Customs Update: New FDA prior notice rules

Customs Update: New FDA prior notice rules

This is the second of two columns dealing with the Food & Drug Administration food import security regulations it will implement under the bioterrorism bill. This article deals with the prior notice regulations. The previous column addressed registration. Both are effective Dec. 12, 2003.

When FDA published its food security regulations in February, the trade insisted to Customs that a new computer system was needed to allow FDA to do its job. Upper management at the two agencies came together and the new regulations confirmed what we had all been hearing - they figured out a way to make it work. FDA now states it expects 90 percent of the prior notices to be filed through Customs' system with the remaining 10 percent to come through FDA's Prior Notice System Interface. Use of FDA's system is mandatory when dealing with mail shipments (which has its own special rules) and those refused admission. Recognizing that computer failures exist, FDA states that if the Customs system is down, importers are to use FDA's system. If both are down, call FDA's Help Desk and if both are confirmed as down, prior notice can be submitted by fax or e-mail. FDA also confirmed the prior notice system will operate 24 hours a day, seven days a week, and details about system outages will be posted on its Web site.

Further progress in the form of the two agencies working together comes from Customs' agreement to examine cargo in ports where FDA has no on-site personnel.

Much change since regs proposal

In the original February proposal, prior notice was required by noon the day prior to arrival. The bioterror bill itself mandates prior notice no less than eight hours and not more than five days prior to arrival. While the no more than five days prior remains, everything else has changed. As has already been publicized, it is now two hours by truck, four hours by air or rail and eight hours by water. By comparison, Customs' advance manifest rules are 24 hours for ocean shipments; four hours or wheels-up for air depending on the starting location; two hours for rail and 30 minutes for truck. Electronic filing of rail manifests already exists in some places. However, it will be at least six months, if not longer, before electronic manifesting exist for truck shipments.

As with registration, prior notice applies to all food for human and animal consumption imported or offered for import into the U.S.

Food is defined as articles used for food or drink for man or other animals, chewing gum and article used for components of any such articles. Food packing materials, contact substances and pesticides are now exempt. Liquor shipments are subject to prior notice but the 7 percent issue remains, i.e., in the past, FDA took jurisdiction over liquor only if the alcohol content was 7 percent or less, everything else being subject to the Bureau of Alcohol, Tobacco and Firearms. But it looks like that may be about to change, too.

There are, of course, items such as oils, gelatins and minerals which have both food and non-food uses. FDA considers them food so long as the importer reasonably believes the substance is reasonably expected to be directed to a food use. The regulations are silent as to what happens if that reasonable belief changes following importation.

Making a distinction

Food which moves in-bond or into an free-trade zone (FTZ) is subject to prior notice. However, there is a distinction. Food which comes in and goes out in-bond at the same port is exempt. However, food transiting the U.S. for export is not. Much of the landbridge traffic, for example out of Asia which transited the U.S. to go to Latin America through Miami, chose other routes due to Customs' advance manifest rules. Adding the new FDA requirements will surely drive away what remains of that business.

Food accompanying a traveler for personal consumption is exempt as are meat, poultry and eggs which are exclusively subject to the jurisdiction of the Dept. of Agriculture.

On the plus side, FDA greatly expanded who may file prior notice so that the criteria now applies to any individual with knowledge of the required information. In other words, prior notice may be filed by a broker, importer, U.S. agent or anyone else who has the necessary details.

The required data:

-- Identification of the submitter, including name, telephone and fax numbers, e-mail address and firm name and address

-- Same details for the transmitter if different than the submitter

-- Entry type and number, including in-bonds (formerly the line item data was required)

-- Mode of transportation and carrier SCAC/IATA code or name and address if none

-- Identification of food article including complete FDA product code, the common or usual name or market name, the estimated quantity described from smallest package size to largest container and the lot or code numbers of other identifiers, if applicable

-- Manufacturer identification if the food is no longer in its natural state

-- Grower identification, if known, one per article or the consolidator in lieu of the identity of any unknown growers

-- Country of origin (now called Country of Production)

-- Shipper identification

-- Country of shipment

-- Anticipated arrival information: location (including the name of the bridge if at a land crossing), port, date and time

-- Importer, owner and ultimate consignee identification

-- Planned shipment details

-- Ocean: vessel name, voyage and bill of lading number

-- Air: flight and airway bill

-- Truck or bus: trip number

-- Rail: car and trip number

-- Automobile: license plate number

-- Container number and six-digit HTS number

-- If food is held for failure to submit or for inadequate prior notice, the location of the food, the date of arrival and the name of the contact at that location; and

-- Special rules for mail shipments

Details, details, details

When looking at the planned shipment details, one can quickly see the problems inherent with in-bond shipments - who provides the required details about size, product code or HTS number? Who transmits the prior notice? Carriers certainly won't want that responsibility nor do they have access to the details demanded.

