Wednesday, February 11, 2009

CPSC Delays Consumer Product Safety Improvement Act for One Year

The enforcement of testing and certification requirements for children's products that was to go into effect February 10, 2009, has now been extended to February 10, 2010. Under the Consumer Product Safety Improvment Act (CPSIA), manufacturers and importers of products for children under the age of 12 are required to be tested and certified to meet certain standards (600 ppm for lead content limits and 1,000 phthalates limits for certain products). The delayed enforcement, however, does not apply to the:

  • Ban on lead in paint and other surface coatings effective for products made after December 21, 2008;
  • Standards for scribs and pacifiers effective for products made after January 20, 2009;
  • Ban on small parts effective for products made after February 15, 2009;
  • Limits on lead content of children's jewelry effective for products made after March 23, 2009;
  • Certification requirements applicable to ATVs manufactured after April 13, 2009;
  • Testing and certification requirements for items before the enactment of the CPSIA (e.g., lawnmowers, lighters, swimming pool slides); and
  • Pool drain cover requirements under the Virginia Graeme Baker Pool & Spa Safety Act.

While the one-year stay will allow small business owners and other children's toy makers some breathing room, they are still required to ensure their products conform to all safety standards and requirements. Items such as zippers, buttoners, fasteners, and plastic components must still be verified to ensure they do not contain lead or phthalates, and if they do, that they fall within the required thresholds.

While the swiftness with which the CPSIA was enacted should be applauded, there are still many far-reaching and unintended consequences that the Commission still needs to address, including the impact to family-owned businesses, first and second hand stores, and other small business owners who are most affected by the Act. Hopefully during this one-year stay, the Commission will be able to address these concerns and issue guidelines to that effect.

Upcoming Seminar - "Import Compliance: The Bridge to Somewhere"

I'm pleased to announce that The Vernon Law Group, PLLC and Panalpina will be holding a seminar on import compliance on March 3, 2009 in Irving, TX. The program, "Import Compliance: The Bridge To Somewhere," will be from 8 am to 1 pm at the Wyndham DFW North Airport (map). The program will include lunch. Topics to be discussed by the panels include:

  • The Lacey Act

  • 10+2

  • The Consumer Product Safety Improvement Act

  • Legislative Updates

Early registration (through February 13, 2009) is $35, and registration after February 13 through the day of the conference will be $45. To register, please call Kelly Chen at 214-751-2016.

This program has been approved for 3 CLE credit hours in Texas.

Tuesday, December 2, 2008

CBP Publishes Final Rule on "10+2"

CBP Publishes Final Rule on “10+2”

On November 25, 2008, U.S. Customs and Border Protection (CBP) issued the Importer Security Filing and Additional Carrier Requirements final rule, which will be effective on January 26, 2009. Currently, carriers are required to submit advance cargo information for vessels to CBP no later than 24 hours before the cargo is laden aboard a vessel at a foreign port (the “24 Hour Rule”) via the Vessel Automated Manifest System (AMS). Based upon comments from the trade community and Congress, the final rule is a more moderate version of the proposed rule.

Under the new rule, in addition to the 24 Hour Rule, carriers must submit a vessel stow plan and container status messages for certain events relating to all containers destined to arrive in the U.S. This is the “+2” in the “10+2.” CBP must receive the vessel stow plan no later than 48 hours after the carrier’s departure from the last foreign port. For those voyages less than 48 hours in duration, CBP must receive the plan before the vessel first arrives at a U.S. port. The following standard information must be included:

1. Vessel name (including international maritime organization number);
2. Vessel operator;
3. Voyage number;
4. Container operator;
5. Equipment number;
6. Equipment size and type;
7. Stow position;
8. Hazmat code, if applicable;
9. Port of lading; and
10. Port of discharge.

