Details of CBP Final Rule Changing MID Rules for Textiles and Apparel, Etc.

(The interim rule, which amended 19 CFR Parts 12, 102, 141, 144, 146 and 163, was largely due to the January 1, 2005 expiration of the Agreement on Textiles and Clothing (ATC) and the resulting elimination of quotas on the entry of textile and apparel products into the U.S. from World Trade Organization (WTO) members.)

2005 Interim Rule Eliminated Textile Declaration and Added MID Requirements

CBP states that there were two main regulatory changes implemented in 2005 by the interim rule: (1) the elimination of the requirement that a textile declaration be submitted for all importations of textile and apparel products, and (2) requiring importers to identify the manufacturer of such products in their manufacturer identification codes (MIDs).

Because the MID “manufacturer only” requirement became effectively immediately without providing the trade community advance notice, CBP delayed the October 5, 2005 enforcement of the rule to November 18, 2005.

Interim Rule Dropped Shipper/Exporter Option for MID, Only Manufacturer Allowed

CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501¹ (Entry Summary) require importers of all goods (textile and non-textile products) to provide an MID at the time of entry in blocks 26 and 13, respectively. Prior to the interim amendments, importers of all goods had the option of constructing the MID from the name and address of the manufacturer, shipper or exporter.

The interim rule required importers of textile and apparel products to construct the MID from the manufacturer only, and not from the exporter or shipper. CBP notes that before this amendment, many importers were already constructing the MID from the name and address of the manufacturer and that the interim rule’s MID requirement for textile and apparel goods was created, in part, to compensate for the elimination of the paper textile declaration.

Highlights of CBP Responses to Comments

CBP received 28 comments on its October 2005 interim regulations. CBP states that nearly all of the commenters supported the elimination of the textile declaration, although 24 of the 26 commenters expressed opposition to or raised concerns or questions on the interim rule's “manufacturer only” requirement for MIDs. The following are highlights of CBP's responses to comments received:

Final Rule Says Non-Commercial Personal Use Items Exempt from MID Reqs

Commenters recommended that, because informal entries were exempt from the textile declaration requirement, CBP should similarly provide an exemption from the MID requirement for non-commercial shipments for personal use as well as goods entered on informal entries.

CBP states that in response to this concern, the final rule states that all personal use shipments subject to formal or informal entry procedures will be excepted from the MID requirement in 19 CFR 102.23(a), while all commercial shipments, whether covered by formal or informal entries, will continue to be subject to this requirement.

Umbrellas, Seat Belts, Certain Other Non-Category Textile Products also Exempt

CBP states that 19 CFR 102.23(a) previously applied the MID requirement to all textile or apparel products listed in section 102.21(b)(5). CBP states this final rule amends 19 CFR 102.23(a) to limit the scope of products for which the MID is required to textile and apparel goods classified within Section XI of the Harmonized Tariff Schedule (HTS), and any 10-digit HTS number outside Section XI with a three-digit textile category number assigned to the specific subheading.

This change benefits products such as umbrellas, seat belts, parachutes, watchstraps, and doll clothing.

(Note that 102.21(b)(5) defines textile and apparel products as articles classified in HTS Chapters 50-63 (Section XI) as well as certain tariff numbers outside of that Section.)

“Reasonable Care” Efforts May Have Little Impact on CBP MID Penalty Decisions

Commenters raised questions on instances where, despite the use of reasonable care, importers are unable to identify the entity that performed the origin-conferring operations through an MID, for example: (i) cross-border trade involving re-imports/re-exports (especially with Canada); (ii) fungible goods procured from multiple manufactures; (iii) textile products sourced from vendors who subcontract to a cottage industry; (iv) articles imported as sets, (v) etc.

CBP states that for importers technically in violation of 19 CFR 102.23(a), CBP port directors will take into account the importer’s use of reasonable care in attempting to determine the information required to comply with the MID regulation when determining whether to assess penalties. For example, a port director may consider not pursuing penalties in cases involving antique Persian carpets, one-of-a-kind dresses, or vintage uniforms.

CBP May Pursue MID Penalties for Supply Chain Difficulties, Agent Reluctance

Examples of instances where a port director may consider pursuing penalties include: (i) when an importer states to CBP that his agent in Asia does not wish to disclose the name of the manufacturer for fear of being cut out of future business; (ii) when an importer believes it is “too difficult” to request the necessary origin information from a European supplier if a particular style of flannel bed sheets formed from Asian cloth is imported from Europe (and pursuant to the origin rules in 102.21 are a product of the country where the cloth was formed).

Importers Should Work with Port to Construct MIDs for Fungible Goods

CBP stated that importers should use reasonable care in situations in which there are multiple manufacturers for a single shipment (e.g. fungible goods) and that importers should work closely with the CBP port director when constructing the MID for each shipment. For example, if an importer purchases from a company with a unique inventory system, this information should be discussed with the port director to ensure that an acceptable yet accurate reporting of required information is provided.

