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Textile Transshipment Report----excerpted from U.S. Customs: Executive summary:
A number of actions have been instituted including: Establishing a national, multi-discipline Textile Transshipment Team, which is responsible for ensuring a coordinated effort to identify and solve the transshipment problem. Establishing a Textile Clearinghouse, which serves as the national Customs Center for all textile data analysis, research and information. Initiating a series of actions aimed at reducing the risk of illegal textile transshipment through Hong Kong and Macau. Results have included publication of names of Hong Kong factories convicted of transshipment and detention of over $100 million worth of goods at the ports of entry. Working in partnership with domestic industry and the international trade community to secure their cooperation in and support for Customs efforts. Establishing an Internal Control Program for prevention of transshipment in which the Office of Regulatory Audit assesses internal systems used by importers to ensure correct origin of imported merchandise. Sending Textile Production Verification Teams (TPVT's) to 11 countries and one insular possession. Results included identification of $52.6 million worth of transshipped goods and $12.6 million in counterfeit visas. Publishing the names of foreign entities who have been issued penalties under 19 U.S.C. 1592. There has been a significant reduction in import activity from those entities. Conducting transshipment training in 9 foreign countries and for 13 U.S. Customs ports of entry. The United States imported more than $54.3 billion of textiles and textile products for consumption during calendar year 1997. Imports have been documented as originating from more than 180 countries, territories, and insular possessions. Arrangements Regarding International Trade in Textiles, commonly referred to as Multifiber Arrangements (MFA), regulate trade in textiles and textile products among many countries. Approximately $48.4 billion of the textiles and textile products imported during calendar year 1997 were subject to MFA. The United States Government has sought to control the importation of this merchandise by establishing bilateral textile agreements under MFA. Currently 47 countries have quota restraint levels on some portion of their trade with the United States in textiles and textile products. The total textile trade from these countries in 1997 was 39.3 billion. Over the years, Customs has approached enforcement of these agreements using a variety of methods. These include, but are not limited to: using multi-disciplinary, in-country TEXTILE production verification teams to verify and investigate specific allegations of quota/visa evasion; automating quota transactions; examining shipments and their corresponding documents; analyzing data to target illegal transshipment; sampling for laboratory analysis; and conducting domestic as well as foreign investigations. Transshipment as commonly used in international trade is a normal business arrangement, which consists of goods passing through a second country, port or territory. Transshipment can be legal or illegal. Customs concern is illegal transshipment, which occurs when there is a false declaration on imported merchandise as to country of origin. The term "transshipment" in this report refers to illegal transshipment as used in the Customs sense. Quota restraints limit access to the world's largest consumer markets for textiles and textile products, including the United States. Transshipment has become an economically viable solution in those countries where factories can and do produce more than they can legally ship to these markets because of quantity restraints. Transshipment is a difficult problem to attack because Customs is trying to prove an economic crime in a foreign country where there are efforts to keep factories open and generate income through exports, despite quota restraints. Back to the TopIn June 1997, the Commissioner and Deputy Commissioner of Customs sponsored a Textile Transshipment Problem Solving Session. Participants included key managers from the Offices of Chief Counsel, Field Operations, Investigations (including Customs Attaches), Regulations and Rulings, International Affairs, and Strategic Trade. In addition, presentations were made by representatives from the Office of the United States Trade Representative and the Department of Commerce, Office of Textiles and Apparel. At that session, the overall goal for the Customs Service with regard to transshipment was clearly defined as ensuring that goods, which have been illegally transshipped to circumvent quota restrictions and admissibility requirements, do not enter the commerce of the United States. This goal clearly impacts the U.S. ports of entry. When there is a question as to the country of origin, Customs officers have to obtain more information regarding the origin of the goods and exclude merchandise for which the satisfactory level of proof is not available. There are also implications for foreign governments and their self-policing efforts. Working with foreign governments to establish a strong enforcement posture with regard to illegal textile transshipment is a major focus for Customs. If countries can stop textiles and textile products from being illegally transshipped through their borders, or ensure that goods have the correct country of origin marking before exportation to the United States, then a major impact can be made. In addition, the use of the Electronic Visa Information System (ELVIS), the comparison of foreign country export data to U.S. import data, unannounced factory visits, analyses of over-shipments help to support the goal by reducing instances where counterfeit documents could be used to transship textiles and textile products illegally. Back to the TopThe textile industry is enormous both in terms of importations and domestic consumption. The issue of textile origin has been the linchpin of each bilateral agreement between the United States and its foreign counterparts. Improving compliance in an industry this large will have significant impact on raising the overall import compliance level and support the underpinnings of the bilateral agreements. As described below, the Customs Service has instituted a series of actions to address transshipment:
In response to the continued allegations from the domestic industry, the importing community and other government agencies that much of the textile and wearing apparel exported from Hong Kong is illegally transshipped, U.S. Customs hosted a textile transshipment conference in Washington, D.C., in April 1996. As a result of this conference, a series of actions was implemented which were aimed at reducing the risk of illegal textile transshipment from the Peoples Republic of China through Hong Kong and Macau. These are described in detail under the Hong Kong Initiative and Macau Initiatives sections of this report. While these actions began late in 1996, the greatest impact was achieved in 1997. Back to the TopOn June 17, 1996, because of the inability to verify the origin of the textiles, U.S. Customs established single entry bond requirements and additional documentation requirements (an original signature from Hong Kong manufacturers on textile declaration and certification by importer declaring the accuracy of the textile declaration) on 10 textile categories (351 - nightwear, 352/652 underwear, 336/636 - dresses, 342/442/642 - skirts, and 443/643 - suits). On June 24, 1996, CITA authorized Customs, consistent with 19 CFR 12.130(g) to deny entry of textile and textile products when the country declared to be the country of origin does not permit Customs to conduct an on-site verification of production of textiles and textile products.
