In fiscal year 2012, Customs & Border Protection (CBP) seized more than $21.92 million worth of textiles for Quota/Visa and Intellectual Property Rights violations. CBP also issued 21 penalties worth about $23 million. CBP reported that it conducted more than 10,000 exams, which resulted in more than 1,000 samples being analyzed at its lab, and initiated 39 audits.

Importers are reminded that CBP sends Textile Production Verification teams (TPVTs) to conduct on-site verification of foreign textile and wearing apparel manufacturers. These teams check production capability and compliance with Free Trade Agreements and trade preference programs. The TPVT visits are designed to help deter circumvention of the preference program requirements. CBP uses this opportunity to also educate foreign governments and manufacturers.

CBP reported that in FY 2011, it visited 165 factories in 9 countries. There was a 27% error rate regarding trade preference program compliance and a 22% error rate arising from transshipments. Additional areas where CBP focuses are:

  1. Undervaluation.
  2. Entry made by parties who do not qualify as importer of record as they have no ownership or other financial interest in the imported goods.
  3. Identity theft where the good name of a company is usurped by cheaters who undervalue and misdescribe the imported goods.
  4. Misclassification of wearing apparel – the CBP lab found 48% of the samples it tested to be misclassified.
  5. Transshipment takes many forms but one of particular interest to CBP is those goods made in other countries which transit the U.S., are claimed to be of U.S. origin and, when sent to Mexico, lead to false NAFTA claims. A false NAFTA claim can arise from the actual importation into Mexico and/or from the NAFTA claim which is filed when the finished garment is made in Mexico and exported back to the U.S.

One other area of concern to CBP is not admitted publicly, but the agency has seen so many improprieties when it comes to goods which are sold on a DDP (delivered duty paid) or LDP  (landed duty paid) term of sale, that these terms of sale are automatically a red flag for the agency.

While the presence of antidumping or countervailing duty assessments with textiles and wearing apparel in the U.S. is rare, many international suppliers have gotten so used to playing games with origin to avoid legitimate duty payments that it has become second nature.  Even when listing the correct country of origin would not trigger a duty difference, these cheaters will fail to do so.  As a legitimate importer, when was the last time you updated your standard operating procedures?

  • Have you included the right to audit your suppliers’ books and records as part of your purchase agreements?
  • Do you have an understanding (legally enforceable) with your suppliers they will provide production records upon demand when needed for CBP?

If not, you could find yourself on the ugly end of an inquiry by CBP which could lead to significant delay in getting your goods, or outright refusal to release them to you.  This is an area where being prepared and accurate is crucial for the importer.