Customs Overviews

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP 

In This Memo: 

  • Hangers
  • Classification Decisions
  • Origin Rules
  • Bond Violations
  • CPSC Developments
     

HANGERS. 

The Customs Bulletin for May 1, 2019 includes the proposed revocation of HQ H058876 (May 14, 20019), which held that certain hangers were classified as instruments of international traffic (“IIT’s”) and therefore free of duty. Proposed HQ H300587 takes the position that the hangers, which are not used to hang garments during transport, are not IIT’s.  The ruling describes the hangers as being re-usable and substantial.  During transit, the garments are on the hangers but are not suspended from the hangers. Rather, they are folded and packed in boxes for transit. Given this consideration, the hangers are not classified as IIT’s as they do not hold garments in transit. 

The ruling does not address or affect the potential classification of these hangers as separate from the garments with which they are imported.


CLASSIFICATION DECISIONS. 

Diapers are the subject of HQ H301362 (April 24, 2019). The diapers that issue consisted of six layers. Two of the layers of polypropylene, three are polyethylene. The six layer, the one in contact with the baby's skin, is comprised of "fluff pulp/wood fibers".  NY N296283 (April 24, 2018) classified the diaper in subheading 9619.00.30 (9%).  This decision was based on a lab report that identified the sixth layer as primarily cotton.

The Headquarters Office decision is based upon a second sample that the Customs Lab determined to have an absorbent layer of wood fibers. Accordingly, classification was held to fall in subheading 9619.00.11 (Free), covering diapers of paper pulp.  The point of the ruling is that it is the absorbent layer, next to the baby's skin, that determines classification under the essential character principle.

HQ H300680 (March 18, 2019) revokes a 2004 pre-classification ruling. The ruling classified a backpack that contained plastic play food as a unit under the provision for toys, subheading 9503.00.00 (Free). That classification was based upon the conclusion that the backpack and play food constituted a tariff set.

The Headquarters Office first looks at the question of whether the combination is a set. It decided that it is not for the reason that the set components are not intended to meet a particular need or to carry out a specific activity. The backpack has a separate use and is not necessary used when a child is playing with the toy food.

The next question is whether the backpack could be classified with the toys as ordinary packaging. Again, the Headquarters Office felt otherwise. First, the Chapter 95 Notes effectively preclude classification of heading 42 bags in the chapter.  Finally, the ruling examines whether backpack could be treated as packaging.  Since the backpack is suitable for long-term use and is not specially fitted to contain the play food it was not classified as packaging. 

Accordingly, the proposal is that the toy food be classified in subheading 9305.00.00 and the backpack in subheading 4202.92.45 (20%).

The classification of a plastic headband is the subject of HQ H302449 (May 8, 2019).  

The headband is completely covered in polyester fabric. The headband has features that indicate it would be used to celebrate the occasion of the graduation. The headband is 80% polyester, 20% plastic by weight and 95% polyester, 5% plastic by value. CBP viewed the headband as similar to a hair slide in that it is ornamental and could also hold hair in place. This places classification in heading 9615.  That heading includes two subheadings, one for articles made of hard rubber or plastics and a second for articles of other materials. CBP determined that the essential character of the headband was imparted by the polyester fabric, based upon the fact that it completely covers the plastic and is the visible material.  Classification therefore falls in subheading 9615.19.60 (11%).

In addition, the ruling finds that the headband is eligible for classification in subheading 9902.17.96 (Free). 


ORIGIN RULES.  

The possibility that wearing apparel originating in China could be subject to 301 duties has led to examination of the rules of origin.  The governing rules of origin are statutory, 19 USC § 3592, and 19 CFR § 102.21.  

The specialized rules of origin applicable to Outward Processing Arrangements (“OPA’s”) that had been in effect while the quota regime was in place did not govern origin for other purposes.

