Cutting Edge Newsletter™ September 2007Public PolicyNo MatchBy John Satagaj, email@jsatlaw.com  The Department of Homeland Security (DHS) has made a change in its employment verification program. I do not believe it is going to have much impact on our industry. I do not know how many of you have ever received what is known as a “no match” letter from the Social Security Administration (SSA). My guess is not many of you. Employers are required to file with the SSA each employee's W-2s for the tax year. If 10 or more of the submitted W-2s have a mistake, and the SSA cannot match the contributions made during the year to an individual’s account, then a “no match” letter is sent to the employer by the SSA. Just in case one of you does receive a no match letter, I will call to your attention the DHS’ change in policy. The DHS is taking a convoluted path to leveraging the SSA’s no match program. It cannot access the list directly so it has no way of constructing an enforcement case based on the results of the SSA’s work. So it came up with a “creative” way to marry the DHS' employment verification program with the SSA's no match program to enforce the law it is charged with enforcing, i.e., to prohibit the “knowing” hiring of an illegal alien by an employer. The DHS is actually changing its rules as to what constitutes “knowing” under the Immigration and Nationality Act (INA). The law states “It is unlawful for a person or other entity, after hiring an alien for employment, to continue to employ the alien in the United States knowing the alien is (or has become) an unauthorized alien with respect to such employment.” The existing rule had already set forth what constitutes “constructive knowledge.” The DHS is amending it so that failure to deal with a SSA “no match” letter, in the new way described by the DHS, will allow the DHS to use the SSA's written notice as evidence of constructive knowledge. Conversely, the DHS is establishing a safe harbor so that if an employer follows the procedures, it will be protected from the use of the written notice as evidence. If the DHS engages in an enforcement action and finds an alleged hiring of an illegal alien, this leads to the question whether the employer had actual or constructive knowledge that it was hiring an illegal alien. Ironically, the SSA generally does not have the authority to do anything about a “no match” mistake. If an employer does not respond to the SSA inquiry to correct the employees' wage records, SSA refers the matter to the IRS. If the IRS finds that the employer has made a reporting error, IRS may charge penalties of up to $100 per missing Form W-2 or 10 percent of the amount of income reported, whichever is greater. No-match letters issued by the SSA for Tax Year 2006 will be accompanied by a letter from the U.S. Immigration and Customs Enforcement (ICE) informing employers on how to respond to the employer no-match letter in a manner consistent with obligations under U.S. immigration laws. According to DHS Secretary Michael Chertoff, “The no-match regulation will be effective in 30 days, and then what will happen is the Social Security Administration will begin to send the letters out. They will not send all of them out at once, they'll probably send out about 15,000 letters a week, over a period of probably about eight to 10 weeks. So it will flow over a period of time.” These letters are based on the 2006 tax year. In the same announcement for the aforementioned change, DHS also indicated it was making changes to its instant verification program. DHS has operated a voluntary employment verification system known as the Basic Pilot/Employment Eligibility Verification Program. It is changing the name to E-Verify. According to Secretary Chertoff, the DHS soon will (the operative word is “will”; it has not done so yet) publish a rule that will make participation in the E-Verify program mandatory for federal contractors and vendors. The expectation is that the rule, when published, will require federal contractors who receive new federal contracts to use the E-Verify system to check the employment eligibility of the contractor work force that will work on those contracts. Using E-Verify will become a contract performance requirement and if a federal contractor fails to use the system for employees who are working on federal contracts, their contract will be subject to termination for non-performance. DHS vendors will be expected to comply even sooner. DHS does, and will continue to, encourage other employers to participate voluntarily in the E-Verify program. The program will not be mandatory for all employers. As I said at the outset, I do not think these changes will have ramifications for our industry, but it is best to be aware of them. My hope is that someday we will have an effective and efficient instant verification system so we can take you out of the employment verification game completely.
