On February 11, 2016, the Senate passed the Trade Facilitation and Trade Enforcement Act of 2015 (H.R. 644) by a 75-20 vote. After passing the House of Representatives in December 2015, Senate action was delayed after a measure permanently extending the ban on Internet access taxes was added to the conference report. Late last week, the Senate accepted the conference agreement and passed the bill. President Obama is expected to sign the final bill into law, so it is important for businesses engaged in international trade to understand these provisions and begin planning to maximize opportunities and minimize risks associated with these impending changes.
The act is comprehensive and wide-ranging. Notably, the act formally authorizes and funds U.S. Customs and Border Protection (CBP) within the Department of Homeland Security (DHS), which has been operating without direct authorization since DHS’s creation in 2003. Key provisions of the act are designed to enhance trade facilitation and enforcement, address potential health and safety concerns relating to imports, protect intellectual property rights, prevent the evasion and circumvention of antidumping and countervailing duties, evaluate the small business impact of trade issues such as free trade agreements, provide additional enforcement powers to the United States Trade Representative, and address currency manipulation. The act also raises the de minimis threshold for low-value shipments, enhances penalties against customs brokers who break the law or ignore regulations, liberalizes some procedures under Harmonized Tariff Schedule of the United States (HTSUS) Chapter 98, simplifies procedures for claiming drawback, and significantly reduces the time period in which Customs may reliquidate an entry under 19 USC § 1501. Many of these specific provisions will be the subject of subsequent alerts. This alert highlights three of the act’s most important provisions.
Antidumping and Countervailing Duties Enforcement
The act creates the Trade Remedy Enforcement Division within DHS. This division is charged with developing and administering policies to prevent and counter evasion, directing enforcement and compliance assessment activities concerning evasion, developing and conducting commercial risk assessment targeting for cargo destined for the United States, issuing trade alerts, and developing policies for the application of single entry and continuous bonds for entries of covered merchandise to protect the collection of antidumping and countervailing duties. These provisions are designed to streamline procedures and shorten timelines for the investigation of evasion, and to provide an expanded range of penalties where evasion is found to have occurred, including the imposition of additional duties and referrals to other agencies for other civil or criminal investigations.
Intellectual Property Protection
The act also contains a number of provisions designed to protect copyrights, trademarks, and other forms of intellectual property rights that are enforced by CBP and U.S. Immigration and Customs Enforcement (ICE). For example, the act calls for DHS to establish within ICE a National Intellectual Property Rights Coordination Center. This center will coordinate the investigation of sources of merchandise that infringe intellectual property rights in order to identify those responsible for producing, smuggling, or distributing such merchandise, and will conduct and coordinate training with other domestic and international law enforcement agencies on investigative best practices. The center will also be responsible for collecting, integrating, and disseminating information regarding infringement of intellectual property rights in conjunction with other federal agencies and sources. Notably, where CBP suspects infringement may have occurred and determines that examination and testing of the merchandise by the rightful intellectual property owner might assist its investigation, CBP may provide the owner with the information that appears on the merchandise and its packaging and labels, including unredacted images of the merchandise, packaging, and labels.
The act also dramatically simplifies and expands provisions pertaining to duty drawback. Drawback is the refund of Customs duties, certain Internal Revenue Service taxes, and certain fees that have been lawfully collected at importation, which CBP allows only after the exportation or destruction of goods under CBP supervision. For manufacturing drawback and unused merchandise, the act simplifies the existing “same kind or quality analysis” by allowing substitution between articles having the same eight-digit HTSUS classification. The act also expands the time frame for claiming drawback from three years to five years from the date of importation. For manufacturing drawback, the act authorizes the refund of additional taxes and fees paid in addition to duties paid on the imported merchandise. Although drawback claimants will not be able to file drawback claims under the new system until two years after enactment, they will be able to take advantage of the expanded five-year window for making claims, meaning current imports may still be eligible for claiming drawback.