The following appears in HQ 959396 (July 25, 1996), which addresses the origin of five pocket jeans;
 
In your submission to this office, you request that Customs confirm that any goods produced in Hong Kong utilizing Hong Kong's Outward Processing Arrangement will be deemed to be presumptively of Hong Kong origin for purposes of Section 102.21, Customs Regulations. Customs cannot make such a confirmation. Each request for a country of origin determination is made on a case by case basis, which allows Customs to carefully consider the particulars of individual manufacturing scenarios.  Pursuant to the Uruguay Round Agreements Act, for textile or apparel products entered, or withdrawn from warehouse for consumption, on or after July 1, 1996, Customs will base its country of origin determinations on U.S. law only, specifically Section 102.21, Customs Regulations.  

The ruling finds origin in HK based on 102.21, only, and clearly indicates that the OPA rules are irrelevant.

The basic rule of origin for apparel that consists of two or more component parts, is that assembly confers origin provided that the apparel is wholly assembled in a single country, territory, or insular possession. 

A second basic rule is that the country of origin of knit-to-shape products is the country in which the major parts are knitted or crocheted directly to the shape used in the finished product. 

A third basic rule is that of origin of certain articles made from fabric is the country in which the fabric is produced.  These articles include handkerchiefs, shawls, scarves mufflers, bed, table, toilet and kitchen linens, curtains, drapes, bedspreads, comforters, pillows and cushions, among other articles.

Once you go beyond the parameters of these general approaches, the origin determination is made on an ad hoc basis applying the principles set forth in the statute and regulations. As a result, there are thousands of rulings dealing with the origin of textiles and apparel.  For example, we found more than 700 rulings on the origin of shirts.  If you are contemplating moving production from China and the processing in the new site does not fall easily into one of the general approaches, a ruling request should be considered.


BOND VIOLATIONS. 

CBP seems to have developed a renewed interest in certain bond violations. We have seen an increase in liquidated damage claims based upon late ISF filings.  This is something CBP has been threatening; it now seems to have become a reality.

The second area involves the failure to file reconciliation entries.  In some cases the issue arose when the importer had set up blanket filing, a process that is no longer available, but did not make the necessary reconciliation filings, which invariably would have been no-change reconciliations.

Members should ensure they have systems and procedures in place designed to ensure that these types of violations are avoided.


CPSC DEVELOPMENTS. 

There were two recalls of textile articles in May.  The recalls cover: 1) children’s robes and pajama pants that fail to meet the flammability standard for children’s sleepwear, posing a risk of burn injuries to children; and, 2) children’s sleep bags that fail to meet the flammability standard for children’s sleepwear.


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties. Matters reported on or summarized herein may not be construed as legal advice on specific situations. 

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP 

In This Memo: 

  • 50/50 Blends
  • Adaptive Clothing
  • Reconciliation 
  • Santa Suits
  • Commission Ruling
  • "Made in USA"
  • CPSC Developments

50/50 BLENDS.

HQ H293468 (Proposed), which appears in the Customs Bulletin for April 3, 2019, highlights a classification principle which many, including yours truly, have overlooked.

The ruling proposes to revise a series of rulings dealing with the classification of garments and furnishing made with various 50/50 blends.  In general, the articles were classified in the provision of the two applicable that appears last in the schedule. This was according to the general rule where a product is covered by more than a single subheading, classification falls in the higher number.  GRI 3(c). That is wrong. A different rule applies in the case of textiles and apparel - the tiebreaker is based on the chapter in which the material is classified. The materials with the higher rates of duty (MMF - Chapters 54, 55) generally appear after the lower duty rate materials (linen Chapter 53).  The opposite occurs in Chapters 61 and 62.   Note that in the case of cotton/poly, 50/50 blends, the result is the same under GRI 3(c) and the Section XI notes.  

ICP Classification: Apparel Terminology under the HTSUS (June 2008) explains as follows;

A garment that is made of a 50/50 blend of fibers (e.g., 50% cotton, 50% polyester) is classified using HTSUS Section XI Note 2(A) and Subheading Note 2(A). It will be classified as if it consisted wholly of that one textile material which is covered by the heading that occurs last in numerical order among those which equally merit consideration.

