Trade Archives - Page 4 of 5 - The National Law Forum

Illinois Department of Revenue Issues Proposed Amendments to Shipping and Handling Regulations

The Illinois Department of Revenue (Department) recently proposed amendments to its regulations governing the taxability of shipping and handling charges. The Proposed Amendments to 86 Ill. Admin Code §§ 130.415 and 130.410 (Proposed Amendments) are intended “to incorporate the holding of the Illinois Supreme Court in Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351 (2009) … [and to] clarif[y] when transportation and delivery charges are considered part of ‘gross receipts’ subject to the Retailers’ Occupation Tax Act or the Use Tax Act.” The Proposed Amendments state that they are retroactive to November 19, 2009, the date of the Kean decision.

Delivery charges taxable when they are “inseparably linked” to the taxable sale of property

In Kean, the Court held that delivery charges for products purchased over the internet and shipped to Illinois customers are taxable when “an ‘inseparable link’ exists between the sale and delivery of the merchandise plaintiffs purchased.”… 235 Ill. 2d at 376. Citing Kean, the Proposed Amendments adopt that rule (Prop. 86 Ill. Admin. Code § 130.415(b)(1)(B)(i)) and provide two examples of an “inseparable link”:

When delivery charges are not separately identified to the customer in the contract or invoice; or
When delivery charges are separately identified to the customer, “but the seller does not offer the purchaser the option to receive the tangible personal property in any manner except by delivery from the seller (g., the seller does not offer the purchaser the option to pick up the tangible personal property).”

Prop. § 130.415(b)(1)(B)(ii)

The Proposed Amendments provide that if a product can be sold without rendering the delivery service, the service is not taxable. Prop. §130.415(b)(1)(B)(ii). Although this language is not limited to a circumstance in which a pickup option is offered, all of the examples provided by the Department focus on that fact pattern. Notably, the pickup option need not be at an in-state location. This is consistent with the Department’s recent private letter rulings concluding that when a pick up option is offered, even if it is out-of-state, the delivery charges are not taxable. ST-15-0011-PLR (7/16/15); ST-15-0012-PLR (7/27/15).

In a change from the Department’s prior practice, the Proposed Amendments provide that separately stated shipping charges not found to be inseparably linked to the sale of goods are not taxable even if they include a profit component (i.e., exceed the actual cost of shipping). Cf. the current regulation, at 86 Ill. Admin. Code §130.415(d), with Prop. §§ 130.415(b)(1)(C) and (b)(1)(D)(iv).

Practice Note:

Sub-part (b)(1)(B)(ii) of the Proposed Amendments supports the conclusion that offering customers free standard shipping evidences that any other shipping service for which a seller charges customers (i.e., expedited shipping) are separately contracted for and thus nontaxable. Arco Industrial Gas Division, The BOC Group, Inc. v. Department of Revenue, 223 Ill. App. 3d 386, 392 (4^th Dist. 1991), which is cited in the Proposed Amendments, also supports this conclusion. Several defendants have successfully raised this defense in response to Illinois False Claims Act litigation alleging a failure to collect tax on shipping charges.

Taxability and rate depend on the underlying property

The Proposed Amendments go on to provide that in the event delivery charges are “inseparably linked” to the sale of property, their taxability and rate depends on the taxability of the property sold:

Property Sold & Delivered	Delivery Charges
All exempt	Not taxable
Part exempt; part taxable	Not taxable if selling price of nontaxable property > selling price of taxable property
All property subject to high or low tax rate	Follows tax rate of property
Some property subject to high tax rate and some subject to low rate	Low rate if selling price of low rate property > selling price of high rate property
Exempt, high and low rate property	Not taxable if selling price of exempt property > selling price of taxable property; low rate if selling price of low rate property > selling price of high rate property

Prop. § 130.415(b)(1)(E).

Incoming transportation generally remains a taxable cost of doing business

The Proposed Amendments maintain the longstanding rule that a seller’s incoming transportation or delivery costs or costs to move property to ready for customer delivery are taxable costs of doing business. The rule applies even if the seller passes on these costs to a buyer by separately stating them on an invoice. 86 Ill. Admin. Code § 130.415(e); Prop. § 130.415(b)(2).

