At long last, after two plus years of debate, last week the Senate finally passed the Trade Facilitation and Enforcement Act of 2015 (2015 Trade Enforcement Act). The legislation contains the most far reaching set of changes since the Customs Modernization (MOD) Act. Of particular significance is the inclusion of brand new measures to protect intellectual property rights and to combat antidumping and countervailing duty violations, the latter highlighted by the mandate that CBP establish its own program for this purpose.

Unique for this trade legislation is that its major provisions have received almost universal support from the trade community. The House had passed the bill last year, but it got bogged down in the Senate because of an unrelated internet sales tax provision. While the provision remains in the final version of the law passed by the Senate, the Senate leadership in return has agreed to take up new Internet sales tax legislation this year. We anticipate President Obama will sign the legislation this week.

The 2015 Trade Enforcement Act makes some significant changes to the operations and programs of Customs and Border Protection (CBP), adds new provisions to the antidumping and countervailing duty laws, including new procedures to combat evasion of AD/CVD orders, and revamps the drawback laws.

In this initial alert we provide a quick summary of the more significant changes. We will be providing more detailed analyses and insights of each major section over the next several weeks.

Trade Facilitation and Trade Enforcement (Title I)

Title I establishes a litany of trade facilitation and enforcement programs, which are highlighted below. Title I:

  • Requires CBP work with the private sector and other federal agencies to ensure that all CBP partnership programs provide meaningful trade benefits to program participants.
  • Authorizes CBP programs, including customs modernization efforts such as the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS), also known as the “Single Window” approach to collecting trade data.
  • Formalizes the Commercial Customs Advisory Committee (COAC) and the Centers of Excellence and Expertise (CEEs).
  • Creates a National Targeting Center (NTC) within the Office of Field Operations that will gather data and assess risk on each of CBP’s Priority Trade Issues (PTIs): 1) agricultural programs; 2) antidumping and countervailing duties; 3) import safety; 4) intellectual property rights; 5) revenue; 6) textiles and wearing apparel; and 7) trade agreements and preference programs.
  • Requires CBP to develop criteria for assigning importer-of-record identification numbers.
  • Establishes a new importer program that directs CBP to adjust bond amounts for new importers based on the level of risk assessed by CBP for revenue protection. CBP is required to develop risk-based guidelines and procedures to ensure increased oversight of imported products of new importers, including new non-resident importers.

Import Health and Safety (Title II)

Title II establishes an interagency import safety working group, chaired by the Secretary of Homeland Security. The group is responsible for developing a joint import safety rapid response plan to establish protocols and practices that CBP, in conjunction with other federal, state, and local authorities, must use when responding to cargo that poses a threat to the health or safety of US consumers. Title II also requires joint exercises with these entities and training for CBP port personnel in enforcement of import health and safety laws.

Import-Related Protection of Intellectual Property Rights (Title III)

Enforcement of intellectual property rights remains one of CBP’s highest priorities. Accordingly, the provisions of Title III will be one of the most scrutinized areas of the 2015 Trade Enforcement Act. Specifically, Title III:

  • Authorizes and directs CBP to share information with rights holders so that they could help to quickly identify whether a product entering the United States is in violation of a copyright or trademark. Rights holders could even examine and test the merchandise.
  • Authorizes CBP to seize merchandise if it is found to be in circumvention of IPR laws.
  • Requires CBP to notify an injured right holder if they are included on an annually revised, CBP-maintained list (i.e., if rights are recorded with CBP).
  • Establishes a National Intellectual Property Rights Coordination Center within CBP to coordinate actions with other agencies and conduct outreach to importers.
  • Calls for an increase in IPR enforcement personnel.

Enforcement of Trade Remedy Laws (Title IV)

The new law adds significant new provisions to deter evasion of antidumping (AD) and countervailing duty (CVD) orders. Directed largely at steel imports, the new provisions, called the “Enforce and Protect Act of 2015” are likely to be invoked frequently by US producers combating imports under an AD or CVD order.

In particular, the new law establishes a whole new procedure within CBP which allows US producers or wholesalers, unions, foreign manufacturers or exporters, or trade associations of a covered product to file an allegation that a party has entered covered merchandise through evasion. Importers beware – as soon as CBP can get this procedure up and running it is likely to be very active.

  • Once a complaint is filed and accepted, CBP is required to conduct a formal investigationwith specific deadlines.
  • CBP can issue questionnaires just like in a trade remedy cases to importers and foreign producers.
  • Failure to respond will result in “adverse inferences” regarding the alleged evasion.  
  • If evasion is found, CBP can suspend liquidation, order payment of duties owed, and pursue an enforcement action.  

The new anti-evasion measures of Title IV also include various directives for CBP to target and investigate potential evasion of AD and CVD orders, including setting up a new Trade Remedy Law Enforcement Division to more aggressively investigate possible evasion cases, and conducting aggressive auditing of firms at high risk. Failure to cooperate in an investigation by an importer or foreign exporter may result in a finding of evasion.

Small Business and State Trade Promotion Programs (Title V)

Title V contains various provisions aimed at aiding small businesses in export promotion activities. For example, it requires further outreach to small businesses on the potential impact of new trade agreements. It also establishes a grant program to states to carry out programs such as foreign trade missions, trade shows, and other forms of marketing and training for small businesses. States will undoubtedly take advantage of this program, and smaller companies should look into it if interested in international sales.

