Pre-planning and investing in regulatory compliance measures are key to success

The US is the most lucrative wellness market in the world – and for some small and medium-sized enterprises (SMEs) that produce supplements, the potential for growth and a bigger bottom line is difficult to ignore. 

And who would blame them? The US wellness sector is valued at US$2tn and is poised to continue growing, recording an average annual growth rate of 8.3% between 2019 and 2023, according to research by the Global Wellness Institute. 

In contrast, China’s market, ranked the second-largest in the world, trails at a more modest US$870bn, followed by Germany at $310bn.

However, rushing in without being fully compliant could result in products being blacklisted or seized at the border, says Jennifer Diaz, an attorney and founding partner at Miami-based Diaz Trade Law, which specializes in customs and US Food and Drug Administration (FDA) laws and compliance.

Here, Diaz offers her top five tips for new brands to stay compliant and off the FDA’s blacklist.

1. Know the regulators

One of the first steps for SMEs planning to import supplements into the US is to register with the FDA, as they are considered a food product, Diaz says.

Companies also need to designate a US agent to act on their behalf before shipments begin.

“Most entities also don’t realize that the US has 47 regulatory agencies that can regulate imports and exports, so you may be dealing with multiple federal regulatory agencies that regulate your product,” she adds.

For example, the FDA, Federal Trade Commission (FTC) and US Customs regulate the imported supplements market, she says.

2. Beware of being blacklisted

One underestimated risk for SMEs launching their supplements in the US is the FDA’s import alert system, which Diaz describes as a blacklist for companies that have failed to comply with regulations.

This could be anything from mislabeling products to not using English on labels, making false medical claims, or failing to register with the FDA, Diaz explains, adding that it is time-consuming and costly to be removed from the list.

“Many SMEs don’t have the ability to survive the enforcement because the full weight of the government on you when you’re non-compliant is big,” she says.

“The government does not have the resources to hold your hand and help you when it comes to compliance – the expectation is that the product is already compliant and you’re smart enough to pick the right business partners and agents before you launch.”

3. Be wary of influencers

Marketing claims, even those from third parties such as influencers, also fall under FDA and FTC regulations, according to Diaz.

“What many don’t realize is that the FDA can legally make your life miserable over your marketing claims, in addition to what’s on your product,” Diaz says.

For example, suppose a business sends a supplement to an influencer to promote it on social media and they claim that it cured their cancer. In this case, the company is deemed liable if they don’t “de-escalate” the claim, Diaz explains.

“The FDA has the legal ability to issue a company a warning letter for the claims that they make on their website or for the claims that influencers make on their behalf on social media.”

4. Set a budget for compliance

Not spending the time or money on pre-compliance preparation can also lead to costly errors, says Diaz.

“It could be hundreds of thousands of dollars if your goods are seized or you receive an FDA audit or warning letter,” she says.

Diaz recommends that SMEs conduct independent testing in a laboratory to verify ingredient claims, as well as taking out product liability insurance to protect against litigation and organizing a legal review of all labels, ingredients and marketing content.

5. Protect your brand

Diaz also recommends that SMEs protect their brands by registering them with the US Patent and Trademark Office.

“Once you register your trademark, you should also record it with US Customs and then teach them how to spot copies of your brand, such as unique packaging,” Diaz says. 

“Customs then logs it in its secret database and it goes to all customs officers – there are 60,000 customs officers in the country at 328 ports of entry – and they will fine the offender and alert you if they spot a fake.”

Customs and Border Protection (CBP)

• President Biden signed H.R. 8982, the Bulk Infant Formula to Retail Shelves Act on October 10, 2022. Duty-free treatment will only be provided to importers of base powder to be manufactured into infant formula authorized to be marketed in the United States or subject to an enforcement discretion letter from the Food and Drug Administration (FDA). The effective date is October 13, 2022, the third day after signature.
  • Should you have questions regarding enforcement discretion, please refer to the Enforcement Discretion to Manufacturers to Increase Infant Formula Supplies FDA website.

The Office of the United States Trade Representative

• The Office of the United States Trade Representative announced the next steps in the statutory four-year review of the tariff actions in the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation following requests for continuation from representatives of domestic industries
  • USTR is seeking public comments, consistent with the statutory directive, to consider the effectiveness of the actions in achieving the objectives of the investigation, other actions that could be taken, and the effects of the actions on the United States economy, including consumers.

United States Department of Commerce (DOC)

• Department of Commerce (DOC) announced on October 3, 2022, an opportunity to request administrative review and join annual inquiry service list for products on AD/CVD lists.  
• DOC is issuing a final rule to implement Proclamation 10414, “Declaration of Emergency and Authorization for Temporary Extensions of Time and Duty- Free Importation of Solar Cells and Modules from Southeast Asia.” 
• DOC is amending the Export Administration Regulations (EAR) in response to Russia’s further invasion of Ukraine on February 24, 2022.
• DOC and the International Trade Commission (USITC) announced a petition filed on Oct. 12 which alleges paper file folders from China, India, and Vietnam are being sold at less than fair value in the U.S. market, and in India benefiting from countervailable subsidies. The alleged average dumping margins are 116.69 percent for China, 174.19 percent for India, and 214.53 percent for Vietnam.
• DOC and the U.S. International Trade Commission (USITC) announced on October 12, that revocation of the antidumping duty  order on certain artist canvas from China would likely lead to a continuation or recurrence of dumping and material injury to an industry in the U.S. 
• DOC determined on October 12, that POSCO and its affiliated companies, made sales of subject merchandise in the United States at less than normal value during the period of review May 1, 2020, through April 30, 2021.
  • DOC intends to disclose the
    calculations for these final results of
    review within five days of the date of
    publication of this notice in the Federal
    Register.
• DOC and the U.S. International Trade Commission (USITC) announced on October 12, that revocation of the AD/CVD orders on certain biaxial integral geogrid products from China would likely lead to continuation or recurrence of dumping, countervailable subsidies, and material injury to an industry in the U.S.
• DOC determines that certain steel nails from the United Arab Emirates were sold in the United States at less than normal value during the period of review May 1, 2020, through April 30, 2021.
  • DOC plans to adopt the Preliminary Results as the
    final results of their review.
• DOC continues to determine that the 30 companies subject to this administrative review of the antidumping duty order on  magnesia carbon bricks from China are part of the China-wide entity because they did not demonstrate eligibility for separate rates.
  • The period of review is September 1, 2020, through August 31, 2021.

U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)

• U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned three individuals on October 6, 2022, and one entity connected to Burma’s military regime pursuant to Executive Order (E.O.) 14014. Following the February 1, 2021, coup that overthrew Burma’s democratically elected civilian government, the military has committed numerous atrocities against people in Burma, including the violent repression of political dissent, the killing of over 2,300 innocent civilians, and displacement of more than 900,000 people. 
• OFAC on October 6, 2022, designated seven senior leaders within Iran’s government and security apparatus for the shutdown of Iran’s Internet access and the continued violence against peaceful protesters in the wake of the tragic death of 22-year-old Mahsa Amini, who was arrested for allegedly wearing a hijab improperly, and died in the custody of Iran’s Morality Police. 
• OFAC on September 30, 2022, placed hundreds of Russian individuals and entities on the Specially Designated Nationals (SDN) List in response to Russia’s illegal annexation of Ukrainian territories.  
• OFAC on September 29, 2022, sanctioned an international network of companies involved in the sale of hundreds of millions of dollars’ worth of Iranian petrochemicals and petroleum products to end users in South and East Asia. 
• OFAC on October 7,2022, designated Malaysian national Teo Boon Ching, the Teo Boon Ching Wildlife Trafficking Transnational Criminal Organization (TCO), and the Malaysian company Sunrise Greenland Sdn. Bhd. for the cruel trafficking of endangered and threatened wildlife and the products of brutal poaching. 
• OFAC on October 7, 2022, designated two individuals and three entities for activities related to the exportation of petroleum to the Democratic People’s Republic of Korea (DPRK), which directly supports the development of DPRK weapons programs and its military. 
• OFAC and Financial Crimes Enforcement Network (FinCEN) announced settlements for over $24 million and $29 million, respectively, with Bittrex, Inc. (Bittrex), a virtual currency exchange based in Bellevue, Washington. 
• OFAC is publishing one general license (GL) issued pursuant to the Iranian Transactions and Sanctions Regulations: GL D-2, which was previously made available on OFAC’s website.
• OFAC is publishing one sectoral determination issued pursuant to an April 15, 2021 Executive order, as well as a category of services determination issued pursuant to an April 6, 2022 Executive order.
• OFAC is publishing one general license (GL) issued pursuant to the Russian Harmful Foreign Activities Sanctions Regulations: GL 13B, which was previously issued on OFAC’s website.
• OFAC is publishing nine general licenses (GLs) issued in the Venezuela Sanctions Regulations program: GLs 3, 3A, 3B, 3C, 3D, 3E, 3F, and 3G, each of which was previously issued on OFAC’s website and is now expired, as well as GL 3H, which was also previously issued on OFAC’s website.
• OFAC is publishing eight general licenses (GLs) issued in the Venezuela Sanctions Regulations program: GLs 9, 9A, 9B, 9C, 9D, 9E, and 9F, each of which was previously issued on OFAC’s website and is now expired, as well as GL 9G, which was also previously issued on OFAC’s website.
• OFAC published the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