Fortunately, this does not have a major impact since most textile and apparel importers prudently avoid 50/50 blends if it all possible.  We do not believe that the recognition of these Section XI rules has any real impact on classification decisions based upon essential character, such as the classification of reversible garments, unless of course one of the shell fabrics is a 50/50 blend.

Keep in mind that a 50/50 blend garment is classified in its condition as imported and is subject to testing by CBP.  There is no tolerance.  CBP made this clear as long ago as 1988.  HQ 082863 (October 3, 1988).  This is in contrast to the FTC rules on content labelling, which allow a discrepancy of up to three percent, an implicit recognition that neither production processes nor testing of blended fabrics are completely accurate.


ADAPTIVE CLOTHING. 

The Customs Bulletin for April 3, 2019 includes HQ H300625 (February 27, 2019). This is the final of a proposed ruling covered in the December 2019 Overview.   USFIA urged that the proposed revocation be abandoned.  The ruling denies 9817.00.96 treatment for men’s shirts with magnetic buttons. The result is that NY N278872 (September 29, 2016), which provided duty-free treatment for shirts with magnetic buttons, is revoked as of June 2, 2019.

Essentially, CBP ruled that because magnetic buttons have "become mainstream in their use", they do not "easily distinguish" garments with the buttons from articles useful to the general public.  Therefore, once a garment feature designed for the physically challenged, becomes “mainstream”, it is no longer eligible for duty-free treatment.  The ruling also asserts that CBP cannot classify identical garments differently based upon how the importer advertises and markets the garment.   This will come as a surprise to members who have experienced changes in the classification of underwear and sleepwear imposed by CBP based in part on marketing and how a garment is displayed on the selling floor.


RECONCILIATION.  

CBP issued the following reminders on Reconciliation processing.   CSMS #19-000203 (April 18, 2019).

No Change Reconciliation.  The Entry-by-Entry method will not be allowed if there are no changes to any of the flagged entries.  

FTA Reconciliation. Reconciliation entries claiming FTA pursuant to a post-importation claim must include electronic certifications of the statements and declarations required by regulation.  
If an entry is flagged for a FTA reconciliation, an individual 520(d) claim on the underlying entry is not allowed.  The filing of a reconciliation entry is the only option to make a claim under 1520(d) after flagging the underlying entry.  

Double Flagging.  If an underlying entry is flagged for both FTA and “OTHER” CBP recommends that the FTA Reconciliation be filed before the “OTHER” Reconciliation so the Special Program Indicator (SPI) can be established.  

Reports.  CBP recommends that filers use ACE reports to ensure underlying entries intended to be flagged were in fact flagged.  


SANTA SUITS.    

In 2017 the Court of International Trade ruled that Santa Claus costumes are not classified in Chapter 95.  Rubies Costume Co. v. United States, Slip Op. 17-147 (October 31, 2017).  The Federal Circuit affirmed the decision this week. 

The Notes to Chapter 95 exclude "fancy dress, of textiles".  The appellate court noted that the importer manufactures the jacket so that it can be worn and cleaned multiple times throughout the Christmas season and in fact likely will survive several seasons. As such, it is considered fancy dress.  The courts have previously ruled that only apparel that is flimsy and for that reason not considered fancy dress may be classified as festive articles. 


COMMISSION RULING.  

HQ H298982 (April 1, 2019) addresses the treatment of a purported buying commission.

The agent will receive a commission based upon the purchase price paid by the importer to the vendor. The agent agrees to perform the following services on behalf of the importer: sourcing strategy, vendor management, order management, logistics coordination, and assistance in dealing with defective merchandise and returns.  The importer places that PO directly with the vendor with a copy to the agent. The agent negotiates purchase prices based on the importer’s instruction. Payment is made by the importer directly to the vendor. The purchase price does not include the commission.  Commissions are invoiced separately by the agent on a monthly basis.  The agency agreement is specific that the agent does not take title or risk of loss and is not responsible for defective merchandise.

