Instead, these commodities present complex issues for exporters and importers, and involve one of CBP’s principle missions—collecting duties on imported products and enforcing fair trade provisions, including protections for our domestic markets. The trail of some commodities can be unexpectedly long and complex and requires knowledge of the nature of the commodity.

Photo Credit: James Tourtellotte

A lab analysis of a commodity is needed so that appropriate tariff can be established.

Garlic spices it up
Classified as both an herb and a vegetable, garlic is grown commercially around the world, and in the United States, principally, in California. China is by far the world's largest garlic producer, producing 13 billion pounds of garlic each year.

Before 1990, most of China’s garlic production was consumed by its huge population. At some point the Chinese realized that garlic, which can be easily stored and shipped, would be an excellent cash crop for export. The incredibly low wages paid to Chinese laborers in comparison to American laborers means that Chinese exported garlic sells for approximately half the price of American garlic.

The export trail
CBP is not only concerned with the integrity of the importation process, but works to enforce protections for domestic industries ensuring that products are as represented and pose no threat to the health and safety of the consumer.

A supplier trying to bring in garlic, or any other commodity from outside the country, must follow a process before it is admitted into the United States. Clearance of a shipment involves a number of steps: entry, inspection, appraisement, classification, and liquidation.

For example, a less than reputable fictitious export company, High Hopes Industries’ garlic shipment has arrived from Thailand at a U.S. port of entry. They present a hard copy entry package to a CBP Officer for preliminary review, but it could also have been submitted electronically. The package includes an entry manifest, commercial invoice, bill of lading, and, visa paperwork for commodities where there is a quota on the quantity of the commodity imported. Garlic has no quota.

The entry, which is formal in this case, must also be accompanied by evidence that a bond has been posted to cover any potential duties, taxes and charges. A CBP Officer verifies the information in the entry package, looking for anything out of the ordinary. Does the invoice reflect the correct amount of goods –no overage or shortage? Is the country of origin marked? Is it plausible─does Thailand actually produce garlic? CBP also reviews the shipment for compliance with other agency requirements, such as the Food and Drug Administration (FDA) or the U.S. Department of Agriculture.

The shipment is appraised to determine the dutiable value of the merchandise. Duty is based on transaction value, which is the price actually paid or payable by the buyer for the goods being imported. CBP Officers validate the classification of the merchandise─the rate of duty is assigned based on how merchandise is classified in the Harmonized Tariff Schedule of the United States.

If the entry package is complete, complies with all applicable regulations, and there are no unresolved questions, the shipment is released. Duty is collected if there is not a bond, and the shipment ultimately gets liquidated.

However, in this case the CBP Officer has some suspicions about Thailand being the country of origin and confers with an Import Specialist. Why would High Hopes Industries misrepresent where this product is from? A sample of High Hopes shipment is pulled for examination by a member of the CBP laboratory.

What a dump!
Remember that lower-priced garlic in China? During the 1990s, the California fresh garlic industry was almost destroyed by a tidal wave of “dumped” Chinese garlic. “Dumping” is when imported merchandise is sold in, or for export to the United States at less than the normal value of the merchandise. This unfair trade practice places domestic producers at a competitive disadvantage in the market.

To combat this disadvantage, the domestic garlic producers filed a complaint alleging dumping with the Department of Commerce (DOC), who then initiated an investigation. If dumping is confirmed, DOC issues an anti-dumping order establishing a duty on that product based on the margin of difference between the fair market value and the dumped price of the commodity.

This anti-dumping duty raises the price of the imported product thereby leveling the commercial playing field for domestic producers. In this case, DOC found that Chinese garlic was being dumped and issued an anti-dumping order that established the highest duty rate on record─376.67 percent.

High Hopes is likely transshipping its garlic from China to Indonesia to avoid the anti-dumping duty. (See article in this issue Textile industry explosion—coming our way). To detect this, CBP labs will examine the garlic sample, conducting analysis, which may give them clues to establish the country of origin.

But an import specialist will also look at the entry package and glean key information. “An import specialist gets to know a lot about the industry for the commodity they work with. They know the importers, who they buy from year to year, patterns of invoices, and what would be a normal business pattern. Talking to an importer can help determine culpability or if something is an honest mistake,” says Lavonne Rees, CBP Import Specialist working in LAX. Falsification of any part of their entry package would subject High Hopes to sanctions, including criminal prosecution.

A shrimp’s tale
On December 31, 2003, the US Southern Shrimp Alliance filed a suit with the U.S. Department of Commerce and the International Trade Commission (ITC) alleging that farm-raised shrimp from China, Thailand, Vietnam, India, Brazil and Ecuador had been dumped on the U.S. market resulting in loss of value of US-harvested shrimp from US$1.25 billion in 2000 to US$559 million in 2002. Shrimp is free of duty, so any added anti-dumping tariff will increase business costs. High Hopes also deals in shrimp, but since several Far East countries are involved, they may try some ruse other than transshipment to avoid the anti-dumping tariff.

One elaborate scheme is to establish a “new” undercapitalized corporation to act as importer of record. Insufficient funds will be set aside to pay the anti-dumping duty or they will be out of business after the entries liquidate.

Photo Credit: James Tourtellotte

Shrimp must be ground up and mixed into a “cocktail” to prepare it for analysis to determine if it is of domestic or foreign origin.

A simpler ploy is to chop up the shrimp and claim that the shipment is langostinos, which do not have an additional duty. In the latter case, CBP lab analysis may foil their plan, by determining that the shipment is shrimp and the country of origin.

Pure, yes, but is it virgin?
Olive oil, in the last few years has taken the lead over all other oils in the pourable oil industry. Since 1995, the volume of olive oil imported into the United States has increased 54 percent. Olive oil is a case in point where CBP’s enforcement efforts work. About eight to ten years ago country of origin was a concern. Olive oil was being shipped to Italy from Greece or Turkey and labeled “Imported from Italy.” Stringent enforcement efforts served as a deterrent with the result that today there are few problems with marking and country of origin. However, there are continuing issues surrounding what the product really is and the level of purity.

Virgin olive oil is the only grade accepted by USDA as "olive oil." The FDA defines olive oil as follows: "Olive oil is the edible oil expressed from the sound, mature fruit of the olive tree." Refined or extracted oil is not entitled to the unqualified name "olive oil."

But then there is “pure olive oil” which contains “crude lampante” which is made from olives that are spoiled or insect infested. Before it can be consumed it must be chemically refined. So, “pure olive oil” isn’t really “olive oil.” Confused?

Now consider the mislabeling of the grade of olive oil. The term “extra virgin” which indicates the highest and therefore most expensive grade has been applied to oils that are not really “extra virgin” but which may be blends using lower-grade olive oil or even other oils such as canola oil. Such manipulation is the source of unfair competition among producers and sellers and perpetrates fraud on consumers. It is the job of the import specialist and the CBP laboratory to protect consumers, producers, and sellers against these practices.

For the most part, commodities flow into this country with ease. Though the import/export business can be highly technical, CBP provides assistance to the trade community to facilitate the lawful entry of products. The result is that consumers, domestic business, and the trade community can be confident that CBP is working to foster legitimate trade, thwart those who seek to undermine it, and to position the United States as a key player in the global economy. So “bon appetit,” eat your garlic shrimp with confidence that it is what it is and came from where it says it did.