Taxability of handling charges follows shipping charges

The Department also proposes similar amendments to the regulation relating to the taxation of handling charges. Prop. § 130.410(c).

Practice Note:

To the extent the Proposed Amendments were issued by the Department to assist companies who have been named in lawsuits filed under the Illinois False Claims Act alleging an intentional failure to collect and remit tax on shipping and handling charges, it may be too late. The Proposed Amendments come almost six years after Kean, and after hundreds of companies have been forced to defend against these claims, regardless of their audit history with the Department, and regardless of their shipping policies. It remains to be seen whether the Department’s effort to impose the Proposed Amendments retroactively will be adopted, or whether the retroactivity will be helpful to companies who are forced to defend against this litigation. The Proposed Amendments also are inconsistent with position that many of the Department’s auditors have taken, both before and after Kean, that taxpayers need to collect tax on separately stated shipping and handling charges only to the extent that the charges are a source of profit for the company.

Article By Mary Kay McCalla Martire, Catherine A. Battin & Lauren A. Ferrante of McDermott Will & Emery

Days of Tax-Free Internet Sales May Soon Be Over With Introduction of Remote Transactions Parity Act

The imposition of sales tax on internet transactions is a continuing topic of conversation on Capitol Hill that has recently gained even more momentum. In June, Rep. Jason Chaffetz and Rep. Steve Womack introduced the Remote Transaction Parity Act (RTPA), a bill which would require online retailers to collect sales taxes from buyers in remote states even if the retailer does not have a physical location in such state. The passing of the RTPA would be a marked shift from current law, which requires internet retailers to pay sales tax only in those states where they have a physical location.

The RTPA is the most recent iteration of bills proposing to broaden the taxing authority of states by allowing them to capture additional sales tax revenue from internet retailers and closing what some have called a tax loophole that for years has allowed internet retailers a great pricing advantage over brick-and-mortar retailers who are forced to charge higher prices for identical merchandise to cover the sales taxes imposed on them. The Marketplace Fairness Act (MFA), which was passed by the Senate but not the House of Representatives in 2013 was also reintroduced earlier this year, showing the importance of this issue to some lawmakers.

While some claim the RTPA is intended to “level the playing field” among internet retailers and brick-and-mortar businesses, the lines of support are not so clear. In today’s marketplace many brick-and-mortar retailers also have some (if not a significant) internet sales presence, which means this Act will not just impact the Amazon’s of the world. Under the RTPA, retailers of all sizes that sell products online face potential new taxes and, at the very least, will be required to implement stringent sales tracking systems. Considering the expected costs of imposing these systems, the RTPA may actually create a competitive advantage for the larger online retailers as they would have the resources to implement these systems while continuing to provide products at a lower cost, while smaller retailers may have to increase prices to cover the additional costs of this system. As such, it is extremely important that retailers understand how the proposed destination-based taxation system will impact their bottom line and to become involved in the discussion prior to the final legislation.

The RTPA includes several notable differences from the MFA that may make this slightly more palatable than its predecessor. These differences include a larger initial small seller exception that phases back over three years and is eliminated in year four rather than the set smaller exception amount included in the MFA, increased protections for sellers using certified software providers, and additional audit protections. However, the basic premise remains the same. Under both Acts, states would be gaining greater authority to look inside a retailer’s business and impose tax based on the location of its customers, not just the location of the retailer itself. This shift in tax law would have a significant impact on the way retailers do business and is something that should be watched carefully in the coming months.

Article By Chris A. Jenny, William R. West & Megan L.W. Jerabek of von Briesen & Roper, S.C.

Coming to America: Foreign Manufacturers Looking to Produce in the U.S.