United States International Trade Commission (USITC)

• United States International Trade Commission (USITC) hereby gives notice of the institution of investigations and commencement of preliminary phase antidumping and countervailing duty investigation Nos. 701-TA-682 and 731-TA-1592-1593 (Preliminary) pursuant to the Tariff Act of 1930 (“the Act”) to determine whether there is a reasonable indication that an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports of certain freight rail couplers and parts thereof from China and Mexico, provided for in subheadings 8607.30.10 and 7326.90.86 of the Harmonized Tariff Schedule of the United States, that are alleged to be sold in the United States at less than fair value and alleged to be subsidized by the Government of China. 

United States Department of Labor (DOL)

• Department of Labor (DOL) has updated its list of goods produced by child or forced labor on September 28, 2022, and is now comprised of 158 goods from 77 countries.  

The White House and Congress

• President Biden issued an executive order on September 15, 2022, elaborating upon existing statutory factors and include additional national security factors the Committee on Foreign Investment in the United States (CFIUS or “Committee”) must consider in its review process of a covered transaction. 
• United States Senate on September 21, 2022, ratified the Kigali Amendment which will phase down global production and consumption of hydrofluorocarbons (HFCs), super-polluting chemicals in technology markets.  
• President Biden on September 15, 2022, issued an executive order elaborating on statutory factors and additional national security factors the Committee on Foreign Investment in the United States must consider in its review process of covered transactions.

Bureau of Industry and Security (BIS)

• The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to implement necessary controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items.
  • In addition, BIS is expanding controls on transactions involving items for supercomputer and semiconductor manufacturing end uses.
• BIS is amending the Export Administration Regulations (EAR) by adding 31 persons to the Unverified List (UVL). The 31 persons of China are added to the UVL on the basis that BIS was unable to verify their bona fides because an end-use check could not be completed satisfactorily for reasons outside the U.S. Government’s control.

British Broadcasting Channel (BBC)

• BBC reports that shares in major Asian computer chipmakers have fallen following the U.S. implementing a ban on American firms from selling certain chips.

Customs and Border Protection (CBP) Bulletin Weekly, Vol. 56, October 5, 2022, No. 39

• Extension and Amendment of Import Restrictions on Archaeological and Ethological Materials from Mali
  • This document amends the U.S. Customs and Border Protection (CBP) regulations to reflect an extension and amendment of import restrictions on certain categories of archaeological and ethnological material from the Republic of Mali (Mali) to fulfill the terms of the new agreement, titled ‘‘Agreement Between the Government of the United States of America and the Government of the Republic of Mali Concerning the Imposition of Import Restrictions on Categories of Archaeological and Ethnological Material of Mali.’’
  • The Designated List, which was last described in CBP Dec. 17–12, is amended in this document to reflect additional categories of archaeological material found throughout the entirety of Mali and additional categories of ethnological material associated with religious activities, ceremonies, or rites, and enforcement of import restrictions is being extended for an additional five years by this final rule
• Quarterly interest rates used in calculating interest on overdue accounts and refunds on Customs duties
  • This notice advises the public that the quarterly Internal Revenue Service interest rates used to calculate interest on overdue accounts (underpayments) and refunds (overpayments) of customs duties will increase from the previous quarter.
  • For the calendar quarter beginning October 1, 2022, the interest rates for overpayments will be 5 percent for corporations and 6 percent for non-corporations, and the interest rate for underpayments will be 6 percent for both corporations and non-corporations
• Proposed revocation of two ruling letter and proposed revocation of treatment relating to the tariff classification of pan masala betel nut food product
  • In NY 830068 and DD H890859, CBP classified the pan masala betel nut food product in heading 2106, HTSUS, specifically in subheading 2106.90.6099, HTSUS Annotated (HTSUSA) (currently subheading 2106.90.99, HTSUS, under the 2022 HTSUS), which provides for “Food preparations not elsewhere specified or included: Other: Other: Other: Other.”
  • CBP has reviewed both NY 830068 and DD H890859 and has determined the ruling letters to be in error. It is now CBP’s position that pan masala betel nut food product is properly classified, in heading 2008, HTSUS, specifically in subheading 2008.19.9090, HTSUSA, which provides for “Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: Other, including mixtures: Other, including mixtures: Other: Other.”
• New American Keg v. United States
  • Because the Department of Commerce failed to explain why it was appropriate to inflate a Mexican labor wage rate using Brazilian data and why doing so was superior to using a Brazilian labor wage rate and to identify the evidence in the administrative record that supported granting a company a separate rate, the case had to be remanded.
• Hyundai Steel Company v. United States
  • Because the Commerce Department reopened the record and necessary information was available, the court concluded that the Department’s decision to recalculate plaintiff’s dumping margin at 0.46% without applying facts available was supported by substantial evidence. Because the court sustained the Department’s decision to not use facts available in recalculating plaintiff’s dumping margin, consideration of the Department’s reiterated benefit determination in the remand results would have no practical significance and was mooted.
• United States v. Zhe “John” Liu
  • Zhe “John” Liu and GL Paper Distribution, LLC (collectively, “Liu”), has moved pursuant to USCIT Rule 12(f) to strike portions of the complaint presented by the United States (“Government”), arguing that paragraphs 5–10, 14, 16, 17, 21, 22, and the majority of paragraph 3 of the complaint are “wholly unrelated to the underlying action and contain allegations that are potentially prejudicial.”
  • Motion to strike denied
• Eteros Technologies v. United States
  • Washington State’s repeal of certain prohibitions attending marijuana-related drug paraphernalia “authorized” plaintiff such that plaintiff’s importation of component parts of an agricultural machine, which was designed to separate the leaf from the flower of cannabis or other plant material, through the Port of Blaine, Washington was exempted by the federal Controlled Substances Act, 21 U.S.C.S. § 863(f)(1), from the federal prohibition on importing drug paraphernalia.

Customs and Border Protection (CBP) Bulletin Weekly, Vol. 56, October 12, 2022, No. 40

