sandler, travis & rosenberg, p.a. an … · agenda •import requirements ... at a minimum,...

SANDLER, TRAVIS & ROSENBERG, P.A.An International Trade and Business Practice

Navigating the Regulatory Matrix of the Chemical TradeBy Deborah B. Stern, Esq.

NACD Southern Region Meeting

March 2, 2018 – Miami, FL

All materials contained in this presentation are protected by United Statescopyright law and may not be reproduced, distributed, transmitted,displayed, published or broadcast without the prior written approval ofSandler, Travis & Rosenberg, P.A.. You may not alter or remove anytrademark, copyright or other notice from copies of the content. Thematerials contained in this presentation are provided for informational useonly and should not be considered legal advice. The hiring of a lawyer is animportant decision that should not be based solely on webinar materials.Please contact us and we will send you free written information about ourqualifications and experience.

Since 1977, Sandler, Travis & Rosenberg, P.A. hasdistinguished itself as a premier international trade,customs and export law firm.

Our success is the direct result of our focus on what mattersmost to our clients: minimizing the risks associated with thecross-border movement of goods; reducing tax and dutyliability; and decreasing cycle time.

We focus on matters concerning the movement of goods,services and intellectual property from one country toanother, regardless of the origin of the import or export.

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About Sandler, Travis & Rosenberg, P.A.

The materials contained in this presentation are provided for informational use only and should not be considered legal advice. The hiring of a lawyer is an important decision that should not be based solely on advertisements or seminar/webinar materials. Before you decide, contact us and we will send you free written information about our qualifications and experience.

© 2018 Sandler, Travis & Rosenberg, P.A. | www.strtrade.com | All rights reserved.

ST&R SERVICES

We provide legal, regulatory, trial and consulting servicesrelated to:

• Customs Laws & Regulations

• Export Controls & Economic Sanctions

• Government Relations & Trade Negotiations

• Trade Remedies Advocacy

• The US Food & Drug Administration

• Other Regulatory Agencies governing imports

© 2018 Sandler, Travis & Rosenberg, P.A. | www.strtrade.com | All rights reserved. 4

ABOUT THE SPEAKER

• DEBORAH B. STERN is a Member in the Import and Export Practice Group of Sandler, Travis & Rosenberg, P.A.,resident in the Miami office, advising domestic and multinational clients on both U.S. and foreign customscompliance and other trade matters. She concentrates her practice primarily in traditional customs areas,such as tariff classification, seizures and penalties, country of origin marking, valuation, broker compliance,government procurement, trade preference programs and free trade agreements, as well as the WorldCustoms Organization’s Harmonized System. With special emphasis in the high-tech sector, she has substantialexperience in almost every product area of the tariff schedule. Notably, she has worked with a number ofcompanies in life sciences, medical diagnostics, and various chemical products, and thus has intimatefamiliarity with the import issues this industry faces.

• Prior to joining the Firm, Ms. Stern was a senior attorney with U.S. Customs and Border Protection inWashington, D.C., and a U.S. delegate to the WCO’s Harmonized System Committee and HS Review Sub-Committee, representing U.S. interests in international classification disputes and legal and interpretiveamendments to the HS. Ms. Stern has been an active member of CompTIA Customs Committee for the lastten years, and currently chairs its HS Sub-Committee. Ms. Stern holds a B.A. from Florida State University anda J.D. from FSU’s School of Law, graduating with cum laude distinction for both degrees. She is a member forthe bars of Florida and Virginia.


AGENDA

• Import Requirements

• Tariff Classification

• Country of Origin

• Trade Remedies

• “PGA” Import Requirements (FDA, USDA, EPA)

• Consequences of Non-Compliance

KNOW BEFORE YOU GO!


OVERVIEW - IMPORT REQUIREMENTS

Whether only the manufacturer/exporter to the U.S. or also an importer in the U.S.,it is important for both parties to a cross border transaction to understand:

• the legal obligations of the U.S. importer of record

• product compliance requirements

• the costs of import compliance

• potential savings that may be available

Particularly in the chemicals trade, import requirements cannot be satisfied withoutsupplier and manufacturer cooperation.

INTRODUCTION


• Tariff Engineering (must understand applicable principles of tariffclassification and product details)

• Temporary duty suspensions or reductions under the MiscellaneousTariff Bill (MTB) (commonly obtained for chemical products)

• FTA/Preference Programs (may have special rules for qualifying)

• First Sale for Exportation Valuation (lowers dutiable value)

• Freight Deductions (supported by actual charges, terms of sale)

• World Customs Org. Classification Decision**not true duty savings, but decision can compel member states to change domestic practice.

