1 U.S. Consumer Product Safety Commission

LOG OF MEETING

SUBJECT : Meeting with Express Association of America (EAA) to Discuss the Proposed R ule

on Certificates of Compliance ( 16 C

. F

. R

. part 1110)

DATE OF MEETING : June 20 , 2013

LOCATION : CPSC Headquarters, Room 836 , 4330 East West Hwy, Bethesda, MD 20814

CPSC ATTENDEES :

Robert (Jay) Howell ; Harriet Kerwin ; Mary House ; Howard Tarnoff ; Carol Cave ; Sabrina Keller ; Carl Philpott , Mary Toro, Henry Tapy (Teleconference)

NON

- CPSC ATTENDEES :

Michael Mullen, Express Association of America Mark Shacklette, UPS Don Woods, UPS John Van Wallaghen, UPS Andrew Shiles, FedEx Cynthia Chandler

- Snell, FedeEx Amy Smith, DHL Chris McCartel, UPS (Teleconference) Brian Gill, FedEx (Teleconference) Quinn Do dd, Attorney (Teleconference) Ben Gross, Product Safety Letter (Teleconference)

SUMMARY OF MEETING :

Carol Cave opened the meeting and reminded participants that the rulemaking is in active

status and that CPSC’s role during the meeting was to listen to the comments made . She added

that CPSC would respond to all comments as part of the rulemaking. Carol Cave stated that CPSC encourages comments in writing, and she noted that July 29, 2013

, is the deadline for submitting comments on the proposed rule.

Mark Shacklette stated that the proposed rule has the potential for enormous impact on express carriers because it makes the “importer of record” (IOR)

, the party responsible for issuing certificates. Ex press carriers that offer their serv ices as a customs broker frequently

serve as the IOR for their customers in the small package world, 75 percent of the time, to expedite trade, such as by paying fees and duties and filing appropriate paperwork , Shacklette explained

. Express carriers do n ot have knowledge about the products being shipped; they must rely on customers to provide appropriate information , he said

. Customers , in turn, rely on express carriers to post a bond with CBP and pay fees and duties up front so that goods are not delaye d. According to Shacklette, t he express carriers are concerned about great expense and2 delay if products are delayed because of a lack of certificate and brokers are held liable. Express carriers do not currently know the breakdown of the impact, but it could be that as much as 50

percent of the products imported that they handle may require certificates , Shacklette estimated

.

Jay Howell asked how express carriers are currently filing certificates. Mark Shacklette stated that they currently rely on the importer, meaning their customer, to file certificates. Jay Howell asked whether express carriers currently file information in CBP’s ACE computer system. Mark Shacklette stated that express carriers do file in the ACE system.

Andrew Shiles stated that another avenue for filing certificates would be for CPSC to place the obligation on the ultimate consignee. B elie ving that the ultimate consignee is still an importer

, Shiles drew a distinction between the importer, by which he m eant the owner or consignee of the goods , and the IOR, which can also include a broker. Shiles stated that the CPSC should place the obligation to certify on the importer (meaning the owner or consignee)

, instead of the IOR. Mr. Shiles also discussed whe n in the entry process a certificate would be required: at entry, upon release of the goods, or at entry summary , he explained

.

Howard Tarnoff asked the carriers to explain the difference between an IOR and an importer . Tarnoff explained that the draft ru le defines “ importer of record ” or IOR consistent

with customs law s

. Mark Shacklette stated that the IOR is responsible for monies owed at entry

. Importers of record seek reimbursement from the ultimate consignee, which is the “sold to”

party , he pointed out

.

Andrew Shiles stated that the IOR is responsible for facilitating clearance, such as paying

duties ; but the consignee/buyer of the goods is ultimately responsible for all duties and taxes , he

noted . The broker goes back to the consignee for reimbur sement , Shiles explained . Serving as the IOR facilitates clearance, but brokers must rely on the information supplied by the ultimate consignee , he added

.

Howard Tarnoff asked whether IORs can get certificates from the consignee. Mark

Shacklette stated that express carriers do not want to have to issue certificates of compliance, because they do not know whether products comply with CPSC regulations. When express carriers serve as the IOR, they have no way to know whether products are compliant , Shackle tt
said . Importers ( referring to owners and consignees) are the party who can vouch for product safety , Shacklett said

.

Mark Shacklette stated that the way the proposed rule is currently written would impact

their customers and drive a lot of additional work. For example, if express carriers stopped serving as the IOR, their customers would need to issue a power of attorney and post a bond with

CBP , he said . Customers may also experience delays and additional costs if express carriers had

to increase st affing to handle certificate requirement s and if products were delayed at entry

, causing increased storage costs , Shacklett predicted

.

Donald Woods stated that one possible solution would be to change the language in the rule regarding which party is responsible for issuing a certificate. The CPSC could still achieve3 its goal of having importers issue certificates, but brokers could be excluded from the term if

“ importer ” was redefined.

Andrew Shiles stated that emphasizing “importer of record” in a rule does not always

work. He stated that the CPSC’s intent was to have the “right” party supply the “right” information. Leaving the rule as it is would have a huge negative effect on express carriers ’

business model

, Shiles said, adding that a termino logy change is needed in the proposed rule.

Donald Woods stated that another option for redefining the party responsible for issuing a

certificate would be to use the IOR or the ultimate consignee. If both parties could be the certifier it may be a way t o solve this specific issue , he observed

.

Mark Shacklette stated that the express carriers would like the agency to remove customs brokers from the responsibility to issue certificates or to use language allowing either the IOR or the ultimate consignee o r beneficial owner to issue certificates. Donald Woods stated that in

their terms of service agreement

, they inform their customers that they are responsible for compl ying with all laws. Carriers p lace the responsibility for compliance on their customers

, whom Woods describe d as the “importers.” Carriers will assume IOR financial liabilities, but they put the financial responsibility back on their clients , according to Woods

.