Not surprisingly, CBP ruled the commission not dutiable.


“MADE in USA”. 

Two Federal Trade Commissioners objected to recent settlements with importers who falsely claimed that their goods were made in the U.S.  In both cases, one involving hockey pucks and the other backpacks and similar items, the importers merely agreed to desist marketing the items as domestic made. No fines were assessed.

The dissenting commissioners asserted that the failure to assess fines meant that the violators essentially got off "scot-free".

In a related matter, the Commission announced a settlement with an importer alleged to have violated a 2017 order relating to false Made in USA claims. The original settlement required that the importer avoid unqualified US-origin claims. Nevertheless, the importer marketed its products as "Designed and Crafted in USA", when the majority of the products were wholly imported. The FTC determined that those claims were false.

The FTC instituted a new action. As a consequence, the importer agrees to pay a civil penalty of $110,000 and will have to notify affected consumers about the deceptive Made in USA representations.


CPSC DEVELOPMENTS.  

There were four recalls of textile articles in April.  The recalls cover: 1) children’s loungewear sets that fail to meet the federal flammability standard for children’s sleepwear, posing a risk of burn injuries to children; 2) children’s hooded bathrobes that fail to meet the flammability standard for children’s sleepwear; 3) infant fur jackets - snaps can detach, posing a choking hazard to young children; and, 4) shag area rugs – the shag cover fails to meet the federal flammability standard for carpets and rugs.

The Commission has requested information about possible changes to the flammability standards. 84 Federal Register 16797 (April 23, 2019). 

One of the subjects of the request is whether spandex should be added to the list of fabrics that are exempt from the testing requirements.  The balance of the requests relate to technical aspects of the testing procedures. The comment period closes June 24, 2019.

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP 

In This Memo: 

  • Classificataion Decisions
  • North Korea - Sanctions
  • Yantian Express
  • CPSC Developments 


Classification Decisions.

CBP recently published the following rulings.  

HQ H296342 (November 19, 2018), which appears in the Customs Bulletin for February 20, 2019, revokes NY N288630 (November 30, 2017).  The New York ruling classified a man's upper body garment in subheading 6110.30.30 (32%), as sweaters pullovers, etc.  The importer sought classification in heading 6101, as a jacket.

The garment is constructed of a bonded fabric consisting of an outer layer of polyester knit fabric, a middle layer of polyurethane film, and an inner layer of polyester microfleece knit fabric. The polyurethane film is not visible in the cross section. The garment has a stand-up collar, a full-front opening with a storm flap and a zippered closure. It has long sleeves with elastic edging on the cuffs, side entry pockets below the waist, and a bottom with a curved tail. 
 
The Headquarters Office agrees with the classification asserted by the importer.

The decision is based upon an analysis of the factors that CBP examines in distinguishing between jackets and other garments. The presence of three jacket characteristics generally leads to classification is outerwear.

The ruling points out that the subject garment has three jacket characteristics: a heavyweight shell fabric (12 ounces), pockets below the waist, and a heavy-duty zipper. In addition, the importer claimed that the garment was water resistant, an attribute confirmed by the Customs Laboratory.  Given these characteristics, CBP holds that classification lies in subheading 6101.30.20 (28.2%).

In HQ H297341 (November 13, 2018), which appears in the same issue of the Customs Bulletin, CBP revokes a portion of NY A89600 (December 9, 1996).  The ruling covers medical stretch briefs classified in subheading 9817.00.96 (Free), as articles specially designed for and adapted for use by the physically or mentally challenged.  Classification in 98f17.00.96 was revoked.

The MMF knit briefs are designed to hold disposable and reusable absorbent pads for use by adults and children suffering with permanent or chronic incontinence.