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DUTY SAVINGS OPPORTUNITIES


Under the Customs Modernization Act, the U.S. importer of record isstatutorily responsible for using “reasonable care” to enter, classify anddetermine the value of imported merchandise, and to provide any otherinformation necessary to enable U.S. Customs & Border Protection(CBP) to properly assess duties, collect accurate statistics, anddetermine whether other applicable legal requirements, if any, havebeen met.

US IMPORT REQUIREMENTS


▪ Tariff Classification

▪ Customs Valuation

▪ Country of Origin and COO Marking

▪ Customs Entry Requirements (Docs, Docs, Docs!)

▪ Recordkeeping Requirements

▪ Other Government Agency Requirements (e.g., TSCA cert)

▪ Intellectual Property Rights Compliance (e.g., trademark enforcement)

▪ Import Security (e.g., Importer Security Filing (“10+2”))

▪ Penalties and Liquidated Damages

KNOW BEFORE YOU GO!



• Importers of Record bear [all] responsibility for compliance with US Customslaws and regulations.

• Importer must exercise due diligence and demonstrate that they haveadequate knowledge of import requirements applicable to the goods theyimport.

• Importer must be aware of and have access to information to carry out theirobligations, and must have procedures to ensure continuing compliance.

Though importers may reasonably rely on customs brokers and other experts,ultimate responsibility for compliance cannot be delegated.

KNOW BEFORE YOU GO!



• As a practical matter, reasonable care also means effectively communicatingto your supplier your compliance needs

• Manufacturer, supplier and/or exporter owns or has better access to or ownsthe detailed information needed by importers.

• Manufacturer, supplier and/or exporter may be subject to facility registration(FDA) or verification or validation visits (C-TPAT, FTA claims).

• Import requirements can affect cost of goods on both sides of transactions.

KNOW BEFORE YOU GO!

REASONABLE CARE AND SUPPLIER RELATIONSHIP


TARIFF CLASSIFICATION

• All goods imported into the US must be classified according to theHarmonized Tariff Schedule of the United States (HTSUS)

• Most national tariffs are based on the WCO Harmonized SystemCommodity Coding System (HS).

• Same legal text and numbers through 6th digit, but countries mayinterpret and apply text differently.




• Duty rate

• Quota/Visa/License

• Eligibility for special duty rates (e.g. FTAs)

• Avoid delay in Customs clearance

• Reduce risk of penalties

• Importer’s Legal Obligation of Reasonable Care


TARIFF PROVISIONS FOR CHEMICALS

• Section VI: Products of the Chemical or Allied Industries

• Chapter 28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactiveelements or of isotopes

• Chapter 29 Organic chemicals

• Chapter 30 Pharmaceutical products

• Chapter 31 Fertilizers

• Chapter 32 Tanning or dyeing extracts; dyes, pigments, paints, varnishes, putty and mastics

• Chapter 33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations

• Chapter 34 Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, preparedwaxes, polishing or scouring preparations, candles and similar articles, modeling pastes, "dental waxes" and dentalpreparations with a basis of plaster

• Chapter 35 Albuminoidal substances; modified starches; glues; enzymes

• Chapter 36 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations

• Chapter 37 Photographic or cinematographic goods

• Chapter 38 Miscellaneous chemical products


HEADING

SUBHEADINGS

INT’L: 6-digit

US ONLY: below 6

8 -digit provides

duty rate, SPI

10 -digit US trade

stats (US Census)


HTSUS HEIRARCHY

• Tariff terms may have different meanings in industry than in theHTSUS.

• When a heading or subheading term is defined in the HTSUS legalnotes, that is how it must be applied.

• The “definition” may be a description or a test*, and may beinclusive or exclusive, and may be applicable to one heading, onechapter or everywhere in HTSUS

• CBP Rulings and decisions, and Federal Court Cases also define orelaborate on the interpretation of tariff provisions

*Supplier/manufacturer cooperation is imperative

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TARIFF TERMS


It is imperative to classification to A) know and B) understandthe material composition and function/test principle of anyimported article to know if it meets the terms of the headingsand subheadings.

At a minimum, importer must know CAS, MSDS*, TSCAcertification, form and use. But that’s not all.

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TARIFF TERMS


CHEMICAL NOMENCLATURE

There are a number of naming conventions and pictorial methods…

• Chemical formula Chemical structureo *Borax decahydrate Na2B4O7·10H2Oo Borax pentahydrate Na2B4O7·5H2Oo Anhydrous borax Na2B4O7

• Nameso IUPAC - Sodium tetraborate decahydrateo Sodium Borateo Disodium Tetraborateo Sodium pyroborate decahydrate

• Numberso EC Number 215-540-4o CAS Number 1303-96-4o ChemSpider ID 17339255



CHEMICAL NOMENCLATURE

MSDS


CHEMICAL NOMENCLATURE AND COMPLETE DATA

Chapters 28 (inorganic) and 29 (organic) provide for specific separatechemical elements and separate chemically defined compounds.Classification therein is limited to pure products or with limited designatedadditions.

