ACE and U.S. Customs in 2013: The Latest Regulations and Updates (Part 2 of a 3-Part Series)
    A Zepol guest blog by John M. Peterson, international trade/Customs law expert and partner at Neville Peterson LLP

Recently, at a meeting in Arizona, a Customs official showed me (without disclosing confidential data) how, with access to a single ACE database, Customs could identify every piece of in-bond merchandise moving by truck for export, show the number of days remaining until the bond period expired, and set up pre-expiration warnings. And Customs could then divide that data, by carrier, port, commodity, and in any of a variety of ways.

By law, all of the confidential information reported to Customs is protected from disclosure by the Trade Secrets Act, 18 U.S.C. §1905, a provision in the Federal criminal code. Government officials who disclose confidential commercial data could be fined, or, in particular cases, prosecuted and jailed.

One of the first things every Customs official learns is that the information reported by importers and others who transact “Customs business” is untouchable and exempt from disclosure.

    But recently, cracks have appeared in the wall of confidentiality surrounding Customs records, fortelling a troubling     trend, as various constituencies claim a need for access to confidential business information in ACS and ACE.


Customs’ new rule is based on Section 818(g) of the National Defense Authorization Act for Fiscal Year 2012 (NDAA) (Pub. L. 112–81), which authorizes the agency to release otherwise confidential information to intellectual property rights holders who believe that importers are offering “counterfeit” versions of goods bearing their trademarks. The law authorizes Customs to provide rights holders with “information appearing on, and unredacted samples of, products and their packaging and labels, or photographs of such products, packaging, and labels”, so that the trademark owners may assist Customs in determining whether the products are prohibited from importation.

Customs’ interim regulation recognizes the competitive value of information provided to the agency in entry documents. “Information that is covered by the Trade Secrets Act and obtained from an importer, including the importer’s name and place of business, manufacturer’s identity, supply chain, and other confidential commercial or financial information, if disclosed, could provide insights into the importer’s business operations, processes, style of work, and income, all inuring to the importer’s competitive disadvantage.”

And Customs understands that a savvy competitor can glean quite a lot of information just by examining a sample or photograph of an imported product. Thus, the agency has noted, “product coding, such as serial numbers, and SKUs often incorporates information about where and when a product was manufactured, as well as other information that could allow one to identify information about the manufacture of the product. It is likewise possible that such information could directly or indirectly reveal the identity of wholesalers, exporters, or other parties in the importer’s supply chain and the timing and pricing of the transactions involving those entities.”

Still, Customs’ regulation allows the agency to release import information to trademark owners once the agency detains a shipment suspected of being a counterfeit version of the mark owner’s product. The information disclosed includes “information appearing on goods (and/or their retail packaging), and on images and samples, that are not redacted, i.e., images showing the merchandise (and/or its retail packaging) in its condition as presented for examination and samples (and/or its retail packaging) in their condition as so presented.” The disclosure of the information is intended to allow the trademark owner to assist Customs in the enforcement of the laws prohibiting the importation of counterfeit goods.

ACE and U.S. Customs in 2013: The Latest Regulations and Updates (3-Part Series)
    A Zepol guest blog by John M. Peterson, international trade/Customs law expert and partner at Neville Peterson LLP


    But, perhaps, not for much longer…

It is Customs’ Automated Commercial System (ACS), currently being transitioned into the agency’s online Automated Commercial Environment (ACE). Although the ACE transition is years behind schedule, and billions of dollars over budget, the operational parts of the system are one of the most powerful engines of business intelligence data in the world. As ACE comes closer to full operational capability, the system’s potential is breathtaking.

With a touch of a few buttons, Customs officials can see almost every aspect of a company’s import activities – the commodities they import, the identities of their suppliers, the prices they pay, the ports of entry they use, the names of their brokers, forwarders, carriers and service providers, and scores of other data points.

When Customs auditors come to review a company’s import operations, they bring with them a profile of the company that rivals, in terms of quality and detail, the finest work of Wall Street industry analysts.

Although, those elephants wouldn’t be Asian, but rather Irish, because for once the leading supplier of something isn’t China. The top country exporting organic chemicals to the United States is actually Ireland. Ireland shipped about $11.7 billion worth of organic chemicals to the United States in 2012 and China’s exports were about $6.4 billion.

So what are organic chemicals and what’s so Irish about them? The U.S. trade commission classifies organic chemicals under chapter 29 of the harmonized tariff schedule (HTS) and Webster defines them as any chemical containing carbon. The leading organic chemicals imported include aromatic compounds used as drugs, cardiovascular drugs, lactam products and much more. So basically, it’s a lot of carbon-based drugs and Ireland produces a significant amount of them.

According to Zepol's online database of U.S. ocean imports, TradeIQ™, December imports increased from November by 17.8% and 6.7% from December of 2011. Total vessel imports for the year of 2012 rose 1.2% from 2011. For the past three years, imports have increased in very small percentages, unlike the large jumps the United States experienced before 2008 (see graph below). Although, with port strikes, hurricanes, and shifts in manufacturing, 2012 was an especially unique year for U.S. imports, which may have impacted the totals.

Methodology:
Zepol’s data is derived from Bills of Lading entered into U.S. Customs and Border Protection’s Automated Commercial Environment (ACE). This information represents the number of House manifests entered by importers of waterborne vessel goods. This is the earliest indicator for trade data available for the previous month’s import activity. The data excludes shipments from empty containers, excludes shipments labeled as Freight Remaining on Board (FROB), and may contain other data anomalies.