U.S. Import Controls Regulations and MOD Act

“Reasonable care is an explicit responsibility on the part of the importer.”

Import Compliance has been a hot topic for U.S. Customs, and for importers, since 1993 when Congress passed the Customs Modernization and Informed Compliance Act (The Mod Act).

The passage of the Mod Act intensified discussion of import compliance by fundamentally altering the relationship between CBP and importers by shifting to the importer from CPB the legal responsibility for declaring the value, classification, and rate of duty applicable to entered merchandise, and for maintaining compliance with import laws and regulations.

In shifting responsibility for import compliance to importers, the Mod Act additionally mandated that U.S. Customs monitor the status of import compliance and publish its findings in an annual report. One method used by Customs to monitor import compliance and to gather data for its annual import compliance report is through Customs Compliance Audits. A prominent feature of the Mod Act is a relationship between CBP and importers that is characterized by informed compliance, a key component of which is the shared responsibility between CBP and the import community, wherein CBP communicates its requirements to the importer, and the importer, in turn, uses reasonable care to assure that CBP is provided with accurate and timely data pertaining to his or her importations.

Determination of the relevant import controls for imported products is a key component of any import compliance program because it sets the stage as to what and how much U.S. importers can import (import prohibitions and import restrictions) and as to whether or not U.S. importers must deal with any specific product requirements or any country of origin marking requirements in importing products. It is also important in that it will safeguard U.S. importers from the imposition of monetary fines and penalties.

U.S. import controls arise from concerns related to the U.S. economy, the preservation of domestic plant and animal life, consumer health and consumer well-being. Consequently, as concern over these matters shifts, import controls will likely be subjected to change.

Penalties for Violations

Failure to comply with any of the relevant import laws and regulations can result in heavy fines ranging in the millions and other significant civil and criminal penalties, including revocation of the company’s import privileges and/or potential seizure of imported merchandise. Individuals found to be in violation of these laws and regulations can be fined or face imprisonment.

Having an Import Compliance program in place can be an effective way to prevent violations and potential penalties.

Import Prohibitions

Import restrictions limit the entry of certain products into the U.S. and are based primarily on country of origin and product type. Restrictions may be imposed by U.S. Customs, by another U.S. agency which has regulatory authority over a particular product, or by a State government into which the goods will be transported or are consigned. Restrictions include:

Import Quotas: Import quotas control the amount or volume of various commodities that can be imported into the United States during a specified period of time. United States import quotas may be divided into two main types: absolute and tariff-rate. Absolute quotas usually apply to textiles and strictly limit the quantity of goods that may enter the commerce of the United States during a specific period. Currently there are no commodities subject to absolute quota restrictions. Tariff-rate quotas permit a specified quantity of imported merchandise to be entered at a reduced rate of duty during the quota period. Once a quota has been reached, goods may still be entered, but at a higher rate of duty.
Import permits, license, visas, certificates: CBP does not require an importer to have a license or permit, but other agencies may require a permit, license, or other certification, depending on the commodity being imported. CBP acts in an administrative capacity for these other agencies.
Specific details, permits/declarations or statements are required for importation of a number of commodities including civil aircraft parts, radio frequency devices and assemblies, food, plants, livestock, firearms, radiation-producing products and materials, biological materials, drugs and medical devices, toxic substances, audio/video cassettes and tapes, textiles, footwear, alcoholic beverages, artwork, antiques, watches, marked/mutilated samples,

Some commodities are eligible for preferential treatment (reduced duty) when the appropriate statement or declaration is provided.
labeling and/or marking requirements: All goods of foreign origin must be legibly, indelibly and permanently marked with the English name of the country of origin unless they meet the exception requirements in the regulations. (The requirement generally applies to individual units.) When marking is not feasible, such as when the article is too small or marking would in some way damage the merchandise, then the packaging or container that will reach the ultimate consumer must be marked. Specific requirements on country or origin marking methods and requirements are available in Title 19, Part 134 of the Code of Federal Regulation (19CFR134). Certain goods (partial list below) have special packing or marking requirements set by U.S. Customs or by an agency with regulatory control of the goods. Note that Section 43 of the Lanham Act (U.S. Trademark Act) refuses entry to goods marked or labeled in contravention of the provisions of the act.
Inspection
Clearance for certain goods being allowed only at certain designated ports

Goods which do not meet restrictions are generally refused entry at the U.S. border.

Country of origin requirements

Country of origin requirements are relevant to all imported products. Country of origin is a technical term which often means more than just where a product came from. The U.S. has approximately 20 different definitions of origin for imported products. The default position deals primarily with substantial transformation, i.e., production which results in a new or different good that has a name, character and use different from those of its constituent materials. In addition to the default position, however, there are various other origin rules that are applied in the U.S.. Some are applicable to certain product categories (rules of origin for apparel); others are applicable to imports from certain geographical regions (NUSMCA origin rules, Caribbean Basin origin rules) or to imports from certain countries (Israel U.S. Free Trade Agreement and countries designated as beneficiary countries under the Generalized System of Preferences).

Country of origin determination is important for many reasons: preferential duty program access either under U.S. Customs Law or under a trade agreement, import control management vis a vis embargoed countries and countries subject to product quotas, consumer/end user notification, statistical reporting, certificate of origin issuance and product marking requirements. Imported products on which there has been an incorrect origin determination or a misrepresentation of origin may be refused entry, seized at the border, assessed a monetary penalty or subjected to a program of forced compliance.

