It is far too early to discern the extent of any change to the relationship between the U.S. and Mexico in the face of the oft-repeated insistence of the Trump campaign to “renegotiate” NAFTA, a promise that was reiterated once Mr. Trump was sworn into office. Following a prickly meeting last month between President Trump and Mexican President Enrique Peña Nieto, accounts from Mexico report the government as having started consultations with its business community, a process described as taking 90 days. The results of those consultations and how they might impact any further discussions with the U.S. remain to be seen. Similarly, President Trump and Canadian Prime Minister Justin Trudeau also met last month, but under somewhat more cordial circumstances. Again, next steps with Canada remain an open question. However, the overarching theme is the oft-repeated promise from the Trump Administration that a border tax will be imposed. While nothing concrete has been proposed to date, how such a border tax might work has understandably caused varying levels of concern among American companies. Given there is nothing concrete to examine, in this Alert, we seek to provide a brief explanation of the concepts being bandied about. (more…)
On November 8, 2016, California voters approved the Adult Use of Marijuana Act (“AUMA”) by approving Proposition 64. AUMA largely legalizes the recreational, non-medical use of marijuana in California, as well as the sale of marijuana to recreational users.
What does AUMA permit?
As of November 9th it is legal for any adult (21 years or older) to:
- Possess, transport, obtain, or give away to other adults 21 or older no more than one ounce of marijuana or 4 grams of concentrated cannabis.
- Cultivate up to six marijuana plants per residence and possess the marijuana produced from those plants.
How does AUMA impact medical marijuana? (more…)
This post is for the many French people who ask me on a regular basis about the U.S. visas that are available to them.
Several visa categories exist. This post will focus on the most commonly used in the case of French nationals: the E2 (for investors); the L1 (intracompany transfer); and the O1 (extraordinary ability). The H1B is also widely used but it will be the subject of a stand-alone post in the not too distant future.
- The E-2 Visa: The E-2 visa is available to foreign nationals who are looking to invest a substantial sum of money into a business in the United States – either a new business or the purchase of an existing U.S. business. Although the law does not mention a minimum amount, in our experience, the minimum investment generally ranges between $120,000 and $150,000, but it can be more or less depending on the nature of the business. Additionally, that money must be spent on the business, and not merely sit dormant in a U.S. bank account. If the investment is made into an existing business then it would need to be substantial in comparison to the current value of the business. The visa can be approved for up to 5 years at a time, and extended in 5 year increments, so long as the business remains operational. There is no limitation on the number of times it can be extended. Note that primary focus of the E-2 is the creation of U.S. jobs, so it is usually critical that the applicant provide proof of U.S. jobs creation or a business plan that shows the creation of U.S. jobs in the near future.
- The L-1A “New Office” Visa: The L-1A visa is an “intracompany transferee” visa that is available to foreign nationals who work in managerial or executive occupations, and are transferring from a foreign company to a U.S. parent, branch, or subsidiary. The visa includes newly formed U.S. offices and businesses, provided that the newly formed U.S. office is established as a subsidiary, affiliate, or parent of a foreign company, and that the foreign company will continue operations abroad. This visa is attractive when the foreign investment into the U.S. business is made through a foreign company, as opposed to a foreign individual investor, as it may allow multiple employees from the foreign company to be transferred to the U.S. office. The L-1A visa requires proof that the foreign national transferee has worked for at least one full year for the company abroad before entering the U.S., and that the U.S. office has sufficient financial or operational resources to conduct business in the U.S. The foreign business must also remain operational after the individual transferee begins work in the United States. An individual is allowed seven (7) years maximum stay on an L-1A, although there are exceptions for individuals who use the visa infrequently and only occasionally.
- The O-1 Visa: The O-1 visa is reserved for individuals of “Extraordinary Ability” in the arts, sciences, and business. To obtain an O-1 visa, a U.S. company must petition for the individual to come to the United States to perform a service that is related to his or her area of extraordinary ability. We also need to establish that the individual is an individual of extraordinary ability in his or her field. The visa can be approved for up to three (3) years at a time, and extended in increments of up to three (3) years. There is no limitation on the number of times it can be extended, but documenting ongoing success and industry contributions with each extension is crucial.
In July 2016, the Houston Regulatory Audit office sent a letter to a number of large importers cautioning them to be sure their value declarations were correct, underscoring CBP’s position by pointing recipients to a long list of CBP informed compliance publications, and touting the advantages of correcting any errors by way of a prior disclosure.
Now we see Round 2. In early October 2016, the Agriculture and Prepared Products Center for Excellence and Expertise (“Center”) sent a letter to many fruit and vegetable importers asking more value questions. Specifically, the Center wanted to know:
- Was the importer purchasing his goods or receiving them on consignment?
- Are the parties related?
- From which suppliers is the importer purchasing?
- From which suppliers are the goods received on consignment?
- If on consignment, how are the goods being valued at time of entry?
- Is reconciliation filed? If not, what actions does the company take to determine if the actual cost of goods is more or less than the value declared at time of entry?
It is this last question that ties right into the revenue collection role of Customs and Border Protection (CBP). Is CBP collecting the right amount at time of entry? If the value is too low at time of entry, it must be corrected. Similarly, if it is too high, it should also be corrected. (more…)
Part 2 – Import Classification
This Alert is one in an occasional series of articles providing tips about various topics which come up routinely with import and export transactions. These articles/tips are published with the intention to provide suggestions to aid international traders in their on-going efforts to get their declarations right the first time, and are based on situations we commonly see arising. Whether it is reasonable care on the import side or not self-blinding on the export side, compliance is a key for many different reasons, including protecting your bottom line.
Part 1 of this series addressed how to value goods correctly, and can be read here. This edition provides import classification tips.
Under U.S. law, imported goods are classified for duty assessment and statistical reporting using the Harmonized Commodity Description and Coding System. This compilation of 97 Chapters and approximately 5,000 product descriptions, known in the U.S. as the Harmonized Tariff Schedule of the United States (HTSUS), provides a single modern structure for product classification and is used by more than 200 countries as a basis for their customs tariff and collection of international trade statistics. The first six digits and their corresponding product descriptions are enacted by the countries World Trade Organization member countries. The remaining digits in any tariff number (which total 10 in the U.S.) and their corresponding duty rates are set individually by each country. The HTSUS in the U.S. has 99 chapters, with the two unique ones intended to cover product specific provisions, such as American goods returned, products assembled abroad, special rules imposed on given products (for example, temporary quotas), and so on.
Tariff classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRIs) which are analyzed in order until one applies. In so doing, don’t forget to also check the additional U.S. rules of interpretation. (more…)
There is a lot of press coverage about the Hanjin bankruptcy, but very little of it provides tangible facts for traders to rely on. One thing we know for sure is Hanjin filed a Chapter 15 bankruptcy in the U.S. What that means is the U.S. bankruptcy court will defer to the Korean bankruptcy court regarding how the case will proceed. The U.S. court will limit its orders to cargo in the U.S. or touching the U.S. Most importantly right now, if you think you have a claim against Hanjin, you need to file that claim in the Korean bankruptcy proceeding, and you must do that between October 11 and 25, 2016. If you miss that claim deadline, you will be out of luck. There are a handful of Korean lawyers representing the interests of cargo owners and other potential claimants in Korea and they should be contacted immediately. Referrals are available.
Beside this one fact, there are a lot of pending questions. The Federal Maritime Commission is accepting consumer claims, but can only facilitate a discussion, as it has little jurisdiction in this context. It does have the bully pulpit, but seems reluctant to use it. (more…)
Part 1 – Value
This Alert is one in an occasional series of articles providing tips about various topics which arise routinely with import and export transactions. These tips are published with the intention to aid international traders in their ongoing efforts to get their declarations right the first time, and are based on situations we commonly see occurring. Whether it is reasonable care on the import side or not self-blinding on the export side, compliance is a key for many different reasons, including protecting your bottom line.
Given the ever increasing attention being paid by the U.S. government to compliance by companies of all sizes, and especially in light of the recent informed compliance letter sent out by CBP’s Regulatory Audit in Houston, TX, now is the time to review how to value goods correctly.
The same basic value code is used throughout the world, at least among all the World Customs Organization member countries, although most assess duty on the C.I.F. value of the imported goods, whereas the U.S. assesses duty on the F.O.B. cost of goods. While admittedly each country has its own interpretation and they vary a tad, the basics are: (more…)
With the bankruptcy filing of Hanjin Shipping having just occurred on the 31st, many of their shipping customers are only now beginning to feel the disruption to their supply chains and are trying to sort out how to get their goods moving. It would be reasonable to expect similar bankruptcy filings in some major countries such as the U.S. and at least one in Europe, but until that happens, here are some tips for getting your goods moving. (more…)
First published by Journal of Commerce, August 2016
In the face of its recent reorganization and enhanced computer system, it was really only a matter of time before the trade community started to see Customs and Border Protection (“CBP”) better organize its enforcement efforts, and now the first tangible step has been publicly disclosed.
When the concept for the Centers for Excellence and Expertise was rolled out, it was logical to expect that CBP would combine the enhanced computer capabilities of the Automated Commercial Environment with information developed from the industry focused CEEs. That meant, we would eventually see CBP relying on computer analytics and internal expertise to help the agency pinpoint where to focus its enforcement efforts. Over the years, we had seen those with the most experience retire. CBP and Immigration and Customs Enforcement seemed to lose their ability to make serious fraud cases. Yes, criminal cases for trade fraud, involving for example for antidumping and export license violations, continued to be brought, but it has been a long time since we have heard about a really significant civil penalty. Sure, some smaller fish got caught, and many of them did some really dumb things. Others who got caught just plain cheated. Now, however, CBP has launched a round of “informed compliance” letters, which are really warning letters to the trade community. (more…)
In an earlier alert, we discussed the various export incentives put into place with the passage of the Trade Facilitation and Trade Enforcement Act (“TFTEA”). One long-standing benefit available to exporters is duty drawback, which enhances a company’s ability to compete in the global market. Drawback lowers the cost of U.S. exports by allowing for refunds of duties, taxes and fees paid on imported merchandise which is subsequently exported in its same form, as part of a U.S. manufactured product or similar domestic merchandise which is substituted for the imported merchandise. More details will become evident as the regulations are developed within two (2) years following enactment. Here we discuss the key provisions in the TFTEA which impact drawback. (more…)