• Extension of import restrictions on archaeological and ecclesiastical ethnological materials from Guatemala
  • This document amends the U.S. Customs and Border Protection (CBP) regulations to reflect an extension of import restrictions on certain categories of archaeological and ecclesiastical ethnological materials from Guatemala to fulfill the terms of the new agreement, titled ‘‘Memorandum of Understanding between the Government of the United States of America and the Government of the Republic of Guatemala Concerning the Imposition of Import Restrictions on Categories Of Archaeological and Ethnological Material of Guatemala.’’
  • CBP Dec. 12–17, which contains the Designated List of archaeological and ecclesiastical ethnological material from Guatemala to which the restrictions apply, is being extended for an additional five years by this final rule.
• Proposed modification of one ruling letter and proposed revocation of treatment relating to the tariff classification of finished wood slats and wood bottom rails with UV coatings used for window blinds
  • In NY N041645, CBP classified various wood components used for the manufacture of window blinds, including two styles of finished wood valances and wood slats that were primed and painted and three styles of finished wood slats and wood bottom rails that were either stained or painted and coated with UV coatings, in heading 4409, HTSUS, specifically in subheading 4409.29.9000, HTSUSA (“Annotated”) , which provides for “[w]ood (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rebated, chamfered, V-jointed, beaded, molded, rounded or the like) along any of its edges, ends or faces, whether or not planed, sanded or end-jointed: Nonconiferous: Other: Other: Other.” CBP has reviewed NY N041645 and has determined the ruling letter to be partially in error.
  • It is now CBP’s position that the finished wood slats and wood bottom rails with UV coatings used for window blinds are properly classified, in heading 4421, HTSUS, specifically in subheading 4421.99.9880, HTSUSA, which provides for “[o]ther articles of wood: Other: Other: Other: Other…Other.”
• Proposed modification of one ruling letter and proposed revocation of treatment relating to the tariff classification of woven upholstery fabrics
  • In NY N319028, CBP classified the woven upholstery fabrics (Style N1829 (Moriarty), Style D1818 (Glossary), and Style J1819 (Fringe)) in heading 5903, HTSUS, specifically in subheading 5903.90.25, HTSUS, which provides for “Textile fabrics impregnated, coated, covered or laminated with plastics, other than those of heading 5902: Other: Of man-made fibers: Other.” CBP has reviewed NY N319028 and has determined the ruling letter to be in error.
  • It is now CBP’s position that woven upholstery fabrics are properly classified, within either heading 5407, HTSUS, or heading 5515, HTSUS, dependent on the specific subject merchandise at-issue. Specifically it is CBP’s position that the first woven upholstery fabric (Style N1829 (Moriarty)) is properly classified within in subheading 5407.53.20, HTSUS, which provides for “Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404: Other woven fabrics, including 85 percent or more by weight of textured polyester filaments: Of yarns of different colors: Other,” that the second woven upholstery fabric (Style D1818 (Glossary)) is classified within 5407.73.20, HTSUS, which provides for “Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404: Other woven fabrics, containing 85 percent or more by weight of synthetic filaments: Of yarns of different colors: Other,” and that the third woven upholstery fabric (Style J1819 (Fringe)) is classified within subheading 5515.12.00, HTSUS, which provides for “Other woven fabrics of synthetic staple fibers: Of polyester stable fibers: Mixed mainly or solely with man-made filaments.”
• Proposed revocation of one ruling letter and proposed revocation of treatment relating to the tariff classification of a woman’s top
  • In NY N324185, CBP classified a woman’s top in heading 6211, HTSUS, specifically in subheading 6211.42.10, HTSUS, which provides for “Track suits, ski-suits and swimwear; other garments: Other garments, women’s or girls’: Of cotton: Other.” CBP has reviewed NY N324185 and has determined the ruling letter to be in error.
  • It is now CBP’s position that the woman’s top is properly classified in heading 6206, HTSUS, specifically in subheading 6206.30.30, HTSUS, which provides for “Women’s or girls’ blouses, shirts and shirt-blouses: Of cotton: Other: Other.”
• Proposed revocation of one ruling letter and proposed revocation of treatment relating to the tariff classification of metal storage lockers and cabinets for garage use
  • In NY N310710, CBP classified the metal storage lockers and cabinets in heading 9403, HTSUS, specifically in subheading 9403.20.0081, HTSUSA (Annotated), which provides for “Other furniture and parts thereof: Other metal furniture: Other: Counters, lockers, racks, display cases, shelves, partitions and similar fixtures: Other”. CBP has reviewed ruling letter to be in error.
  • It is now CBP’s position that the metal locker cabinets are properly classified, in heading 9403, HTSUS, specifically in subheading 9403.20.0050, HTSUSA, which provides for “Other furniture and parts thereof: Other metal furniture: Household: Other: Other
• Proposed revocation of one ruling letter and proposed revocation of treatment relating to the tariff classification of cast-iron cylinder heads and block castings
  • In NY N312073, CBP classified cast-iron cylinder heads and block castings in heading 8409, HTSUS, specifically in subheading 8409.99.91, HTSUS, which provides for “Parts suitable for use solely or principally with the engines of heading 8407 or 8408: Other: Other: Other: For vehicles of subheading 8701.20, or heading 8702, 8703 or 8704.” CBP has reviewed NY N312073 and has determined the ruling letter to be in error.
  • It is now CBP’s position that cast-iron cylinder heads and block castings are properly classified in heading 8409, HTSUS, specifically in subheading 8409.99.10, HTSUS, which provides for “Parts suitable for use solely or principally with the engines of heading 8407 or 8408: Other: Other: Cast-iron parts, not advanced beyond cleaning, and machined only for the removal of fins, gates, sprues and risers or to permit location in finishing machinery.”
• Proposed revocation of one ruling letter, proposed modification of one ruling letter and proposed revocation of treatment relating to the country of origin of certain air purifiers
  • In NY N322681, CBP determined that the air purifiers, manufactured from parts of Chinese and Vietnamese-origin and further assembled in Vietnam into subassemblies and the finished air purifiers, were products of China. It is now CBP’s position that the country of origin of these air purifiers is Vietnam. In NY N322364, CBP determined that air purifiers, manufactured from parts of Chinese and Vietnamese-origin and further assembled in Vietnam into subassemblies and the finished air purifiers, were products of Vietnam in the first manufacturing scenario and products of China in the second manufacturing scenario.
  • It is now CBP’s position that the country of origin of the air purifiers in the second manufacturing scenario is Vietnam
• Xi’an Metals & Mineral Import & Export Co v. United States
  • There was no error in the U.S. Court of International Trade’s determination that the CONNUM-specific rule was not subject to the notice-and-comment rulemaking provisions of the APA; hence, the U.S. Department of Commerce was entitled to clarify the regulation regarding the data used in performing margin calculations in the third administrative review because it needed data that more accurately reflected the costs associated with the production and sale of the subject merchandise;
  • The Court correctly determined that Commerce’s application of facts otherwise available (FA) was supported by substantial evidence; in deciding to apply FA, Commerce reasonably determined that appellant’s repeated failure to submit its cost information on a CONNUM-specific basis meant that necessary information reasonably reflecting the costs of production was not available.
• Kaptan Demir Celik Endustrisi ve Ticaret v. United States
  • A Turkish producer and exporter of steel concrete reinforcing bar was not entitled to a stay pending resolution of its separate action arising from the previous administrative review of the same countervailing duty order where no common legal issue was being reviewed by the appellate court, the administrative reviews were separate actions based on the specific factual records, and thus, the proposed stay did not meaningfully advance judicial economy;
  • In light of the court‘s overarching duty to timely resolve disputes, the interests of the litigants in resolving disputes quickly, as well as the general interest of the public in expeditiously resolving matters of great economic importance, the extensive stay of proceedings requested by the producer and exporter did not meet the pressing need required for such stays.
• HiSteel v. United States
  • Because the foreign producer of heavy walled rectangular welded carbon steel pipes and tubes did not seek any relief separate from that sought by the producer challenging its individual weighted-average dumping margin, the foreign producer could piggyback on the challenging producer’s standing and did not need to establish independent constitutional standing;
  • Because the underlying litigation consisted of a civil action commenced under § 516A of the Tariff Act of 1930, and because the foreign producer was an interested party who was a party to the proceedings, the foreign producer was to intervene as of right by operation of 28 U.S.C.S. § 2631(j)(1)(B) and Ct. Int’l Trade R. 24(a)(1).
• AG der Dillinger Huttenwerke et. Al. v. United States
  • This consolidated action involves a challenge to the final determination in the antidumping (“AD”) investigation conducted by the U.S. Department of Commerce (“Commerce”) of certain carbon and alloy steel cut-to-length plate (“CTL plate”) from the Federal Republic of Germany
  • Since the issue, Commerce’s analysis, and the arguments of the parties are nearly identical to those presented in Dillinger France, the court concludes that a remand is equally appropriate here. Because Dillinger has failed to place information on the record demonstrating the actual cost of production of its non-prime products, Commerce may reasonably rely on facts otherwise available pursuant to § 1677e(a)(1); however, in making its selection of facts otherwise available, Commerce must explain how its reliance on information indicating the “likely selling price” of non-prime products accords with its obligation to ensure that the reported costs of production reasonably reflect the cost of producing the merchandise under consideration

If you have questions about these updates, contact our Diaz Trade Law attorneys at info@diaztradelaw.com or call us at 305-456-3830.

To receive an email notification whenever a new post is published, please subscribe to our weekly blog here.

Below we share some of our top 2021 success stories with you.

Successfully Mitigated Liquidated Damages Claims 

• For failure to timely refile rejected entries subject to AD/CV duties:
  • After DTL’s strategic involvement CBP substantially mitigated approximately $5 MILLION in claims down to $26,365.00, successfully saving our client over $4.7 MILLION dollars
  • Our client received 36 liquidated damages notices from CBP totaling over $567,000. After Diaz Trade Law’s successful negotiation with CBP, all 36 cases were canceled by CBP, saving our client $over $567,000!!
• CBP sent our client a liquidated damages claim in the amount of $150,000. As a result of Diaz Trade Law’s successful petition, CBP mitigated the liquidated damages claim down to $1,500!
• CBP issued a liquidated damages claim in the amount of $50,000.00. After DTL successfully petitioned CBP, the claim was cancelled!
• CBP issued a liquidated damages claim in the amount of $36,033.00. After DTL successfully petitioned CBP, the claim was mitigated to $360.33 (the best potential mitigation!).