CBP asserts that to be classified in the Chapter 98 provision, an article must be made with the specific purpose and intent to be used by persons facing physical challenges and it must benefit those persons to a greater extent than others.  From this principle, CBP points out that many of the features of the subject merchandise are found in garments – pants marketed to and used by women after childbirth, and briefs designed to hold post-surgery dressings - not designed for the physically challenged.  Given these factors, CBP concluded that the subject briefs were not sufficiently specialized to qualify for classification in subheading 9817.00.96.

This ruling is another indication that CBP is taking a very close, perhaps jaundiced, look at existing rulings that classify garments in the provision for garments specially designed for the use of the handicapped.


North Korea – Sanctions. 

A recent press release from Treasury’s Office of Foreign Assets Control ("OFAC"), highlights one more area of potential concern for members. The press release covered a civil settlement with a cosmetics importer.   The cosmetics, false eyelash kits, originated in China but contained ingredients produced in North Korea. This violated sanctions against North Korea.  The fine approached $1M.  Although, the fine was substantially reduced from a potential maximum of $40M, in part because the importer reported the violations, OFAC was highly critical of the importer’s failure to institute an adequate compliance program. 

It is a given that members routinely pay close attention to origin issues. Nevertheless, they should review their procedures to ensure that suppliers have provided representations that they comply with all US export controls in trade sanctions. Further, training materials should include information on sanctions. The likelihood is that members cover these areas but perhaps more indirectly than OFAC would consider adequate.


YANTIAN EXPRESS.  

As some of you may be aware, the Yantian Express caught fire on the way to the US and is now in Freeport for damage assessment and repairs. Importers whose cargo had been laden on the vessel are also engaged in damage assessment.

Some of the cargo had been released electronically in early January based upon an estimated date of arrival of January 6, 2019.  CBP has issued instructions on how an importer whose cargo had been released should deal with the situation. The instructions are found in CSMS# 19-000071 (February 14, 2019). A copy is available here. 


CPSC DEVELOPMENTS.  

There were no recalls of a textile or apparel item in February.


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties.  Matters reported on or summarized herein may not be construed as legal advice on specific situations. 

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP 

In This Memo:

  • 301 Developments 
  • "Jump Teams" 2018
  • Commission Decision
  • 21st Century
  • FTC - Leather Guides
  • GSP
  • CPSC Developments

301 DEVELOPMENTS. 

The threat of a List 4, the likelihood that List 3 will be revoked or that the duty will be increased to 25%, all appear to be waning. 

USTR is expected to establish a List 3 exclusion process in the very near future.  Members who import goods on List 3 should begin formulating support for an exclusion petition.  Any petition must address the following elements; 1) is the product available in the US and China is the sole source, 2) the product is not strategically important and not related to "Made in China 2025” or another China industrial programs; and 3) the 301 tariffs are a cause of severe harm to petitioner.  The fact that most List 3 products of interest to USFIA members are subject to “normal” duties much higher other the 301 retaliation duties  should mean there is a strong case for an exclusion.

It is obvious that members who submit exclusion petitions on List 3 products face an uphill battle, nevertheless, there is no disadvantage in seeking an exclusion.  


“JUMP TEAMS” 2018. 

Customs and Border Protection (“CBP”) has shared the results of the Fiscal 2018 Textile Production Verification Team visits with USFIA.

The teams visited approximately 138 factories in nine countries, Colombia, the Dominican Republic, El Salvador, Guatemala, Kenya, Madagascar, Mauritius, Nicaragua, and Peru.  None of the factories visited showed evidence of transshipment but 18 were categorized as high risks for transshipment. 

The visits also looked at compliance with preference program requirements; AGOA, CAFTA, as well as the Colombia and Peru agreements.  Nine of the 49 CAFTA factories were found to have violated CAFTA program requirements.  No violations were found in the AGOA, Colombia or Peru agreements.

Insufficient documentation was detected in 13 of the 28 AGOA factories. The same criticism (insufficient documentation) was lodged against 10 of the 23 Peru factories, four of the 19 Colombia factories and 17 of the 49 CAFTA factories.