Country of shipment is defined as the country in which the shipment was loaded on the carrier's conveyance. Country of origin is not the same as Customs' origin determination. Now called the Country of Production, it focuses on where production took place. Using FDA's examples: With carrots, if raw, whole and unpeeled, production occurs where the carrots are grown and harvested. However, if they are chopped or canned, production occurs where they are chopped or canned. With decaffeinated coffee, the Country of Production is not where the coffee was grown, but rather where it was decaffeinated. With seafood, production is determined by the flag of the vessel which catches the fish.

With the February proposal, there were amendments and updates provided for in case of changes. However, given the shortened time frames which now apply, FDA has said no amendments and no updates. If it turns out there are changes to the data elements, other than those involving quantity or anticipated arrival information, one must cancel the original prior notice and submit a new one. If the prior notice is inadequate, the food will be subject to refusal and must be held at the port or a secure facility. Only with the approval of Customs can that food be moved to another port. Given Customs' recent experiences with the purported compromise of in-bonds, it is likely this won't often be allowed.

Prior-notice filing only the beginning

FDA states it intends to only examine those shipments identified as posting the potential for significant risk to public health and again pointed out that acceptance of prior notice is not an indication of whether the shipment will be released for entry purposes. However, when filing prior notice, FDA will issue a PN Confirmation Number which starts the clock running. That number must then be provided to Customs and FDA at time of entry. Carriers would be wise to get it as well so their equipment is not tied up upon arrival.

In order to expeditiously deal with any cargo which might get held up, FDA has taken the position that any food refused admission over prior notice issues is subject to Customs' general order regulations and so must be stored in a bonded warehouse approved to hold general order cargo by Customs. While an understandable position, it raises the question of what happens at a port if there is insufficient refrigerated space?

If a shipment consists of mixed goods, food and non-food or some compliant food and some non-compliant food, FDA has changed its position and will now allow segregation. Refused food may be exported with the concurrence of Customs provided FDA has not placed an administrative hold on it. If sent to G.O., it may only be sold for export or destroyed.

As with the registration regulations, the failure to comply with the prior notice requirements is subject to both criminal and civil penalties and is also a prohibited act. Similarly, if followed by a felony conviction, debarment is possible, i.e., denial of the right to import.

Questions over land border rules

One of the more questionable provisions published by FDA involves shipments arriving at the land borders. In all other settings, whoever transmits the prior notice is advised if there is a problem with it. In the case of land border shipments, FDA intends to give notice to the carrier of any problems with prior notice, so it is the carrier which then has the responsibility to advise everyone else. This approach works well if the carrier is a company which is sufficiently sophisticated to have e-mail, computers and the like. Many of the carriers at the Southern border are owner-operators. Further, as things stand right now, there is no electronic manifest system for truckers at either land border and, as previously noted, one is mostly likely at least six months off. Most truckers do not have computers and so would likely rely on a Canadian or Mexican freight forwarder or an American customs broker to transmit prior notice. Is relying on the carrier in this setting the most reliable way to proceed?

If one wishes to appeal a prior notice decision leading to refused admission, the information must be submitted within five calendar days of refusal and then FDA has another five days to respond. Only the submitter, importer, owner or ultimate consignee may appeal and the status of the appellant must be identified. More details on this topic will be posted on the FDA Web site.

FDA stated that in 2001, its database reflected 77,247 importers and consignees of imported food shipments. Based on 2002 figures, FDA found 2.9 million food entry lines were imported by sea and air, plus 2.3 million lines by ground transport; there were 630,000 entry lines by land. Because of the requirement for entry data prior to arrival, FDA's prior notice rules eliminate BRASS as a method of entry.

Importers are cautioned that there are lots of exceptions and specific rules so make sure to check your situation carefully. It will not be enough to just read the regulations, as FDA took great pains to carefully explain its actions, and those explanations are in the comments, not the regulations.

Susan Kohn Ross is a partner in Rodriguez O'Donnell Ross Fuerst Gonzalez & Williams, Los Angeles, and since 1978 has specialized in Customs, international trade and transportation law. Ross was a member of the COAC Subcommittee on Border Security, the Nafta Advisory Committee on Private Commercial Disputes, and served as a member of the U.S. Customs Nafta Advisory Committee, a private sector group which advised U.S. Customs regarding Nafta implementation.