Thursday, July 27, 2006

CBP Slugs It Out

An Agricultural Inspector at the airport in Seattle intercepted a slug that had stowed away in a container of Bulgarian mushrooms. This, however, was not your typical harmless Bulgarian slug. Apparently, it is the Lex Luther of slugs--the voracious Lehmannia nyctelia. This particular slug also carries nasty crop viruses. So, nice catch by the inspectors. Read all about it here.

All of which serves as a nice reminder that import compliance involves a number of agencies including the Department of Agriculture, the Animal Plant Health Inspection Service, Food & Drug, etc. Customs and Border Protection, by enforcing these agencies' rules, plays an important role in securing the food supply not just against intentional tampering but also from inadvertent threats such as slugs.

This sometimes has more immediate and practical consequences than one might expect. Here in Chicago, we lost many old trees to the dreaded Asian longhorn beetle. Now, we are loosing ash trees to the invading emerald ash borer. The men and women who pick through shipments of food have a tough job and the goal is not just to preserve landscaping. The farm economy depends on their protection to avoid outbreaks of exotic plant and animal diseases and pests.

So, the next time an inspector at the airport asks whether you are carrying any food, tell the truth. We all know you have a quart of kimchi in your carry-on bag.

Oh, no . . .

Remember when this blog was about customs law? It will be again soon. In the meantime, I was thinking about a post on the Tour de France and how kids in America have never before had the opportunity to have a hero named "Floyd." Mayberry jokes would have followed.

But, now I see this. Let's hope it is not true.

Friday, July 21, 2006

El Mejor de Guerrero

Cycling in on Friday, I hit a red light near a woman selling tamales from a cooler and a push cart. Given that she may be violating a number of laws, I will not specify where. Someday, when I drive, I am going to stop and load up on her tamales. They must be good because her sign says "El Mejor de Guerrero." She has about a dozen varieties including cheso con jalepeno, which is what I most want to try. Others include beef, pork, and pineapple.

Guerrero is a long way from Chicago. It lies between Oaxaca and Michoacan on the pacific coast.

I know nothing about this woman. She is around 60 and looks like she has had a rough life by North American standards. She may be younger. I don't know how she found herself in Chicago or whether she is legally here. Let's assume she is illegal. In addition, she probably pays no taxes, has no local business license, and no health inspection certificate. OK, technically, that is all bad. But, is it really?

The federal, state, county, and local tax revenue lost must be de minimis at best. She is not in a building, so the physical safety of her business is not an issue. Given her continued presence at one location and the customers I see her serving, she must be providing a needed or desirable service. If she were making people sick, one would think the market would react relatively quickly.

Still, she likely lacks insurance and may be judgment proof should she cause a mini epidemic of ptomaine. Plus, there are people all over the city who have played by the rules to get a business license, insurance, and submit to inspection. So, why giver her a break? That is a tough question.

How about starting with the obvious: Because she came to Chicago from Guerrero. Guerrero is where Acapulco and Ixtapa are located. She came from the pacific tropics to a city of short summers and long harsh winters. Doing that, she may have faced more hardship and physical danger than most of us will ever see. The only reason she would do that is the promise of America to be the place where hard work permits all of us to make something more of ourselves. That is the same promise that drew my grandparents and great grandparents to America early in the 20th century and continues to draw immigrants, legal and illegal, every day.

I don't know for certain, but she does not strike me as a violent criminal or threat to national security. When I ride my expensive bike past her a couple times a week on the way to my job as a respected professional, she makes ME think about what it means to do hard work and how much I have had given to me and have earned through work. So, I suspect that if she has children and grandchildren, she has instilled in them a strong work ethic. To me, this woman selling tamales on the corner represents the best role model in America, not a threat to our, security or economy.

The problem of course, is that this is a micro example of a macro issue. That is why it is so intractable. All the terrible statistics the shameful Lou Dobbs tosses around ignore the quality of the individuals who take us up on our collective promise of a better life through sacrifice and hard work. And, every story of an individual who tries hard to earn a place in this country can be countered with a sordid story of an undocumented felon who takes advantage of our social safety net. There seems to be no middle ground and it is easy to demonize the illegal immigrant because he or she is, by definition, a criminal.