Other Enforcement Measures (Title VI)

Title VI establishes a Trade Enforcement Trust Fund to be used by the USTR and other agencies to enforce US trade agreements and trade rights under the WTO and US free trade agreements (FTAs). The trust fund could also be used for trade capacity building efforts.

Title VI also requires CBP and ICE to institute certain measures to stop illegal honey transshipment; and requires that the two agencies train and employ sufficient personnel to detect, identify, and seize cultural property, archeological or ethnological materials, and other fish, wildlife or plants that violate US laws. Title VI also codifies the establishment of the Interagency Trade Enforcement Center (ITEC).

Currency Manipulation (Title VII)

Title VII addresses issues regarding currency undervaluation, a main thorn in the recent trade promotion efforts. Among other things, Title VII:

  • Requires the ITA to investigate alleged currency undervaluation in AD/CVD investigations and provides a method for calculating the amount of undervaluation.
  • Requires the administration to actively engage with those countries found to manipulate exchange rates in order to urge implementation of monetary policies that would address the issue.
  • Sets criteria on what constitutes currency manipulation similar to existing International Monetary Fund standards.
  • Creates an advisory committee for the US Treasury Department on currency issues.
  • Directs Treasury to take certain steps if it believes currency manipulation has occurred.

The most contentious dispute involved competing proposals on currency manipulation that were not enacted in the final legislation, with the original Senate bill including a strict provision that would have enabled the US Department of Commerce to treat undervalued foreign currency as a prohibited government subsidy in its countervailing duty investigations.

Renewal and Expansion of CBP Operations/Programs (Title VIII)

Title VIII of the 2015 Trade Enforcement Act consists of two parts. First is the US Customs and Border Protection Authorization Act, which formally establishes the US Customs and Border Protection, along with operational offices within CBP and the positions of the Commissioner and Deputy Commissioner. Although the Act provides for a number of name changes to the internal offices within CBP and structure of their leadership, it is largely a formal codification of the existing structure and role of the agency. In fact, Section 802 specifically affirms that CBP shall continue to carry out the functions, missions, duties, and authorities previously vested within CBP prior to the passage of this legislation, and all rules regulations and policies issued by CBP remain in effect.

The second part of Title VIII is the Preclearance Authorization Act of 2015, which authorizes CBP to operate preclearance locations in foreign countries, provided an aviation security preclearance agreement is in effect. The provisions of Preclearance Authorization Act of 2015:

  • Set forth various reporting requirements to Congress prior to entering into a preclearance agreement with a foreign country, to enable Congress to comprehensively assess the appropriateness of commencing the preclearance operations and monitor the resources allocated to preclearance locations.
  • Incorporate certain security measures, including requiring TSA to prescreen passengers and their baggage if the foreign government has not maintained security standards comparable to the US, and prohibiting preclearance locations in foreign countries that do not routinely provide stolen passport information to INTERPOL or the United States.
  • Allow CBP to enter into cost-sharing agreements with the airport authorities (where preclearance locations are established) in foreign countries for preclearance operations costs, immigration services, and agricultural inspection services, enabling CBP to receive payments in advance of the incurrence of the costs or on a reimbursable basis.

Miscellaneous (Title IX)

Drawback, internet tax, outerwear and footwear, voluntary reliquidations, and residue

Title IX covers a broad array of miscellaneous provisions, though "miscellaneous" may be a misleading description as some of the provisions were the most sought after changes advocated by the trade community. Among the changes provided for in this Title are the following:

  • Raises the amount allowed to be entered on a “manifest entry” as de minimis from $200 - $800 (Sec. 901).
  • Increases the time required for consultations with Congress on certain administrative actions involving international trade and requiring certain minimum time periods for consulting with business on such actions (Sec. 902).
  • Enhances certain provisions of Chapter 98 regarding goods returned to the United States to both enlarge the scope and make them more user friendly (Sec. 904).
  • Removes the entry requirement for certain bulk cargo residue returning to the United States in Instruments of International Traffic after export from the US (Sec. 905).
  • Provides for numerous changes to the current drawback statute, including requiring certain substitution drawback determinations to be based on classification in the same 8-digit tariff heading, amending the requirements for establishing “proof of export” and certain time periods for filing claims, and providing for joint liability for the claimant and the importer (Sec. 906).
  • Makes technical corrections to certain tariff classifications for recreational performance outerwear and to Additional US Note for Chapter 64 relating to certain protective active footwear (Sec. 912 and 913).
  • Creates a trade preference for Nepal similar to AGOA (Sec. 915)
  • Allows for the implementation of APEC Agreement providing for duty reductions on certain environmental goods (Sec. 916).
  • Adopts specific country of origin marking requirement for certain castings (Sec. 917).
  • Provides a sense of Congress that the relevant Senate and House Committees development a process for temporary duty suspensions and reductions (Sec. 919).
  • Extends the period for which certain customs fees may be charged and the rate charged(Sec. 920).
  • Increases the penalty for the failure to file certain tax returns (Sec. 921).
  • Imposes a moratorium on certain internet taxes being imposed by the States or other localities (Sec. 922).

********************

Some of the key sections of the 2015 Trade Enforcement Act summarized above will be the subject of separate Arent Fox alerts and analysis. The provisions in this new law are intended to facilitate the import process, and importers specifically. A critical first step will be to understand the contents of the new law and identify which of these provisions is of most interest could benefit your company.