CAFTA also contemplates

cumulation with Canadian

materials, but Canada has

not reached the necessary

agreement with the

CAFTA countries

Selected Utilization

• Cumulation

- Overall: 13.91 percent

- Trousers and skirts: 8.39 percent

- Denim: 34.70 percent

• Costa Rica

- TPL “A:” 8.80 percent

- TPL “C:” 0.67 percent

- Swimwear TPL: 0 percent

• Nicaragua

- TPL: 61.5 percent

- Sport coats TPL: 0 percent

• Data from OTEXA, as of Oct. 6

CAFTA Short Supply

• There are now 148 yarns,

fabrics, and fibers that are

considered to be in “short

supply” or “commercially

unavailable”

• Some were in the

agreement already, others

have been added by

requests for short supply

determinations

CAFTA Short Supply

• Apparel articles are treated as originating if they are cut or knit to shape and sewn or otherwise assembled in CAFTA countries, and if the fabric of the outer shell (exclusive of collars, cuffs, and ribbed waistbands (only if the ribbed waistband is present in combination with cuffs and identical in fabric construction to the cuffs) is wholly of one or more of the following: - short supply fabric,

- fabric that is formed in CAFTA countries with short supply yarns, or

- any combination of short supply fabric and originating fabric

• Originating fabric can contain de minimis fibers and yarns

CAFTA Short Supply

• Effects of CAFTA Fixes - Made short supply available not just

for outer shell fabric, but also for visible lining fabric, narrow elastic fabric, sewing thread, and pocketing

- Ribbed waistbands Addressed an unintended problem

faced by producers using short supply fabric to make garments like sweatshirts

Previously, waistbands were part of the outer shell and thus had to be of short supply or originating fabric or yarn

Now, waistbands can be non-originating, like collars and cuffs

- Permitted use in short supply fabrics of elastomeric yarn of any origin

CAFTA’s Odd Treatment of Spandex

• Narrow elastic fabric only

needs to be formed from yarn

in CAFTA countries – it can be

made there with foreign

spandex (elastomeric) yarn

• Spandex in short supply fabric

can now be of any origin too

• But spandex yarn in the

component determining

classification of originating yarn

forward garments still isn’t

eligible for de minimis

2. Enforcement and Verifications

• Factory visits

• Requests for

documents from

importers

• Challenging CBP

determinations

• CBP enforcement

actions

CBP has the Enforcement Job

• U.S. Customs and Border Protection (CBP) protects the tariff revenue of the United States – that’s its job

• U.S. Trade Representative (USTR) negotiates free trade agreements like CAFTA

• U.S. Department of Commerce (DOC) maintains data on TPL usage and facilitates short supply process

• But origin verifications, information requests, notices of action, penalties and other compliance and enforcement actions are CBP’s responsibilities

And Enforcement is Important

• U.S. and CAFTA companies work hard to comply – and it is an expensive, time consuming enterprise

• When someone is reckless, or cheats, and doesn’t get caught, he gets an unfair competitive advantage

• Worse still, the infractions of reckless companies cause CBP to become suspicious of the industry and increase intrusive enforcement activity

• Noncompliance just isn’t fair

The Unfortunate Tension

• U.S. policymakers must

empower enforcement

authorities without

making compliance so

difficult that it offsets

the benefits of trade

CAFTA Compliance Baggage

• CAFTA comes with a lot of compliance baggage

• Outsider - Commercial invoice

- Bill of lading

• CAFTA - Commercial invoice

- Bill of lading

- FTA certificate of origin

- Fabric affidavit

- Yarn affidavit

- Thread affidavit

- Production records

- Information requests

- Notices of action

- Factory visits

- Etc., etc.

Striking a Balance

• The challenge to the industry is to manage the baggage so that the program is worthwhile

• Compliance starts in the factories

• Each producer should have a carefully established compliance practice, with specific individuals charged with the responsibility to follow the rules

Factory Visits/Verifications

• CBP requests the government of the party where the goods are produced to visit the factory

• CBP attends the visit; usually 3 CBP personnel attend

• The visit is on short notice and lasts only a few hours

• CBP produces two or three invoices and asks to see production records relating to the invoices

• They may request affidavits for yarn, fabric, sewing thread, etc.