I have no policy suggestion. People far smarter than me have been stymied by this question. All I have is the thought that we should spend more time looking at the immigrants around us and less time thinking about their status or the bad examples among them. If we did that micro analysis, we might be more willing to let America use its resources to keep its promise.

Tuesday, July 18, 2006

Road Block

According to smarmy Phil Keoghan, a road block is a task only one person may perform.

Last night, pretty strong storms came through. This morning, I rode my bike to work. Through the magic of the Treo 700p camera, I can show you a real road block. This one is around Foster on the Lakefront bike path.

Also sighted on the ride today:

A guy running in what looked like a pair of ski boots with leaf springs attached at the bottom. They looked as if they had come from the Hanna-Barbera workshop. I have no idea what these are called and I can't find a picture to illustrate them.

A woman riding a Trek 730 with a milk crate basket on the back. Attached to the basket was a license-plate style sign emblazoned with the slogan "Bicycling: A quiet statement against oil," or something similar. She was impressively fast.

UPDATE: They are called Kangoo Jumps. You be the judge.

Friday, July 14, 2006

Senate Moves to Allow Some Prescription Drug Imports

According to this article from Chicago's paper of record, Senator Vitter of Louisiana has introduced a measure requiring CBP to allow the the importation of prescription drugs by individuals. The proposal is an amendment to the Homeland Security appropriations bill.

Thursday, July 13, 2006

The Fine Art of Customs Law

The GranneBlog has a fascinating post on a piece of customs law history relating to the tariff classification of abstract art. So, consider this an annotation to that otherwise fine post.

Given the excellent library of honest-to-goodness paper and leather books in my office, I was able to find the relevant decision, which is Brancusi v. United States, T.D. 43063 (1928). It includes a picture of the sculpture as well. Sorry for the poor scan. Keep in mind that it is a black and white photo from 1928.

Wednesday, July 12, 2006

I Need To Open A Book Now and Then

It occurred to me that it would be wise to actually take a look at the Administrative Procedure Act in reference to my prior post regarding the UPS case. Guess what? It now seems I may have been a bit too quick to blog.

This is what the APA actually says:

To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—

(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.

So, it appear that years of using the shorthand "arbitrary and capricious" to designate the APA standard of review is dangerous. UPS would have been successful had it been able to show that Customs' determination was "not in accordance with law" or "in excess of statutory . . . authority."

And how would the Court decide if Customs had acted in violation of the statute? It would interpret the statute using Chevron deference to figure out what the statute means. Which is what Judge Carman did. Chevron applies rather than Skidmore because there was a regulation in play although Customs also cited guidelines and other less formal rules.

I admit I went astray. I'm glad Judge DiCarlo did not get a chance to see this.

Apparently I needed two sentences saying, "Because the statute, as interpreted with due deference to Customs, provides authority for Customs' actions, the determination is in accordance with law and not in excess of statutory authority. Thus, Customs' determination is consistent with the Administrative Procedure Act."

Saturday, July 08, 2006

Cycling is . . .

  1. Full of more juice than a Barry Bonds' healthy breakfast.
  2. According to the August Bicycle magazine, the new golf.
  3. According to that same magazine, the new Nascar.

Take your pick.

Also in the media, the Friday (7/7/2006) Wall Street Journal had an interesting article on the new popularity of track bikes, also called fixed gear bikes, or "fixies." These are the most basic bikes around. They have no gears and no ability to coast. When the bike is rolling, the chain is turning, and the pedals are moving. That means your legs are moving as well. Riding a fixie, therefore, takes a certain amount of finesse most riders people develop on the track. They also became popular among urban bike messengers because they are light, relatively inexpensive, and easy to maintain. Bike messengers and other urban fixies learn to ride these things with a high degree of confidence, but it takes time.

