CBP Updates Its Wood Packaging Material FAQ for Liquidated Damages and Penalties

(On July 5, 2006, the U.S. began full enforcement of the International Standards for Phytosanitary Measures (ISPM) 15 entitled, "Guidelines for Regulating Wood Packaging Material in International Trade." ISPM 15 calls for affected WPM to be either heat treated or fumigated with methyl bromide and marked in a certain way certifying treatment (with certain exemptions for most WPM from Canada and a limited exception for WPM from Mexican border states).)

CBP is "Now Issuing" Liquidated Damages and Penalties

CBP states that on March 9, 2007, liquidated damages and penalties guidelines on issues related to WPM went into effect. These guidelines have raised additional questions, which it is addressing in ten new FAQs. CBP also indicates that it is now issuing liquidated damages and penalties under the guidelines. (See ITT's Online Archives or 04/06/07 news, 07040605, for BP summary of guidelines.)

Ten FAQs Added on Liquidated Damages and Penalties

The 10 new FAQs are listed in their entirety below:

Why is CBP now issuing liquidated damages and penalties for WPM violations?

The regulations set forth in 7 CFR 319.40 are intended to protect U.S. agricultural resources from the introduction of potentially injurious wood-boring pests. Failure to comply with these regulations poses significant pest risks to U.S. agriculture. This policy provides the means to assess liquidated damages against those who do not comply with the action specified on the EAN for failure to comply with WPM regulations. The policy also enables CBP to penalize those documented importers, carriers, or bonded custodians who have made multiple attempts to enter violative WPM or who attempt to conceal a WPM violation.

What is the effective date for liquidated damages and penalties under the guidelines?

The guidelines will only be applied to shipments that arrive on or after the effective date of March 9, 2007. Shipments that arrived before March 8, 2007, will not be subject to the new guidelines. When determining whether a party is subject to penalties based on their prior record for failure to comply with WPM regulations, CBP will only consider an Emergency Action Notification (EAN) received by the party for shipments that arrived on or after March 9, 2007.

When will an EAN be issued?

An EAN will be issued when a "WPM violation" is discovered. A "WPM violation" occurs when WPM entering the U.S. does not adhere to the required treatment under the "Guidelines for Regulating Wood Packaging Material in International Trade," of the International Standards of Phytosanitary Measures (ISPM-15), the WPM regulations and any associated amendments, revisions or exemptions identified by APHIS.

Who will receive an EAN for failure to comply with WPM regulations?

The party that is responsible for the WPM (i.e., the party whose bond was obligated) at the time that the violation is discovered will receive an EAN.

How long will the violator be given to comply with the EAN for failure to comply with WPM regulation?

The time frame in which the action must be completed will be specified in Block 17 of the EAN. CBP will use its discretionary authority to determine a reasonable time for completion of the specified action.

When will liquidated damages be assessed?

Liquidated damages will be assessed when a party fails to comply with the terms of an EAN. Therefore, liquidated damages claims shall not be assessed for the mere importation of violative WPM, but will be assessed for non-compliance with the EAN issued as a result of the importation of violative WPM.

Who will be subject to a liquidated damages claim for failure to comply with WPM regulation?

The party that received the EAN and failed to comply with the terms of the EAN will be subject to a liquidated damages claim. In the event that a party receives an EAN, but was not responsible for the shipment (their bond was not obligated), it will not be subject to liquidated damages.

When will penalties be assessed?

Penalties may be assessed when a party attempts to conceal a "WPM violation" or a party has received five (5) prior EANs in the previous fiscal year, nationally. Penalties based on a party's prior history of receiving EANs may be assessed even if the party has complied with past EANs and/or has complied with the EAN that resulted in the penalty.

What happens when violative WPM is found with in-transit or in-bond containers or cargo?

Shipments that arrive in the U.S., or enter the U.S. under a bond, or are in-transit through the U.S. from foreign must meet all conditions of the bond and adhere to all rules and regulations set forth under U.S. laws and regulations. If an in-bond shipment is found to contain violative WPM, then the party who is responsible for the merchandise under a bond will be issued an EAN. Upon receipt of the EAN, it is expected that expeditious action shall be taken to comply with the terms and conditions of the notification. In the event that the recipient is non-compliant with the EAN and there is a failure to export the WPM, then liquidated damages will be assessed.

Is WPM that remains onboard a vessel subject to potential liquidated damages and penalties?

Unmarked WPM that remains onboard a vessel (seagoing carrier) is not in violation of the ISPM-15 markings standard. However, if the WPM is unladed and found violative, then the vessel owner or carrier shall be issued an EAN if it is still responsible for the shipment at the time the violation is discovered. If the recipient does not comply with the terms and conditions of the EAN, it shall be subject to liquidated damages.

(Affected WPM includes WPM other than manufactured wood material, loose wood packing materials, and wood pieces less than 6 mm thick in any dimension, that are used for or for use with cargo to prevent damage, including, but not limited to, dunnage, crating, pallets, packing blocks, drums, cases, and skids. See ITT's Online Archives or 07/08/05 news, 05070810, for BP summary on these WPM treatment/marking requirements.)

CBP's July 13, 2009 FAQ on WPM available at http://www.cbp.gov/linkhandler/cgov/trade/trade_programs/agriculture/wpm/wpm_faq.ctt/wpm_faq.doc

BP Note

Some information, and some questions and answers, appearing in the March 23, 2006 version of this FAQ (the most recent prior version) have been removed from the FAQ. See future issue of ITT for an update on the removed FAQs and information, along with an update on whether any FAQs have been amended.