International Trade Law News

An unusual criminal case involving a customs broker illustrates the need for U.S. importers to be vigilant in exercising oversight over the activity of their customs brokers.

Earlier this week a New York-based customs broker was sentenced to 24 months in prison, three years of supervised release and ordered to pay nearly $1.2 million in restitution for defrauding an importer of medical equipment by submitting false customs documents that indicated that the importer owed customs duties on goods that were actually duty free.

According to the Justice Department, the customs broker, who had served as the importer's broker since 1980, continued to invoice the importer for customs duties over a seven year period even though the U.S. duty rate had decreased on  imported medical equipment from 5.5% to duty free.

To show that the invoices were legitimate, the customs broker sent the importer falsified customs forms that indicated the amount of duty owed on the medical equipment. As a result, the importer reimbursed the customs broker for duties that the broker never paid, in amounts ranging from $1,000 to $9,000 per customs entry. By the time the importer discovered the problem seven years later the broker had defrauded the importer out of almost $1.2 million.

Under U.S. law, a conviction of a customs broker of a crime involving the importation of merchandise or arising out of the conduct of customs business is grounds for revocation of a customs broker license. As a result, assuming that this case is not overturned on appeal, the defendant's customs broker's license will be revoked by U.S. Customs and Border Protection.

While this type of activity by a customs broker is extremely rare (customs brokers must undergo an extensive background check before they receive their broker's license), this situation could have been easily avoided had the importer audited the customs entries to verify that the amount of duties and fees shown on the invoices and documents provided by the broker was consistent with the applicable duty rate shown on the Harmonized Tariff Schedule of the United States.

Labels: CBP; Marking, Customs, Customs Brokers

U.S. Customs and Border Protection (CBP) published two notices in today's Federal Register:

The first notice advises importers that as a result of the U.S. recognizing the Republic of Kosovo as a sovereign and independent state, for purposes of country of origin marking merchandise produced in Kosovo must be marked as "Kosovo" or "Republic of Kosovo" when entering the U.S. In order to give manufacturers and importers time to adjust to these changes, CBP will permit goods from the Republic of Kosovo to be marked "Serbia'" until February 18, 2009. After that date, all merchandise originating in the Republic of Kosovo will be required to be marked using the short or long forms noted above.

The second notice indicates that CBP's Advisory Committee on Commercial Operations (commonly known as "COAC'') will meet on May 9, 2008, in Washington, DC from 9 a.m. to 1 p.m at the Ronald Reagan Building. The meeting will be open to the public. The tentative agenda for the COAC meeting includes the following items:

1. Post Incident Response.
2. Advance Trade Data ("10+2'').
3. Secure Freight Initiative.
4. C-TPAT (Customs-Trade Partnership Against Terrorism) and CSI (Container Security Initiative).
5. Conveyance Security Devices.
6. ACE (Automated Commercial Environment) Programs Status/ITDS (International Trade Data Systems).
7. International Trade Issues/Updates.
8. Import Safety Initiatives.
9. World Customs Organization & Mutual Recognition Status.
10. Proposed Revisions to In-Bond Process.
11. Automated Export System (AES).
12. Agriculture Program Update.

Labels: CBP; Marking