The “10” in the “10+2” refers to the ten data elements that CBP now requires importers to transmit to CBP for cargo other than foreign cargo remaining on board, no later than 24 hours before the cargo is loaded onto a vessel bound for the U.S. The ten elements are:

1. Seller;
2. Buyer;
3. Importer of record number/foreign trade zone applicant identification number;
4. Consignee number(s);
5. Manufacturer (or supplier);
6. Ship to party;
7. Country of origin;
8. Commodity HTSUS number;
9. Container stuffing location; and
10. Consolidator (stuffer).

The information transmitted to CBP under the Importer Security Filing will be treated as confidential in accordance with the SAFE Port Act of 2006 and section 343(a) of the Trade Act of 2002. Failure to comply with these new requirements could result in liquidated damages of $5,000 per violation, up to a maximum of $100,000 per vessel arrival. Failure to provide a vessel stow plan will result in liquidated damages of $50,000 per vessel arrival. However, CBP has indicated that it will exercise some leniency in enforcing the rule for the next 12 months to allow importers to overcome any difficulties they may have in complying with these new requirements.

Tuesday, November 18, 2008

The Clock’s Ticking on 10+2

In a matter of days, Customs & Border Protection (CBP) is expected to publish the final version of its Importer Security Filing (ISF) rule—known as "10 + 2". The filing rule will require importers and ocean carriers to provide 12 additional data elements that do not currently appear on the manifest. On November 6, the White House Office of Management and Budget approved the measure. It is now under a 15-day review by congressional committees. If lawmakers do not request revisions, the final rule should be ready for publication in the Federal Register.

Congressional review of security regulations is according to a provision in the Trade Act of 2002. The same law gave CBP the authority to require cargo manifest data in advance of the arrival of goods so that the goods can be screened. The proposed 10+2 rule would amend the Department of Homeland Security (DHS) regulations to provide that CBP must receive, via a CBP-approved electronic data interchange system, new information from carriers and importers before cargo is brought into the U.S. by vessel. The information required is that which is reasonably necessary to enable high-risk shipments to be identified so as to prevent smuggling and ensure cargo safety and security. The new rule is specifically intended to implement the provisions of section 203 of the Security and Accountability for Every (SAFE) Port Act of 2006.

The measure requires submission of 10+2 specific data elements to be transmitted to CBP 24 hours prior to cargo being loaded onto a vessel bound for the U.S. An importer will be required to submit 10 additional pieces of information which are: Manufacturer, Seller, Consolidator, Buyer and Ship To names and addresses, Container stuffing location, Importer and Consignee record numbers, Country of origin of goods, and the Commodity Harmonized Tariff Schedule number. The carrier will need to submit 2 additional data sets which are: Vessel Stowage Plan (or BAPLIE), and Container Status Messages. At present, the rule only deals with ocean freight. CBP has stated, in the future, similar data elements will be required of other modes of transportation.

Currently, a proposal circulates within the House of Representatives urging CBP to implement a limited ISF pilot before launching the full program. Lawmakers said CBP could use the pilot to test compliance with 10+2 with a small number of importers and correct any technical problems. Under a pilot, all other companies would be encouraged to comply on a voluntary basis.

A pilot program or other changes to the rule could influence its effective date. The pilot proposal, signed by Chairman Charles Rangel, D-N.Y., and other senior committee members of both parties, called for CBP to issue an interim final 10+2 rule. Interim rules allow for another round of public comment before an agency publishes a final rule. Comments on CBP’s proposed ISF rule ended on March 18. If a pilot program is not adopted, the rule could be issued immediately.

In an interview with The Journal of Commerce, CBP Deputy Commissioner Jayson Ahern rejected the idea of an ISF pilot that might delay its implementation. Moreover, CBP is expected to introduce 10+2 in the way it has described it in the past. That would include a 60-day grace period for importers to implement the rule, and a further year before Customs begins to sanction importers for non-compliance.

However, before the rule is published, importers are being encouraged to get involved with the CBP Advanced Trade Data Initiative (ATDI). This is a test method by which participating importers can transmit the types of data that ISF will require. It is important to note that these test transmissions are not a substitute for regular Customs entries. Although, CBP has processed some 55,000 ATDI transactions from 200 importers, industry groups are concerned about the capacity and viability of channels to handle the volume of data that the new security rules will require.

