Originally published by the Journal of Commerce in October 2019

As the deadline to file List 3 exclusions requests for goods from China (the 301 investigation) has now expired, there is the opportunity to take a bit of a deep breath and survey the trade landscape. Doing so serves as a reminder, there is much more than “just” the 301 tariffs to be concerned about. Here is a sampling of relevant topics, in no particular order of importance:

  • More Vigorous Pest Searches: USDA/APHIS and CBP seem to be ratcheting up their inspection of soft wood lumber packing materials, said to be based on risk factors, with the net result that the finding of the presence of pests has increased, even with properly marked wood packing materials. Is the wood not properly treated from the outset? Is the wood being reinfested? Is the challenge the nature of the chemicals with which treatment is permitted? Methyl bromide is not permitted in Europe. Does the infestation come from other cargo in the same hold as your shipment?  The amount of wood and the nature of the commodity in your shipment may make the difference between whether you are permitted to remove the infested wood and clear the goods or are ordered to export the entire shipment.
  • Substantial Transformation Definition Changed? Much was made at the time of the decision in Energizer Battery, Inc. v U.S., 190 F.Supp.3d 1308 (2016). Therein, the Court of International Trade held that because the foreign parts being imported had a pre-determined end use when delivered for assembly in the U.S., the manner in which Energizer assembled its flashlight did not meet the substantial transformation test.  The court was asked to reach its decision in the context of the Buy America provisions for government contracting.  While seen as significant at the time, a reasonable reading of the situation is this case further clarified when assembly is taking place, and typically assembly does not confer origin. Whether any broader application of this decision will occur remains to be seen.
  • CBP Enforcement. There has been a noticeable increase in the number of audits conducted by CBP, along with a serious increase in the number of Requests for Information (CBP Form 28) and Notices of Action (CBP From 29) and the related inquiries regarding classification and value, especially as relates to free trade agreement and similar duty deferral claims.
  • FDA’s Shot Across the Bow re FSVP. Also well publicized earlier this year was the FDA warning letter to Brodt Zenatti Holdings LLC. The basis for the warning was described as the lack of a Foreign Supplier Verification Program. The matter arose due to a finding of Salmonella in Tahini imported by the company. FDA conducted an on-site visit and cited the company for its lack of an FSVP program. Worse yet, FDA issued its Form FDA 483a, the report of inspection findings,  and two months later, the importer had still not responded. That lack of response caused the warning letter to be issued. While FSVP inspections have been occurring since 2017, this was the first warning letter made public, and is that proverbial shot across the bow to remind importers, FSVP programs are mandatory and FDA is not kidding around. Of course, if FDA applied similar standards to U.S. domestic companies, importer would sense a more level playing field, but still seems a pipedream!
  • Cyber Concern Is On the Rise. There were several reminders about the scourge of cyber breaches.
    1. CBP Cyber Breach. CBP found itself with a black eye when an employee of one of its contractors broke protocol and as the result of mishandling confidential data, traveler photos and license place images were taken. The contractor had suffered its own breach which resulted in a data dump on the dark web.
    2. Fitness Devices. There are the ever popular health apps on the market. When was the last time you read the related privacy policy? Is there any security protecting your personal information on that app? The U.S. military is concerned about fitness trackers as they are web connected and so make it that much easier for U.S. enemies to determine where troops are stationed – check out the map and related article at https://www.stripes.com/news/us/wearable-tech-could-be-a-challenge-for-us-military-experts-say-1.509666.
    3. FDA and Medical Devices. The FDA has published several articles on the topic of medical device cybersecurity. In them, FDA consistently makes the point there are quality system regulations which require medical device manufacturers to address all risks, including pre- and post-market guidances. FDA also underscores that device makers are free to update their software at any time, and runs the expected risks using off-the-shelf software.
    4. FDA has focused on software, too. It has identified software as its own medical device and defines that term as “software intended to be used for one or more medical purposes that perform these purposes without being part of a hardware medical device.” Due to the international nature of medical devices, there are on-going discussions about international standards and documentation, see in particular the efforts of the International Medical Device Regulators Forum.
    5. Then, just a few days ago, the FDA issued a news release to “inform” patients and others about potential cybersecurity concerns. In particular, the FDA advised about URGENT/11, a set of cybersecurity vulnerabilities found in IPNet software, which could impact “certain medical devices connected to a communications networks, such as wi-fi [sic] and public or home Internet” as well as routers, connected phones and other critical infrastructure equipment. The identified vulnerabilities could allow “a remote user to take control of a medical device and change its function, cause denial of service or cause information leaks or logical flaws, which may prevent a device” from functioning properly.

Without meaning to make light of these serious issues, it certainly seems only a matter of time before one of these scenarios makes its way into the plot of a movie or television show. No one wants to be the poster child for that story line! Of course, for all of us as international traders, we know the many ways in which the international trading system has already been, or could in the future be, compromised. We had an unpleasant reminder earlier this year with all the general press coverage of the North Korean vessel M/V WISE HONEST.  Among the allegations made in the complaint were that it turned off its AIS or automatic identification system signal (to conceal its route) and was carrying documents which stated the shipment originated in Russia, when, in fact, the cargo was North Korean coal. These actions are not a terribly new set, and, in the end, obviously not successful in concealing DPRK actions!