Product composed of substances deliberately added together during orafter manufacture (including purification) are generally excluded, and oftenfall to a basket provision that may have a higher duty rate.

SEPARATE CHEMICALLY DEFINED COMPOUNDS

24© 2018 Sandler, Travis & Rosenberg, P.A. | www.strtrade.com | All rights reserved.

http://www.school-for-champions.com/chemistry/images/hydrocarbon-ethane.gif

• If they don’t meet the designated limitations – including water,impurities, certain additives specifically for identification, preservationor safety in transport and does not render the product suitable for aspecific use rather than a general one -- they either must meetanother specific provision, or fall to the “basket” provision (3824).

• Basket provision duty rates are 5% - 6.5%, often depending uponwhether containing in excess of 5% by weight aromatic or modifiedaromatic substances.

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SEPARATE CHEMICALLY DEFINED COMPOUNDS


Finished products and Intermediates:

• Blood fractions; modified immunological products (3002)

• Medicaments and Pharmaceuticals (3004)

• Make-up and Skin Care Preparations (3304)

• Soaps and Surface Active Agents (3402)

• Preparations for Oral Hygiene (3306)

• Disinfectants (3808)

• Anti-knock preparations and anticorrosive (3811)

• Compound plasticizers for rubber/plastic (3812)

• Organic composite solvents (3814)

• Diagnostic laboratory reagents (3822)

SOME SPECIFIC PROVISIONS


COUNTRY OF ORIGIN

• Entry Declaration

• Origin Marking of Imported Goods

• Certificate of Origin for Preferential Treatment (e.g., FTAs)

• Quota/Visa Restrictions

• Antidumping/Countervailing

• Government Procurement Qualification/Waivers (“Buy American”)

• Embargoes

28© 2018 Sandler, Travis & Rosenberg, P.A. | www.strtrade.com | All rights reserved. 28

USE OF COUNTRY OF ORIGIN

COUNTRY OF ORIGIN DETERMINATIONS

• “Substantial transformation”: Change in name, character and use• Mixtures, blends, suspensions vs. chemical reactions

• For bulk substances, relevant factors include: whether an article is fit forhuman use (consumption or medicinal uses); whether there is a change inuse and/or is the use predetermined at time of import; whether there is achange in name; and the extent the chemical or physical properties arechanged

• FTA Tariff Shift Rules: some FTA provisions require a change occur bychemical reaction to qualify


TRADE REMEDIES FOR IMPORT INJURY

TRADE REMEDIES

• Trade policy tools that allow governments to take remedial actionagainst imports which are causing material injury to a domesticindustry

• Protective measures intended to level the playing field

• May include but not limited to Antiduming Duties, CountervailingDuties, Section 232 Investigations*


ANTIDUMPING AND COUNTERVAILING DUTIES

• U.S. industries petition the government for relief from imports that aresold in the United States at less than fair value ("dumped") or whichbenefit from subsidies provided through foreign governmentprograms.

• AD/CVD cases are investigated by the USITC for injury determinations.If found, AD/CVD Orders are issued and administered by the Dept. ofCommerce. Imposition of ADD/CVD is enforced by CBP in consultationwith DOC.

• Both ADD and CVD may be imposed on the same goods. ADD rates canbe upwards of 150-200% ad valorem.


CURRENT ORDERS ON CHEMICAL PRODUCTS

• 1-Hydroxyethylidene-1, 1-Diphosphonic Acid (HEDP) from China

• Ammonium Sulfate from China

• Biodiesel from Argentina and Indonesia

• Polyethylene Terephthalate Resin from China and India

• Calcium Hypochlorite from China

• Chlorinated Isocyanurates from China

• Citric acid and certain citrate from China

• Sodium nitrite from China


IS YOUR PRODUCT SUBJECT?

• Determine if the product you intend to import is subject to any orderbefore it leaves the foreign port.

• Scope of the order governs; Tariff classification of a product isidentified in the order though does not itself dictate whether a good issubject to ADD/CVD (origin, certain conditions)

• Seek the advice of counsel: Whether a good falls within scope mayrequire a review of the case history, case law, and prior scope rulingsissued by DOC.

• Minimize risk/costs with a scope ruling from the Dept. of Commerce;separate rate application for the manufacturer; change sourcing toavoid altogether.


OTHER GOV’T AGENCY REQUIREMENTS (FDA, USDA, EPA/TSCA)

OTHER AGENCY CONTROLS

• FDA governs foods, which includes dietary supplements, foodadditives, cosmetics, drugs (chemicals that are used as drugs).• Facility Registrations, FSMA supply chain controls, labeling, 510K etc.