Failure to comply with the new ISF requirements will result in severe penalties. You could be required to pay damages equal to the value of the merchandise involved in the default. As the proposed 10+2 Security Filing Final Rule is nearing publication, importers should determine who in their supply chains has access to the proposed 10 data elements, and who in the supply chain will have responsibility for making the 10+2 data available to the agent selected to transmit the Security Filing. Importers should consider weaving these Security Filing requirements into their import compliance checklist. Experienced legal counsel can review an importer’s checklist for legal compliance issues.

[Thanks to Rosa Dunnegan for her assistance in preparing this article.]

Thursday, October 16, 2008

Melamine Contamination Poses Global Threat

Melamine contamination of Chinese milk is posing a global threat prompting countries to impose bans and further casting a shadow on the safety of Chinese food exports. Although you’ve heard “melamine” in the media, you may not know what it is. Melamine is a chemical compound used in the production of laminates, glues, dinnerware, adhesives, molding compounds, coatings and flame retardants. Although melamine is the term used both for a chemical and for the plastic made from it, all references in the food contamination threat are to the chemical. Because melamine is high in nitrogen, adding it to food artificially increases the apparent protein content as measured with standard tests. It is important to know that there is no approved melamine use in direct addition to human or animal food in the U.S. As recently as October 1, 2008, reports indicated there have been over 53,000 illnesses, nearly 13,000 hospitalizations,100 seriously ill cases and at least four infant deaths in China. Approximately 158 of the victims thus far have suffered acute kidney failure.

Source of the Contamination

In 2007, melamine was found in pet feed manufactured in China and exported to the U.S. which caused the death of a large number of dogs and cats due to kidney failure. It is unknown when melamine contamination first resulted in human illness. However, in March 2008, Chinese manufacturer Sanlu received a complaint of illness. In early September 2008, Chinese media reported that Sanlu brand infant formula produced by Hebei-based Sanlu Group was contaminated with melamine. Sanlu's powdered infant formula is widely consumed by infants across China because the product is relatively affordable.

Chinese authorities have disclosed that, in addition to discovering contaminated infant formulas, melamine has been discovered in 24 of 1202 samples of milk and yogurt. There is little information at this stage to determine how widespread the contamination might be. However, Chinese authorities report that melamine was found in infant formula, milk, yogurt, and ice cream manufactured by 22 companies in China. There are a total of 175 infant formula manufacturers across China, of which 66 have halted production and the remaining 109 manufacturers have undergone inspection.

Chinese government officials have pinpointed milk collecting stations as the sites where the melamine was added. Tests have also found melamine in 24 batches of liquid milk produced by three of China’s best known dairy firms. Sanlu reported that contaminated milk was used in the manufacture of powdered infant formula processed before August 6, 2008. The raw milk used to produce powdered baby formula had been watered down, and the chemical melamine was added to fool quality checks. The scandal was worsened by an apparent cover-up by companies involved and the ignoring by safety officials of tips and warnings from parents and doctors. Top Sanlu executives and government officials in the northern city of Shijiazhuang, where the company is based, have been forced to resign.

Products Affected and Recalls

The FDA reports that melamine contamination has been found in liquid milk, frozen yogurt dessert, biscuits, candy, and coffee. All these products were most probably manufactured using ingredients made from melamine contaminated milk. The FDA is advising consumers not to consume the following products because of possible melamine contamination: Blue Cat Flavored Drinks, White Rabbit Candies, certain varieties of Mr. Brown Instant Coffee, Mr. Brown Milk Tea, and all infant formula manufactured in China.

On October 10, HUA XIA Food Trade USA, Inc. based in Flushing, N.Y., issued a recall for YILI Brand Sour Milk Drink packaged in 250ml flexible paperboard boxes and YILI Brand Pure Milk Drink packaged in 250ml flexible paperboard boxes because it may be contaminated with melamine. These YILI products were distributed to New York City through Asian retail grocery stores. The recall was initiated after FDA testing discovered that the product was found to contain melamine.