There’s been buzz about Keer Group lately, the Chinese textile company that opened a cotton mill this year in South Carolina. China has long been seen as the global capital of textile manufacturing, due in part to their low production costs and seemingly endless supply of cheap labor. But Keer Group found the rising costs in China made it difficult to grow in its hometown of Hangzhou. Wages there have been steadily increasing, energy costs are rising, and shipping costs are growing higher. Textile operations in China are actually starting to become unprofitable. So production was moved to America. And Keer Group is not alone. JN Fibers Inc., also of China, is building a plant in South Carolina. Indian textile manufacturer, ShriVallabh Pittie Group, is building a factory in Georgia.

Why would textile companies from traditionally low cost countries move production to the U.S.? What’s the allure for these foreign companies? Isn’t it expensive to operate here as opposed to low wage countries like China and India? Well, despite the comparatively high wage rate in the U.S., several factors are at play to offset the cost of labor. Years of low employment mean that Americans are willing to work longer hours and for suppressed wages. The U.S. is also home to several right-to-work states where union representation is low and workers are not restricted to a single task but rather can set up, operate, and run multiple machines. But even with a wage gap between the U.S. and low wage countries, the gap is more than compensated for by other savings.

“Except for human labor, all other production factors are cheaper in the U.S.”

The U.S. is a political, economic, and infrastructural oasis in an uncertain world. America benefits from cheap, plentiful, and reliable energy ensuring production facilities can be kept running constantly. While textile companies in the past have looked to countries such as Bangladesh and India to keep production costs low, economic volatility resulting in unreliable energy sources are disrupting production. Many plants today are primarily automated, meaning companies rely on the constant energy supply. What good are cheap utilities when they aren’t stable?

The U.S. has also created incentives to keep costs down for foreign companies looking to relocate. Government at the local, state, and federal level have eagerly provided infrastructure grants, revenue bonds, and tax credits in order to bring back jobs to economically depressed areas. Additionally, trade agreements between the U.S. and other low cost countries provide the extra incentive of keeping shipping and logistical costs low. NAFTA has created duty free zones on imported textiles between the U.S. and several trade partners. And should the Trans-Pacific Partnership reach an agreement, companies with production in America can take advantage of an expanded pool of countries with tariff reductions, including Vietnam.

Just how difficult is it for a foreign company to establish operations in America? Not difficult at all. The U.S. Small Business Administration has provided excellent guidance on the basic steps needed get started.

Businesses in the U.S. are incorporated at the state level, first by registering with the state and then establishing a registered agent with a valid state address to receive legal documents on behalf of the company. Considerations for the foreign company include which state will be the most attractive in terms of readiness of labor force, land availability, and tax benefits.

International shipping of goods through the U.S. will be regulated at the federal level, requiring specific licenses and permits. The Department of Commerce’s Trade Information Center and the U.S. Customs and Border Protection provide useful information on U.S. importation and exportation procedures. Additional considerations include compliance with the Internal Revenue Service, starting by either obtaining an Employment Identification Number or an Individual Taxpayer Identification Number, depending upon the citizenship of the individual establishing the business. Trade licensing requirements, IRS compliance, and tax credits, including incentives available to businesses through a foreign tax treaty, are all important issues to consider, and if left with any questions, it is always best to consult with a qualified attorney.

There are numerous benefits for a foreign company to relocate manufacturing operations to the U.S., but there are also important considerations that should be taken into account. However, navigating the channels of regulations and requirements shouldn’t deter manufacturers from taking advantage of all of that come from setting up shop in America. Foreign companies are finding that operating in what were traditionally considered to be low cost countries are no longer profitable and are starting to look outside their borders. And if companies like Keer Group are any indication, for the first time in a long time manufacturing in America is not only a consideration, it’s a serious contender.

ARTICLE BY Ayako Hobbs & Sarah K. Rathke of Squire Patton Boggs (US) LLP

Trans-Pacific Partnership Negotiations Face Tighter Timeline as Talks Continue

Trade ministers announced that they will continue negotiations over several unresolved provisions of the Trans-Pacific Partnership (TPP) during a four-day meeting in Maui, Hawaii that concluded July 31. Trade ministers representing the 12 Pacific Rim countries included in the free trade deal remain optimistic about negotiations and said in a joint statement that they are “more confident than ever that TPP is within reach.”

trade partnership, negotiations, trading deal, stakeholders, intellectual property

One of the major sticking points reportedly centers around intellectual property protections for biologics. The U.S. reportedly attempted to secure 12 years’ data protection for pharmaceutical companies, while Australia is insisting on five years. Observers suggest the agreement will fall somewhere between five and seven years’ data protection. U.S. stakeholders concerned with a deal that only includes five years of data protection could threaten to round up enough opposition in Congress to stymie the deal.