Origin Verification Problems

• Factory can’t find or produce

documents during short visit

• Documents are missing or non-

existent

• Documents are incorrect

• Factory is closed

• Problems with visit can lead to

action against U.S. importer

Consent

• If the producer does not

consent to a verification

visit, CBP may deny

preferential tariff

treatment to the type of

goods of the producer that

would have been the

subject of the verification

Importer Obligations

• CBP’s regulations implementing CAFTA state:

- “An importer claiming preferential tariff treatment for a good imported into the United States under [CAFTA] must maintain, for a minimum of five years after the date of importation of the good, all records and documents that the importer has demonstrating that the good qualifies for preferential tariff treatment under the CAFTA–DR”

• The fact that the importer has made a claim based on information/certification provided by an exporter or producer will not relieve the importer of the responsibility to provide supporting documents to CBP

Levels of CBP Attention

• None – CBP most often

releases and liquidates

entries with no review at all

• Review of entry

documents

• Request for Information

(CBP Form 28)

• Focused assessment (audit)

Request for Information

• CBP Form 28

• 30 day response deadline

• CBP (especially at ports

with the most CAFTA

claims, like Miami) rarely

allows extensions

• Responsible request:

Asks for relevant

documentation for two or

three good examples of

styles in the entry

Request for Information: Example

• In support of the DR-

CAFTA claim for styles ___,

___ and ___, please submit

affidavits of origin from the

producers of the yarn, fabric

and thread

• Each affidavit must provide a

complete description of the

item produced, including

fiber content, purchaser, date

of sale, telephone numbers of

persons executing affidavits

for verification purposes, etc.

Common Requests

• Requests for: - Documents not relevant to the claimed

preference Sewing thread records for short supply

garments

- Documents substantiating claims for dozens of similar styles in the same entry

- Documents substantiating the same claims in dozens of entries

• Most companies simply cannot compile this much information within 30 days

• CBP would need a forklift to handle all the documents

• Ask early: sometimes CBP will agree reasonably to narrow the scope of the request

Next Step: Proposed Action

• CBP Form 29 Notice of

Action

- If an importer fails to answer the Form

28 within 30 days

- If CBP is unhappy with the Form 28

Response

This is likely!

Form 29 should state what additional

information CBP requires

- On the Notice of Action, CBP will

check the box that says, “This action is

proposed”

• 20 day response deadline

Next Step: Action Taken

• CBP should issue a

second Notice of Action

- This time CBP should check the

box that says, “This action has

been taken”

• This results in liquidation

- If CBP is satisfied with the

response, CBP will liquidate the

entry as filed (with CAFTA

treatment)

- If CBP is not satisfied with the

response, CBP will deny CAFTA

treatment and will liquidate the

entry with a rate advance (with

duty)

Next Step: Protest

• Once the entry is liquidated, it may be challenged only by protest

- Must be filed within 180 days after liquidation

- Will be initially reviewed, and approved or denied, by the same import specialists who issued the Forms 28 and 29

• Gives the opportunity to make new arguments or to provide additional documents

• Always ask for further review (by CBP Headquarters) with adequate justification

Next Step: Litigation

• If the protest is denied, the only recourse is litigation

• Deadline to file in the U.S. Court of International Trade is 180 days from the date of protest denial

• This is an Article III court, just like a U.S. Federal District Court

• Either party can then appeal to the U.S. Court of Appeals for the Federal Circuit

• Denials of FTA treatment for alleged document failures are rarely litigated

CBP Enforcement

• Information provided through factory verifications has consequences for importers. CBP can:

- Suspend preferential treatment if there is insufficient information to support the origin claim

- Deny preferential treatment if the factory provides incorrect information to support the claim

- Detain goods if there is insufficient information to determine country of origin of the goods

- Deny entry if the factory provides incorrect information about country of origin of the goods

Importers can be severely punished

• Failure in an origin verification

can cause CBP to claim duties

on the factory’s past exports to

its U.S. customers

• U.S. importers also can be

penalized – for gross negligence,

CBP can claim a penalty of four

times the duty, and CBP has the

power to collect duties, even for

mere negligence, going back as

far as five years

So is it Hopeless?