Recently, Hong Kong's food safety agency said its tests have found melamine in a Japanese brand's Chinese-made cheesecake. Moreover, a sample of Lotte Cream Cheese Cake manufactured by Japan's Lotte China Foods Co. Ltd in mainland China was found to contain melamine. Hong Kong and Macau authorities earlier detected excessive melamine in Lotte's popular Koala's March chocolate and strawberry cream cookies. In September, British confectioner Cadbury recalled all of its Beijing-made candy products over fears that they may be contaminated with the chemical melamine.

FDA Efforts to Protect American Consumers

On September 12, 2008, in light of reports from China of infant formula contaminated with melamine, the FDA issued an advisory to reassure Americans that there is no known threat of contamination in infant formula manufactured by companies authorized to sell in the U.S. That advisory also warns members of Asian communities in the U.S. that infant formula manufactured in China, possibly available for purchase at Asian markets, could pose a risk to infants. According to the FDA, no Chinese manufacturers of infant formula are authorized to sell infant formula in the U.S.

In addition, companies that manufacture infant formula for distribution in the U.S. have reported to the FDA that they do not import formula and do not source milk-based ingredients from China. The FDA – in conjunction with state and local officials – continues to check Asian markets for food items that are imported from China and that could contain a significant amount of milk or milk proteins. The FDA has broadened its domestic and import sampling and testing of milk-derived ingredients as well as finished food products containing milk or milk-derived ingredients from Chinese sources.

The sampling is being done either when products are offered for entry into the U.S. or at the retail level. In addition to working with state and local governments, FDA is working in close cooperation with Customs and Border Protection within the U.S. Department of Homeland Security, the U.S. Department of Agriculture, other federal agencies, and foreign governments.

FDA’s Advice to Importers and U.S. Food Manufacturers

The FDA recently issued a “Dear College Letter” to importers and U.S. food manufacturers advising how to protect against melamine contamination. The letter indicated that for food manufactured in the last twelve months which might still be on retail shelves or in stock elsewhere, the supplier should determine whether the food might contain any milk-derived ingredients from China. Moreover, the FDA advised that importers and manufacturers know the precise origin of each milk-derived ingredient and to determine that milk-derived ingredients originating from China are free of melamine and its analogues prior to usage. Furthermore, the letter advised that manufacturers should be alert to the possibility that non-milk-derived ingredients from China that are or may be sold on the basis of protein content, such as soy protein, also could be contaminated with melamine. To issue a recall for any product due to the presence of melamine, firms should follow the FDA guidelines in 21 CFR Part 7 Subpart C as well as communicate with the local FDA district office.

Importers and manufacturers can test for the presence of melamine using a gas chromatography-mass spectrometry (GC-MS) as well as a liquid chromatograph-tandem mass spectrometry (LC-MS/MS). More information is available at the FDA website. FDA Field laboratories are using LC-MS/MS methods that are capable of determining melamine and cyanuric acid at levels of 0.25 ppm (parts per million) in powdered infant formula and other dairy-containing food products or ingredients.

Measuring the Risk Level of Melamine Tainted Products

The FDA conducted an interim safety/risk assessment to identify the level of melamine and melamine-related compounds in food which would not raise public health concerns. For infant formula, the assessment concluded that currently FDA is unable to establish any level of melamine and melamine-related compounds in infant formula that does not raise public health concerns. Largely, this is due to gaps in our scientific knowledge. In food products other than infant formula, the safety/risk assessment concludes that levels of melamine and melamine-related compounds below 2.5 ppm do not raise public health concerns. According to the State Council of China, the levels found in the batches ranged between 0.09 mg/kg and 619 mg/kg. Batches from the company Shijiangzhuang Sanlu Co. contained the highest levels, up to 2563 mg/kg. (Note: parts per million are the same as mg/kg. Since mg/kg = 0.001/1000 = 0.000001 = 1/1,000,000 = ppm).