Why? Because a lot of fixies HAVE NO BRAKES! Look here for an example. Stopping can be accomplished a number of ways:

  1. Slowing your cadence until you are moving slow enough to click out and drop your feet.
  2. Using a tremendous amount of leg muscle to come to a quick stop and skid to a halt.
  3. Performing a trick called a skip stop which involves jumping the rear wheel off the ground, pulling the pedals to a stop and skidding when the tire hits the ground.
The WSJ article, to which I won't link because it requires a subscription, talked about the growing number of injuries resulting from fixies (or, I guess, their riders). But, they seem to be the new macho bike among male riders at the tail end of the baby boom, like me, and their mid-30's. Go figure.

The WSJ points out that in many states it is illegal to ride a bike without brakes in the public (as opposed to on the track). A lawyer who specializes in bike-related issues pointed out that under applicable Consumer Product Safety Commission regulations, the rider's legs can qualify as the brakes, making the bikes legal. Clever analysis.

Cautious fixie riders can equip their bikes with brakes. For more info on the fixie phenomenon,
read this article from Wired. Here is a video of fixie tricks.

Thursday, July 06, 2006

Spin the Wheel of Standards

UPDATE: Don't Be Fooled. Read this too!

We all know that importers are ultimately responsible for the legal accuracy of their entries. In most cases, it seems that Customs generally looks to the importer no matter how egregious the broker error. But, that is not always the case. Brokers are sometime the subject of enforcement actions. That is what Judge Carman’s case U.S. v. UPS Customhouse Brokerage, Inc. is about and brokers are not going to like the outcome.

Here is what you need to know: In 2000, CBP hit UPS with three pre-penalty notices for its alleged failure to properly supervise and control the customs business it conducts. Eventually, Customs issued penalty notices and UPS paid $15,000 in penalties. CBP followed up with an additional five pre-penalty notices, which became five penalty notices and a demand for an additional $75,000. UPS refused to pay and got itself sued. So far, so good. This looks like a normal penalty case. But, it is not because brokers are not importers.

Brokers, it turns out, believe they are protected from penalties in excess of $30,000 for all violations occurring prior to the issuance of a pre-penalty notice. This comes from 19 U.S.C. § 1641 (d)(2)(A) which states in, relevant part, that “the appropriate customs officer
shall serve notice in writing upon any customs broker to show cause why the broker should not be subject to a monetary penalty not to exceed $30,000 in total for a violation or violations of this section.”

I am going to skip the big fight about whether UPS properly pled it claim for a refund of $10,000 it paid to CBP as a penalty. That is a technical side show that distracts from the bigger issues. But note that UPS wants that money back because it thinks it can only be subject to one penalty for all violations prior to the pre-penalty notice. Hence, it should only have paid on the first of the three $5,000 penalties, not the full $15,000 on all three. Seems to me it should really be arguing that it should only be paying on the last pre-penalty notice for all prior violations; but that is not important.

UPS reads § 1641 as meaning that there can only be one pre-penalty notice for all violations prior to the date of the notice and that the maximum liability for all those violations is $30,000. In the alternative, it argues that the total liability for all pre-penalty notices is limited to $30,000. The government, naturally disagreed. It says all that is required is that each penalty action start with a pre-penalty notice and that no single action seek more than $30,000 in penalties. This should set up a straightforward question of statutory construction in which the Court decides who is reading the law correctly. Hold on, because that is not exactly what happened.

In most customs cases before the CIT, the Court makes its decision based on the evidence and arguments submitted to it rather than what was submitted to Customs. That is called “de novo review” to make it sound impressive. The Court said this is a de novo review case. That means that the Court looked at the issue on its own; it was not limited to the agency record. So, this was not an agency review case. Remember that for later.

On questions of law, the court is the final arbiter of the meaning of the statute. But, it does not ignore the interpretation Customs applied. That, according to the Supreme Court, would not give proper deference to the agency Congress has designated as the primary enforcer of the law. In other words, Customs gets some deference from the Court on the meaning of the law. The amount of deference was subject to debate until the Supreme Court decided Mead and held that Customs’ decisions are entitled to deference proportional to their power to persuade. In other words, the Court should look at what Customs said, whether it is consistent with the statute, prior decisions, and logic before deciding whether to follow Customs’ lead. This is called Skidmore deference after Skidmore v. Swift & Co., 323 U.S. 134 (1944), which I cannot find free online.

