The 2012 HTSUS will include 220 sets of amendments; will your company be affected?
The Omnibus Trade and Competitiveness Act of 1988, Section 1205, obligates the U.S. International Trade Commission (ITC) to continuously review the Harmonized Tariff Schedule of the United States (HTSUS) and to make any recommendations to the President of any necessary modifications to the Harmonized Commodity Description and Coding System (HS), according to the World Customs Organization’s (WCO) recommendations. These changes are implemented every five years, and the next set of changes is due to take place in 2012.
Two major trends appear among the proposed 220 sets of amendments, and these are (1) an accounting for constant evolution and progress in the technical industries, as well as (2) the recognition of globally relevant environmental and social issues. The former has resulted in the recognition of new technologies, while the latter is reflected in the host of changes to the HS’ classification and codification of foods of specific importance to food security and the early warning system of the Food and Agriculture Organization of the United Nations (FAO).
In summary, the 220 sets of amendments that were accepted will effect changes in the following sectors:
- Agriculture, which will see 98 amendments;
- Chemical, which will see 27 amendments;
- Paper, which will see 14 amendments;
- Textile, which will see 14 amendments;
- Metal, which will see 5 amendments;
- Machinery, which will see 30 amendments; and
- A variety of other sectors, which will see a total of 37 amendments.
As these changes are scheduled to be implemented on January 1, 2012, it is of the utmost importance that your company review the anticipated amendments and make any necessary in-house adjustments to prevent any potential delays, fines or penalties that may result from improper classification.
Should you require any additional information or advice on whether or not your company’s imports will be affected by these changes, please feel free to contact one of the attorneys at Middleton & Shrull.
Attention Exporters: Are you in compliance with the EAR’s Antiboycott Provisions?
On October 27, 2011, the Bureau of Industry and Security (BIS) of the Department of Commerce released the names of four companies that had recently agreed to pay a total of $72,000 in civil penalties to settle allegations that each had violated the antiboycott provisions of the Export Administration Regulations (EAR). This notice serves as a valuable reminder of a set of often-overlooked provisions that ought to be on every exporter’s compliance checklist.
In the mid-1970s, the U.S. adopted two sets of antiboycott laws, the Ribicoff Amendment to the 1979 Tax Reform Act (TRA), found in Section 999 of the IRS Code, and the 1977 Amendments to the Export Administration Act (EAA) of 1979, found in section 8, which are implemented by the EAR, and which are enforced by the Office of Antiboycott Compliance (OAC) of the BIS. The antiboycott provisions are designed to address foreign governments’ economic boycotts of countries friendly to the U.S. An example of this, and the impetus for the establishment of the provisions, as well as the current prevailing driver behind the legislation, is the Arab League boycott of Israel.
The Ribicoff Amendment denies various tax benefits normally available to exporters if they participate in a boycott. In addition, the IRS requires U.S. taxpayers to report operations in, with, or related to countries that the Treasury Department includes on their annual list of countries that may require participation in an international boycott, and with any other country from which they receive a request to participate in a boycott.
In the context of the EAR’s antiboycott provisions, which are the principal focus of this article, the term boycott is used to refer to economic coercion associated with such methods as refusing to engage in business transactions or conditioning business transactions on agreements that a party will not do business with another party or country.
There are three different levels of boycotts:
- Primary: where one country refuses to trade with another. These are a recognized tool of international trade policy and politics and the U.S. Congress did not intend to substantially interfere at this primary level.
- Secondary: where one country refuses to trade with anyone who does business with the country being boycotted. The U.S. Congress did intend to interfere at this secondary level and the EAR’s antiboycott provisions seek to address actions at this level.
- Tertiary: where a country refuses to trade with anyone who does business with companies or firms on their blacklist. This third level of boycotts is also covered by the EAR.
In terms of the mechanics of compliance with the antiboycott provisions, the following steps are advised:
1) Determine whether the activity is being performed by a U.S. person. If the answer is no, the provisions do not apply. In this context, U.S. persons include individuals and companies located in the United States and their foreign affiliates. These persons are subject to the EAR when their activities relate to the sale, purchase, or transfer of goods, services, or information between the U.S. and a foreign country.
2) Determine whether the activity is in the interstate or foreign commerce of the U.S. If the answer is no, the provisions do not apply. The sale, transfer, or purchase of goods and services, including information, to or from the U.S. is considered activity in the interstate or foreign commerce of the United States.
3) Determine whether the activity is prohibited by one of the express prohibitions in the law. If the answer is no, the activity is permissible. Prohibitions include:
a) Refusing or knowingly agreeing to refuse to do business with a boycotted country or blacklisted companies pursuant to a requirement of, an agreement with, or a request from or on behalf of a boycotting country.
b) Furnishing or knowingly agreeing to furnish information about business relationships with a boycotted country or with blacklisted companies.
c) Refusing or requiring any other person to refuse to employ or otherwise discriminate against any U.S. person on the basis of race, religion, sex, national origin or nationality.
4) If the answer to 1 – 3 is positive, then determine whether or not any of the exceptions in the provisions apply to the activity. Exceptions include:
a) U.S. persons may comply with certain boycotting country shipping requirements concerning importing foods or using carrying vessels. This exception in effect allows U.S. persons to comply with certain primary level boycotts.
b) U.S. persons may comply with certain shipping document requirements. This includes a positive certificate of origin, a positive statement of the name of the supplier of the goods or the provider of services and a positive or negative statement as to the route of the shipment or the name of the carrier of the goods.
c) Beyond the shipping documents exceptions, U.S. persons may furnish positive certificates of origin of goods and may certify concerning his/her own blacklist status.
5) Determine whether or not the activity needs to be reported to the U.S. government. A U.S. person who receives a request to take any action which has the effect of furthering or supporting a restrictive trade practice or boycott imposed by a foreign country against a country friendly to the U.S. must report such a request to the Department of Commerce. These reports are to be filed quarterly, and must be postmarked by the end of the month following the quarter in which the U.S. person received the boycott request, if the U.S. person is located in the U.S., or by the end of the second month following the quarter in which the request was received, if the U.S. person is located outside of the U.S. Failure to properly report the receipt of a boycott request within the time mandated by the regulations constitutes a violation. Additionally, the receipt of a request must be reported, regardless of whether the recipient intends to comply and regardless of whether or not the requested activity would be permissible under the provisions.
6) Keep in mind that the antiboycott provisions require that all records containing information relating to a reportable boycott request, including a copy of any documents in which the request appears, must be kept for a five-year period after the receipt of the request.
As always, if your company has any questions or concerns regarding the EAR’s antiboycott provisions, their interpretation, or their application to your company’s international trade activities, please do not hesitate to contact one of the attorneys at Middleton & Shrull.
Middleton & Shrull - Customs and International Trade Lawyers
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Burlington, MA 01803
(781) 272-7966 (Office)
(781) 927-5470 (Cell)
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