CBP Makes Major Changes to FAQ on IIT with Residue, Hints at Effective Date

(In July 2009, CBP published HQ H026715 in the Customs Bulletin, to require chemical residue imported in reusable containers be classified, entered, and manifested, while the containers themselves continue to be considered IIT. CBP then delayed enforcement of these requirements for bulk chemicals and other cargo until further notice, followed by an announced July 17, 2011 effective date, which was then delayed pending the resolution of IT issues such as M1 (e-Manifest: Ocean and Rail). During the delay, CBP encouraged importers to take steps to comply with the new requirement before it was enforced.)

Highlights of the changes in this version of the FAQ include the following provisions (partial list):

Enforcement Date Expected to be Set when "all Rail Carriers on M1"

Once HQ Ruling H026715 and the procedural changes it triggered are enforced, IIT containing residue that return to the U.S. will no longer be treated as empty. The residual cargo must be manifested, classified and entered. With an anticipated deployment of the ACE M1 Vessel and Rail Manifest release in early 2012, the filing of electronic Section 321 entries (for cargo valued at $200 or less) will be possible in all modes of transport. CBP anticipates establishing an enforcement date for all modes once the requisite information technology issues are resolved and all rail carriers are using ACE M1 to manifest shipments. The trade community will be notified well in advanced of the enforcement date once it is established.

(See ITT's Online Archives 12022319 which states that CBP expects to close down the ACE Automated Manifest System (AMS) for ocean and rail by the end of September 2012, leaving ACE M1 as the only option for rail and ocean carriers. Six months advance notice of this deadline will be published in the Federal Register.)

Requirements CBP to Enforce

The FAQ newly states that the trade industry should use the current non-enforcement period to make any necessary changes to business practices and operations to comply with the ruling. When ACE M1 is deployed, the following is a breakdown of the requirements CBP will enforce:

• Instruments of international traffic (IIT) containing residual shipments (chemicals, cargo, goods, etc.), must be manifested and entered in compliance with customs laws; and
• If qualified, shipments containing residual goods can be entered as American Goods Returned (AGR).

Info Importer of Record to be Responsible for

The FAQ newly states that when a shipment (including IIT with residue) reaches the U.S., the importer of record (i.e., the owner, purchaser, or licensed customs broker designated by the owner, purchaser, or consignee) will be responsible for:

• Filing entry documents for the goods with the port director at the goods' port of entry when required by CBP regulation (e.g. the value is more than $200, etc.). 19 CFR 141.4 provides that entry as required by 19 USC 1484(a) shall be made of all merchandise imported into the U.S. unless specifically excepted. Imported goods are not legally entered until after the shipment has arrived within the port of entry, and delivery of the merchandise has been authorized by CBP. Pursuant to the CBP regulations at 19 CFR 143.22, the port director may require a formal consumption or appraisement entry for any merchandise if deemed necessary for import admissibility enforcement purposes, revenue protection, or the efficient conduct of Customs business, even if the importation would otherwise qualify for informal entry;
• Maintaining a valid CBP bond type 3A (Instruments of International Traffic continuous bond) in the name of the entity requesting release for all IIT (19 CFR 113.66); and
• Retaining documentation establishing the basis for determining the value provided for the residual commodity (19 CFR 163).

(See FAQ for list of information the carrier will be responsible for providing.)

Procedural and Entry Requirements for IIT with 321 and Non-321 Residual Cargo

The FAQ also reorganizes and adds information on the procedural and entry requirements for IIT with residual cargo. CBP has added two new sections to its FAQ explaining the (1) procedures for manifesting IIT with residual cargo and (2) entry requirements for IIT with residual cargo.

The FAQ states that entry requirements for IIT with residual cargo are based on value, not manifested quantities or the fact that the IIT contains residue below the Manifest Threshold Limit. Therefore, even if the quantity of residue remaining in the IIT is below the Manifest Threshold Limit, an entry (formal or informal) may be required.

(While the FAQ continues to state that the residue threshold will be less than 3% of the total capacity of the truck IIT or less than 7% of the total cargo capacity for the rail IIT, these limits are now described as "Manifest Threshold Limits".)

CBP has also added two sections to its FAQ for carriers, explaining their (1) procedures for manifesting and entering IIT with Section 321 residual truck cargo and (2) procedures for manifesting and entering IIT with Section 321 residual rail cargo.

Estimating the Quantity of Residual Cargo for Advance Cargo Information

Since the exact amount of the residual goods is often unknown at the time that the advance cargo information is required to be transmitted, the importer may estimate the amount when providing that information to the carrier for transmission to CBP. The FAQ now states that the determination that the shipment is below the "Manifest Threshold Limit" levels and qualifies for treatment as residue should be based on mathematical calculations, volume and weight readings, and historical data.

Importer Scenarios Revised

CBP now lists 4 importer scenarios to help the trade determine which party should file the entry for the IIT residue. All of the scenarios are revised. (The FAQ had previously listed five scenarios.)

1592 Action Possible if Falsify Entry Value of Residue

The FAQ newly states that carriers should ascertain the value of the residue shipment as outlined in 19 USC 1401a. The parties responsible for providing the shipment value to CBP (through formal entry, informal entry, or Section 321 release) could be liable for enforcement action for falsifying entry value (19 USC 1592). If requested by CBP (during an audit, etc.), carriers should be able to provide the method used to determine the shipment value.

(Note that the FAQ no longer states that CBP will exercise restraint when reviewing the declared "heel" amounts for accuracy and compliance with the 1% manifest discrepancy rule.)

(See ITT's Online Archives 09072140 for summary of 2009 CBP Bulletin notice HQ H026715 modifying HQ 113129 to require residue imported in reusable containers to be classified, entered, and manifested. See ITT's Online Archives 09091405 for summary of CBP notice delaying enforcement of the new requirement until further notice. See ITT's Online Archives 11050513 for summary of further CBP delay of enforcement pending resolution of IT issues, including ACE M1 release. See ITT's Online Archives 11120931 for summary of CBP announcement that updates will be made to the CAMIR and ANSI X12 sea and rail interface guidelines to set the stage for announcing an enforcement date for residue requirement.)