CBP Detention Assistance 

• Mere days after being retained, Diaz Trade Law successfully assisted in negotiating with CBP and numerous trademark owners proving that our clients detained goods (collectively valued over $1,000,000.00) were legitimate, receiving either consent TM holder, and/or convincing CBP to release legitimate merchandise that should not have been detained.
• After CBP detained our client’s electronic merchandise to verify admissibility with the Department of Transportation (DOT)
  • CBP released the electronic goods after DTL proved the merchandise, LED driving lights, were eligible for an “off road” use exception and DOT providing such confirmation.
• After CBP detained our client’s electronic merchandise to verify the validity of a trademark on the product packaging.
  • Diaz Trade Law proactively communicated with the trademark holder and CBP, who, with the authorization of the trademark holder, permitted the importer to manipulate the merchandise and import the goods saving our client from a costly and lengthy seizure case that potentially exposed our client to CBP penalties.
• After CBP detained our client’s electronic merchandise to verify the validity of a trademark on the product packaging.
  • After Diaz Trade Law’s immediate involvement in arguing the product was “confusingly similar” and not counterfeit, DTL persuaded CBP to apply the relief afforded to “confusingly similar” seized merchandise and ultimately CBP permitted the exportation – which is relief that is rarely granted for detained products. DTL saved our client from a seizure case and potential penalties.
• CBP detained 28 containers of our client’s cargo.
  • Diaz Trade Law successfully negotiated with CBP to permit the goods to be reexported and avoid substantial demurrage expenses.

4647 Responses 

• CBP issued our client a CBP Form 4647 – Notice to Mark, because its electronic car accessories labels had both a country of origin marking and a “Designed in the USA” claim (in separate locations on the label).
  • After 48 hours of Diaz Trade Law’s successful escalation and negotiation with the Electronic Center of Excellence and Expertise, CBP granted a rarely used marking waiver permitting the merchandise to be imported as is, saving our client both money and time.
• CBP issued our client a CBP Form 4647 – Notice to Mark, because over 1,000 electronic car accessory units did not bear a country of origin marking.
  • Diaz Trade Law successfully and efficiently guided our client through the marking process. Ultimately, the goods were marked and authorized for distribution within recording timing – less than 10 days from the issuance of the 4647, saving our client both money and time.
• CBPO’s at Port Everglades detained two of our client’s shipments and issued two separate CBP Form 4647s – Notices to Mark because the imported merchandise valued at $98,744.00 did not bear a country of origin marking.
  • Diaz Trade Law successfully and efficiently guided our client through the marking process. Ultimately, the goods were marked and authorized for distribution with record timing – within 7 days from the issuance of the 4647, saving our client both money and time.
• Diaz Trade Law successfully assisted our client in responding to CBP’s Notice to Redeliver (CBP Form 4647) and provided CBP confirmation that the intellectual property rights displayed on the goods was authorized and our client’s merchandise was released in record timing!

Successfully Assisted Numerous Importers Battle Alleged Intellectual Property Rights Violations

• Our client’s merchandise was seized by CBP due to an alleged trademark violation.
  • After Diaz Trade Law’s successful petition, CBP issued a decision authorizing our client to relabel and export its legitimate merchandise.
• CBP detained several shipments of our client’s cargo for both Country of Origin (COO) and Intellectual Property Rights (IPR) reasons.
  • Diaz Trade Law advocated for our client and within less than one week convinced CBP to release our client’s legitimate merchandise detained at numerous ports of entry nationwide.
• Our client’s designer handbags were seized by CBP due to an alleged counterfeit violation.
  • After Diaz Trade Law’s successful petition, proving that the handbags were legitimate, CBP released our client’s legitimate merchandise.
• CBP detained our client’s goods valued at $98,744.00 for an alleged IPR validation.
  • Our firm immediately communicated with the appropriate CBP CEE and submitted evidence supporting the legitimacy of the imported goods requesting their immediate release. The CBP CEE agreed with our request and recommended the local port release the shipment, saving our client from a costly and lengthy seizure case.
• Diaz Trade Law successfully negotiated with CBP on behalf of an aftermarket car part importer to permit the exportation of goods detained for alleged IPR violations, saving the importer from a costly and lengthy seizure and potential penalty.
• Our client imported electronic merchandise which contained a trademark-violating processing system.
  • After Diaz Trade Law’s successful intervention, Diaz Trade Law received authorization from the trademark holder to permit the violative components to be removed and destroyed, and the larger shell merchandise to be imported in its current form. CBP agreed to these terms, and issued a disposition order authorizing the manipulation and release of the goods as Diaz Trade Law had requested.

Successfully Mitigated Penalty Actions Issued by CBP to our Clients 

• For importing noncompliant Wood Packaging Material:
  • $91,714 mitigated to 3% of penalty to $2,751.42, saving our client $88,962
  • $69,900 mitigated to 3% of penalty to $6,990, saving our client $60,000
  • $28,478 mitigated to 10% of penalty to $2,847, saving our client $25,631
  • $27,857 mitigated to 10% of penalty to $2,786, saving our client $25,071
  • $19,980.00 mitigated to 10% of penalty to $1,998, saving our client $17,982
• For filing incorrect Electronic Export Information (EEI)
  • $14,194 mitigated down to $500 (the best possible relief)!
  • $14,194 mitigated to 10% of penalty to $1500, saving our client $12,694

CBP 28 / CBP 29 Responses / CBP Investigations and Rejections

• Our client received a CBP 28 for a U.S. Australia Free Trade Agreement verification.
  • After Diaz Trade Law filed a successful response proving the imported goods were eligible for preferential duty-free treatment, CBP closed the 28 with a positive CBP 29 (Notice of Action).
• Our client received a CBP 28 Request for Information from U.S. Customs to verify GSP eligibility.
  • After Diaz Trade Law submitted a substantive response proving the GSP claim was valid, CBP issued a CBP 29 determining that the merchandise qualifies for GSP and no duties are owed to CBP!
• Our client received a Request for Information (CBP 28) from CBP.
  • Diaz Trade Law filed a 28 response which included a Prior Disclosure. The 28 was closed out, and the disclosure was accepted by CBP resulting in no 1592 penalties being issued to our client.
• CBP physically inspected our client’s cargo at the time of entry and identified that the commercial invoice and packing slip submitted to CBP did not include one model number included in the cargo. Diaz Trade Law immediately negotiated with CBP to accept an updated invoice and packing list. CBP accepted and released the complete cargo with no further enforcement action taken, saving our client costly demerge fees and other expenses.
• CBP rejected and refused an importation of tires because CBP alleged the importer did not have a right to make entry. After three uphill battles with CBP and DTL’s strategic recommendation to change the import transaction model, the importer was successfully able to act as IOR and its merchandise was admitted into the US.

USTR/China Tariffs

• Diaz Trade Law assisted over 100 importers in filing complaints with the Court of International Trade challenging Section 301 tariffs imposed for imported goods under for List 3 and List 4a, requesting full refunds.
• Diaz Trade Law filed numerous exclusions for goods subject to the Section 301 List 3 and List 4. USTR agreed and granted our client’s exclusion!
• Numerous clients that were subject to 301 duties used Diaz Trade Law to actively monitor 301 exclusions to ensure they were notified when refunds were a possibility. Diaz Trade Law assisted with not only actively monitoring the relevant exclusions, but also interpreting the applicability, and fighting for refunds via the Protest or PSC process. CBP has accepted numerous Protests, and hundreds of thousands of dollars of refunds were sent to our clients!
• As a result of Diaz Trade Law’s closely monitoring Section 301 China tariff exclusions, Diaz Trade Law found an applicable exclusion for our client to use and filed two Protests with CBP requesting that CBP refund the China tariffs paid. Our client’s protests were approved by CBP, resulting in a refund of $64,678.00.

Export Compliance and Enforcement Mitigation Assistance

• Diaz Trade Law is actively assisting exporters:
  • Vetting proposed export transactions
  • Providing voluntary self-disclosures to Census and OFAC
  • Developing an effective export compliance plan
  • Developing export compliance training
  • Mitigation and corrective action
  • Presenting export report cards to clients based upon an analysis of ACE data
  • Analyze export trade data
  • With mitigation of export seizures and penalties
• Our client needed urgent assistance to ensure it understood the requirements to properly export hazardous materials. Diaz Trade Law successfully and expeditiously secured Competent Authority Approvals for the hazardous material from the U.S. DEPARTMENT OF TRANSPORTATION Pipeline and Hazardous Materials Safety Administration (PHMSA) as well as the Competent Authority of Turkey and Finland.

