House Bill Enhances Customs’ Power to Police Apparel Imports

Nearly two dozen members of the U.S. House of Representatives introduced a bipartisan bill Tuesday to give the federal government the resources and authority to better enforce textile and apparel trade obligations. The Textile Enforcement and Security Act of 2010 instructs the U.S. Customs and Border Patrol to crack down on customs textile fraud. The National Council of Textile Organizations (NCTO), which has long sought to protect domestic producers, estimates the U.S. Treasury could be losing up to $1 billion a year in revenue because importers are undervaluing apparel products from China or improperly claiming free trade preferences.

 

NCTO claims illegal trafficking surged in the CAFTA region last year.

 

The bill contains 13 provisions that would bolster enforcement of apparel trade laws, including allowing the Department of Homeland Security and Department of Treasury to use fines, penalties and forfeitures collected from import violations to pay for investigations of any unlawful import of textile and apparel goods. The money could be used to pay rewards of up to $20,000 to whistleblowers whose tips help secure an arrest, conviction, civil penalty or forfeiture. The law also instructs the U.S. government to establish an electronic verification program that tracks yarn and fabric inputs to ensure compliance with free trade agreements that often grant preferences to garments made with U.S.-made fabrics. The law would also boost the number of inspectors at 15 U.S. ports and place three in CAFTA countries and a fourth in the People’s Republic of China.

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House Bill Enhances Custom’s Power to Police Apparel Imports

Nearly two dozen members of the U.S. House of Represtatives  introduced a bipartisan bill Tuesday to give the federal government the resources, authority, and direction to better enforce textile and apparel trade obligations.


“High levels of fraud and illegal imports continue to plague the American textile industry,” said U.S. Rep. John Spratt, D-SC and co-chairman of the Congressional Textile Caucus.  “The failure to enforce these trade obligations adequately is severely damaging the ability of U.S. textile firms to compete in the global market.


“The Textile Enforcement and Security Act of 2010 (TESA) will help tighten enforcement,” Spratt said.  “I am pleased to support it.”


According to the National Council of Textile Organizations (NCTO), the U.S. textile industry depends on customs enforcement for its livelihood.  The U.S. textile industry is the third largest exporter of textile products in the world with over $12 billion in exports last year.  A majority of our production is exported, with three quarters of the industry’s exports going to trade preference countries, most notably CAFTA, NAFTA and the ANDEAN region.


The industry has experienced a surge in illegal trafficking in the CAFTA region.  For example, last year, the government reported that more combed cotton yarn was exported from the United States to the CAFTA region than was actually produced.  In addition, a number of “phony companies” have created websites purporting to produce U.S. yarns and fabrics for use in the CAFTA region but Customs has been unable to move effectively against them. 


“The TESA bill will enhance Customs textile enforcement and allow U.S. manufacturers to compete in the global market,” Spratt said.


Specifically, the bill:


 



  • Directs Department of Homeland Security and Department of Treasury to use amounts from fines, penalties and forfeitures collected from import violations to pay for expenses directly related to investigations of violations or proceedings of any unlawful import of textile and apparel goods.
  • Provides Department of Homeland Security or Department of Treasury to use amounts from fines and penalties to reward (of not less than 20 percent of the amount of fine, penalty, etc or $20,000 whichever is lesser) any person who furnished information that leads to arrest, conviction, civil penalty, or forfeiture for violation of these imports.
  • Instructs the U.S. government to establish an electronic verification program that tracks yarn and fabric inputs in free trade agreements. Under the current CAFTA agreement, all product verification documentation must be submitted in paper form making it almost impossible for CBP to conduct the necessary investigations. An electronic system would streamline the process for imports, while providing Customs with the pertinent information prior to port arrival to better target shipments, as well as conduct investigations.
  • Increases Import Specialists at the largest 15 U.S. ports (by value), which are high traffic ports for textile and apparel imports.  According to information provided to the Small Business Committee, following a hearing on textile enforcement, the number of import specialists at these high traffic ports is concerning. (I.e. the Miami, Florida port which is the top port for textile and apparel imports ($2.2 billion) has only 8 import specialists on hand to verify these imports and these specialists are not solely appointed to textiles, but are trained to handle textiles.
  • Directs Customs to assign staff to three CAFTA-DR countries and to the People’s Republic of China for purposes of customs services and preference verification.
  • Establishes a Nonresident Importer Program which mandates that nonresident importers:

    • Identify a resident agent in the state which the port of entry is located and who is authorized to accept service of process.
    • Certify that the resident agent has assets in the United States in sufficient amounts for ensuring payment of any loss of revenue not covered by the bond or for civil penalties.
    • Provide a copy of the commercial invoice accompanying the shipment that includes name, address, and contact information for each person in the transaction such as trading house, freight forwarder, and the ultimate purchaser of goods.
    • Declare a secured bond and established a power of attorney.

  • Establishes an Office of Textile and Apparel Trade Enforcement within the Department of Justice to carry out all the functions relating to enforcement cases.
  • Provides Customs with expanded authority to seize goods imported from Trade Preference Areas.  Currently, these goods can only be penalized.
  • Broadens scope of entities to hold all parties in the supply chain accountable for intentionally undervalued transactions (not just the importer of record) in order to collect revenue or assess penalties.
  • Applies penalties to importer who provide false information, such that the articles are subject to seizure and forfeiture.
  • Increases bond requirements to include amounts equal to any duties, fee, and estimated penalties.  Bond amounts are based off a formula of taxes and fees paid annually, which does not take into account risk assessment.  This provision provides CBP the authority to modify these amounts based on assessment.
  • Requires additional information on affidavits to help decrease use of ‘blanket’ affidavits including ‘date of sale or shipment’ and ‘container number and bill of lading’
  • Mandates the government to publish names of companies that intentionally violate the rules of trade agreements.


“This bill will help protect the American textile industry and the thousands of jobs it still provides,” Spratt said. “I am all for it.”



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