Jay Howell asked the group , as experts in supply chain management, what party is in the best position in the supply chain to have knowledge about supplying the required certificate. Mark Shacklette reiterated that the ultimate consignee, the buyer of the goods, has this knowledge.

Jay Howell asked whether an individual consumer w ould have enough knowledge about a product to issue a certificate. Mark Shacklette and Andrew Shiles agreed that an individual

consumer would not have the knowledge required to issue a certificate. Andrew Shiles added

that the CPSC can see these s hipments and target suppliers.

Andrew Shiles explained the concept of drop shipments. Sometimes goods are shipped to an end customer, but that person is not the ultimate consignee , he explained . The ultimate consignee is the party responsible for the sh ipment.

Jay Howell asked whether direct Internet sales to a consumer were considered drop shipments. Andrew Shiles stated that direct consumer sales can sometimes be drop shipments.

A consumer may purchase a product from a retailer over the Internet. T he retailer has the product shipped directly to the consumer from its factory overseas. The retailer is the importer or the ultimate consignee, with the customer listed as the “care of” party. If an express carrier served as the IOR in the transaction, a nd more information was required, they would seek

information from the importer, meaning the retailer , according to Shiles

.

Donald Wood s added that the customs entry forms do not display the “ship to” information. The IOR and the ultimate consignee are d isplayed on the customs entry form. If CPSC requests a certificate at the time of entry, the IOR

, or the ultimate consignee

, are the two4 parties listed on the entry form from whom a certificate could be requested. Carol Cave stated that the importer is r equired to issue certificates under the existing rule

.

Mary House explained that the proposed rule would require that certificates be filed with CBP at entry or at entry summary , if both are filed together

. House asked, practically speaking

, how this wou ld work from the express carrier’s perspective. Andrew Shiles stated that filing at entry summary would be preferable

.

John Van Wallaghen stated that it would be a problem for the carriers if carriers did not have certificates and they were required at e ntry. If the certificate is required at entry summary

, it would be better because carriers would be given 10 additional days to file the document and the goods would not be held waiting for the certificate. If the certificate is re quired before entry

summary
, it would “ shut down trade.”

Andrew Shiles stated that certificates should be provided via computer, not paper, if they are required for all shipments. He stated that CPSC should develop a process so that larger importers can go straight to the C PSC’s website to file certificates. Mark Shacklette stated that

CBP’s ACE system would be a better solution for certificates or , he suggested us ing blanket

certificates.

Andrew Shiles stated that another challenge with express carriers providing certific ates and knowing when they are required

, involves use of the harmonized tariff schedule codes (HT S s). When additional information on a product is required at entry , Shiles explained, an “edit” is put into the computer system to alert brokers that addition al government information is necessary. If the CPSC governs some , but not all, products in a n HT S

, that would require a human decision on what requires a certificate.

Shiles asked whether CPSC has a master list of the HT S that apply to products within th e agency’s jurisdiction. Jay Howell stated that some HT S are all

- encompassing ; however, he

noted that subsets of broader codes are applicable. Not all products within the CPSC’s jurisdiction are regulated and would require a certificate

, Howell said; so HT S would not necessarily provide accurate information on which products are regulated.

Michael Mullen inquired where to retrieve the relevant HT S or NAIC codes online. Jay Howell stated that the agency will check and see what information has been public ly distributed

on this issue. Mr. Shiles asked whether CPSC is working with CBP on this issue in the ACE system. Carol Cave stated that we have explored ACE options with CBP.

Carol Cave asked the carriers to discuss what the “A1A list” is and explain how the list currently is used by carriers. Donald Woods stated that the A1A list contains CBP’s recordkeeping requirements for importers and brokers. The list states import documents required for different agencies and has a five

- year record retention p eriod. UPS has an imaging system to

maintain A1A documents. UPS finds this to be an effective way to manage the documents and

has used this system for 20 years. Documents are imaged early in the import process before the shipment leaves. Brokerage at U PS uses the images to ensure access to all necessary documents.5 Donald Woods stated that 90 percent of UPS’s customers provide information in the form of data elements or as images in UPS’s computer system , which al low s goods to move more quickly.

Andrew Shiles stated that not all documents listed on the A1A ar e necessarily provided

on entry; t he documents are stored as back up to the entry documents , he noted

. Mark Shacklette added that they try to get documents up front from their customer s . The real issue , Shacklette

said is whether documents are present when they are needed for entry.

Andrew Shiles stated that better advance information regarding a shipment makes clearance run smoothly. Shiles a lso noted that ambiguous governmental requiremen ts can frustrate the clearance process. Shiles stated that g overnment requirements need to be simple, plain, and public.

Carol Cave asked whether the express carriers had a ball park estimate of the cost of delay involved with the current amount of cargo that is moved to check for certificates. Andrew Shiles and Mark Shacklette stated that they would look into this, explaining that customers may be better situated to provide this information. Jay Howell stated that the CPSC is interested in learning abo ut cost increases caused by delay at the ports.

Michael Mullen stated that four of the companies at the meeting repres ent 7 5 percent of the shipments by air , noting that these companies are the best automated and the best at shipment management. Carriers can help achieve what the Commission wants to achieve in the rule without a negative impact on imports or on the industry , Mullen posited

. Jay Howell encouraged those present to file comment s
, and Howell stated that he appreciated the carriers ’ willingness to

share their concerns. Mark Shacklette and Andrew Shiles stated that the CPSC is welcome to visit their operation s

.

The meeting closed

.