Fashion Intel & Analysis

The Wall Street Journal is reporting progress in the U.S.-China trade talks and released a tentative schedule of two rounds of face-to-face meetings to finalize a trade deal concluded by a signing ceremony in late May or early June, “according to people familiar with the situation.” 

The article reports U.S. Trade Representative Robert Lighthizer plans to travel to Beijing the week of April 29, and Chinese envoy Liu He will arrive in Washington the week of May 6. Treasury Secretary Steven Mnuchin will also be involved in the delegation to China. If talks continue to progress, as suggested lately, U.S. and Chinese officials will finalize the agreement’s text and legal language and hope for a presidential signing ceremony as soon as Memorial Day. A U.S. trade official declined to confirm the tentative schedule. We will keep you posted as the official timeline is released.

This week, the U.S. and Japan wrapped up two days of bilateral trade discussions led by U.S. Trade Representative Robert Lighthizer and Japan’s Economic Revitalization Minister Toshimitsu Motegi. In a statement released by USTR, the two officials are reported to have reestablished the commitment to reach a meaningful agreement and agreed to continue the discussions in the near future. The two sides discussed trade issues involving goods, including agriculture, and the need to establish high standards in the area of digital trade.

The following update was prepared by John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP.

The Department of Justice announced a recent settlement in a False Claims Act case that involves a DDP purchaser and its knowledge of the violation of the customs laws by its DDP supplier.  The settlement requires that the defendant, an apparel wholesaler to major chains, pay $325,000 in damages.

The settlement resulted from a complaint lodged by a whistle blower.  

The crux of the complaint is that the wholesaler had direct knowledge that the garments were under valued at entry. The direct knowledge is said to be based on the fact that the wholesaler made supplemental payments against debit notes and/or cost sheets.  The payments did not appear on the commercial invoices that the DDP vendor submitted to CBP.  It was nothing more than garden variety “double invoicing”.

The settlement agreement indicates that the DDP purchaser actually reviewed the vendor's customs filings. The documents included the entered values.  Thus, in addition to the indirect knowledge that it made payments over and above the price on the commercial invoice, the wholesaler had direct evidence that the entered values were understated.  Further, the DDP vendor attempted to bribe the wholesaler’s compliance manager to look the other way. The bribe was not accepted but the wholesaler continued to purchase merchandise from the DDP vendor and failed to advise CBP of the obvious and ongoing fraud.

This settlement flows from earlier settlements.  The earlier settlements were based upon claims by the same whistleblower who was a former employee of one of the DDP purchasers caught up in the scheme.

As a reminder, companies who buy on the DDP terms must exercise a reasonable degree of due diligence.  This should include reviewing customs filings certified by the broker. Generally, DDP vendors are not willing to disclose entered values. That is understandable. Nevertheless, DDP purchasers cannot claim ignorance of customs fraud when the prices are too good to be true.

Yesterday, the Office of the U.S. Trade Representative (USTR) announced additional product exclusions for products covered by the first tranche of the Section 301 tariffs.  As a reminder these tariffs affect $34 billion of imports from China and went into effect on July 6, 2018. The full list is available in the Federal Register. Of note, the Federal Register indicates exclusions for 8420.10.9080: Roller machines designed for cutting, etching or embossing paper, foil or fabric, manually powered and 8425.39.0100: and Ratchet winches designed for use with textile fabric strapping. These product exclusions will be retroactive to July 6, 2018 and will remain in effect for one year from the Federal Register publication.

The Trump Administration is getting pushback for the proposal to remove GSP (Generalized System of Preferences) duty-free benefits from India.  The Administration could take action any time after May 4th, and today both the co-chairs of the Senate India Caucus and a group of industry associations, including USFIA, wrote to the U.S. Trade Representative asking for a delay.  

Senators John Cornyn (R-TX) and Mark Warner (D-VA) wrote to USTR Robert Lighthizer asking for a delay of at least thirty days so that negotiations to resolve the trade tensions can be held after the Indian elections (which will end on May 23rd). 

The 25 industry associations writing to Lighthizer have a similar message -- although we ask for a sixty-day delay in any action by the Administration.  Let USFIA know if you have any questions.