• CAFTA has extraordinarily

complex origin rules

• Consider: yarn forward, visible

linings, sewing thread, narrow

elastic fabrics, pocketing, de

minimis rules and many others

• A slight misstep (like a missing

sewing thread affidavit) can

make a duty free garment

dutiable at very high duty rates

It’s Not Hopeless

If You’re Prepared!

3. Documentation Requirements

• Goals

• Types of required

documents

One Goal

• We’ve reviewed the CAFTA origin

rules for the duty free treatment of the

apparel articles we export to the

United States

• All documents and records should be

precisely prepared with a single goal

- Making it clear to the audience (e.g., customers,

customs brokers and CBP) that we know the

applicable rules and have complied with them

• We always want the audience’s initial

reaction to be, “This company knows

what it’s doing”

Who is Our Audience?

• The customer (usually the importer of

record) wants reassurance from

documents and records that his

CAFTA claims are justified

• The customs broker wants guidance

from entry documents about which

HTSUS classification and CAFTA

claim is intended

• CBP wants to protect the revenue,

collect data, and prevent improper

classifications and CAFTA claims

- CBP is the most powerful audience member,

on which this part of the seminar will focus

Four Main Types of Documents

• Entry documents: commercial

invoice, bill of lading and

other documents (e.g.,

Nicaragua TPL certificate

of eligibility) necessary to

obtain release

• CAFTA certificate of origin

• Manufacturers’ affidavits

• Production records

Entry Docs: Invoice

• The commercial invoice should

describe the apparel with

sufficient detail to classify it

- Type of garment (e.g., shirt, trousers, etc.)

- Sex and age group of intended wearer (e.g.,

men’s, women’s, boys’ or girls’)

- Whether woven or knit

- Fiber content (e.g., 60 percent cotton, 40

percent polyester)

Entry Docs: Invoice

• Other descriptive information, where applicable, necessary for tariff classification (e.g., “water resistant,” “with two or more colors in the warp and/or the filling”)

• For short supply garments, the commercial invoice should also include the specifications of the fabric or yarn called for by the short supply designation

Entry Docs: Certificate of Eligibility

• Not a CAFTA certificate of origin

- CAFTA certificates are issued by

importers, exporters, or producers

- Certificates of eligibility are issued by the

producer/exporter’s government

• Required for CAFTA Nicaragua

TPLs

• Not required for CAFTA Costa

Rica TPLs

- Means the government can’t control who

uses the TPLs

- Available on a first come, first served

basis

CAFTA Certificate of Origin

• This isn’t an entry document

• It must be prepared and signed by the importer, exporter or producer and must be in the importer’s possession at the time the CAFTA claim is made

• The importer must submit it to CBP upon request

• No required form as long as it contains the necessary information

• See 19 CFR 10.584

Certificate of Origin Contents

• Name, address, phone, and email of the importer, exporter, and producer, and of the official or authorized agent of the importer, exporter, or producer signing the form

• Description of the good

• Tariff classification to 6 or more digits as necessary for application of the rule of origin

• Invoice number (if a single shipment) or blanket period not exceeding one year

• The applicable rule of origin in HTSUS General Note 29 under which the good qualifies

• Required certification statement about accuracy and availability of supporting records

“Applicable rule of origin”

• If originating status is based on

one of the origin rules in HTSUS

Gen. Note 29(n), the certificate

should say so (e.g., “Gen. Note

29(n)(62/11)”).

• If originating status is based on

short supply under HTSUS Gen.

