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SANDLER & TRAVIS TRADE ADVISORY SERVICES, INC. An Affiliate of Sandler, Travis & Rosenberg, P.A.
All producers of textile/apparel articles, regardless of use of FTAs/preference programs, are routinely subjected to unannounced, onsite factory verifications by CBP.
The Jump Team/Verification Team typically consists of two or three-persons—usually Import Specialists and CBP Agents
Purpose of Visit: Jump Team will seek to verify country of origin, recent FTA/preference program claims made, and look for evidence of transshipment.
Meet with and interview the Producer’s Senior Management;
Tour the Producer’s facility, looking for evidence of transshipment activities;
Request and review production documents for recent shipments to the US
Submit written report to CBP HQ as to: (1) whether the factory’s records clearly substantiate the origin of the goods; and, (2) whether the factory poses a risk of engaging in illegal transshipment
Typical questions: When was the company established and by whom? Does the company have any other related factories? Where are
they located and what are there names? What products does the company manufacture? What is the factory’s monthly production capacity? How many employees are involved in the production of the
merchandise (KTS, cutting, sewing, inspecting, finishing, etc.)? What is the skill level of the employees? What is the typical work week– 5 days, 6 days, 7 days? What is the typical workday– 8 hours, longer?
Jump/Verification Team’s Meeting With Senior Management
Typical questions: (continued) How many and what types of machines does the factory have? Does the factory subcontract production? To whom? Does the factory use OPA? Who are your primary customers in the United States? Does the company sell to customers in countries other than the
United States? If so, where and what percentage of its production is dedicated to non-US markets?
Does the factory maintain production records for goods shipped to the United States? Do their subcontractors maintain production records?
Etc.
Jump/Verification Team’s Meeting With Senior Management
CBP is required to detain or release goods within 5 working days after the goods’ arrival in the US.
2. Customs Issues Notice of Detention
A Notice of Detention (which can also be accompanied by a CF-28) will be issued to the customs broker or the US importer. The US Importer is required to respond and present all of the required documentation within 30 days of the date of Notice of Detention or the goods will be excluded. No extensions will be granted by CBP.
NOTE – CBP is required to make its decision (release or exclude) by Day 30, so US Importers must respond with production records as early as possible within the 30-day period so that CBP will have time to make a decision.
3. Deemed Exclusion: If no decision is made by CBP within this 30-day period, the goods will be “deemed excluded.”
4. Decision to Exclude: If the goods are excluded, the US Importer may—• Export the goods (they may never reenter the US);• Destroy the goods under CBP supervision; or,• Protest CBP’s decision to exclude the goods.
Even when goods are not detained, CBP may later issue a CF-28 requesting records to substantiate origin or verify a FTA/preferential trade program claim.
US Importer will have 30 days in which to respond, and CBP may grant extensions.
If CBP is satisfied with the documentation, no further action will be taken.
If CBP is not satisfied with the documentation, CBP may—• Request additional information/documentation;• Issue a CF-29 Notice of Action;• Request redelivery of the goods to CBP;• Begin detaining future shipments; and/or • Begin denying future FTA/preferential trade program claims.
If CBP disagrees with the manner in which the US Importer originally the merchandise (i.e., declared origin, eligibility for FTA/preferential trade program), CBP will issue a CF-29 Notice of Action proposing to take a certain action on the entry (i.e., denial of claim, change in origin).
The Notice will typically request that the US Importer respond within 20 days—submit production records
If no response is made (or documents are unsatisfactory), CBP will take the proposed action.
CBP has wide latitude in deciding which records it wants to review.
All documents must be translated into English.
Submit a detailed document timeline with the records.
Submit a detailed explanation of who all the parties to the transactions are and what role they played.
Records should contain one or more reference numbers (PO#, style number, production order number, cut lot number, contract number, etc.) that may be used to trace production from the raw materials to the finished goods.
Avoid submission of only computerized summaries– CBP wants the original, contemporaneous documents.
Records should create a paper audit trail that clearly, logically, and chronologically tells the whole story.