• USDA-APHIS implicated for products containing plant or animalmaterial, for use with animals (e.g. diagnostic reagents)• Permits, foreign government certifications, etc.

• EPA controls Pesticides and all other chemicals.• Registration, label requirements, Notification of Arrival forms, TSCA

certification


EPA - TSCA

• Imports of chemical substances, mixtures or articles that contain achemical substance or mixture must comply with the Toxic SubstancesControl Act (TSCA) in order to enter the U.S.

• Importers must certify that imported chemical substances eithercomply with TSCA (positive certification) or are not subject to TSCA(negative certification). Certain chemicals are excluded and certainchemicals require no certification.

• Failure to comply with certification may result in refusal of shipment(denial of entry).


https://www.epa.gov/tsca-import-export-requirements/tsca-requirements-importing-chemicals#positive

https://www.epa.gov/tsca-import-export-requirements/tsca-requirements-importing-chemicals#negative

EPA - TSCA

• TSCA Inventory• existing chemicals

• non-confidential chemical substance listings by CAS number and CA indexname

• confidential listings by Accession Number and generic name

• Bona Fide Intent to Manufacture or Import Notice (ask supplier first!)

• New Chemicals• Premanufacture Notice/Significant New Use Notice

• 90 days prior to import

• Exemptions for safe polymers, test marketing, low volume


TSCA EXCLUSIONS

• Pesticides and pesticide devices (FIFRA)

• Any food, food additive, drug, cosmetic or device (FD&C Act)

• Tobacco and tobacco products

• Source material, special nuclear material, or by-product material

• Firearms and ammunitions

• Chemicals that are a part of articles, unless required by a specific ruleunder TSCA

(essentially, as chemical product governed by another statute or agency)


TSCA REFORM 2016

• Risk reviews of existing chemicals

• Authority to require testing of chemicals

• Review of new chemicals/significant new use rules

• Regulation of chemicals presenting significant risks

• Confidential business information (CBI)

• User fees to cover costs of regulating inventory

• Federal preemption of state laws moving forward


TSCA REFORM IMPACT ON IMPORTS

• The regulation of new chemicals shouldn’t affect commerce in“downstream” goods – the effects would be observed before thechemical got into the supply chain.

• Regulating existing chemicals means that exporters into the U.S.market will need to review the chemicals in their supply chains.

• EPA authority to ban or restrict import or use of articles containingchemicals that may cause harm, enhancing need for knowledge ofproduct inputs.


CONSEQUENCES OF NONCOMPLIANCE

• Refusal of Entry: Failure to comply with OGA import requirements may resultin shipment refusal.

• Seizures & Forfeitures: the act of taking possession of property for violation ofthe law. Seizure occurs when import is prohibited or is restricted and does notcomply with restrictions (e.g, license, registration). Forfeiture occurs when aparty loses right of ownership to property.

• Penalties/Fines: a monetary punishment for committing a prohibited act oromitting an act which is required.

• Liquidated Damages: specific sum of money (“damages”) that party pays whena bond agreement is breached.


CONSEQUENCES OF NONCOMPLIANCE

CUSTOMS PENALTIES - 19 U.S.C. 1592

Without regard to whether the U.S. is or may be deprived of all or a portion of any lawful duty, taxor fee, no person may by fraud, gross negligence or negligence, enter, introduce or attempt to enteror introduce any merchandise into the commerce of the U.S. by means of any documents orelectronically transmitted data or information, written or oral statement, or act which is material orfalse or any omission which is material, or may aid or abet any other person to violate the above.

• 2x underpaid duties and taxes for negligence (or 20% of value for non-revenue, affectingadmissibility)

• 4x for gross negligence (or 40% non-revenue)

• 8x for fraud plus the underpaid duties

Calculated up to 5 years back.


• Value of the merchandise for failure to redeliver

• Three times the value of the merchandise for FDA failure to redeliver

• Other amounts as set forth in CBP guidelines and regulations

OGA PENALTIES

CLEARANCE DELAYS

INCREASED TRANSACTION COSTS

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LIQUIDATED DAMAGES


ITS NEVER TOO LATE…

• Compliance Review/Internal Audit

• Voluntary Disclosures

• Implementation of Supply Chain and Import Compliance Controls

• Stay Informed!

Please leave your business card if you would like to be added to our freedaily trade newsletter STR Trade Report


Deborah B. Stern, Esq.Member- Miami OfficeSandler, Travis & Rosenberg, P.A.

Phone: 305-894-1007Email: [email protected]

QUESTIONS?


mailto:[email protected]

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