Only one country, Guatemala, had no issues. None of the 20 factories visited were deemed a transshipment risk, violated the applicable preference program or had insufficient documentation.


COMMISSION DECISION.    

CBP recently published HQ H301531 (March 5, 2019), which addresses the dutiable status of a payment purported to be a buying commission.

The importer provided the following documentation to support its claim, sales contract cover invoice and a commission agreement. The sales contract lists a separate amount for the commission and notes the commission is included as part of the total price.  The commission agreement lists the importer and the seller as parties and indicates that the commission is paid to a third party. This agreement, which is between the third party and the seller, not the buyer, indicates that the former’s duties include providing customer information, commercial information and investigating the credit worthiness of buyers.

It is no surprise that CBP ruled that the commission is part of the customs value. First, it is included in the price. Even if one could argue that the commission was paid to a bona fide buying agent, the fact that it was paid to the seller means that it is dutiable.  Further, the third party's obligations make it clear that it is acting on behalf of the seller not the buyer. 

There could hardly be a clearer case that the commission is not paid to a bona fide buying agent and for that reason dutiable.


21st Century. 

CBP has announced the reopening of the public comment period on the themes identified in “The 21st-Century Customs Framework” initiative. 84 Federal Register 8884 (March 12, 2019).  The additional comment period expires April 11, 2019.


GSP.  

The Trump Administration has announced its intention to remove India and Turkey from the list of beneficiary countries under the Generalized System of Preferences.  Once the change goes into effect, otherwise eligible goods from either country will no longer enjoy the duty-free treatment. GSP changes typically take effect on July 1.  

However, it is also possible that the change could take place 60 days after Congress and the governments of India and Turkey are informed of the change. Presumably, the necessary Presidential Proclamation will provide more details.  It is likely that any change will apply to goods entered (not exported or ordered) on or after the effective date.


FTC – LEATHER GUIDES. 

The FTC has published a notice seeking comments on the Guides for Select Leather and Imitation Leather Products, 19 CFR Part 24.  84 Federal Register 8045 (March 6, 2019). The request is part of the FTC’s systematic review of all current regulations and guides.   The Guides apply to leather and imitation leather luggage, handbags, flatgoods, belts and footwear.

The most recent review of the Guides took place in 2007-2008.     

The Commission seeks comments on the following points, among others.
(1)  Whether there is a continuing need for the Guides as currently promulgated.
(2)  Are these specific provisions of the Guides that re no longer necessary?
(3)  Where the industry has adopted the Guides as part of its routine business practices.
(4)  Are these deceptive or unfair practices addressed in the Guides prevalent in the marketplace?  Are the Guides effective in addressing the practices?
(5)  The burdens and costs, including costs of compliance, imposed on businesses that follow the Guides.
(6)  What changes, if any, should be made to the Guides to reduce the burdens or costs to businesses.
(7)  Whether the Guides overlap or conflict with other Federal, State or local or international laws and regulations.
(8)  Whether consumer perceptions or preferences have changed since the Guides were issued in 1996 and, if so, whether the changes warrant revising the Guides.
(9)  Whether any changes in relevant technology, economic conditions or environmental conditions have had an impact on the Guides.

Comments are due on or before April 22, 2019.  If you would like USFIA to file comments, please let us know your recommendations and feedback by April 18th.  . 


CPSC DEVELOPMENTS.  

There were two recalls of textile articles in March.  The recalls cover: 1) heated socks - the lithium-ion battery can heat, melt or ignite when charged with a charger other than the one provided with the product, posing fire and burn hazards to the user; and 2) baby rattle socks - small ornaments can detach from the socks, posing a choking hazard to young children.


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties.  Matters reported on or summarized herein may not be construed as legal advice on specific situations. 