Certain HTS 9802 Goods May Construct MID from Shipper or Exporter

Commenters requested CBP exempt goods classified in certain HTS 9802 tariff numbers² from the MID requirement. CBP responds that the MID for goods in Chapter 98 have to be constructed from the entity performing the origin-conferring operations only if the Statistical Notes for the specific Chapter 98 subheading require the reporting of the associated Chapter 1-97 10-digit statistical number and that number falls within the scope of the MID requirement set forth in amended section 102.23(a) of this rule.

Thus, if a good is classified in a Chapter 98 subheading that does not require the reporting of the associated Chapter 1-97 number, or the associated Chapter 1-97 number falls outside the scope of the MID requirement in section 102.23(a) of this final rule, then the MID may be constructed from the manufacturer, shipper, or exporter.

AII Module & RLF Program Allow for Multiple MIDs per Invoice

The Automated Invoice Interface (AII) module of ACS/ABI, is used for electronic invoices and is capable of handling more than one MID per invoice. For example, if there are three lines on an invoice, each line could be transmitted separately with a different MID for each. If a broker needs assistance with the AII module, they should contact their ABI Client Representative. CBP also notes that the AII module is separate from the line data transmitted for purposes of CBP Forms 3461 and 7501. The Remote Location Filing (RLF), program allows also for multiple line entries and a broker would be able to transmit a different MID for each line on the entry/entry summary.

Regulatory Changes in Final Rule

Scope of MID Requirement Limited to Commercial Importations

The final rule revises paragraph (a) to 19 CFR 102.23 of the interim regulatory text on origin and manufacturer identification, to limit the MID requirement to commercial importations of textile and apparel goods.

The first sentence of paragraph (a) is revised to read as follows (deletions are struck, additions are underlined):

"All entriescommercial importations of textile or apparel products listed in 102.21(b)(5) must identify on CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary), and in all electronic data transmissions that require identification of the manufacturer, the manufacturer of such products through a manufacturer identification code (MID) constructed from the name and address of the entity performing the origin-conferring operations pursuant to 102.21 or 102.22, of this part as applicable."

Scope of Textiles Outside of Section XI Limited to HTS Nos with Categories

The final rule also revises paragraph (a) of 19 CFR 102.23 to limit the MID requirement by adding the following sentence: "For purposes of this paragraph, “textile or apparel products” means goods classifiable in Section XI, Harmonized Tariff Schedule of the United States (HTSUS), and goods classifiable in any 10-digit HTSUS number outside of Section XI with a three-digit textile category number assigned to the specific subheading."

Appendix on MID is Revised to Reflect Limitation to Commercial Importers

The final rule revises paragraph 1 of the Appendix to Part 102 to reflect the limitation in scope of the MID requirement set forth in amended 19 CFR 102.23(a), as follows (deletions are struck, additions are underlined):

"Pursuant to 102.23(a) of this part, all entriescommercial importations of textile or apparel products listed in §102.21(b)(5)as defined in that paragraph, must identify on CBP Form 3461 (Entry/Immediate Delivery) and CBP Form 7501 (Entry Summary), and in all electronic data transmissions that require identification of the manufacturer, the manufacturer of such products through a manufacturer identification code (MID) constructed from the name and address of the entity performing the origin-conferring operations The MID may be up to 15 characters in length, with no spaces inserted between the characters."

Example Added to Appendix on MID Construction for P.O. Box in Hong Kong

The Appendix to Part 102 is also revised by adding a new example to Paragraph 7 to clarify the proper construction of the MID. CBP states that the following new example illustrates the use of a post office box number, as well as a manufacturer located in Kowloon, Hong Kong:

"A.B.C. COMPANY, 55-5 Hung To Road, P.O. Box 1234, Kowloon, Hong Kong;

HKABCCOM1234HON."

¹CBP states that there should be no discrepancy between the requirements of 19 CFR 102.23(a) and the instructions for the completion of CBP Form 7501. Therefore, CBP has amended the instruction notice for completing CBP Form 7501 to conform to the requirements of this final rule and has posted it to the CBP website, www.cbp.gov.

²Commenters requested CBP exempt goods classified in the following subheadings:

(i) 9802.00.40 and 9802.00.50, articles exported for repair;

(ii) 9802.00.80, articles assembled abroad with U.S. fabricated components; and

(iii)9802.00.90, textile and apparel assembled in Mexico from all U.S. formed and cut fabric components.

(See ITT's Online Archives or 03/16/11 news, 11031629, for BP announcing the availability of this CBP final rule.

See ITT's Online Archives or 11/18/05 news, 05111805, for BP summary of CBP delaying enforcement of the MID requirement.

See ITT's Online Archives or 10/11/05 news, 05101105, for BP summary of CBP's instructions on the new requirement for origin-conferring MID.

See ITT’s Online Archives or 10/06/05 and 10/26/05 news, 05100605 and 05102610, for BP summaries of the interim rule.)

CBP contacts-

(CBP Dec. 11-09, FR Pub 03/17/11)