What Stays on the Importer and What Continues Past

So a professional and experienced importer is a wonderful thing.  The importer can provide multiple services to the downstream market, ranging from quality control to helping with the financing of a program.  They also usually assume a great deal of responsibility and liability for compliance-related issues.  What the downstream market needs to understand is that some responsibilities and liabilities can go past the importer and fall on them. 

So let’s look at some of the common issues an importer should be monitoring and what consequences might fall solely on the importer vs. what might land in someone else’s lap.

First, there are the primary Customs requirements.  These start with properly identifying the product and the regular duty rate.  Is the engineered floor under the 4412 or 4418 HTS listing?  Is it at 8% or 5% or duty-free? 

Then you have to understand the origin of the product.  That isn’t always that obvious and many inexperienced importers can run into problems here.  For example, if you took engineered plywood core flooring blanks from Country A to Country B and then profiled and painted them, you might think “oh, I added a lot of value there, so it must be Country B origin.”  Well, actually Customs is likely to still consider that a product of Country A. 

If you misidentify the Country of Origin, that can lead a slew of problems.  Not only is just “simple” Customs’ fraud, it can also mean you are evading the 301 tariffs in place from the trade war or circumventing an anti-dumping order.  This might mean a GSP problem or even a USMCA issue.  If Customs determines that the origin has been misrepresented, penalties could be not just the original correct duty rates, but interest on those rates and potentially, punitive assessments up to triple the original rates.

Now those penalties—a misidentification of product or the origin—stop with the Importer of Record, at least unless it can be shown that the customer was an active participant in fraud.  So if you’re a distributor or a retailer and you buy, in good faith innocence, material marked “made in Cambodia” and Customs says that it was actually made in China, you’re not likely to be punished by Customs. 

So great, right?  No risk there!  Well, there are other things for the downstream customer to consider. 

A good importer should be monitoring the supply chain for Lacey and TSCA.  That’s one of their biggest responsibilities these days.  But what if they aren’t?  I think everyone understands now that a problem with Lacey or TSCA ANYwhere in the chain can become a problem EVERYwhere in the chain!  So a lot of customers are learning to ask about that, and are picking importers with strong compliance programs for protection.

But hey, let’s go back to that Origin issue again.  The issue of “origin” alone falls on the importer, but if the Origin information isn’t accurate, it is quite possible that the Lacey and TSCA information isn’t either!  So that while you may not be on the hook for Customs’ punitive tariffs, do you want to have your stock found to be in violation of either of those two regulations? 

Remember with Lacey, you have three potential punishments.  Two types, fines and jail time, are generally based on your professional knowledge, the due care actions you took, where you are in the supply chain and the nature of the violation.  That’s why a key due care action for non-importers is vetting your importer, and making sure they have a compliance program you have confidence in.

Realistically, it’s fairly unlikely that an independent retailer is going to get hit with huge punitive fines and certainly it is very unlikely to go to jail for a good faith purchase. (Although your definition of “huge” and the government’s definition might be different!)  But Lacey is a strict liability law, so it doesn’t matter how far you are from the illegal action or if you were a knowing participant—if the wood is identified as illegal, that’s the bottom line.  And that means for a retailer, confiscation is likely to be the result.  That might be the government taking the actual stock in the warehouse or maybe just taking all your profits.  (In the case of Lumber Liquidators, after they pled guilty to various violations, they paid a hefty fine in lieu of confiscation so that the government wasn’t going into homes to rip flooring out.)

What about TSCA?  The issue of TSCA and Origin are very interconnected.  Let’s say you had some plywood engineered flooring produced in Country A.  But you were told it was coming from a factory in Country B and that they were TSCA certified.  So you are now in possession of flooring that has not properly followed the compliance chain. It may not have even been compliant in the first place.  Readers will remember that a fraudulent plywood TSCA certificate was represented to an importer—apparently for the purpose of hiding origin specifically to circumvent anti-dumping.  Fortunately, that importer had a strong compliance program and instead reported the fraud to CARB and the TPC and the industry was notified.  But what if that importer hadn’t checked?  Do you want that fraudulent material in your warehouse?

What about engineered flooring in a white box?  Many importers bring in white boxes and sell to multiple customers to avoid stocking multiple brands…remember, that’s a TSCA violation. That’s on the retailer—particularly if you’ve specified that’s how you want your stock!

There are a lot of other issues that we’ll try to look at more another time, but you really do want to understand what you have responsibility and liability for.  The government has frequently stated that they will consider professional knowledge and position when establishing punishments for Lacey and TSCA violations.  They are unlikely to fault a homeowner for not understanding these, but a retailer or a distributor needs to know the fundamentals.  I encourage everyone in the supply chain to familiarize themselves with these issues and know what can land (and potentially land HARD!) on you.

So pick your importer carefully and confirm they have a compliance program you can trust. And join the IWPA due care training in Nashville in two weeks to learn more about what you can do and what you need to be sure your importer is doing.  (Or, for that matter, what your US distributor or US manufacturer are doing, as Lacey and TSCA responsibilities fall on them too.)  Watching the budget?  Remember the old saying:  “If you think education is expensive, try ignorance.”

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Elizabeth Baldwin is Environmental Compliance Officer for Metropolitan Hardwood Floors. In her 25 plus year career in the wood industry has visited over 70 countries and hundreds of facilities of all sizes and types. She describes herself as a “jack of all wood trades.” Familiar with jungles of all sorts–having camped out along the Amazon and walked the halls of Congress–she blogs for the NWFA on both environmental and regulatory issues for educational and informational purposes only. Her blog is not intended and should not be construed as legal advice. Persons seeking legal advice on compliance with CARB, TSCA, the U.S. Lacey Act or any other law, regulation, or compliance requirement/claim should consult with the regulatory agency directly and/or a qualified legal professional.

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