Other points of contention arose over agricultural issues and the auto industry. The U.S. is pushing for greater access to Canada’s dairy market, but Canada is concerned that could cause instability in its prices. Australia is seeking increased access to the U.S. sugar market, while the U.S. is trying to limit large increases in sugar imports. Meanwhile, the U.S., Canada, Mexico and Japan are hashing out “rule of origin” and other auto industry issues.

Once all 12 trade ministers agree to a deal, Congress will have 90 days to review and approve it. If talks continue beyond August, pushing the review period deep into the fall or winter, the deal is likely to become front and center in the U.S. presidential campaign. Democratic front-runner Hillary Clinton would face intense pressure from labor unions to disavow the deal, along with the 28 House Democrats who supported legislation to fast-track passage of the agreement. It could also become a problem for Canadian Prime Minister Stephen Harper, who is up for re-election in October.

The TPP will govern foreign exports, imports, and investment implicating several major sectors of the U.S. economy, including manufacturing, intellectual property, textiles and apparel, telecommunications, agriculture and others. It will also cover labor, employment, and environmental issues. The TPP will initially cover 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Collectively these countries represent 40 percent of the global economy.

ARTICLE BY Richard J. Ferris, Jr., Jennifer F. Walsh & Michelle A. Leeds of Foley & Lardner LLP

What Is The FTC Looking at When It Reviews Merger Agreements?

In our last post, we spoke about a proposed merger between office supply chains Office Depot and Staples. As we noted, Office Depot shareholders recently voted to go forward with the acquisition, but the Federal Trade Agreement still has to review the agreement and make a decision, which could make or break the process.

In reviewing any merger agreement the Federal Trade Commission—or the Department of Justice, depending on which agency reviews the agreement—an important consideration is the impact the transaction will have on the market. Speaking generally, federal law prohibits mergers that would potentially harm market competition by creating a monopoly on goods or services.

According to the FTC, competitive harm often stems not from the agreement as a whole, but from how the deal will impact certain areas of business. Problems can arise when a proposed merger has too much of a limiting effect based on the type of products or services being sold and the geographic area in which the company is doing business.

With that having been said, most mergers—95 percent, according to the FTC—present no issues in terms of market competition. Those that do present issues are often resolved by tweaking the agreement so as to address any competitive threats. In cases where the reviewing agency and the businesses cannot agree on a solution, litigation may be necessary, but it often isn’t.

Any company that plans on going forward with a merger or acquisition needs to have a clear understanding of the law and the review process. This is especially the case if issues come up regarding competitive threats.

ARTICLE BY Business and Corporate Law Practice Group of McBrayer, McGinnis, Leslie and Kirkland, PLLC

Certain Goods and Services Now Eligible for Importation into the United States from Cuba

The U.S. Department of State published its Section 515.582 List that outlines which goods and services produced by independent Cuban entrepreneurs are eligible for importation into the United States.

In accordance with the Cuban policy changes announced by U.S. President Barack Obama on December 17, 2014, the Office of Foreign Assets Control (OFAC) issued implementing regulations on January 16, 2015. A new Section 515.582 of the Cuban Assets Control Regulations (31 C.F.R. Part 515—the CACR) authorized the importation into the United States of certain goods and services produced by independent Cuban entrepreneurs as determined by the U.S. Department of State. However, Section 515.582 as issued on January 16 did not state what those goods and services actually are. Section 515.582 states the following:

Persons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List, located here.