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP

In This Memo:

  • 2019 HTSUS
  • California - Shippers Liability
  • Morocco FTA
  • “Made in USA”
  • CPSC Developments

2019 HTSUS.

The 2019 Harmonized Tariff Schedule is now available on the USITC website.  

We saw only one change from the final 2018 version. The change relates the Miscellaneous Tariff Bill (MTB) provisions. As in the past, a footnote indicates that an MTB may apply. However, the relevant MTB subheading, where there is one, is found at the end of chapter rather than on the same page as the main subheading.

CALIFORNIA - SHIPPER LIABILITY.

Under California Labor Code Section 2810.4, effective Jan. 1, 2019, any customer of a port drayage carrier will be jointly and severally liable for unpaid wages, unreimbursed expenses, damages, and penalties due to the commercial truck driver after the date the carrier is listed on the California Division of Labor Standards Enforcement (“DLSE”), available at https://www.dir.ca.gov/dlse/List_Port_Trucking_Companies_Outstanding_Judgments.html

On January 2, the California DLSE published the list of port drayage companies with unsatisfied final court judgments, tax assessments or tax liens. Members who use any of the port drayage carriers may be liable for the following:

  • unpaid minimum, regular or premium wages;
  • unlawful deductions by the motor carrier from wages;
  • out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier;
  • civil penalties for failure to secure valid workers’ compensation coverage; and
  • damages or penalties, as provided for by law, that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed.

The type of customer that may be jointly and severally under this new law is broadly defined as “a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customer’s behalf, whether the customer directly engages or uses a port drayage motor carrier or indirectly engages or uses a port drayage motor carrier through the use of an agent, including, but not limited to, a freight forwarder, motor transportation broker, ocean carrier, or other motor carrier.”

The customer is liable prospectively, not retroactively, for unpaid wages, unreimbursed expenses, damages and penalties incurred after the carrier is listed on the California DLSE website. If the customer and the carrier have a contract and the customer wishes to terminate the contract, the customer will not be liable until the earlier of the contract’s expiration date or 90 business days after the carrier is listed on the website.

Any company that engages California port drayage carriers, directly or indirectly, should take steps to protect itself from liability, including:

  1. monitoring the California DLSE list, which must be updated by the fifth day of every month, to determine whether any of its existing or prospective port drayage carriers are on the list;
  2. considering whether to cease engaging a port drayage carrier while that carrier appears on the list and whether to terminate contracts with listed carriers;
  3. verifying that its ocean carriers, freight forwarders, brokers and other transportation providers are not engaging any listed port drayage carriers; and
  4. considering amendments to its contracts with these transportation providers to require them to monitor the California DLSE list and to address any liabilities that might arise from engaging any port drayage carrier while that carrier appears on the list.

Prepared by Lisa Ormand Taylor of McGuireWoods LLP, 904-798-3240, This email address is being protected from spambots. You need JavaScript enabled to view it.

MOROCCO FTA.

PP 9834 (December 21, 2018), 84 F.R. 35 (January 7, 2019) amend the Morocco agreement to grant duty-free treatment to articles of women’s apparel classified headings 6204 and 6206 made from certain, very specific fabrics. The change was effective January 1, 2018.

PP 9834 also contains the change in the Panama agreement relating to women’s guyabara shirts previously reported.         

“MADE IN USA”.

The district court has granted preliminary approval of the revised settlement under which New Balance must pay $750,000 and agree to change its misleading labeling practices. The revised settlement will provide refunds of up to $100 per household for consumers who bought New Balance shoes in California. Unused funds will be donated to the Public Justice Foundation.

The original proposal was rejected because the court found that the maximum recovery of $10 would require an “abysmally low” participation rate of five percent for each class member to receive the $10. The class is estimated to be nearly one million.

CPSC DEVELOPMENTS.

There were no recalls of a textile or apparel item published since December 20, 2018. This does not mean that there were no disclosures, only that they have not been published – another result of the shutdown.

The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties. Matters reported on or summarized herein may not be construed as legal advice on specific situations.