The EO directs on the federal agencies to continue to assist States with not only “taking administrative actions to provide flexibility regarding burdensome requirements that stood in the way of implementing the most effective strategies to stop the virus’s spread”; but to continue to “remove barriers to the greatest engine of economic prosperity the world has ever known:  the innovation, initiative, and drive of the American people.”

The EO pushes businesses, especially small businesses, to the forefront of recovery by directing federal agencies to act in manner that will instill confidence during the re-opening phase. To meet this directive, federal agencies are charged to provide clear guidance on discretionary policies and laws, acknowledge businesses (such as importers and exporter) regulatory compliance efforts during the rapid change of environment, and apply principles of fairness in administrative enforcement and adjudication to individual cases.

Broadly the EO orders the federal agencies, to address our current economic emergency by “rescinding, modifying, waiving, or providing exemptions from regulations and other requirements that may inhibit economic recovery.”

The EO mandates the federal agencies to execute the following directives (this is not an exhaustive list):

Rescission and waiver of regulatory standards: 

• Identify regulatory standards that may inhibit economic recovery.
• Consider taking appropriate action to temporarily or permanently rescind, modify, waive, or exempt persons or entities from those inhibiting requirements.
• Consider exercising appropriate temporary enforcement discretion or appropriate temporary extensions of time for the purpose of promoting job creation and economic growth.

Compliance assistance for regulated entities:

• Consider policies of enforcement discretion that decline enforcement against persons and entities that have attempted in reasonably good faith to comply with applicable statutory and regulatory standards.
• Consider a situation in which a person or entity makes a reasonable attempt to comply with and discretion guidance to be a rationale for declining enforcement described above.
• Non-adherence to guidance shall not by itself form the basis for an enforcement action by a Federal agency.

 Fairness in Administrative Enforcement and Adjudication

• Consider the principles of fairness in administrative enforcement and adjudication, which include in part,
  • Administrative enforcement should be prompt and fair.
  • The Government should provide favorable relevant evidence to the subject of an administrative enforcement action.
  • Penalties should be proportionate, transparent, and imposed based on consistent lawful standards.
  • Administrative enforcement should be free of coercion.
  • Liability should be imposed only after notice and an opportunity to respond.
  • Administrative enforcement should be free of unfair surprise.
  • Agencies must be accountable for their administrative enforcement decisions.

Contact our Customs and International Law attorneys at info@diaztradelaw.com or 305-456-3830, to discuss this new Executive Order and how it applies to you.

On March 18, 2020, President Trump issued an Executive Order (EO) focused on Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of COVID-19. This EO stems from authority granted under the Defense Production Act of 1950 (DPA) and seeks to “ensure our healthcare system is able to surge capacity and capability to respond to the spread of COVID-19.”

Two days later in a press briefing, President Trump formally announced that the federal government had begun to use the DPA, as previously stated in the EO to direct US companies to shift their focus on producing emergency supplies of protective masks and other necessary medical devices.

What is the Defense Production Act?

The Defense Production Act (DPA) was initially enacted in 1950 during the Korean war to grant the president the authority to direct what the private sector can produce in the interest of national defense. If the DPA is invoked by the president, federal agencies have the authority to direct domestic industrial entities to produce essential goods and materials necessary for national defense.

Through this Act, the US Department of Defense has historically requested private companies to assist in military readiness, but the Act has been amended over time to broaden the scope beyond that to include essential goods and materials needed for recovery and response to natural hazards and other national emergencies. President Trump EO from March 18, 2020 invoked this Act which had three sections detailing how it would come into effect.

FEMA’s Temporary Halt

On April 10, 2020, drawing authority from the DPA, multiple EOs, and the memorandum, the Federal Emergency Management Agency (FEMA) issued a temporary final rule to allocate certain scarce or threatened materials for domestic use, so that these materials may not be exported from the United States without explicit approval by FEMA. Until August 10, 2020, no shipments of the five types of personal protective equipment (PPE), specified below, may be exported from the United States without explicit approval by FEMA.