Note 1 to §515.582: As of the date of publication in theFederal Register of the final rule including this provision, January 16, 2015, the State Department’s Section 515.582 List has not yet been published on its Web site. The State Department’s Section 515.582 list also will be published in the Federal Register, as will any changes to the list.

Note 2 to §515.582: Imports authorized by this section are not subject to the limitations set forth in §515.560(c).

On February 13, 2015, the Department of State issued its Section 515.582 List, as follows below.

Goods

The goods whose import is authorized by Section 515.582 “are goods produced by independent Cuban entrepreneurs, as demonstrated by documentary evidence” that are “imported into the United States directly from Cuba,” except for goods specified in the following sections/chapters of the Harmonized Tariff Schedule of the United States (HTS):

Section I: Live Animals; Animal Products (all chapters)
Section II: Vegetable Products (all chapters)
Section III: Animal or Vegetable Fats and Oils and Their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes (all chapters)
Section IV: Prepared Foodstuffs; Beverages, Spirits, and Vinegar; Tobacco and Manufactured Tobacco Substitutes (all chapters)
Section V: Mineral Products (all chapters)
Section VI: Products of the Chemical or Allied Industries (chapters 28–32; 35–36, and 38)
Section XI: Textile and Textile Articles (chapters 51–52)
Section XV: Base Metals and Articles of Base Metal (chapters 72–81)
Section XVI: Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles (all chapters)
Section XVII: Vehicles, Aircraft, Vessels, and Associated Transportation Equipment (all chapters)
Section XIX: Arms and Ammunition; Parts and Accessories Thereof (all chapters)

Accordingly, any goods produced by independent Cuban entrepreneurs that do not fall under one of the above-enumerated HTS categories are now eligible for importation. Persons subject to U.S. jurisdiction who engage in import transactions involving goods produced by an independent Cuban entrepreneur pursuant to Section 515.582 must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed that was issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity not owned or controlled by the Cuban government.

“Persons subject to U.S. jurisdiction” means the following for purposes of the CACR:

(a) Any individual, wherever located, who is a citizen or resident of the United States;
(b) Any person within the United States;
(c) Any corporation, partnership, association, or other organization organized under U.S. laws or the laws of any state, territory, possession, or district of the United States; and
(d) Any corporation, partnership, association, or other organization, wherever organized or doing business, that is owned or controlled by persons specified in items (a) or (c).

This Section 515.582 List does not supersede or excuse compliance with any additional requirements in U.S. law or regulation, including the relevant import duties as set forth on the HTS.

The Department of State stated that the $400 monetary limit set forth in Section 515.560(c)(3) of the CACR for travelers who bring back goods from Cuba as accompanied baggage would not apply for any goods now authorized for import under Section 515.582.

Services

The authorized services pursuant to 31 C.F.R. §515.582 are services supplied by an independent Cuban entrepreneur in Cuba, as demonstrated by documentary evidence. Persons subject to U.S. jurisdiction who engage in import transactions involving services supplied by an independent Cuban entrepreneur pursuant to Section 515.582 are required to obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed that was issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity not owned or controlled by the Cuban government.

Payments

All payment transactions necessary to import goods and services authorized by Section 515.582 are also authorized. We recommend that payment documentation reference Section 515.582 to avoid payment rejection.

The Department of State, in consultation with other federal agencies, reserves the right to update the list periodically. Any subsequent updates will take effect when published on the Web page of the Bureau of Economic and Business Affairs’ Office of Economic Sanctions Policy and Implementation. Updates will also be published in the Federal Register.

BY
Louis Rothberg
Margaret M. Gatti

Morgan, Lewis & Bockius LLP

Analysis of the European Commission’s 2015 Work Programme

The European Commission’s Work Programme for 2015 falls in line with Juncker’s political guidelines for his Presidency. The overall focus lies on the creation of jobs and economic growth, and the vision is to achieve this through a greener, more digital and more unified European economy. At the same time the Commission has restated its ambition to make regulation leaner and relieve markets from unnecessary administrative burden without compromising the high standards in social, environmental and consumer protection.