Note 29(m)(viii)(B), the certificate

should say so and refer to the

OTEXA designation number (e.g.,

“Gen. Note 29(m)(viii), OTEXA

Website designation number

141”)

Manufacturer’s Affidavit

• Manufacturer’s

statement describing: - Place of production

- Sources of inputs

• Affidavits may

describe finished

goods, raw

materials/components

(yarn, fabric, thread)

Manufacturer’s Affidavit

• A manufacturer’s affidavit

is not a CAFTA

certificate of origin

• A manufacturer’s affidavit

may describe goods of

any origin

• We should never issue a CAFTA certificate of origin for goods not eligible for preferential treatment

Manufacturer’s Affidavit “Guidance”

• Sources of CBP

Guidance - Three TBTs

- TBT-07-019 (October 10,

2007)

- TBT-11-004 (March 31, 2011)

- TBT-12-003 (March 22, 2012)

- Where to find them:

http://www.cbp.gov/xp/cgo

v/trade/priority_trade/textile

s/tbts/

- Ruling letters

Background on the TBTs

• The 2011 and 2012 TBTs were issued in response to complaints that CBP import specialists were interpreting the rules too rigidly

- CBP acknowledged it was “aware of inconsistencies” in the application of the TBTs

- CBP addressed certain impractical requirements

- CBP Headquarters also issued several ruling letters to clarify its clarifying TBTs

• Limitations - Three TBTs are cumulative, so they are

difficult to interpret

- TBTs are guidance, not law

- TBTs are not exhaustive and should not be interpreted rigidly

TBT Takeaways

• Fabric and yarn affidavits are necessary

• They must identify the factory that produced the yarn or fabric, giving the full name and address (not a corporate address or a PO box)

• An individual contact’s name are required

- But this need not be a person at the factory

- An individual from a corporate office may sign

TBT Takeaways

• The contact person’s name must be legibly printed, with at least one of the following: phone number, fax number or email address (phone and fax no longer required)

• Separate yarn and fabric affidavits are required (the fabric manufacturer cannot give an affidavit for yarn that it purchases from someone else)

TBT Takeaways

• The affidavit must contain a

description of the goods, such

as fiber content, yarn count,

and fabric type, and identifying

information such as an invoice

or order number

• Blanket certificates are okay;

but:

- They must describe the product;

product descriptions can’t vary among

orders covered by the blanket

certificate

- They cannot cover a period of more

than one year

Blanket vs. Individual Affidavits

• Some U.S. yarn spinners don’t

like to give blanket affidavits

because of transshipping

concerns

• Either is permitted; but if you use

a blanket affidavit, make sure

there is no discrepancy with any

shipment that it supports

• Some CBP officers used to say

blanket certificates aren’t allowed

– that’s wrong – but blanket

affidavits must be accurate

TBT Takeaways

• When an affidavit doesn’t provide confirming details, the importer should supply more support, like purchase orders, invoices, or proofs of payment

• Where correlation is not apparent, importers should supplement documents with information showing how they are connected to one another, possibly by numbering them

• If documents cover materials that weren’t used to make the goods in question, the importer should include a note that explains this

TBT Takeaways

• If there are omissions through

oversight or the result of

inaccurate translations, CBP

import specialists should seek

clarification

• CBP denial solely on the basis

of information it did not

request is not appropriate

TBT Takeaways

• Affidavits are expected to but

need not be signed, nor do

they need to be originals –

import specialists can call

issuers to verify

• The use of letterhead is not

required – a letterhead’s

implication that the company

produces other merchandise

does not preclude use of the

letterhead

Production Records

• CBP regulation requires

- All records relating to the origin of a good

for which a certificate of origin was issued,

including a copy of the certificate and

records and documents associated with:

The purchase, cost, and value of, and

payment for, the good

The purchase, cost, and value of, and

payment for, all materials, including indirect

materials, used in the production of the good,

and

The production of the good in the form in

which the good was exported

Production Records

• Records include certificates of origin,

purchase orders, invoices, delivery

notices

• Records of yarn, fabric, or panel

formation

• Transportation and export

documents (bills of lading) from the

country of origin of yarn or fabric to

the country of production

• Entry documents in the country of

production and documents showing

movement and delivery in the

country of production

Production Records

• Cutting tickets

• Bills of material or specification

sheets

• Fabric pull sheets of dispatch

forms

• Cutting order

• Fabric dispatch

• Cutting reports

• Production reports

• Finishing reports

• Inspection reports

• Export manifests

Production Records: TBT Guidance

• If the importer purchased the

fabric or yarn, he should have

invoices for the material

• If the fabric is a U.S. product,

the importer should have bills

of lading showing movement

to the country of production

• If applicable, the importer

should have records showing

the use of U.S. or regionally

produced yarn, fabric or cut

or knit to shape components

4. Examples and Common Pitfalls

• How do we use entry

documents and

production records to

demonstrate

compliance with the

rules of origin? - Three examples (yarn

forward, single

transformation, short supply)

- Common pitfalls (short

supply, affidavit mishaps)

Ex 1: Cotton Knit Polo Shirt

• A men’s cotton knit polo shirt is cut and sewn in Guatemala

• The fabric is knit in the United States with yarn spun in the United States

• The collars are knit to shape in the United States with yarn spun in the United States

• The sewing thread is formed in the United States from cotton fiber and finished in the United States

Classification of the Shirt

• The classification of this shirt

under the HTSUS would be

6105.10.0010, which covers

“Men’s or boys’ shirts,

knitted or crocheted: Of

cotton: Men’s”

• The commercial invoice

accompanying the shirts to

the United States should

describe the shirts in

sufficient detail to classify

them

Tariff Shift Rule

• The origin rule says, “A change

to headings 6105 through 6111

from any other chapter, except

from headings 5111 through

5113, 5204 through 5212, 5310

through 5311, chapter 54,

headings 5508 through 5516 or

6001 through 6006, provided that

the good is cut or knit to shape,

or both, and sewn or otherwise

assembled in the territory of one

or more of the parties”

To What Does the Rule Apply?

• Chapter Rule 2

- For purposes of determining

whether a good of this chapter is

originating, the rule applicable to

that good shall only apply to the

component that determines the tariff

classification of the good and such

component must satisfy the tariff

change requirements set out in

the rule for that good

Decoding the Rule

• The applicable origin rule is a yarn forward rule, so the yarn must be spun in a CAFTA country, the fabric must be knit in a CAFTA country, and the garment must be cut and sewn or knit to shape in a CAFTA country

• What about the knit to shape collar? It’s not the component determining classification, so it doesn’t have to be yarn forward; but it still has to be knit to shape in a CAFTA country

Applying the Chapter Rules

• Chapter Rule 4

- Notwithstanding chapter rule 2, a

good of this chapter, other than—

[single transformation goods],

containing sewing thread of

heading 5204, 5401 or 5508 or

yarn of heading 5402 used as

sewing thread, shall be considered

originating only if such sewing

thread is both formed and finished

in the territory of one or more of

the parties to the Agreement

What Does this Mean for the Thread?

• The sewing thread is of

cotton

• It is classified under

HTSUS heading 5204

• The rule says that, even

thought the sewing thread

is not the component of

the garment that

determines its

classification, it must be

formed and finished in the

CAFTA territory

Cotton Knit Polo Shirt Result

• Based on the facts in our

example: - U.S. knit fabric formed from U.S.

spun yarn (yarn forward)

- Collars knit in United States

- Fabric cut and shirt assembled in

Guatemala

- Sewing thread formed and

finished in United States

• Originating shirt!

• But how do we prove it?

Required Documents

• Commercial invoice

(already mentioned)

• CAFTA certificate stating

that the garment meets

Gen. Note 29(n)

• Affidavit for the fabric

• Affidavit for the yarn

• Affidavit for the collars(?)