The rule covers five types of personal protective equipment (PPE):

1. N95 Filtering Facepiece Respirators, including devices that are disposable half-face-piece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth of the wearer to help reduce wearer exposure to pathogenic biological airborne particulates;
2. Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, or P95, P99, P100), including single-use, disposable half-mask respiratory protective devices that cover the user’s airway (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level per 42 CFR 84.181;
3. Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;
4. PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials; and
5. PPE gloves or surgical gloves, including those defined at 21 CFR 880.6250 (exam gloves) and 878.4460 (surgical gloves) and such gloves intended for the same purposes.

What is the Process to Export these Products?

The rule stipulates that CBP, in coordination with other appropriate officials, is to notify FEMA of any intended export of covered materials. According to the temporary final rule, the process is as follows:

• Customs and Border Protection (CBP) will notify FEMA of any intended exports of the restricted PPE.
• CBP would then temporarily detain the export while the FEMA administrator decides whether to return the shipment for domestic use or issue a rated order for or allow the export of part or all of the shipment.
• The FEMA administrator makes a decision within a reasonable time frame after CBP notifies them of the intended export.
• If it is decided the shipment is needed for domestic use, FEMA will purchase the shipment.

Allocation of Intended PPE Exports

In making such determination, the Administrator may consult other agencies and will to consider the totality of the circumstances, including:

(1)The need to ensure that scarce or threatened items are appropriately allocated for domestic use
(2) Minimization of disruption to the supply chain, both domestically and abroad
(3) Circumstances surrounding the distribution of the materials and potential hoarding or price-gouging concerns
(4) Quantity and Quality of the materials
(5) Humanitarian considerations
(6) International relations and diplomatic considerations

Exemption:

An exemption exists for U.S. manufacturers that meet the following criteria:

1. The U.S. manufacturer has a continuous export agreement in place since at least January 1, 2020.
2. At least 80 percent of the manufacturer’s domestic production was distributed in the US in the preceding 12 months

It is important to note that exporters can NOT make this determination on their own and must apply to FEMA for exemption. If FEMA determines that a shipment falls within this exemption, such materials may be exported without further review. However, even if you qualify for the exemption, FEMA can waive this exemption if the Administrator deems it necessary or appropriate for the promotion of national defense.

Additional Exemptions?

The rule also states that pursuant to 44 CFR 328.102, if deemed necessary for national defense, the Administrator may announce any of the exemptions listed by notice in the Federal Register at his discretion. However, he may waive any of these exemptions, and if CBP believes that someone is intentionally taking advantage of these exemptions, they may detain a shipment and forward information to FEMA for determination. Below are the additional exemptions:

1. Shipments of PPE to US Commonwealths and Territories, Including Guam, American Samoa, Puerto Rico, US Virgin Islands, and the Commonwealth of the Northern Mariana Islands are NOT ‘exports’.
2. Exports of Covered Materials by Non-profit or Non-governmental Organizations that are Solely for Donation to Foreign Charities or Governments for Free Distribution (Not Sale) at their Destination(s).
3. Intracompany Transfers of Covered Materials by US Companies from Domestic Facilities to Company-Owned or Affiliated Foreign Facilities.
4. Shipments of Covered Materials that are Exported Solely for Assembly in Medical Kits and Diagnostic Testing Kits Destined for U.S. Sale and Delivery
5. Sealed, Sterile Medical Kits, and Diagnostic Testing Kits Where Only a Portion of the Kit is Made Up of One or More Covered Materials That Cannot Be Easily Removed Without Damaging the Kits.
6. Declared Diplomatic Shipments from Foreign Embassies and Consulates to their Home Countries. These May be Shipped via Intermediaries (Logistics Providers) but are Shipped from and Consigned to Foreign Governments.
7. Shipments to Overseas U.S. Military Addresses, Foreign Service Posts (e.g., Diplomatic Post Offices), and Embassies.
8. In-Transit Merchandise: Shipments in Transit through the United States with a Foreign Shipper and Consignee, Including Shipments Temporarily Entered into a Warehouse or Temporarily Admitted to a Foreign Trade Zone.
9. Shipments for Which the Final Destination is Canada or Mexico
10. Shipments by or on behalf of the U.S. Federal Government, including its Military.

FEMA will require a letter of attestation to be submitted via to certify the purpose of the shipment for exemptions (2), (3), (4), (8), and (9), above. Reach out to DTL for any concerns you have regarding how to file this letter of attestation.

