Importers Beware - Textiles And Apparel Are In The Crosshairs Again

Importers, manufacturers and shippers of textiles and apparel who assume that the elimination of quotas means that Customs ands Border Protection (CBP) is no longer interested in regulating trade in this area may be surprised to learn that textile enforcement remains a priority issue for the agency.

Textile imports represent 43 percent of all revenue collected by CBP and the agency has recently begun to increase its enforcement efforts in this area. CBP recently announced that it had initiated a special program to address the misdescription of textile merchandise on Customs entry documents. This operation uncovered various schemes to evade duty or quotas on wearing apparel including transshipment (changing the country or origin of the goods), use of false documents or labels, or the providing incorrect descriptions of merchandise. CBP seized $10 million in misdescribed goods and identified a scheme to circumvent the 2005 China safeguard quotas by misdescribing cotton merchandise as ramie, which is subject to a significantly lower rate of duty.

Textile Production Verification Teams have been dispatched by the agency to overseas factories to verify that wearing apparel shipped to the United States is in fact produced at those factories. The factories visited are selected after an extensive trade analysis has been conducted which categorizes countries and individual manufacturers based upon risk for noncompliance with trade laws and policies. Countries and manufacturers identified as high-risk are placed at the top of the list for verification activities. In the past year Textile Production Verification Teams have visited factories in Canada, Hong Kong, Macao, Kenya, South Africa, Namibia, Mexico, Israel, Jordan, Costa Rica, Madagascar, Peru and Nicaragua. In November of last year, the teams visited 195 factories considered to be high risk and discovered that 70 were closed. Of the remaining 125, 24 refused the team admission, 50 were considered a high potential for transshipment and 3 actually produced evidence that they were engaged in illegal transshipment activity. As a result of these visits, CBP is in the process of seizing shipments worth approximately $1.7 million from factories that were closed. All subsequent shipments of goods that are claimed to have been manufactured in factories that are closed will be immediately seized or excluded from entry into the U.S. Shipments from factories which denied the teams access or were considered high risk due to the inability to provide production records verifying origin of the goods will be subject to increased scrutiny by CBP and possible demands for redelivery. The verification visits by the Textile Production Verification Teams are ongoing and CBP reports that more are planned.

CBP officials have also announced that goods imported under the various Free Trade Agreements (FTA’s) recently entered into by the United States will be subject to increased scrutiny. The agency is providing its local import specialists with extensive training to target possible violations of FTA requirements for shipments entering the U.S. In November and December of 2005 over 2,000 additional examinations were performed by CBP to identify the misdescription of merchandise as well as smuggling. These examinations resulted in the discovery of violations in the importation of textile and apparel imports under the Caribbean Basin Trade Partnership Act, and the Singapore Free Trade Agreement. CBP also discovered a significant number of intellectual property rights violations. Factories claiming trade preferences that have been found to be noncompliant will have all of their preference claims reviewed.

Although the violations uncovered by CBP and the amounts of seizures are relatively small in relation to the total volume and value of imports of textiles and apparel into the U.S., the fact that CBP is again focusing its attention on textile enforcement should serve as a warning to importers. These companies should take the time to verify that the goods they are importing are in fact produced in the factory claimed and that all documentation concerning description, value, country of origin and, where applicable, trade preference eligibility is accurate and complete.

The preceding information, is not nor is intended to be, legal advice which can only be provided to clients of the firm on a case-by-case basis.)

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