Detention of Products Without Physical Examination

The FDA has issued an import alert to announce the detention without physical examination (DWPE) of certain food products due to the presence of melamine. The agency’s authority for such action is found in the Federal Food, Drug and Cosmetics Act. The FDA may refuse import admission pursuant to Section 801(a)(3) for adulterated foods under the meaning of section 402(a)(2)(C)(i), for foods that contain poisonous or deleterious substance which may render it injurious to health under section 402(a)(1) and appear unfit for food under section 402(a)(3).

To secure release of an individual shipment subject to the import alert, the importer is required to provide the results of a third-party laboratory analysis of a representative sample of the lot verifying that it does not contain melamine or melamine analogs. To remove a firm from detention without physical examination, information should be provided to FDA to adequately demonstrate that the manufacturer has resolved the conditions that gave rise to the appearance of the violation, so that the agency will have confidence that future entries will be in compliance. Requests for removal from DWPE should be directed to FDA's Division of Import Operations and Policy.

Melamine Threat Results in Global Bans

The scandal has sparked global concern about Chinese food imports, with more than 30 countries restricting Chinese dairy products, and in some cases all Chinese food imports. In addition to the recalls announced by the FDA, other countries have all identified products containing melamine including flavored milks, cakes, candies, crackers, rice snacks, coffee creamer, lactoferrin, and cereal. Milk and milk products that could originate from China include condensed, dried, and non-fat milk, condensed and dried whey, lactose powder, permeate powder, demineralized and partially demineralized whey powders, caseins, yogurt, ice cream, cheese, whey protein concentrate, and milk protein concentrate.

In Vietnam, authorities established inspection teams to test milk products while India's Health Ministry imposed a three-month ban on the import of Chinese milk and milk products. In South Korea, the government banned the importation of all Chinese products containing milk after Chinese biscuits tainted with melamine were discovered. Meanwhile, health officials in Singapore and Indonesia announced additional recalls of products made with the contaminated milk. Products pulled from store shelves range from flavored milks and ice creams to cookies and candies. Authorities in a variety of places have stopped importing some Chinese products made from milk including Indonesia, Taiwan, Japan, Singapore, Malaysia, Burundi, Gabon, Tanzania, Brunei and the Philippines. In late September, Taiwan announced Monday it was banning the importation of all dairy products from China because of melamine contamination in milk supplies on the mainland, Taiwan's Health Ministry said Monday. On September 25, 2008, the European Union announced a ban on imports of baby food containing Chinese milk. In addition to the ban, the European Commission called for tighter checks on other Chinese food imports.

Chinese Action to Curb Melamine Threat

On October 10, China's State Council tightened quality control regulations for the dairy industry. The new regulations, effective immediately, tighten control over cattle breeding, the purchase of raw milk and the production and sale of dairy products, the official Xinhua News Agency said. The measures also increase punishments for those caught violating safety standards.

Chinese police have arrested 40 people in the tainted-milk scandal, including 22 in northern China's Hebei province. Nineteen of those were managers of pastures, breeding farms and milk-purchasing stations, the Xinhua news agency reported, citing a panel investigating the case. Authorities say they raided 41 locations in Hebei and seized 490 pounds (222 kilograms) of melamine. Eighteen arrests were announced earlier. They include two brothers who face charges of selling contaminated milk. The brothers could face death if convicted, according to China Daily, a state-run newspaper.

Police in northern Hebei province arrested a suspect accused of producing 600 tons of melamine-spiked protein powder, Xinhua said. Eight dairy farm owners and milk buyers were also arrested purchasing the powder. Chinese government investigations finding 37 Chinese dairy companies, including the most reputable brands, had sold tainted products. Police have arrested 36 people in connection with the scandal in Hebei, where Sanlu is headquartered.

The head of China's quality watchdog is reported to have resigned over the scandal. Li Changjiang had quit with the approval of China's State Council. Li's agency is responsible for ensuring that China's food supply chain is safe. Monday's resignation came hours after the World Health Organization said the scandal had highlighted flaws in the country's entire food supply chain.