Potential Penalties

The FEMA administrator may apply for a preliminary, permanent, or temporary injunction, restraining order, or other order to enforce compliance. Any violations are subject to penalties available under section 103 of the DPA. The criminal and civil penalties are a potential $10,000 fine and/or one year of imprisonment. Penalties under 18 U.S.C. 554 are also applicable and criminal with a potential 10 years’ imprisonment and/or a fine.

The FEMA administrator has authority under section 705 of the DPA, with adequate scope and purpose, to:

• Conduct investigations;
• Request information or testimony; and
• Inspect records or premises;

The administrator, with their judgment, would determine if any person has engaged or is about to engage in acts or practices to violate any provisions of the temporary rule to proceed accordingly with penalties.

On April 9, 2020, CBP published a memorandum superseding the one published on April 4^th. This memorandum serves as an updated guidance for the allocation of certain scarce or threatened health and medical resources for domestic use. The focus of the allocation is on commercial quantities defined as shipments valued at $2,500 and containing more than 10,000 units of gloves, masks, or other commodities referenced above. In the Memo, CBP noted that the following circumstances also qualify for an exclusion to the export ban:

• Exports to Canada or Mexico;
• Exports to U.S. Government entities such as U.S. military bases overseas;
• Exports by U.S. Government agencies;
• Exports by U.S. charities;
• Exports by critical infrastructure industries for the protection of their workers;
• Exports by the 3M Company;
• Express or Mail Parcels that do not meet the commercial quantity definition above;
• In-transit shipments.

Export shipments that do not meet the exclusions would receive document reviews and physical examinations conducted at the port to determine if the commodity fits the definition of scarce or threatened. Only when commodity expertise is required should there be consultation with the COVID-19 Cargo Resolution Team.

Diaz Trade Law specializes in customs and international trade matters. Our Customs and International Trade Law attorneys are available at info@diaztradelaw.com or 305-456-3830.

The United States Federal Trade Commission (FTC) issued a press release confirming is sent three warning letters to companies that sell oils, tinctures, capsules, “gummies,” and creams containing cannabidiol (CBD), a chemical compound derived from the cannabis plant. While the warning letters are not made publicly available, the FTC advised the warning letters were sent because the companies were advertising their CBD products could treat or cure serious diseases and health conditions, in violation of both the FTC Act (as well as U.S. Food and Drug Administration (FDA)) laws and regulations.

FTC’s mission is to “Protect consumers and competition by preventing anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education without unduly burdening legitimate business activity.” As part of its regular monitoring of health-related advertising claims, the FTC issued the three warning letters for advertisements of CBD products claiming to treat or cure serious diseases and health conditions. The letters warn that selling CBD products without such substantiation could violate the FTC Act and may result in legal action that could result in an injunction and an order to return money to consumers.

One of the CBD advertisements described the product with claims such as, “work like magic … to relieve even the most agonizing pain” better than prescription opioid painkillers; To bolster its claims that CBD has been “clinically proven” to treat cancer, Alzheimer’s disease, multiple sclerosis (MS), fibromyalgia, cigarette addiction, and colitis, the company states it has participated in “thousands of hours of research” with Harvard researchers.

Another company’s website claims that CBD products are proven to treat autism, anorexia, bipolar disorder, post-traumatic stress disorder, schizophrenia, anxiety, depression, Alzheimer’s disease, Lou Gehrig’s Disease (ALS), stroke, Parkinson’s disease, epilepsy, traumatic brain injuries, diabetes, Crohn’s disease, psoriasis, MS, fibromyalgia, cancer, and AIDS. The company also advertises CBD as a “miracle pain remedy” for both acute and chronic pain, including pain from cancer treatment and arthritis.

The third company’s website promotes CBD gummies as highly effective at treating “the root cause of most major degenerative diseases, including arthritis, heart disease, fibromyalgia, cancer, asthma, and a wide spectrum of autoimmune disorders.” The company also claims its CBD cream relieves arthritis pain and that its CBD oil may effectively treat depression, PTSD, epilepsy, heart disease, arthritis, fibromyalgia, and asthma.

