On 5 July 2013, U.S. Customs and Border Protection (CBP) published a final rule that amends the CBP regulations that allow CBP to deny importation of, or conditionally release, certain consumer products and industrial equipment that do not comply with energy conservation or labeling standards of the Energy Policy and Conservation Act of 1975 (EPCA). The final rule amends Part 12 of Title 19 of the Code of Federal Regulations (19 C.F.R. Part 12) by adding a new Section § 12.50 that sets forth CBP’s procedures to restrict importation of noncompliant products subject to EPCA requirements. Manufacturers and importers of consumer products and industrial equipment should ensure that their products comply with applicable EPCA requirements prior to importation into the United States. However, even where products are initially refused entry, procedures may be followed to bring products into conformity after importation.
The final rule is effective 5 August 2013.
The Energy Policy and Conservation Act of 1975 (EPCA, 42 U.S.C. §§ 6291-6317), as amended, established the Energy Conservation Program for Consumer Products Other than Automobiles, covering most major household appliances, and the Energy Conservation Program for Certain Industrial Equipment, a program covering industrial equipment.
Section 6302(a) of the EPCA and its implementing regulations prescribe the specific energy conservation and labeling standards applicable to manufacturers and, in some instances, private labelers, distributors, and retailers.
Consumer products covered under the Energy Policy and Conservation Act include:
- room air conditioners
- central air conditioners
- central air conditioning heat pumps
- water heaters
- clothes washers
- clothes dryers
- direct heating equipment
- kitchen ranges and ovens
- pool heaters
- television sets
- fluorescent lamp ballasts
- general service fluorescent lamps, incandescent lamps, and incandescent reflector lamps
- showerheads, except safety shower showerheads
- water closets
- metal halide lamp fixtures
- any other type of consumer product which the Secretary of Energy classifies as a covered product
Industrial equipment covered under the Energy Policy and Conservation Act includes:
- electric motors and pumps
- small, large, and very large commercial package air conditioning and heating equipment
- commercial refrigerators, freezers, and refrigerator-freezers
- automatic commercial ice makers
- walk-in coolers and walk-in freezers
- commercial clothes washers
- packaged terminal air-conditioners
- packaged terminal heat pumps
- warm air furnaces
- packaged boilers
- storage water heaters
- instantaneous water heaters
- unfired hot water storage tanks
- any other type of industrial equipment which the Secretary of Energy classifies as covered equipment
CBP enforcement authority
The 5 July final rule amends the Customs regulations by adding a new provision (§ 12.50, “Consumer Products and Industrial Equipment Subject to Energy Conservation or Labeling Standards”). Section 12.50 provides that if a “covered import” does not comply with applicable energy conservation or labeling admissibility standards in sections 6302 or 6316 of the EPCA, the Department of Energy (DOE) or the Federal Trade Commission (FTC) may direct CBP to refuse admission of the covered import or recommend conditional release of the covered import to be brought into compliance. The notice issued by the DOE or FTC will identify the importer of the noncompliance covered import and describe the subject import in a manner sufficient to enable CBP to identify the article. (19 C.F.R. § 12.50(c)).
The final rule also clarifies that CBP has the authority to make its own finding that a covered product or equipment is noncompliant without notification from DOE or FTC. However, in such situations, CBP will confer with DOE or FTC regarding the disposition of the import before denying admission. (19 C.F.R. § 12.50(b)).
“Covered imports” are defined as those for which an entry for consumption has been filed, including those products and equipment withdrawn from warehouse for consumption or foreign merchandise entered for consumption from a foreign trade zone. Imported products and equipment not entered for consumption are excluded from the definition of “covered import.” Thus, warehouse entries, foreign trade zone admissions, and temporary importations under bond are not covered by this regulation; however, withdrawals from bonded warehouses or zones for consumption are within the scope of the new regulation.
The conditional release option
There is an exception to immediate refusal, if DOE or the FTC provides written or electronic notice, CBP may conditionally release under bond to the importer such noncompliant consumer products or industrial equipment for purpose of reconditioning, re-labeling, or other action so as to bring the subject product or equipment into compliance with applicable energy conservation and labeling admissibility standards. (19 C.F.R. § 12.50(b)-(d)). CBP may also allow conditional release on its own authority. The bond conditions applicable to importers set forth in 19 C.F.R. § 113.62 apply.
Imports that are conditionally released remain subject to the jurisdiction of DOE and/or FTC, and must be brought into compliance within 30 days, unless an extension is granted by CBP, following a recommendation from DOE or FTC. (19 C.F.R. § 12.50(d)(1)(2)). If the subject import is not timely brought into compliance, CBP, at the discretion of DOE or FTC, will issue a refusal of admission notice to the importer and demand redelivery of the specified covered import to CBP custody. (19 C.F.R. § 12.50(d)(3)).
Potential liquidated damages
A failure to comply with a redelivery demand “will” result in the assessment of liquidated damages against the importer’s Customs bond in an amount up to three times the value of the covered import. (19 C.F.R. § 12.50(d)(4)).
CBP’s final rule implements the mandate of the EPCA to preclude admission into the United States of consumer products and industrial equipment that fail to meet applicable labeling or energy conservation requirements. The new provision in the CBP regulations also shows certain flexibility towards importers, by allowing the conditional release of noncompliant imports, thus giving importers a chance to bring noncompliant covered imports into compliance, by, for example reconditioning, re-labeling or other modification and ensure entry and clearance of their products to their final destination in the United States. Failure to comply with applicable energy conservation and labeling standards of the EPCA can be costly as imports can ultimately be refused admission and subject to a demand for redelivery by CBP and possibly significant liquidated damages for non-compliance.
How Hogan Lovells can assist
Companies interested in determining whether their products are subject to the energy efficiency or labeling standards of the EPCA, and thus the new CBP procedures, are encouraged to contact any of the listed lawyers in Hogan Lovells’ International Trade and Investment Practice in Washington, D.C.