United States: Country of Origin Tracing – CBP Enforcement Trends Involving Country of Origin Verification of Imports
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Country of origin of imported goods is a fundamental area of application for Customs and Border Protection (“CBP” or “Customs”) and is the accurate tracing of the country of origin of goods and materials across multiple countries and is a crucial aspect of maintaining a compliant global supply chain. Recently, CBP requested information from importers in the form of a Customs Form-28 (“CF-28”) which requests additional documentation demonstrating proof of declared origin. Sometimes the CF-28s will mention that the investigation is related to the assessment of anti-dumping/countervailing duties or sectional duties, but others are not as specific. The truth is that the origin of a good can determine the applicability of a variety of enforcement actions, including customs duties, anti-dumping/countervailing duties, import bans or quotas, treatment preferential under free trade agreements or the generalized system of preferences, and more. .
Regardless of the issue cited in the RFI, one of CBP’s top enforcement priorities is the enforcement of anti-dumping/countervailing duties and Section 301 duties, particularly when CBP suspects transhipment to evade duties. Many recent EAPA evasion cases involved the transshipment of Chinese-origin goods through Southeast Asian countries like Malaysia and Thailand to evade anti-dumping/countervailing duties. In addition, the recent Uyghur Forced Labor Prevention Law, which prohibits the import of all goods manufactured in the Xinjiang Uyghur Autonomous Region (“XUAR”) in China, including products made from raw materials and inputs from the region. A goods origin investigation should be a red flag for importers as a sign that CBP might be motivated by one of these enforcement areas.
When CBP requests verification of origin through CF-28s, import specialists focus on a number of issues in addition to the declaration of origin, including anti-dumping/countervailing duties, section rights, marking and forced labor issues. Some of the more origin invasive CF-28s have requested the following proofs:
- Photos of the goods before and/or after importation
- Videos of the factory or factories, starting from the outside and working through the production of the product – showing every step.
- Real-time photos of the equipment used in the production of the products, including wide-angle photos of the factory showing the ceilings.
- Payment records that show the importer paid the correct exporter or supplier.
- Time records or other evidence that workers were at the plant when the product was manufactured.
- The Air Waybill or BOL showing the movement of products from origin to the United States
- Raw material documentation, such as invoices for materials paid for by the producer.
- Certificates of Origin – CBP looks for discrepancies between dates and quantities shown in certificates and other entry documents, such as invoices.
If CBP is not satisfied with the documentation, it may reliquidate the entry with a different origin via a Form-29 (“CF-29”). In this case, the importer will be responsible for any duties that apply to the goods under the new origin. CBP can also use this CF-29 to liquidate all future entries of the same products with a different origin. To combat this re-determination of origin, the importer would have to protest the entries.
However, if the importer receives a letter of inquiry regarding the origin of their merchandise, there is a greater burden for documentation to prove declared origin and less opportunity to mitigate the adverse effects of a determination. unfavorable from the origin by the customs. For example, during a fraud investigation, CBP will attempt to verify the origin of the merchandise under investigation pursuant to 19 CFR Part 165. This verification requires the importer to produce documentation relating the foreign supplier’s production capacity, including calculations based on machinery, equipment, and number of employees. In previous investigations, CBP has requested the following types of information:
- Real-time photos of the equipment used in the production of the products, including wide-angle photos of the factory showing the ceilings,
- Photos of the goods before and/or after importation,
- Videos of the factory or factories, starting from the outside and working through the production of the product – showing each step,
- Time records or other evidence that workers were at the plant approximately when the product was manufactured, and
- Raw material documentation, such as an itemized bill of materials with invoices for materials paid for by the producer.
- Verification report by a person who carried out a physical verification on site. The report must include the name of the person, the date and the physical address where the verification was carried out. This report must be signed and certified by the person who made the report. The individual may be a company employee or a third-party contractor.
It is not usual for importers to keep this type of detailed documentation for every shipment, and some of this information can be extremely difficult to obtain. In light of recent CBP enforcement developments, importers should begin screening their foreign suppliers more carefully by requesting additional documentation and verifying the foreign supplier’s capability with photos and personal testimonials. If a company receives a CF-28 regarding the country of origin of its goods, it should conduct a detailed internal review of its entries and should consider the benefits of prior disclosure to CBP to protect against potential penalties that could result from an investigation. If a company receives a letter of inquiry, it should consider contacting the outside Customs and Trade attorney immediately.
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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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