FTC has instructed the companies to respond to FTC’s concerns within fifteen (15) days of the date of the letter confirming the claims are backed by scientific research. FTC alleges that CBD companies making drug claims on their products are subject to potential violations of Sections 5(a) and 12 of the FTC Act, codified at 15 U.S.C. 45(a) and 52, which typically carry a civil penalty of not more than $10,000 for each violation.

The FTC in conjunction with the United States Food and Drug Administration (FDA) issued three similar letters earlier this year to three other CBD companies for alleged violation of FDA regulation and FTC regulations. It is important to note, both FDA and FTC regulate not only the product, but, also all ancillary advertisements, including websites

Under FDA’s Food Drug and Cosmetic Act, products are drugs under section 201(g)(1) of the FD&C Act, 21 U.S.C. 321(g)(1), because they are intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body. In the case of the CBD companies at issue, blatant claims to treat a disease are “drug” claims. When there is not a current over the counter drug monograph (or rulemaking process) for CBD (which there is not), then the products are considered “unapproved new drugs” sold in violation of sections 505(a) and 301(d) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act)).

The federal agencies seek to prevent unproven medical claims regarding CBD from flooding commercial markets. Diaz Trade Law has helped countless small, medium, and big businesses with FTC and FDA compliance. Contact our office at info@diaztradelaw.com to discuss how to ensure your CBD products remain on the shelves and not subject to an FTC and/or FDA warning letter.

If you have ever had your money seized by Customs for failure to declare over $10,000, had merchandise seized for misdeclaring its value or not paying enough customs duties, had your bank account seized for alleged trade-based money laundering, or had any other items detained or seized by U.S. Customs for violating another Federal agency’s regulations, you should sign up for this webinar.

The fee is only $155 for this most informative webinar taught by experts with a comprehensive understanding of the internal policies and procedures of U.S. Customs and Border Protection.  A little knowledge now could save you time, frustration, and a lot of money by learning how to avoid a seizure, or when a seizure has already occurred, how to get your seized cargo back as quickly as possible.

Whatever the type of merchandise, whether it is an import or an export shipment, whether it will be sold in the United States or just moving in-transit through the United States, whether it needs a special import or export license, U.S. Customs seizes and forfeits tens of millions of dollars of merchandise every year.  Download the Powerpoint presentations, and get involved in the Q&A session. Click  “Recovering Your Seized Cargo” to register at the Journal of Commerce website.

The difference between a seizure under CAFRA’s  rules under 18 U.S.C. 983 – The General Rules for Civil Forfeitures, and the U.S. Customs rules under the Tariff Act of 1930 and the Supplemental Rules of Admiralty, is significant. These significant differences are often misunderstood, including by attorneys who do not regularly practice in seizure and forfeiture matters.   Under CAFRA, the U.S. Government must send an administrative seizure notice to affected persons within 60 days of the seizure, but for U.S. Customs cases, there is no such requirement. In fact, unfortunately, U.S. Customs often takes 90 to days to issue the Seizure Notice letter to affected parties such as the owner of the seized merchandise. Under CAFRA, a claimant has 35 days from the date of the notice of seizure to file its administrative claim or request judicial forfeiture.  For U.S. Customs cases, the claimant must file a Petition within 30 days of the seizure notice or, if seeking judicial review of the seizure, file a claim and cost bond equal to 10% of the value of the seized merchandise, up to a maximum of $5,000.  In CAFRA cases, no court bond is required.  Once in Federal Court, for CAFRA cases, the U.S. Government’s burden of proof is by the preponderance of the evidence.  In U.S. Customs cases, the Government has a lower burden of proof by establishing probable cause for the seizure, and then the burden shifts to the claimant to establish, by the preponderance of the evidence, that the property may not be forfeited.

There are other numerous differences, a few of which are set forth in a comparison chart. One big difference is that in U.S. Customs cases, a claimant may file an administrative Petition with U.S. Customs seeking to get the seized merchandise released, and if unsuccessful, then go to Court.  In non-U.S. Customs cases, a claimant who chooses to file a Petition with the Federal agency and loses cannot then seek relief in Federal Court.  In general, filing a Petition with U.S. Customs or other Federal agency is the preferred alternative because it is often (1) faster, (2) less expensive, and (3) gives the greatest chance of success in getting the merchandise released from seizure.