The Work Programme stands out from prior ones by its emphasis on discarding a total of 80 proposals that have either not progressed or that are not aligned with the objectives of the new Commission. Amongst the most prominent proposals to be withdrawn are the directive for the taxation of energy products and electricity, and the directive on the reduction of national emissions of certain atmospheric pollutants.

Combined with Juncker’s €315 billion investment plan, however, the Commission’s Work Programme is potentially very good news for companies seeking to invest in cutting-edge infrastructure and technologies, but also for those that simply seek to benefit from the single market. There is a renewed focus on a strong European industrial base and the Commission’s introductory note promises measures to improve its competitiveness.

The Commission also intends to work on further pooling sovereignty in economic governance, for example through a Common Consolidated Corporate Tax Base and a Financial Transaction Tax. The focus here is on providing more transparency and a level playing field, mainly in response to the Luxleaks affair. This might imply a revision of state aid rules as well as of the implementation of Juncker’s investment program.

From a broader perspective, the Commission’s Work Programme emphasizes the importance of trade, with the Transatlantic Trade and Investment Partnership Agreement (TTIP) at the very top of the priority list of bilateral agreements. The Work Programme also mentions the intention to promote stability at Europe’s borders, although it is likely that internal security matters, e.g. on cross-border crime, cybercrime, terrorism and radicalization, will trump any focus on external policies.

The links below open analysis pieces on topics and initiatives linked to particular sectors, focused on by the Commission:

Energy and transport, read the overview here

Life sciences, read the overview here

ICT and telecoms, read the overview here

The European Commission’s full Work Programme for 2015 can be found here.

ARTICLE BY

Sebastian F.A. Vos

Covington & Burling LLP

Too Good To Be True: FTC’s Crackdown On L’Occitane’s Body Slimming Almond Extracts

L’Occitane Inc’s advertisements for its topically-applied body sculpting almond extracts seemed straightforward: “Almond Shaping Delight 3 out of 4 women saw firmer, lifted skin. This luxuriously lightweight massage gel instantly melts into the skin to help visibly refine and sculpt the silhouette” and “Almond Beautiful Shape Trim 1.3 inches in just 4 weeks. This ultra-fresh gel cream helps to visibly reduce the appearance of cellulite, while smoothing and firming the skin.”

Unfortunately for L’Occitane, an international skin care company with over 150 shops across the U.S., the Federal Trade Commission (FTC) found those claims dubious at best, and earlier this year charged the company with violating the Federal Trade Commission Act (“FTC Act”).

According to the FTC’s complaint, which was filed on January 7, 2014, L’Occitane had been manufacturing, advertising, and selling the two products at issue, “Almond Beautiful Shape” and “Almond Shaping Delight,” in interstate commerce and violated the FTC Act by promoting them as being able to slim and reshape the body. The FTC alleged that L’Occitane did not have sufficient scientific data to support L’Occitane’s advertising claims that the creams could trim the user’s thighs, reduce cellulite, and slim the body in just weeks. The FTC asserted that L’Occitane based its advertising claims in large part on two unblinded and non-controlled clinical trials and greatly exaggerated the results from one of the studies. The FTC charged L’Occitane with violating Sections 5(a) and 12 of the FTC Act, which declare unfair or deceptive acts or practices unlawful and bar false advertisements likely to induce the purchase of food, drugs, devices, or cosmetics. As part of the final consent order, the FTC fined L’Occitane $450,000 and prohibited it from making future false and deceptive weight-loss claims.

L’Occitane, however, is not the only entity which the FTC has recently fined because of questionable advertising claims. The FTC has also charged Sensa Products, LeanSpa, and HCG Diet Direct with violations of the FTC Act for allegedly misleading the public with unfounded weight loss claims and misleading endorsements relating to their products. These complaints, along with L’Occitane’s, were part of the FTC’s recent “Operation Failed Resolution” initiative, aimed at combating deceptive weight-loss claims.

One of the companies charged, Sensa Products, which claimed weight loss results from one of its dietary supplements, had to pay a $26 million fine for FTC Act violations. As a part of “Operation Failed Resolution,” the FTC also released an updated media guide for spotting deceptive weight-loss claims in advertising, entitled “Gut Check: A Reference Guide for Media on Spotting False Weight-Loss Claims.”