Modular Manufacturing: CBP has acknowledged that many factories are using modernized line systems of production, in which traditional documents (i.e., cutting tickets, sewing tickets, manual timecards) are not used. Rather, all of the records generated for these functions are automated. Ensure to make CBP aware of this for production document reviews.
Traditional Production System: Producers that do not use a module system will still be required to present cutting tickets, sewing tickets, manual timecards to verify production.
10. Make valid FTA/preferential trade program claims: Proper CBP declarations Valid Certificates of Origin Valid Declarations of Compliance for Brassieres
11. Protectection through your contracts, PO terms and conditions, agent agreements, vendor agreements, etc.—
Require retention of records Prohibit unauthorized subcontracting Provide “out” from agreement for violations Condition payment on legitimacy of goods Impose indemnification for penalties/expenses of
transshipment Include penalty provisions in letters of credit if information
12. Require retention of records for at least one-year from date of shipment for non-FTA/Preference Program goods.
13. Require retention of records for at least the period required by CBP for the FTA/Preference Program used (i.e., AGOA – 2 years, FTAs usually 5 years).
14. Perform regular and periodic inspections of manufacturer operations/document reviews.
15. Require agents to perform regular and periodic inspections/document review.
Factory Profiles and Factory Visit Reports form an excellent audit trail showing that the Importer has exercised due diligence and only places orders with factories that—
• Have been proven to be open and in full operation; and,
• Have the requisite machinery and skilled manpower to produce the imported merchandise
Importer/agent inspection records from factory visits Factory profile for producers/subcontractors (verification of production
forms, if used) Importer purchase order Commercial invoice, packing list, transportation, export clearance
records for finished garments shipped to the United States Certificates of origin, Declarations of Compliance, Manufacturers
Affidavits of Origin List of production steps and time required for each step Product specifications Costing sheets Raw material (fabric, yarn, sewing thread trim) records:
• Purchase orders, packing lists, invoices• Bills of lading/air waybills• Customs export/import clearance records• Certificates of origin• Warehouse records (receiving and “pull” records)
Cutting records (tickets, daily records) Assembly records (tickets, daily records) Knitting machine records (KTS) Finishing records (washing, ironing, packing, etc.) Transportation records showing movement of components from/to
cutting facility, sewing facility, facility of any subcontractor used (including Customs import/export clearance records for OPA operations)
In-line and final inspection records Employee timecards (including timecards for employees supervising
knitting machines) Employee payroll records (including records for employees supervising
knitting machines) Proof of payment Documents showing the factories were actually operating during the
period of production (i.e., utility bills, rent checks, etc.) All of the above-referenced records for subcontractors used for
Be Prepared: Factories should be maintaining production documents for all styles of merchandise shipped to the United States (including all cutting and sewing tickets).
ALWAYS Let Them In! – Factories should never refuse to let a Jump/Verification Team in their doors, unless they want to have their goods detained.
Avoid Communication Problems: Factories should designate someone in Senior Management with excellent English language skills to act as the main contact with the Jump/Verification Team
Speak up! There Is No Harm In Asking! Factories should never be afraid to ask the Team questions about their concerns and impressions of the factory, and should give explanations when the Jump Team does not understand something.
Successful Jump/Verification Team Visits: Preparing Your Agents/Vendors/Producers
After the Visit Notify the Importer: Factories should immediately notify the
Importer that a Visit of its facilities (or one of its subcontractors) has occurred.
Address Issues: Factories should immediately address any issues identified by the Jump Team and implement the necessary internal controls.
Get the Report: Importers can obtain a copy of the Jump Team’s Report via FOIA.
Recordkeeping: Confirm that the factories are maintaining production records for upcoming shipments or shipments that are on the water (readiness to respond to detentions).
Successful Jump/Verification Team Visits: Preparing Your Agents/Vendors/Producers
Cost for 3rd party testing Increased inspection by buyers Increased inspection by US entities Increased inspection by Domestic entities New product compliance requirements Costs for additional personnel to handle
compliance Costs associated with any problems with
It is essential that manufacturers and exporters to the United States closely monitor developments by government agencies and US Congress that may impede trade, add costs, impact directly ability to compete.