WASHINGTON: As criminals grow more creative in efforts to circumvent the law, the US Customs and Border Protection (CBP) is implementing new enforcement tools. One new tool is worth considering, and one existing tool is worth revisiting. The new tool is the Importer of Record Task Force, which cuts across all product lines. CBP is requiring first-time importers and companies to establish they are real before goods are released. The long-standing approach criminals have relied on is to find a relative or friend in the United States to act as a middleman. The friend or relative is paid a small fee to act as importer. When confronted, most say they know the oversees supplier has asked them to act as a middleman in order to reduce the duty paid. The trouble is those middlemen do not really appreciate the consequences of their actions. The transaction takes place between the often Chinese seller and the US buyer. In these cases, the proper term of sale is delivered duty paid. However, the criminal consigns the goods to the designated US middleman at an FOB cost of goods that is frequently well below market price. The fact the value is too low is itself a trigger in CBP’s risk management analysis, but the poor middleman gets nailed nonetheless. CBP detains the shipment upon arrival with the requirement the middleman first establish his as a real company. This inquiry requires the company to provide its formation documents and evidence of the identity of its principals. The company must then also provide the purchase order between it and the factory and it and the ultimate US buyer.
CBP also insists on receiving proof of payment to the factory and by the US buyer. If there is design work involved, the designs must be produced. Similarly, if there are product specifications or other documentation that would typically be exchanged between a US buyer and a foreign seller, those, too, must be produced. All too often, the middleman has no idea what he is getting into, cannot produce the basic commercial documents that would exist between the typical buyer and seller, and then CBP is faced with deciding which enforcement tool it will implement. First, CBP insists the ultimate US buyer must be the importer and pay duty at the price at which the goods are sold to him, if he still wants those goods. If not, the middleman is left liable to the carrier for the charges associated with the shipment sitting often for weeks on end.
At the same time, CBP is left to decide how to deal with the middleman. Because there were declarations made by that middleman when the entry was filed on his behalf, CBP is in position to impose a fine. 19 U.S.C. 1592 authorizes CBP to impose a fine on a party that either misrepresents a material fact or makes a material omission, but it also allows imposition of a fine against those who “attempt to enter or introduce” goods when a material omission or misrepresentation is made. Filing the entry with an improper value and representing oneself as an importer when both are incorrect certainly is material and could be grounds for such a penalty. CBP is putting renewed emphasis on its country of origin enforcement rules. Inquiries typically arise when goods that would be subject to anti-dumping if made in Country A are imported stating Country B as their origin and the two countries are in relatively close geographic proximity.