Melamine Product Liability Cases Pending in China

In late September, one lawyer reported that the Beijing Judicial Bureau asked Beijing lawyers not to accept problematic milk powder-related cases. Other Beijing lawyers told the Associated Press they had not come under any pressure to reject such cases. Parents of an 11-month-old diagnosed with kidney stones filed a lawsuit against the Sanlu Group Co. - the dairy company at the heart of the tainted milk crisis. It is the second known lawsuit against the company. Earlier in September, parents from central Henan province filed suit against Sanlu, seeking $22,000 in compensation for medical, travel and other expenses incurred after their 14-month-old baby developed kidney stones. It is not clear if courts will allow these suits to progress as product liability lawsuits are still relatively rare in China, and lawyers have complained of government pressure to withdraw from the cases.

Global Scandal Affecting Chinese Milk Farmers

Yangjiazhai milk farmers in north China’s Hebei province say the collection center once supplied seven tons of milk a day to Sanlu. Operations ceased after Hu Shumin, the owner of the collection center, was arrested for allegedly selling four packets of the chemical melamine to a cow breeder for mixing into milk, but it was not clear if Hu was accused of using the chemical at his own collection center. Lacking buyers, the farmers are now forced to dump freshly pumped milk or peddle it to nearby villagers. And as uncertainties grow over the global scale of the crisis, others say they plan to sell their cows before further losses mount due to feed costs they can’t recoup.

[Thanks to Rosa Dunnegan for her assistance in preparing this article.]

Friday, June 20, 2008

Highlights from the U.S.-China 4th Annual Strategic Economic Dialogue

Wednesday wrapped up the 4th round of the Strategic Economic Dialogue (SED) between the U.S. and China. The SED was first introduced in September 2006 as a biannual event to promote stronger ties between the U.S. and China and to establish a foundation from which both nations could openly discuss bilateral investment and trade issues. Representatives from both countries acknowledge and stress that continued future cooperation and open dialogue between the two countries is essential to the economic development of the two nations.

In what both parties hailed as a successful meeting, the two-day dialogue discussed such issues as the development and protection of each country’s human capital, investment in the countries, and opportunities for advancing cooperation in the energy and environmental sectors. In fact, both parties signed a 10-year agreement on energy and environmental protection after the meeting, an important move that signified China’s awareness that with a rapidly expanding nation of 1.3 billion people, it cannot continue to use energy at its current rate without regard to the environment, a particularly sticky issue that has not only economists and environmentalists nervous, but athletes preparing for the upcoming Beijing Olympics uneasy.

Chinese Vice Premier Wang Qishan and U.S. Secretary of Treasury Henry Paulson also announced at the SED that both countries would begin talks on negotiating a bilateral investment accord between the two countries. Likely topics of common interest for both sides would include the U.S. mortgage loan crisis, global financial issues, and intellectual property rights. A bilateral investment agreement between China and the U.S. would build investment confidence, especially U.S. investment in China, where transparency is not always present.

Just a week ago, China had urged the U.S. to lift its export restrictions in order to reduce trade barriers between the countries. As if in response to this, at the close of the 4th SED, both GM and Ford Motor signed 1 billion and 800 million dollar contracts, respectively, with China for more exports, including exports of GM’s Cadillac brand, a move that showcases China’s growing demand for not just automobiles, but luxury automobiles. GM’s contract with China further demonstrated GM’s determination to maintain its position as the leading automaker in the Chinese market, a market that in recent years has shown itself to be more selective and demanding.

Thursday, June 19, 2008

AES Mandatory As of July 2

According to notice posted by the Census Bureau, mandatory AES officially begins July 2, and the 90 day implementation period will end September 30, 2008. This means that all exporters should begin looking to make their transition to the AES system or AES Direct system as soon as possible. After September 30, 2008, the SED will officially be extinct.

Census has also posted a Mandatory AES FAQ that may answer many questions about the transition process not addressed in our prior article.