OFAC/FAA/HSI 

• Our client’s incoming wire payments of $842,918.92 from Venezuela were blocked by its U.S. bank for possible violations of U.S. sanctions laws.
  • After Diaz Trade Law filed a specific license application with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), OFAC issued a specific license authorizing the legitimate funds to be unblocked and returned to our client.
• Our client was being investigated by FAA as a result of a hazardous materials incident.
  • As a result of Diaz Trade Law’s successful involvement, the FAA closed the matter with an informal action!
• Our client was being investigated by HSI for possible criminal liability.
  • After Diaz Trade Law’s intervention, HSI closed its investigation into our client.

 Protests

• Diaz Trade Law successfully assisted our client in filing two Protests with CBP. These approvals saved our client over $600,000!!
• After Diaz Trade Law’s successful Protest of CBP’s AD/CVD bills, our client’s protest was approved by CBP, saving our client over $200,000!!

Binding Rulings

• Diaz Trade Law successfully requested and received binding rulings for numerous clients confirming:
  • the correct country of origin for its prospective imported merchandise.
  • the correct harmonized tariff schedule (HTSUS) for its imported merchandise.
  • both the origin of their merchandise and appropriate CBP country of origin marking
  • the applicability of a free trade agreement.

Assisted Numerous Importers in Filing Prior Disclosures and Voluntary Self-Disclosures Accepted by CBP 

• Diaz Trade Law successfully submitted a perfected prior disclosure for underlying classification, valuation, quantity, and 301/China tariff errors. While reviewing ACE data, we identified offsets for the duties owed to CBP. Ultimately, CBP agreed with our assessment and accepted our prior disclosure and tender, resulting in a refund of over $25,000 to our client and ensuring no future penalties would be assessed for our client’s past importing errors.
• After discovering Electronic Export Information (EEI) filing errors made by one of our clients, Diaz Trade Law assisted our client in proactively filing a Voluntary Self-Disclosure (VSD) with the U.S. Census Bureau and assisting our client in fixing all past errors. The VSD filing was accepted and resulted in the U.S. Census Bureau closing out the matter without penalties being assessed.
• On behalf of a client, Diaz Trade Law filed a voluntary disclosure with the Office of Foreign Assets Control (OFAC), disclosing potential sanctions violations.
  • Diaz Trade Law worked proactively with OFAC and received this “No Action letter” with no penalties assessed to our client.
• Diaz Trade Law successfully assisted our client in filing a Voluntary Self-Disclosure (VSD) with the U.S. Census Bureau for violations of the Foreign Trade Regulations.
  • Diaz Trade Law proactively worked with the Census Bureau and corrected past filing errors. The VSD was successfully closed out with no penalties assessed.
• Diaz Trade Law successfully assisted our client in filing a Prior Disclosure. CBP accepted the prior disclosure with no 1592 penalties being assessed!

Bonded Warehouse

• After Diaz Trade Law’s successful application, our client’s Bonded Warehouse Application was approved!
• After its bonded warehouse was activated by CBP, our client realized it wanted to change the total square footage. Diaz Trade Law successfully assisted our client alter its customs bonded warehouse space.

Successfully Assisted Numerous Importers in Various Seizure Cases 

• CBP seized our client’s vehicle after believing it could have been used to import illegal substances. After Diaz Trade Law’s successful petition proving our client’s innocence, CBP released the vehicle with no penalty assessed
• $20,868.81 of our client’s currency was seized by CBP. After Diaz Trade Law’s successful petition, $19,868.81 was returned to our client!
• $15,795 of our client’s currency was seized by CBP. After Diaz Trade Law’s successful petition, $14,795 was returned to our client!
• $12,157.95 worth of jewelry was seized by Customs after our client failed to declare it. After Diaz Trade Law’s successful Petition, CBP released the jewelry within 22 days.

Awards

• In 2021, Diaz Trade Law founder Jennifer Diaz was again Chambers ranked in International Trade: Customs – USA – Nationwide

Publications

Key publications written by Diaz Trade Law in 2021 were:

• Bloomberg Law, Introduction to U.S. Export Controls: Part 2, November, 2021.
• Bloomberg Law, Protecting Intellectual Property Rights in China, October 2021.
• Bloomberg Law, Incoterms 2020, May 2021.
• Bloomberg Law, Submitting Voluntary Self-Disclosures to Bureau of Industry & Security, May 2021.
• Bloomberg Law, Submitting a Voluntary Self-Disclosure to Census, April 2021.
• Bloomberg Law, Submitting a Voluntary Self-Disclosure to OFAC, April 2021.
• Bloomberg Law, U.S. Customs Targets Use of Forced Labor, January 2021.
• Customs and International Trade Bar Association, An Overview of China’s New Export Controls Regime,
• Customs and International Trade Bar Association, COVID-19’s Impact on 2020 Trade Flows,

Customized Training Programs & Webinars

Key compliance programs taught by Diaz Trade Law in 2021 were:

• Intellectual Property Rights and Customs – Amazon Brand Registry
• CTPAT Program: Is CTPAT a Right Fit
• Successfully Navigating the U.S. Customs Detention and Seizure Process
• How to Navigate FDA Enforcement Action: Detentions, Warning Letters, and Import Alerts
• Requests For Information (CBP Form 28) and Prior Disclosures
• How to Build and Maintain an Effective Import Compliance Plan
• How to Build and Maintain an Effective Export Compliance Plan
• Importing Food in Compliance With U.S. FDA and Surviving A FSVP Audit
• Importing Medical Devices in Compliance With U.S. FDA
• 6 Months In – Insights on Biden & Congress on Trade
• Is it a Cosmetic, a Drug, or Both? FDA Enforcement Actions
• ACE: Auditing Your Export History
• ACE: Auditing Your Import History
• Introduction to Export Controls
• Importing 101 – Introduction to U.S. Customs
• Anti-Circumvention / EAPA / Dumping Duties & the Spreadability of Cases (Coated Paper)
• Other Trade Remedies 101 – Every Administration has a Favorite!
• Basics on AD/CVD
• Cleaning for Covid-19 – Importing Cleaning Products: Who Regulates You?
• Forecasting the Next 4 Years of Biden on Trade

Diaz Trade Law values you and appreciates your trust in us to be your Customs and International Trade Law Expert! Contact us at info@diaztradelaw.com to schedule your consultation or customized training today.

Did you know FDA has issued 1,569 enforcement actions against  medical device companies? Now is the time to ensure your medical devices are in compliance with FDA laws and regulations prior to importation. If your business is manufacturing, repackaging, relabeling, and/or importing medical devices into the U.S., or wants to start, our one-hour webinar on “Importing Medical Devices in Compliance with U.S. FDA” is for you. We will provide TOP tips to avoid U.S. Food and Drug Administration (FDA) enforcement action, and best practices to navigate and mitigate FDA enforcement.

Register today to to hear directly from DTL’s president, Jennifer Diaz, and Associate Attorney, Denise Calle, on the pathway to legally market a medical device and best practices for avoiding and responding to enforcement actions.

Why Should I Register for this Webinar?

The FDA is actively enforcing its laws and regulations against non-compliant importers of medical devices. In FY21 alone the FDA has issued 53 warning letters  against medical devices companies.  Manufacturers, repackagers, relabelers, importers, and others engaged in the production or sale of medical devices must be aware of FDA’s various enforcement mechanisms, and more importantly,  how to avoid and/or mitigate such actions.  FDA’s most common enforcement activities include notices of FDA action, warning letters, import alerts, seizures, voluntary recalls, injunctions, and criminal prosecution.

In response to the increase in enforcement discussed below, Diaz Trade Law is hosting a NEI accredited webinar, FDA – Is it a Cosmetic, a Drug, or Both? Mitigating FDA Enforcement Actions to train industry on top compliance tips to avoid enforcement, and best practices in responding to various FDA enforcement.

Warning Letters issued in FY21:

• Of the 53 warning letters issued to medical device companies in FY2021, 50% of these warning letters were issued against firms that marketed their medical devices as devices that treat or mitigate Covid-19. FDA found these devices (including  “KN95 Face Mask” and “3-ply Surgical Mask Disposable Face Mask”) to be “Unapproved Drugs, Misbranded, and/or Adulterated Products Related to Coronavirus Disease 2019 (COVID-19)”.
• In FY21, FDA warning letters have been issued against firms for offering medical devices for sale in the United States without marketing approval, clearance, or authorization from the FDA as well as poor current Good Manufacturing Practices (cGMPs).
• Interestingly enough 40 of the 52 warning letters were against U.S. and Chinese companies.

Recalled Medical Devices in 2020 and 2021:

• In FY21, FDA has recalled a total of 2161 medical devices, including the recall of 132 Class I devices, 1986 Class II devices, and 43 Class III devices have been recalled in FY21! 
• In FY20 a total of 3042 medical devices were recalled. 
• There are a total of 304 firms currently performing medical device recalls. Don’t be one of them!