• Affidavit for the sewing

thread (and possibly yarn

used to make the thread)

Production Records

• Purchase orders and invoices

for the yarn, fabric, collars and

sewing thread

• Bills of lading and import

documents showing movement

of the fabric, collars and sewing

thread to Guatemala

• Records showing that these

materials were used to produce

the shirts (e.g., bills of material,

pull sheets, cutting tickets,

production reports)

Ex 2: Woven Cotton Boxer Shorts

• Boxer shorts are cut and sewn

in Guatemala

• The fabric is from China

• The sewing thread is from

India

• The narrow elastic fabric in the

waistband is from Malaysia

• In other words, the boxer

shorts are made entirely with

non-originating materials

Classification of the Boxer Shorts

• The classification of these boxer shorts under the HTSUS would be 6207.11.0000, which covers “Men’s or boys’ singlets and other undershirts, underpants, briefs, nightshirts, pajamas, bathrobes, dressing gowns and similar articles: Underpants and briefs: Of cotton”

• The commercial invoice accompanying the boxer shorts to the United States should describe the boxer shorts in sufficient detail to classify them

Tariff Shift Rule

• The origin rule says, “A

change to boxer shorts of

subheading 6207.11, tariff

items 6207.19.90 or

6208.91.30 or subheading

6208.92 from any other

chapter, provided that the

good is cut or knit to

shape, or both, and sewn

or otherwise assembled in

the territory of one or

more of the parties to the

Agreement”

Decoding the Rule

• The applicable

origin rule is a single

transformation rule.

It requires only

cutting and sewing

in the CAFTA

territory.

• But what about the

Chapter Rules?


• Chapter Rule 4

- Notwithstanding chapter rule 2, a

good of this chapter, other than—

… a good of headings 6207 through

6208 (for boxers, pajamas, and

nightwear only) …, containing

sewing thread of heading 5204, 5401

or 5508 or yarn of heading 5402

used as sewing thread, shall be

considered originating only if such

sewing thread is both formed and

finished in the territory of one or

more of the parties to the Agreement


• Chapter Rule 3

- Notwithstanding chapter rule 2 to this

chapter, a good of this chapter, other

than— … a good of headings 6207

through 6208 (for boxers, pajamas, and

nightwear only) …, containing fabrics of

heading 6002 or subheading 5806.20

shall be considered originating only if

such fabrics are both formed from yarn

and finished in the territory of one or

more of the parties to the Agreement

Boxer Shorts Result

• The tariff shift rule allows non-

originating material from any

other chapter – so the yarn and

fabric can be non-originating

• The chapter rules for sewing

thread and narrow elastic fabric

don’t apply, because boxer

shorts are excepted from these

rules

• Originating shorts!

• And fewer documents will be

required

Required Documents

• Commercial invoice (already mentioned)

• CAFTA certificate stating that the garment meets Gen. Note 29(n)

• Affidavit for the fabric not required

• Affidavit for the yarn not required

• Affidavit for the sewing thread not required

• Affidavit for the narrow elastic fabric not required

Production Records

• Purchase orders, invoices, bills of lading and import documents for the yarn, fabric, narrow elastic fabric, and sewing thread should not be required

- CBP might request some evidence of receipt at factory of raw materials

• Records showing merely that the garments were cut and sewn in Guatemala (e.g., cutting tickets, production reports) are required

Ex 3: Pants of Short Supply Fabric

• Women’s trousers of HTSUS subheading 6204.63.3510 are cut and sewn in Guatemala with Chinese fabric

• The fabric is two-way stretch woven polyester, rayon, spandex fabric designated as in short supply under CAFTA designation number 89 on the OTEXA website (http://otexa.ita.doc.gov)

• Pocketing material and sewing thread are also Chinese, so all materials are non-originating

http://otexa.ita.doc.gov/

Classification of the Pants

• The classification is HTSUS

subheading 6204.63.3510;

but the importer also must

use the classification

provision covering all

CAFTA short supply

garments: heading

9822.05.01

• The commercial invoice

should describe the trousers

sufficiently to classify them

Short Supply Treatment

• Since this garment is made with

short supply fabric, the rule

applies to the outer shell,

exclusive of collars, cuffs, and

certain ribbed waistbands

• The short supply fabric may be

of any origin

• As a garment made with a short

supply fabric, the garment is

exempt from all of the chapter

rules about visible linings,

narrow elastic fabric, sewing

thread, and pocketing

Short Supply Pants Result

• Based on the facts in

our example: - Chinese fabric, pocketing, and

sewing thread

- But fabric designated as short

supply

- And all cutting and sewing

occurs in Guatemala

• Originating Pants!