Trade group memberships

Numerous bilateral and multilateral agreements such as the Agreement on Textiles and Clothing (formerly the Multi-fiber Agreement) are grouped under the umbrella of the WTO, the World Trade Organization, the successor to the GATT (General Agreement on Tariff and Trade). The WTO oversees most global trade in goods and services as negotiated in the various agreements; it also provides arbitration in case of disputes. MFN or Most Favored Nation tariff treatment is accorded to all countries who have ratified the WTO as well as to the other previous GATT members who have yet to ratify the accord.

The U.S. has trade agreements with many countries, including Canada and Mexico under USMCA, the United States-Mexico-Canada Agreement, which provides for the elimination or progressive reduction of tariffs between the U.S., Canada and Mexico. The exemption or reduced tariff is applicable only to goods qualified under the agreement as originating goods.

The U.S.-Israel Free Trade Agreement provides duty-free entry for qualified products imported directly from Israel.
CBI, the Caribbean Basin Initiative (also known as the CBERA, the Caribbean Basin Economic Recovery Act), provides duty-free entry for qualified products imported directly from Caribbean nations.
ATPA, the Andean Trade Preference Act, provides duty-free entry of eligible goods imported directly from Colombia and Ecuador.
CBTPA, the Caribbean Basin Trade Partnership Act, provides for reduced or free duty on qualified products imported directly from CBTPA beneficiary countries.
AGOA, the African Growth Opportunity Act, provides for reduced or free duty on qualified products imported directly from AGOA beneficiary countries.
The U.S.-Jordan Free Trade Agreement provides for reduced or free duty on qualified products imported directly from Jordan.
FAS, Compact of Free Association, provides for duty-free entry for eligible goods directly imported to the U.S. from Palau, the Marshall Islands and the Federated States of Micronesia.
Under the U.S. Generalized System of Preference or GSP, duty-free entry is allowed for direct importation into the U.S. of eligible goods from designated developing countries.
APEC, the Asia Pacific Economic Cooperation is considering the progressive elimination of tariffs among the Pacific Rim members (Brunei, Canada, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Philippines, Singapore, South Korea, Taiwan, Thailand, U.S.A.)

Other government agencies

Although Title 15 (Foreign Trade) and Title 19 (Customs Duties) contain regulations that apply to most or all imports, many other Titles contain import and export requirements that are associated with specific regulatory agencies.

Food and Drug Administration (FDA) Regulations (21 CFR, Chapter 1) regulate all imported foods, drugs, and electronic products that emit radiation or contain lasers.
Federal Communications Commission (FCC) Regulations (47 CFR Parts 1-199) regulate all imported digital devices, for example, transponders, monitors, turning units with transceivers installed/radar components, alarm system devices that can transmit a signal for help.
International Traffic in Arms Regulations (ITAR), (22 CFR Parts 120-130) are administered by the State Department and require all exports and temporary defense imports and services be authorized by a U.S. State Department approved license, an approved agreement, or a valid ITAR exception.
Alcohol, Tobacco, Firearms and Explosives (ATF) Regulations (27 CFR Parts 447, 478, 479) detail import license processes for the permanent import of defense articles contained on the United States Munitions List (USML) as well as alcoholic beverages and tobacco products.
Environmental Protection Agency (EPA) Regulations (40 CFR Section 707.20) regulate all imported chemicals, plastics, rubber, paints, dyes, pesticides etc that fall under its general regulations.
OFAC (Office of Foreign Assets Control) — an agency of the U.S. Treasury that controls U.S. sanctions and embargos which prohibit exports to or the conduct of business with certain entities, organizations, and countries.

Other regulating agencies include:

Consumer Product Safety Commission
Health & Human Services
Immigration & Customs Enforcement (ICE)
Census Bureau
S. Patents & Trademarks
Defense Logistics Agency
Federal Maritime Commission
Department of State Authentications Office
Bureau of Educational and Cultural Affairs
Department of Transportation
Department of Agriculture
Animal and Plant Health Inspection Service
Fish & Wildlife Service, International Affairs
Department of Commerce
International Trade Administration
International Trade Commission
Office of Textiles & Apparel
Government Printing Office

CITES, the Convention on International Trade in Endangered Species of wild fauna and flora provides for the seizure of shipments prohibited under this agreement and the assessment of fines.

Import record-keeping

Import record-keeping requirements require the following persons to maintain import records and to make them available for examination by the Customs Service on Customs' demand: an importer, consignee, entry filer or other person who: (a) imports merchandise into the customs territory of the U.S.; or (b) files a drawback claim.

The specific import records that must be retained are “any information required by law or regulation for the entry of merchandise”, including statements, declarations, documents, correspondence and financial accounting data. The record keeper must maintain the import records in their original form, whether paper or electronic. Any record required to be kept and rendered for examination or inspection for a period of 5 years from the date of entry, if the record relates to an entry, or 5 years from the date of the activity which required creation of the record.

If a record keeper fails to produce an import record upon lawful demand by Customs, the consequences can be severe. If the failure is the result of a willful failure, Customs may assess an administrative penalty for each release of merchandise, not to exceed $100,000, or an amount equal to 75% of the appraised value of the merchandise, whichever is less. Alternatively, if the failure is the result of a negligent failure, Customs may assess an administrative penalty for each release of merchandise, not to exceed $10,000, or an amount equal to 40% of the appraised value of the merchandise, whichever is less.

For more information

For more information, call toll-free 1-877-328-7866 (Intl: 716-881-2590) and talk to one of our foreign trade compliance consultants. Or send an email.

U.S. Import Controls

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