International Business DevelopmentCredit Card Scams...Beware
The following article is adopted from one prepared by Jeff Pitcher, CP Adhesives, jpitcher@pilotchem.com, and member of the International Business Development Committee. It deals with international credit card scams and how you can arm yourself against this unfortunate trend. The original article was published in the WMMA Export Manual, http://www.wmma.org/members/exp_man_toc.cfm, in the spring of 2006. Today more and more manufacturers are accepting credit cards. After all, they make it easier to do business. Smaller purchases are accomplished quickly and easily and the seller receives their money in a more timely fashion aiding cash flow. Unfortunately, there is a downside to accepting credit cards. Most businesses are unaware that many credit card transactions are far from secure. It is this fact that has caused an explosion in credit card scams. It’s a popular misconception that if a business is given an authorization number it’s a guarantee that the card is good and they will be paid. This is far from accurate especially if a business accepts credit cards over the phone or the internet. The authorization number simply indicates that the card is in good standing at the time of the transaction. Today, there are thousands of valid credit card numbers in circulation that can be used but will never be honored. The latest and most prevalent scam starts when the victim receives an “urgent” e-mail requesting pricing on items they have for sale on the internet. In many cases the “buyer” wants to purchase a large quantity. A Visa or MasterCard is offered for immediate payment. A seemingly valid credit card is used for payment and the seller ships the order quickly, as directed by the buyer. However, maybe a couple of weeks to a month later the charge is rejected by the card issuer with the excuse that the card holder did not authorize its use. In two cases I came across, the card holder called up the WMMA member and asked “Who are you and why are you charging my account for these products I didn’t order?” The seller has no recourse --- he did not receive a signature and approved the order on the basis of a valid card. Many of these scams seem to originate for some strange reason in Singapore and in and around Western Africa including Nigeria, Ghana and the Ivory Coast. However, they are not limited to these areas and can originate from anywhere in the world. There are a number of ways to protect your business from these scams while still accepting credit cards.
For more information on this subject contact Merchant Services at 800-928-2583. For more tips and techniques of exporting visit the WMMA’s Export Manual, http://www.wmma.org/members/exp_man_toc.cfmChina Reduces VAT Rebates to its Exporters
In China a VAT is paid in full at the completion of each sale of goods. An export drawback is a system where a Chinese exporter pays a reduced VAT charge on exported products in comparison to the VAT charged on domestically marketed goods. In practice, after the final export sale the VAT is paid and at a later date part of the VAT is returned to the exporter, i.e. the exporter gets a “rebate” or “draws back” part of the VAT payment. The drawback rate for endangered and threatened plant species and by-products has been eliminated, including the 13% rebate for furniture made from endangered species and the 11% rebate for flooring and plywood made solely from these species. This change will make a minimal impact on most products, as exports through legal channels of these products are almost non-existent. However, this should further constrain Chinese use of endangered Southeast Asian or African wood used in plywood. The rebate for joinery products (doors, windows, etc.), wood frames, boxes, caskets, and similar wood products as well as pallets, MDF, plywood, laminate and particleboard has been reduced from either 13% or 11% to 5%. Finally the VAT rebate for most furniture items (made of non endangered species) has been reduced by 2 percentage points from either 11% or 13% to 9% or 11%. The reduction of the export rebate for many wood products may have a significant impact on Chinese companies, especially those made of endangered species. The change will encourage consolidation in the industry and further increase the importance of the domestic market. For a more detailed report on the China Solid Wood Products market and it potential, click hereBusiness DevelopmentSales Forecasting Tools
July 2007 Leading Indicator Residential Construction Statistics - August 2007 Residential Construction Statistics- July 2007 Purchasing Managers Index - August 2007 Association News
17th Annual Woodworking Industry Conference
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| ©2007 by Wood Machinery Manufacturers of America, Philadelphia, PA. All rights reserved. This publication or any parts of it may not be reproduced in any form without written permission from the publisher. For permission to reprint articles or to send correspondence, write to: WMMA, 100 North 20th Street, 4th Floor Philadelphia, PA 19103-1443 Phone: (215) 564-3484 Fax: (215) 963-9785 E-mail: wmma@fernley.com The opinion expressed in any articles by outside consultants are their own views and not necessarily those of the WMMA. |
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Shortly before The ASWFS Fair I received an email from a WMMA member that a colleague had just been ripped off by a credit card scam. While visiting with members at The AWFS Fair I found that other members had similar experiences --- luckily, they were not out a dime. 
Effective July 1, 2007, China changed the value-added tax (VAT) rebate (also called drawback) for over 2,800 products. China eliminated VAT tax rebates on 553 exports, most of which are described as “energy-intensive, heavily polluting, and resource consuming” products. This category includes most wood products made from endangered species (products in “imminent danger”). VAT rebates were reduced on another 2,268 products (mostly from 5-11 %) described as “prone to causing trade frictions,” including among other items, wood products. 
Mark Your Calendar Today! 
WMMA members are entitled to a 20% discount on booth space at IWF 2008 provided the payments due are received by the postmarked deadline date. The second invoice will be mailed to exhibitors the week of December 3, 2007, with a post mark deadline date of January 11, 2008. 
WMMA will hold its annual Public Policy Fly-In on February 13th, 2008 in Washington, D.C.