Manufactures and marketers of health products, cosmetics, drugs, and dietary supplements should be mindful of the FTC’s continuing and increasing vigilance in taking action with respect to enforcement of the FTC Act to stop unfounded weight loss claims. Companies making weight-loss claims in advertising and marketing materials must make sure that their claims are defensible and supported by sufficient credible scientific data.

Jordan Grushkin contributed to this article.

Article By:

Theodore C. Max

Of:

Sheppard, Mullin, Richter & Hampton LLP

US Customs and Border Patrol (CBP) Announces Trusted Trader Program Test

U.S. Customs and Border Protection (“CBP”) announced today the commencement of its long-anticipated Trusted Trader Program test which will run for 18 months in collaboration with the U.S. Consumer Product Safety Commission (“CPSC”) and theU.S. Food and Drug Administration (“FDA”). In effect, the Trusted Trader Program will combine the current Customs-Trade Partnership Against Terrorism (“C-TPAT”) and Importer Self-Assessment (“ISA”) program with the objective of streamlining the process through which importers can establish that they strive to secure their supply chains and strengthen their internal controls for compliance with the laws and regulations administered or enforced by CBP, including those of other government agencies.

Currently, importing companies can participate in C-TPAT, which focuses on securing supply chains, and ISA, which focuses on strengthening internal controls to comply with Customs laws and regulations in exchange for special benefits. If a company wants to participate in ISA, that company must also be in C-TPAT. By combining the two programs, the Trusted Trader Program will move toward a whole-government approach to supply chain security and trade compliance thereby strengthening government collaboration among different government agencies – CBP, the FDA, and the CPSC. It will also align with the Authorized Economic Operator (“AEO”) programs around the world, which focus on a combined security and compliance model.

Benefits of Participation

To encourage participation in this dual model, CBP is offering the following additional benefits to those currently offered to C-TPAT and ISA members:

A reduced FDA targeting/examination risk score;
A penalty offset, upon request, as part of a CBP penalty mitigation decision;
For Reconciliation program participants, an ability to flag and unflag entries retroactively after the entry summary is filed up until 60 days prior to the date of liquidation;
A reduction in Foreign Trade Zone on-site inspections;
An exemption from on-site visits from Drawback Specialists, for drawback claimants;
A limit of one full desk review per year for drawback claimants;
An exemption from random Non-Intrusive Inspections (although the right is reserved to conduct the inspections as appropriate for operational reasons);
A quarterly submission of the CAS number, the use, and the description for the chemical compound in advance of the calendar year quarter;
A promise from CBP to process Post-Entry Amendments on unliquidated entries within a 90-day timeframe;
A choice of exam location when CBP selects an entry for examination;
When a single entry contains multiple containers, but only one container is selected for examination, the remaining articles will be released; and
Additional incentives for the companies that complete the Product Safety portion of the Trusted Trader application.

Application Process

Importing companies that are interested in participating in the Trusted Trader Program test and meet the eligibility criteria must submit an email; if they are provisionally selected they will be given the Trusted Trader application. CBP will begin accepting emails on Monday June 16, 2014, and plans to begin selecting the initial test participants no later than July 16, 2014. CBP plans to limit the Trusted Trader program test to fewer than 10 participants. Specifically, CBP is looking for test participants to include at least one importer currently participating in C-TPAT, one importer not currently participating in any CBP partnership programs, and one or two participants monitored by CPSC and FDA.

To be eligible to apply for the Trusted Trader Program test, a company must be an active U.S. or Non-Resident Canadian importer with an Importer of Record or CBP-assigned number and at least two years of importing history. The company must also have written policies and procedures pertaining to its import process, a business office staffed in the United States or Canada, and a valid continuous importation bond filed with CBP. A company must also conduct an assessment of its supply chain based on C-TPAT’s security criteria for importers, implement and maintain security measures and supply chain security practices meeting C-TPAT’s security criteria, have a designated company officer responsible for C-TPAT, and create and provide a C-TPAT security profile. Finally, it must maintain books and records to establish compliance with U.S. Customs laws and regulations.