• And fewer supporting

documents required

Required Documents

• Commercial invoice (already mentioned)

• CAFTA certificate stating that the garment meets Gen. Note 29(m)(viii)(B) and referring to the designation number from the CITA website

• Affidavit for the fabric not required

• Affidavit for the yarn not required

• Affidavit for the sewing thread not required

• Affidavit for any narrow elastic fabric not required

Production Records

• Purchase orders, invoices, bills of lading, and import documents for the yarn, sewing thread, pocketing, and other materials should not be required

• CBP is likely to request evidence of purchase and delivery to the place of production of fabric meeting the short supply specifications (purchase order, invoice, bill of lading, fabric specification sheet)

• Records showing merely that the garments were cut and sewn in Guatemala (cutting tickets, production reports)

Common Pitfalls: Short Supply

• CBP conducts lab tests on garments entered under CAFTA short supply claims

• If the lab test results deviate from the designation specifications, CBP denies CAFTA treatment

• So far, CBP will only consider its lab test results; it will not accept documents proving that the factory used yarns and fabrics meeting the short supply specifications

The Recipe Problem

• Lab results will almost

always deviate from the

specifications for the

inputs

• In other words, the cake has

different characteristics than the

ingredients in the recipe

The Recipe Problem

• Three sources of variation - Fabric specifications, such as fiber

content and weight, are never an exact science

- Weaving, knitting, dyeing and other processes tend to effect the characteristics of yarns and fabrics so that yarns or fabrics cut from sample garments have different characteristics than those of the original greige inputs

- The test methods themselves are imprecise For example, ASTM D 1059 (used to

test yarn linear density) says, “Results should be considered as approximations of the yarn number since the procedures are based on short-length specimens”

The Recipe Problem

• Lab tests should not disqualify

short supply unless the results

are unreasonably inconsistent

with the factory’s documents

• CBP does not agree; CBP

accepts no tolerance between lab

results and short supply

specifications


• An example: OTEXA short supply designation 52 is for a certain fabric for which the yarns per square centimeter must be 40.1, the weight must be 152.6 g/m2 and the average yarn number must be 39.4

• Average yarn number is computed by multiplying yarns per square centimeter times 100 and dividing the result by grams per square meter

• As shown on the right, the average yarn number should be 26.28

The Math Problem

• The average yarn number in designation

52 is just wrong; it was erroneously

computed with linear meters rather than

square meters

• The error is harmless, because average

yarn number is merely a function of

yarns per square centimeter and grams

per square meter

• Miami CBP sent samples of garments of

this fabric to the CBP lab, and denied

short supply treatment because the

average yarn number was wrong

The Math Problem

• It turns out that average yarn number is incorrect in 17 CITA designations

- 15 are incorrect because linear meters were used instead of square meters in the equation

- 2 are incorrect for unclear reasons

• CBP refuses to disregard the erroneous part of the specifications, and CITA and USTR have declined to correct the errors; they say that interested persons should do the due diligence and start the application process over again


• Short supply can unfortunately be a trap

Avoiding Short Supply Pitfalls

• Short supply designations without

ranges or tolerances are meaningless

unless CBP, CITA, and USTR

change policies

• Short supply designations with math

errors are meaningless for the same

reason

• Even for designations with ranges

and tolerances, companies should

consider carefully whether random

tests on garments will pass

Common Pitfalls: Affidavits

• CBP reasonably could propose

to deny a CAFTA claim when:

- An importer submits a fabric affidavit,

but no supporting yarn affidavit

- There is inconsistency between persons

named on the CAFTA certificate and the

affidavits

- There are date discrepancies (affidavit

dated 2012 for fabric supplied in 2013)

- Information required on the affidavit is

missing (address, contact person, etc.)


• CBP has also proposed to deny affidavits on less reasonable bases

• Rulings interpreting the two recent TBTs caution import specialists to be less rigid

• But watch out for these statements on affidavits that CBP is likely to criticize:


• “Thread” affidavits that refer to unfinished “yarn”

• Reference by fabric mill to two or more suppliers of fungible yarn

• Affidavits that refer to plying, Z-twisting and finishing, but do not specify whether the greige yarn supplier or the thread company performed these operations


• Fabric affidavits that do not name the buyer

• Affidavit, signed by the parent, that says its subsidiary produced the fabric

• Affidavit with an “inaccurate” reference to “season” “

• Accurate description of fabric with wrong HTSUS number


• Affidavit describing fabric

as “tan” when invoice

describes garments as

“khaki”

• Affidavit referring to

material that “will be sold”

or is “to be sold” – CBP

ruled this is ambiguous

and, if an affidavit says

this, CBP expects records

showing when the sale

took place

Avoiding Affidavit Pitfalls

• Keep affidavits and related documents (purchase orders, invoices, bills of lading) by shipment or entry so they are readily accessible

• Be sure to answer CBP information requests and proposed notices of action

• Request extensions if you need them

• Make responses concise and easy to understand and follow; don’t expect CBP to figure it out

5. Suggestions and Conclusions

• Policy

recommendations

• Suggestions for

factories

Policy Recommendations

• The latest TBT indicates that CBP is trying to be reasonable; but there is still room for improvement

• CBP import specialists’ objections to affidavits should be quickly, informally reviewable

• Short supply claims should be accepted where lab tests are reasonably consistent with designations (and the math error should be addressed)

• CBP import specialists should be encouraged to call producers of yarn and fabric to confirm details of affidavits


• Reputable U.S. yarn and fabric

producers should enjoy a

presumption that their affidavits

are correct if not materially

deficient

• Reputable U.S. importers should

enjoy a presumption that their

documents are correct if not

materially deficient

• CBP import specialists should

not require formats that

conform to their individual

preferences


• Encourage governments

to change or simplify the

rules - Easier rules that accomplish the

same general objectives (value

added rules?)

- Rules that allow more non-regional

input (short supply, TPLs?)

• Insist on origin rules and

flexibilities consistent with

new agreements (TPP?)

So What Should We Do?

• Have an individual or

individuals whose job is

compliance

• Attend a compliance

seminar

- Today is a good first step

- VESTEX and other trade

associations regularly offer

worthwhile seminars

Focus on Traceability

• Connection of materials to finished goods

• For each component, you want to be able to show a chain of documents that links the component to the finished garments

• “Documents should demonstrate a direct correlation of the materials or components to the finished good by way of style numbers, fabric type and construction, or other means”

Documents Showing Movement

• Show the movement of the goods from the place of production to the next place of production

• Documents might include purchase orders, invoices, bills of lading, and customs entry documents

• For non-US regional goods, documents might include delivery notices, truck receipts, and other locally produced documents

Standardized Practices and Forms

• Establish reliable practices and procedures, including checklists and written guidelines ensuring compliance

• Use standardized forms for certificates of origin, affidavits, invoices, etc.

• Notice, for example, that U.S. yarn and fabric companies have developed good, thorough affidavit forms

Periodically Audit Compliance

• Select random examples

of export document

packages and scrutinize

them for errors or

incomplete information

• In other words, review

your work before CBP

does

And Remember

• Be mindful of your

audience (especially

CBP)

• The primary goal is

to use clear and

precise documents to

show we know the

rules and we follow

them

BJ Shannon

Alston & Bird LLP

950 F Street, N.W.

Washington, D.C. 20004

(202) 239-3344

[email protected]