In this webinar, you will receive an overview of FDA regulations and requirements for importing medical devices. Presenters will discuss how FDA defines and regulates a medical device, as well as what requirements FDA imposes when importing a medical device. The objective of the webinar is to teach participants how to navigate FDA’s regulatory framework, provide TOP compliance tips to avoid FDA enforcement actions, and top strategies to implement when you are faced with an enforcement action.

Manufacturers, importers, distributors, and others engaged in the production or sale of medical devices are encouraged to attend either live on August 25, 2021 at 12:00 PM, or on demand thereafter. Register Here!

In response to the increase in enforcement discussed below, Diaz Trade Law is hosting a NEI accredited webinar, FDA – Is it a Cosmetic, a Drug, or Both? Mitigating FDA Enforcement Actions to train industry on top compliance tips to avoid enforcement, and best practices in responding to various FDA enforcement.

Why Should Industry Register for the Webinar?

Warning Letters in 2021:

• Just yesterday, FDA teamed up with the Federal Trade Commission (FTC) to publicly admonish 5 companies with warning letters for illegally selling dietary supplements claiming to treat infertility because FDA advised the products are unapproved drugs.
• Since the beginning of 2021, alone, the FDA has already issued 260 warning letters. 55 of those warning letters were issued against firms, including cosmetic firms, for selling unapproved drugs that are misbranded or adulterated or selling unapproved and misbranded products related to COVID-19.

Import Alerts in 2021:

• FDA has 208 active import alerts. Since the beginning of 2021, the FDA has already updated 74 import alerts to add new violators. 4 of the 74 import alerts are specifically for unapproved drug violations:

• FDA has updated Import Alert 66-41 a total of 274 times since the beginning of 2021, with the most recent update on May 6, 2021. This import alert lists 379 violative cosmetic products which are (because of their claims) unapproved drugs. This import alert will be discussed in detail at the webinar. The speedy increase in the number of firms subject to the this import alert indicates that manufacturers, importers, and distributors of cosmetic and over-the-counter drugs must review their labeling and pre-compliance protocols to avoid being targeted by the FDA.
• Important to note that on February 25, 2021, FDA published Import Alert 62-08, which allows for the “Detention Without Physical Examination of Alcohol-Based Hand Sanitizers Manufactured in Mexico.”

This one-hour webinar will provide an overview of FDA regulatory enforcement actions. Our international trade attorneys will discuss top labeling dos and don’ts to lower your risk of FDA enforcement, while offering best practices. You will learn about FDA regulations and laws pertaining to over-the-counter (OTC) drugs and cosmetics marketed in the United States. The presentation will discuss real case scenarios. The objective of the webinar is to teach manufacturers, importers, and the like, how to navigate FDA’s regulatory framework, provide TOP compliance tips to avoid FDA enforcement actions, and top strategies to implement when you are faced with an enforcement action.

Manufacturers, importers, distributors, and others engaged in the production or sale of Over the Counter (OTC) drugs or cosmetic products are encouraged to attend our one-hour webinar, “Is it a Cosmetic, a Drug, or Both? FDA Enforcement Actions” either live on June 9, 2021 at 12:00 PM, or on demand thereafter.

Diaz Trade Law’s president, Jennifer Diaz, accompanied by DTL’s Associate Attorney Denise Calle, will be our featured speakers. Importers, exporters, brokers, and others interested in trade policy are encouraged to attend. REGISTER HERE!

WHAT WAS THE STANDARD AND WHY IS IT CHANGING?

1979 NATIONWIDE STANDARD – OPEN FLAMESTANDARD

 In April 1979, the Upholstered Furniture Action Council (“UFAC”), an industry association, established a voluntary furniture flammability testing standard known as the open flame standard. Under the open flame standard, technicians test the flammability of furniture using a candle or lighted match and measure how quickly the open flames spread and grow. The open flame standard required upholstered furniture fabric to have a flame-retardant back coating. As a result, flame retardants were added to furniture. Furniture manufacturers nationwide have been adding brominated or chlorinated chemicals to the foam to slow the flames’ spread. The 1979 “open flame” standard has now been replaced by the “smolder test” standard set in TB 117-2013.

CRITICISM OF THE OPEN FLAME STANDARD

 For decades, the regulatory standard for testing furniture flammability has been the subject of significant contention. The Consumer Product Safety Commission (“CPSC”) has been conducting tests and studies on whether furniture should be required to withstand an “open-flame” standard.

 In recent years, concern has grown over the use of flame retardants in upholstered furniture (required by the open flame standard) and its effects on the human body. According to Scientific American, over the past several years, concerns about chemicals have mounted as evidence points to an array of potential health effects, including reduced IQs, attention problems, and other neurological effects in children exposed in the womb or during infancy. The chemicals have been building up in human bodies, including breast milk, around the world.

According to the National Fire Protection Association (“NFPA”), smoldering objects such as cigarettes were the leading cause of household fires rather than open flames. Therefore, there were mounting calls for a testing standard that focused on smoldering rather than open flames.

2013 TB 117-2013 CALIFORNIA STANDARD – SMOLDER TEST

In 2013, in response to concerns that flame retardants negatively affected public health, California issued TB 117-2013. This was an important development because TB-117-2013 no longer required the “open-flame test,” As a result, manufacturers no longer need to use flame retardant chemicals in their products.  Instead, TB 117-2013 required the “smolder test.” The “smolder test” tests the fire resistance of upholstered furniture when exposed to smoldering objects such as a lit cigarette.

The smolder test standard is comprised of three sub-tests that apply to upholstered furniture components:

1. A cover fabric test which applies to outer cover fabrics
2. A barrier materials test which applies to materials intended to serve as a barrier between cover fabric the resilient filling material
3. A resilient filling material test applies to resilient filling materials used in upholstered seating furniture.

Laboratories can test for furniture flammability and fire resistance in accordance with  California Technical Bulletin 117-2013.

CALIFORNIA STANDARD ADOPTED NATIONWIDE

 On December 21, 2020, Congress passed The Safer Occupancy Furniture Flammability Act (“SOFFA”). Section 2101 of SOFFA (Title XXI – COVID-19 Regulatory Relief and Work from Home Safety Act) makes it mandatory for all upholstered furniture to meet the standards of California Technical Bulletin 117-2013 (“Cal TB 117-2013”). on December 27, 2020. This new law mandates that California’s flammability standard for upholstered furniture under TB 117-2013 is the new nationwide standard utilized by the CPSC under section 4 of the Flammable Fabrics Act (15 U.S.C. 1193).

 Key Provisions

Key provisions of the new national standard include: 

• A compliance date of June 25, 2021
• All upholstered furniture, whether it be for home or office use, must have a permanent label that states, “Complies with the S. Consumer Product Safety Commission (“CPSC”) requirements for upholstered furniture flammability.” This includes pillows and accessories of furniture.
• The permanent label will serve as certification that the furniture is compliant with TB117-2013 and will be considered to be the certification that the product complies with the standard.

Scope of the New Standard:

 The following furniture is included within the scope of the new standard:

• Upholstered furniture is seating furniture intended for indoor use, movable or stationary, that is built with an upholstered seat, back, or arm. It is also made or sold with a cushion or pillow (regardless if that pillow is attached or detached from the furniture). Examples are single sofas, double seater sofas or triple seater sofas, living room chairs, couches, and dining room chairs.

Meanwhile, the act does not apply to:

• Outdoor patio furniture, mattresses, foundations, bedding products, furniture used exclusively for physical fitness and exercise, or non-furniture juvenile products such as walkers, strollers, highchairs, and pillows.

What You Should Do

 Companies that manufacture or sell upholstered furniture should begin planning for compliance with TB-117-2013. For example, companies should:

1. Review the required test procedures and engage a laboratory to perform the required testing.
2. Review current inventory of furniture. If it does not sell before June 25^th, 2021, the furniture should be tested and labeled accordingly.
3. Communicate with suppliers and manufacturers to confirm they are aware of the new law and requirements.

Contact Us!

 Diaz Trade Law has significant experience in product safety matters and has successfully represented clients in complying with CPSC laws and regulations. Diaz Trade Law is here to ensure you understand what this change may mean to your business and the requirements needed to meet compliance. If you have questions regarding importing upholstered furniture, want to understand how this new statute affects your business, contact Diaz Trade Law today.