Through the Trusted Trader Program, CBP will: achieve integrated U.S. government collaborations that will result in enhanced efficiencies leading to a reduction in government-wide resource expenditures; expand information sharing between government agencies; reduce administrative costs by streamlining the application and validation processes; and increase efficiencies in the existing trade programs. Just as CBP has done with C-TPAT, ISA, and the Centers of Excellence and Expertise, the Trusted Trader program should strengthen security, identify low-risk trade entities, and increase overall efficiency of trade by segmenting risk and processing by account.

Article By:

Kathleen M. Murphy

Beata K. Spuhler

Mollie D. Sitkowski

Of:

Drinker Biddle & Reath LLP

New G-7 Sanctions Against Russia

The United States, in coordination with other G-7 nations, announced on Monday, April 28new sanctions on individuals and entities with ties to the Russian government and President Putin. The newly announced sanctions build on earlier rounds of U.S. sanctions imposed on March 6, March 17, March 20 and April 11. The United States also tightened license restrictions for high technology exports to Russia. In addition to the new U.S. sanctions, the European Union, Canada and Japan also announced new sanctions against Russian individuals and entities.

Reasons cited for the new sanctions were Russia’s failure to abide by commitments it made to de-escalate the crisis during an April 17 meeting in Geneva among Russia, Ukraine, the United States and the European Union (also known as the Geneva accord) and continued Russian-supported efforts to destabilize Eastern Ukraine. According to an April 25 statement by the G-7 leaders, Russia has failed to take actions required by the Geneva accord and has continued to escalate tensions through its “increasingly concerning rhetoric” and “ongoing threatening military maneuvers on Ukraine’s border.”

New U.S. Sanctions and Export Restrictions

The new U.S. sanctions issued by the Office of Foreign Assets Control of the U.S. Department of the Treasury, target seven individuals and 17 entities, including banks, construction companies and transportation companies, with connections to the Russian government. These sanctions, like those previously announced, freeze the assets subject to U.S. jurisdiction of all sanctioned individuals and bar those individuals from obtaining visas to enter the United States. The sanctions also prohibit U.S. persons, including U.S. companies and their overseas branches and divisions, from transacting business with any sanctioned individuals or entities.

In addition, the Bureau of Industry and Security of the U.S. Department of Commerce announced that it added 13 of the newly sanctioned entities to its Entity List (comprised of parties that are prohibited from receiving some or all items subject to the U.S. Export Administration Regulations without a license), and that it will immediately begin denying pending applications for licenses to export or re-export “high technology” items to Russia or Crimea that may enhance Russia’s military capabilities. Concurrently, the Directorate of Defense Trade Controls of the U.S. Department of State announced that it is placing a hold on all licenses for exports of defense articles and defense services to Russia.

New EU Sanctions

In coordination with the new U.S. sanctions, the new EU sanctions add 15 individuals with ties to the Russian government to the European Union’s existing list of sanctioned individuals.

Other New G-7 Sanctions

The two remaining G-7 member states also imposed new sanctions on Russian individuals this week: Canada announced sanctions against two Russian banks and nine individuals, and Japan announced visa bans on 23 as-yet-unnamed individuals.

Companies with interests in Russia or Ukraine or doing business with Russian enterprises are advised to ensure appropriate measures are in place to comply with the sanctions, including careful screening of all parties to transactions.

Article By:

Of:

McDermott Will & Emery

Tag: Trade

Illinois Department of Revenue Issues Proposed Amendments to Shipping and Handling Regulations

Like this:

Days of Tax-Free Internet Sales May Soon Be Over With Introduction of Remote Transactions Parity Act

Like this:

Coming to America: Foreign Manufacturers Looking to Produce in the U.S.

Like this:

Trans-Pacific Partnership Negotiations Face Tighter Timeline as Talks Continue

Like this:

What Is The FTC Looking at When It Reviews Merger Agreements?

Like this: