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U.S. Customs and Border Protection Textile Law Enforcement Challenges

Department of Homeland Security  Customs and Border Protection. U.S. Customs and Border Protection Textile Law Enforcement Challenges. “And the Plot Thickens” California Fashion Association May 9, 2007. Department of Homeland Security  Customs and Border Protection.

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U.S. Customs and Border Protection Textile Law Enforcement Challenges

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  1. Department of Homeland Security  Customs and Border Protection U.S. Customs and Border ProtectionTextile Law Enforcement Challenges “And the Plot Thickens” California Fashion Association May 9, 2007

  2. Department of Homeland Security  Customs and Border Protection • Enforce all Laws Involving the Imports of Textile and Clothing Products • Correct Description • Quantity • Value • Country of Origin • Ensure the Compliance of all Import Transactions What is the Role of Customs?

  3. Department of Homeland Security  Customs and Border Protection The Textile Import Industry

  4. Department of Homeland Security  Customs and Border Protection The Textile Import Industry

  5. Textile Trade Preferences • Free Trade Agreements • Guatemala Implemented July 1, 2006 • Peru and Colombia Negotiations Completed • Bahrain Implemented August 1, 2006 and Oman Completed • Thailand Stopped Due to Coup d’Etat • South Korea and Malaysia Negotiations Started

  6. Textile Trade Preferences • Trade Preference Legislation • Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 aka Haiti HOPE • Allows Cumulation with All U.S. Free Trade and Trade Preference Partners • Allows Third Country Fabric from China with a Capped Limit • Value-Based Rule of Origin as Opposed to a Tariff Shift • Annual Aggregation

  7. Textile Enforcement • Quota Eliminated for all WTO Member Nations EXCEPT China • Safeguard Mechanism Replaced by Comprehensive Quota Agreement • Textile Bilaterals Expire • MOUs; CBP Instrumental in the Negotiation of Agreements with Hong Kong, Macao, the Philippines and Indonesia • Enforcement Focus Unchanging

  8. Textile Enforcement Focus • Textiles and Wearing Apparel Industry Designated As a Priority Trade Issue for FY 07 • Enforcement Focus • Origin Fraud; Illegal Transshipment; Quota Circumvention; Inadmissibility of Merchandise • Enforcement of Various Legislative Trade Initiatives and Free Trade Agreement Preference Claims • Protection of the Revenue • 5 Year Enforcement Strategy Reported to Congress

  9. Textile Enforcement Focus • Risks • FTA and other Trade Legislation • $22+ Billion in Trade Preference Claims out of a Universe of $104.2 Billion in Imports • China Quota • Illegal Transshipment • Misdescription of Merchandise • Smuggling; Unmanifested Goods • General Misdescription to Avoid Duties and Quota • 42% of Duties Collected Involve Textile Goods

  10. Textile Production Verification Teams • In 2006 TPVTs Were Conducted in: • Hong Kong • Macao • Swaziland • Vietnam • Egypt • Mauritius • South Africa • Thailand • Kenya • Chile • El Salvador • Guatemala • Honduras 428 Factories Visited

  11. Textile Production Verification Team Statistics 2006 • 13 Countries Visited • 428 Factories Visited • 8 Transshipment Found • 97 Permanently Closed • 95 High Potential for Transshipment • 20 Refused Admission to the Team • 51% Not Compliant for Illegal Transshipment • 41% Not Compliant for Trade Preference

  12. Seizures for Quota Circumvention Quota Eliminated January 1, 2005

  13. Current Investigation • Seizure of $46 Million in Smuggled Textiles • Criminal Organization Based in Hong Kong • Goods Declared as Furniture; C/O China • Undercover Investigation/Operation • China Quota Circumvention and Duty Circumvention • Loss of Revenue in Excess of $50 Million • Landed Duty Paid Transactions; Middlemen Acting As Importers/Ultimate Consignees Buying from a “Domestic” Supplier

  14. Textile Enforcement • Thailand Ghost Factories • 8 Factories Existed on Paper Only • Were Shipping to the U.S. • Goods Suspected c/o China • CBP Working Closely with Thailand • 328,802 Pieces T-shirts, Underwear, Pants, Jackets, Baby Garments • $727,796 Value of Garments • CBP Requested Redeliveries for Shipments Valued at $3.2 Million Entered from March – May 2006

  15. Textile Enforcement • Identity Theft of U.S. Firms • Shipments of Denim Jeans Stopped at Numerous Ports of Entry • Goods Chinese in Origin Claiming Made in the U.S.A. • Seized by CBP

  16. Textile Enforcement • Use of Counterfeit Certificates of Origin • Russia, the Philippines • Use of Forged Government Communications • Russia • Most of the Counterfeits Link Back to Korean, Hong Kong Trading Houses/Middlemen

  17. Textile Enforcement • Last Year vs. This Year • 64% Increase in Enforcement Actions • 7100% Increase in the Number of Liquidated Damages Penalties • Exclusions of Merchandise Increased by 368% • Detentions Increased by 1000%

  18. Trade Preference Enforcement • Additional 1,377 Targeted Verifications Performed • $53.6 Million in Value • 37% Non-Compliance Rate • $1.7 Million in Additional Revenues Collected

  19. Textile Penalties • 502 Liquidated Damages Penalties Issued Totaling $ 21.8 Million • 65 Penalties Issued Totaling $6.5 Million

  20. Thank You • Questions??????

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