COVID-19’s Impact on the Global Economy

The COVID-19 pandemic has had systemic implications for nearly every facet of our lives and society. The world of international trade is certainly no exception. Businesses and governments alike have had to figure out how to continue import and export operations while accounting for the risks present in the current trading climate. Challenges that importers and exporters have faced include: 1) dramatic demand spikes for certain goods, 2) equally dramatic crashes in demand for other goods, 3) significant back-ups of inflowing shipments at key ports, 4) an increase in trade restrictions and other barriers to trade, and 5) contractions in trade volumes, just to name a few.

Trade Challenges in Florida

Florida has not been immune to these trade disruptions. The U.S. Census Bureau released 2020 annual trade data on February 5, 2021, which included interesting trends about Florida’s trade flows. International trade is big business in the Sunshine State In fact, in 2019, Florida exported $57.3 billion in goods, and ranked as the seventh largest exporting state according to the U.S. Census Bureau. Similarly, Florida imported $83.7 billion in goods in 2019, and ranked the tenth largest importing state. In recent years, Florida’s top three export destinations have been Brazil, Canada, and Mexico, respectively while its top import sources have been China, Mexico, and Canada, respectively. In 2020, these import trade relationships took a hit. Fortunately, however, the state is quickly rebounding.

EXPORTS

In 2020, total Florida export values have crashed relative to recent years. The 2020 annual data, which was released on February 5, 2021, indicates that Florida exports of goods crashed 19.2% ($11.0 billion) in 2020 compared to 2019, and 22.4% ($13.4 billion) in 2020 compared to 2018. In 2019, Florida’s top three export categories were electronics and electric machinery (HS code 85), heavy machinery (HS code 84), and aircraft/spacecraft and parts (HS code 88). These export categories all crashed in 2020 compared to 2019 at a rate of 14.84% ($1.49 billion), 16.5% ($1.52 billion), and 29% ($2.4 billion), respectively. Florida’s exports to its most significant export partner, Brazil, were impacted 22.4% ($1.0 billion) compared to 2019. Interestingly, the majority of Florida’s export crash occurred in the April to September of 2020. Exports are steadily rebounding and total Florida export values in October to December 2020 are more similar to the same months in 2019 or 2018.

Source: U.S. Census Bureau

Source: U.S. Census Bureau

IMPORTS

In 2020, total Florida import values also crashed relative to recent years. The 2020 annual data indicates that Florida imports of goods crashed 7.6% ($6.4 billion) in 2020 compared to 2019, and 7.9% ($6.7 billion) in 2020 compared to 2018. Florida’s top three import categories are electronics and electrical machinery (HS code 85), heavy machinery (HS code 84), and automobiles / automobile parts (HS 87). These export categories all crashed in 2020 compared to 2019 at a rate of 4.6% ($493 million), 12.1% (1.0 billion), and 20.0% ($1.5 billion), respectively. Florida’s imports from its most significant import source, China, decreased 9.2% ($1.2 billion) compared to 2020. The majority of the crash in imports occurred in April to June of 2020. Imports have quickly rebounded and total imports in September to December 2020 are similar to the same period in 2019 or 2018. In fact, Florida imports in December 2020 were 2.3% higher than Florida imports in December 2019.

Source: U.S. Census Bureau

Source: U.S. Census Bureau

Promising Months Ahead

Although the State of Florida continues to deal with sky-high COVID-19 figures and there is still much to be done to combat the virus, Florida’s trade outlook appears promising and a return to normal is on the horizon. Florida Secretary of Commerce Jamal Sowell and president & CEO of Enterprise Florida, Inc. stated in a December 2020 press release:

Florida’s economy was blindsided by a sudden recession and prolonged disruptions to supply chains because of COVID-19. But jobs are coming back, commerce is on the uptick and Enterprise Florida is in lockstep with Governor DeSantis’s bold mission to retake the high ground of prosperity for all corners of Florida.

The outlook for Florida’s many seaports is also positive. For example, Moody’s Investors Service forecasted a stable outlook for the Port of Palm Beach. Moody’s Chief Financial Officer and Deputy Director Paul Zielinski stated:

The Port of Palm Beach, like most businesses, was significantly impacted in 2020 by the COVID-19 pandemic. While we saw a slight declines in cargo shipments, the no-sail order on our cruise business was and continues to be our greatest challenge. However, we have the financial depth to meet these challenges with a liquidity position exceeding 24 months. We also have the ability to maintain a favorable liquidity position as a result, of both the solid profit margins inherent in our long-term agreements and our continued commitment during this time to control expenses.

Finally, Doug Wheeler, the president and CEO of the Florida Ports Council remarked on the challenges and opportunities ahead:

Recent studies have shown Florida’s ports remain resilient to disasters, from recurring hurricanes to disruptions to the global supply chain. We continue to grow and diversify — in goods and services, trade partners, and innovative technologies — to help us withstand and endure the myriad challenges we face. Although we know the COVID‑19 pandemic will continue to impact our port economies into the unforeseeable future, every single day, Florida’s ports continue to deliver critical goods to individuals, families, and businesses. Our ports are economic engines of our communities, and they will be instrumental in getting the state’s, and the nation’s, economy back on track.

Overall, Florida importers and exporters continue to deal with many challenges including contractions in trade volumes, disruptions in supply chains, and quickly changing federal trade policies. Nevertheless, Florida’s remarkable path to recovery is promising. The Florida’s trade community hopes for the trajectory of the last four months to continue through 2021.

DATA NOTES

All data sourced from the U.S. Census Bureau and adjusted for inflation to base month December 2020. 2020 annual data was released by the U.S. Census Bureau on February 5, 2021. Although U.S. Census Bureau trade data can be helpful, the data has many limitations. For further questions on how COVID-19 may have impacted your particular industry’s trade flows and for assistance on any trade or customs matters, contact us at info@diaztradelaw.com. 

On November 12, 2020, President Trump issued Executive Order 13959 (“EO 13959”), Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies. EO 13959 prohibits U.S. investors from purchasing or investing in securities of companies identified by the U.S. government as Communist Chinese military companies (“CCMCs”), a designation determined by the U.S. Department of Defense and the U.S. Department of the Treasury.

Since former President Trump signed EO 13959, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) has issued clarifying guidance and general licenses on this matter.

Key Developments

On January 13, 2021, President Trump strengthened EO 13959 with a directive. The directive broadened the scope of restrictions on U.S. persons. Notably, the amended EO 13959 makes clear that U.S. persons must divest their holdings in such securities within designated wind-down periods, after which it prohibits the “possession” of covered CCMC securities by U.S. persons after the end of the divestment period. The wind-down period will end on November 11, 2021.

Consequently, on January 14, 2021, the U.S. Department of Defense (“DoD“) designated nine further Chinese companies as CCMCs targeted under EO 13959.

Key Points from OFAC’s FAQs

As of January 14, 2021, OFAC has issued a total of 13 FAQs on EO 13959. Some of the most significant are described below:

• FAQ 858 notes that some names of CCMCs previously identified by the Department of Defense (DoD) do not match the names of issuers of publicly traded securities. The FAQ states that the EO applies to securities of CCMCs “with a name that exactly or closely matches the name of an entity” identified in the Annex to EO 13959 or subsequently identified by the DoD or Treasury Department. The newly issued Non-SDN Communist Chinese Military Companies List provides additional identifying information.
• FAQ 860 provides examples of financial instruments covered by this provision include, but are not limited to, derivatives (e.g., futures, options, swaps), warrants, American depositary receipts (“ADRs”), global depositary receipts (“GDRs”), exchange-traded funds (“ETFs”), index funds, and mutual funds, to the extent, such instruments also meet the definition of “security” as defined in section 4(d) of E.O. 13959.
• FAQ 861 clarifies that U.S. persons are prohibited from investing in U.S. or foreign funds, such as exchange-traded funds (ETFs) or other mutual funds, that hold publicly traded securities of a Communist Chinese military company.
• In FAQ 863, OFAC provides guidance on which services are considered permissible under EO 13959. OFAC stated that “support services” such as clearing, execution, settlement, custody, transfer agency, and back-end services, as well as other such support services by or involving a U.S. person, are permissible, to the extent they are not provided to U.S. persons in connection with prohibited transactions.

Export Compliance Obligations

The ultimate responsibility for complying with E.O. 13959 will fall to those U.S. persons transacting or potentially transacting with the listed businesses. U.S. persons may not rely on an exact name match to identify CCMC securities, but rather must exercise due diligence, including identifying similar names, to determine whether securities are subject to the prohibition in E.O. 13959.

It is critical to note that CCMCs are not listed on the Consolidated Screening List. Therefore, U.S. companies must manually screen CCMCs against OFAC’s list or utilize a private screening tool that includes the CCMCs.