On July 2-3, 1996, a meeting was held in Washington, D.C. with the U.S. Customs Deputy Commissioner and both Customs and Trade Department officials from Hong Kong to discuss the problem. In arguing against the additional entry requirements, the officials from Hong Kong explained their systems for combating illegal transshipment, including a newly established program called the Production Notification System (PNS), and reiterated their determination to intensify their efforts. The PNS program is designed to require manufacturers to notify the Hong Kong Trade Department of the commencement of garment production to enable real time verification of production. Anytime during this manufacturing process, the factory may be visited by Hong Kong Customs and Excise to verify production. Hong Kong Customs and Excise, under the Consignment and Factory Inspection System (CFI), conducts inspections on factory basis, and if necessary, puts factories where indications of transshipment are uncovered under the Factory Audit Check (FAC). Under the FAC, factory operations are reviewed over an extended period of time to ensure that transshipment has not involved other previous exports.
The issue of U.S. Customs verification team visits was a major topic of discussion and debate. (Hong Kong Customs and Excise has refused to agree to any typical production verification team visits [one which has access to the corporate books and records] to Hong Kong factories to verify production.) On August 15, 1996, after a number of informal meetings, the U.S. Customs Commissioner accepted the Hong Kong Customs Commissioner's invitation to allow U.S. Customs officers to act as observers in the foreign manufacturing facilities to evaluate the effectiveness of the new PNS, CFI and FAC Systems.
In, Hong Kong Customs and Excise conducted 2,248 factory visits under the CFI. One hundred and seventy-nine (179) illegal transshipment cases involving goods destined for the U.S. market were established for these visits and these cases are now being investigated and processed through the Hong Kong Court of Law.
In 1997, the names of 28 factories which were convicted of transshipment to the United States were published by the U.S. Customs Service. Obviously, the number will grow as the factories found to be illegally transshipping continue to be processed through the Hong Kong Court system. The Textile Clearinghouse has analyzed the activity of these 28 manufacturers. Based on that analysis, our actions have led to the following results:
As a result of these convictions, Customs detained more than $100 million worth of goods from entering the United States to more closely scrutinize production documents. The importers have continued to transact business with the convicted factories and there is an alert at our ports of entry to require a greater level of proof regarding the country of origin.
Throughout 1997, U.S. Customs representatives have maintained a close and cooperative working relationship with their counterparts in Hong Kong Customs and Excise and with the Hong Kong Trade Department. Analysts from both countries are working on joint analytical projects in order to detect, more quickly, instances of illegal textile transshipment. Because of continued allegations of illegal textile transshipment involving Macau, on June 5, 1996, U.S. Customs instituted single entry bond requirements and additional information requirements on wearing apparel shipments for targeted categories from Macau. If the textile declaration was not completed or signed by the manufacturer, subcontractor, and any party involved in the manufacture of the goods and certified by the importer, the goods were to be denied entry. Macau agreed to allow a TPVT to view factory operations. U.S. Customs officers visited factories for 120 days, from July-October 1996 and certified the manufacture of each shipment, in the targeted categories, before export to the United States. As a result of confirming that there was not a great deal of transshipment of the targeted categories during the 120-day period, the single entry bond requirement was removed on the targeted goods being exported from Macau. The U.S. Customs Service is continuing to monitor exports from Macau to evaluate conformity with the bilateral agreement. U.S. Customs is working with the Macau Economic Services (MES), to
continue a program of TPVT visits as well as establishing a program
of self-policing. The government of Macau has agreed to quarterly
meetings with the Senior Customs Representative in Hong Kong on
the issue of illegal transshipment. In addition, they have agreed
to suspend the issuance of country of origin certificates to those
factories which are found to be transshipping. On their own initiative,
in 1997, Macau made 71 visits to 36 factories in the targeted categories.
Two of these factories have been closed. An additional 26 factories
were visited for Category 239 infants' and baby wear. Three of these
factories closed and the issuance of the certificate of origin was
suspended for four other factories. |