If you violate any of the regulations, there are severe penalties

Violations of export and sanctions laws carry hefty civil and criminal penalties.  Many U.S. businesses have paid hefty civil penalties for violating U.S. export control laws. L3Harris Technologies, for example, was fined $13 million for illicitly exporting defense technology and software. For more examples of costly civil and criminal penalties, check out BIS’ latest Don’t Let This Happen to You!

Contact Us

Diaz Trade Law has significant experience in export and sanctions compliance matters. Specifically, Diaz Trade Law has successfully assisted clients in submitting voluntary self-disclosures to mitigate penalties, submitting export license applications, requesting authorizations for sales, vetting proposed transactions, and building corrective action systems to help ensure that your business does not make the same violation again.

Diaz Trade Law offers export compliance training, can develop or improve your export compliance program, and vet proposed transactions to ensure they comply with U.S. export control regulations. If you have questions on export compliance matters, contact us today at info@diaztradelaw.com or call us at 305-456-3830.

Biden Signs Executive Order Strengthening Buy American Laws

Buy American laws are a set of statutes, regulations, rules, and Executive Orders that require that the U.S. federal government require or provide preferences for purchasing goods produced in the United States. Buy American laws were created and continue to be amended with the intention of promoting economic and national security, stimulating economic growth, creating good jobs at decent wages, and supporting the U.S. manufacturing and defense industrial bases.

On January 25, 2021, President Biden signed Executive Order 14005 titled Ensuring the Future is Made in All of America by All of America’s Workers. At its core, EO 14005 amends standards to ensure that the federal government invests taxpayer dollars in U.S.-owned businesses. EO 14005 sought to close loopholes that allow companies to offshore production and jobs while still qualifying for domestic preferences.

Specifically, EO 14005 does the following:

• Directs agencies to close current loopholes in how domestic content is measured and increase domestic content requirements
• Appoints a new senior leader in the Executive Office of the President in charge of the government’s Made-in-America policy approach
• Increases oversight of potential waivers to domestic preference laws
• Connects new businesses to contracting opportunities by requiring active use of supplier scouting by agencies
• Reiterates the President’s strong support for the Jones Act, which requires that only U.S.-flag vessels carry cargo between U.S. ports
• Directs a cross-agency review of all domestic preferences

EO 14005 requires the Federal Acquisition Regulatory Council (“FAR Council”), which coordinates U.S. government procurement activities, to consider amendments to current Buy American Act rules such as:

• Replace the “component test” in Part 25 of the Federal Acquisition Regulations that is used to identify domestic end products and domestic construction materials with a test under which domestic content is measured by the value that is added to the product through U.S.-based production or U.S. job-supporting economic activity
• Increase the numerical threshold for domestic content requirements for end products and construction materials
• Increase the price preferences for domestic end products and domestic construction materials.

EO 14005 has importation implications for the federal procurement process. After all, U.S. federal procurement is big business accounting for $600 billion in federal spending annually. Detailed information on U.S. government procurement activities by fiscal year is available on usaspending.gov. EO 14005 is estimated to apply to a third (or $200 billion worth) of U.S. annual federal procurement activities.

Buy American & U.S. WTO Commitments

Despite the popularity of Buy American laws domestically, the set of laws sometimes violates U.S. commitments under the World Trade Organization’s Agreement on Government Procurement, which works to ensure open, fair, and transparent conditions of competition in government procurement markets.

With regards to concerns that strengthened Buy American preferences violate U.S. WTO commitments, a White House press release indicating the Biden administration’s intent to change WTO rules: “The President remains committed to working with partners and allies to modernize international trade rules—including those related to government procurement–to make sure all countries can use their taxpayer dollars to spur investment in their own countries.”

Similarly, when asked if the order would be seen as protectionist, a Biden administration official said that EO 14005 would be fully consistent with U.S. commitments under the WTO and the administration would work with trade partners to modernize global rules.

However, EO 14005 has drawn criticism from foreign leaders. “We are always concerned by ‘Buy American’ … for sure that is going to be an issue very, very high on our agenda in our work with the Biden administration,” Canadian Finance Minister Chrystia Freeland told reporters.

Contact Us

If you have questions about federal procurement, Buy American waivers, country of origin determinations, Made in USA rules, or other customs and trade matters, contact Diaz Trade Law today at info@diaztradelaw.com or 305-456-3830.

Co-Authored by

Exporting is a Privilege, Not a Right

Over 95% of the world’s consumers are outside of the United States. Opportunities abound for U.S. companies that export. However, exporting is a privilege and not a right. U.S. exporters have an important responsibility to adhere to U.S. export control laws, including the Export Administration Regulations (“EAR”), the International Traffic in Arms Regulations (“ITAR”) the Office of Foreign Assets Control (“OFAC”) sanctions laws, and the Foreign Corrupt Practices Act (“FCPA”). Violations of export control laws carry hefty civil and criminal penalties. Exporters can pay hundreds of thousands of dollars in penalties, lose export privileges, and even be imprisoned for violations of U.S. export control laws.

The EAR is a set of regulations which governs whether U.S. persons may export or transfer goods, software, and technology outside of the United States or to non-U.S. citizens. The ITAR, on the other hand, is a set of regulations which governs whether defense or military-related technologies may be exported or transferred to non-U.S. citizens. The purpose of both the EAR and the ITAR is to safeguard U.S. national security interests by ensuring that critical technology does not fall into the wrong hands. The EAR is administered by the Commerce Department’s Bureau of Industry & Security (“BIS”) while the ITAR is administered by the State Department’s Directorate of Defense Trade Controls (“DDTC”).

OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United​ States. U.S. persons are generally prohibited from engaging in transactions, directly or indirectly, with individuals or entities (“persons”) on OFAC’s Specially Designated Nationals and Blocked Persons List, other blocked persons, and those covered by comprehensive country or region embargoes (e.g., Cuba, the Crimea region of Ukraine, Iran, North Korea, and Syria).

The FCPA was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business.  The anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. The anti-bribery provisions also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.

Developing or Enhancing Your Export Compliance Plan

A key foundation of proactive and effective export compliance requires the development of an export compliance plan which establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. An export compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and also to protect national security. Diaz Trade Law helps exporters create export compliance manuals that help prove you have a process in place to classify your merchandise correctly, vet your customers and ensure you can prove you can take compliance seriously and implement all of the important great weight mitigating factors. Diaz Trade Law has significant experience in developing export compliance plans for organizations without plans.

Why is Developing a Strong Export Compliance Plan Important?

A strong export compliance plan is beneficial to your business because it:

• Ensures that all employees understand the export regulations and reinforces internal policies and procedures. Many businesses don’t realize the export control concerns many of their employees, not just the export department. This is because the scope of the term “export” is broad in the EAR and the ITAR. For example, “deemed exports” refer to the release of controlled technology to a foreign person, including within the territory of the United States. Therefore, employees that have little to do with a business’ export activities (e.g. accountants, information technology, customer service) can inadvertently cause your business to violate U.S. export control laws (e.g. by sharing information to non-U.S. persons, by failing to secure data on a cloud server, etc.).
• Demonstrates to federal government agencies that your business is proactive about export compliance. An effective export compliance plan is a great way to demonstrate to BIS and DDTC that you are on top of your export compliance obligations.
• Avoids your business from being subject to costly penalties and even criminal liability. Many U.S. businesses have paid hefty civil penalties for violating U.S. export control laws. L3Harris Technologies, for example, was fined $13 million for illicitly exporting defense technology and software. For more examples of costly civil and criminal penalties, check out BIS’ latest Don’t Let This Happen to You!

U.S. Government Guidance on Compliance Plans

According to the Bureau of Industry & Security, developing an effective export compliance program is “an invaluable way a company can contribute to U.S. national security and nonproliferation priorities while protecting vital company interests.”

BIS identifies the following key factors of an effective export compliance plan:

• Management commitment
• Risk assessment
• Export authorization
• Recordkeeping
• Training
• Audits
• Handling export violations and taking corrective actions
• Building and maintaining your export compliance manual

Similarly, DDTC identifies the following key factors:

• A clear description of organizational structure
• Corporate commitment
• A methodology for identifying, receiving, and tracking ITAR-controlled items or data
• A procedure for handling re-exports and re-transfers and restricted exports
• Recordkeeping
• Internal monitoring
• Training
• A system for proactively handling violations

The U.S. government has published similar guidance for OFAC and FCPA compliance. While having an export compliance plan is not a guarantee that an export violation will not occur, a coherent export compliance program can minimize the risk of non-compliance.

Contact Us

Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape or building an effective plan from scratch. To learn more about the services we offer, contact us at info@diaztradelaw.com or call us at 305-456-3830.