In this case, the government argued for Chevron deference on the meaning of the law. Under that standard, the Court first decides if the statute is clear. If so, it applies the statute as written. However, if there is any ambiguity, the Court looks at the agency interpretation. If the agency interpretation is “permissible,” which can be read as “reasonable,” the Court will defer to the agency, even if it disagrees with that interpretation.

Here, however, Judge Carman rummaged through the U.S. Code and apparently (nudge, nudge) landed on the Administrative Procedure Act. This law governs judicial review of most administrative actions by federal agencies. To be fair to the Judge, the APA standard of review has been applied by the CIT in prior similar cases. But, I don’t see why. This is a de novo case. It should be decided on the record developed before the Court and on the Court’s interpretation of the statute with due deference to Customs. Perhaps someone can explain to me why the APA popped up. If so, feel free to add a comment.

So, the Court said (nudge again) it would apply the APA’s “arbitrary and capricious” standard. This is probably the most deferential standard available in American law. It means, the agency’s decision stands unless it is not rational.

But, then the Court went on to issue its decision. Guess what, the first thing it did was look for ambiguity in the statute. In other words, it said APA (wink, wink) whilst it applied Chevron. The Court found the language to be ambiguous, possibly purposefully so. Then, it looked at the implementing regulations and other Customs’ materials and found the agency interpretation to be reasonable.

Why, oh why, honorable Judge, did you tease me with the APA? Moreover, was any consideration given by the parties or the Court to whether Skidmore was the proper standard? I gather Skidmore is inapplicable because the Court viewed the broker penalty implementing regulations as at issue and entitled to full blown Chevron deference.

Thus, the Court held under Chevron that the government is not limited to a single pre-penalty notice for multiple violations and the $30,000 limitation applies only to each individual notice. This is likely a tremendous blow to the broker community and an appeal is almost certain. If Chevron applies, this is probably (weasel word intended) the right result. It would be wrong if Customs' interpretation is contrary to some unambiguously expressed Congressional intent or, if some less deferential standard of review applies. Holding out the possibility that my firm might get involved in this case, I will not venture an opinion on the ultimate decision.

Wednesday, July 05, 2006

What Do You Want From Me?

Right now, I am having editorial issues. Frankly, I have a bunch of blog-worthy material piled up. I need some time to sort through it and decide what to address. Or, in the alternative, I might do a series of very quick summaries and send you on your way with a link. It depends, I guess, on how I feel.

For one thing, keep in mind that the web site of my law firm, Barnes, Richardson & Colburn, covers a lot of this in a more timely manner. I encourage you who visit here, to make a habit of visiting there regularly. So, I will leave it to the crack web master at BR&C to cover the news that Customs has extended the deadline for filing a C-TPAT supply chain security profile to October 1.

Another interesting thing happening is a renewed focus on intellectual property enforcement at the border. Customs made an announcement that it is working to support the US-EU Action Strategy for the Enforcement of Intellectual Property Rights. At about the same time, the new USTR announced a new focus on the protection of US intellectual property rights in foreign markets.

Guatemala is now functioning as a CAFTA-DR country. On June 28, the government of Peru approved the Trade Promotion Agreement with the US.

Judge Carman has likely given heartburn to every customhouse broker in the U.S. Judge Ridgeway has given something similar to the U.S. District Court for the District of Massachusetts. Judge Musgrave has given us all renewed hope that maybe someday CBP will mitigate the interest in a prior disclosure case. And Ford? Well, Ford is not having a good run of luck at the moment. Oh, and nice effort trying to get the Court of Federal Claims to refund antidumping duties.

My goal is to cover these court cases in greater detail. I'll see what I can do.

Update: Limbaugh Not Charged

Rush Limbaugh will not be charged for illegally importing the prescription drug Viagra.

And so another great customs law story peters out . . . so to speak.

Monday, July 03, 2006

A Couple Links

No big news over the long weekend. Just a couple links worth posting.

The first relates to modern vexillology. I have always had a passing interest in national flags and hate when I can't identify a country by its flag. One of my favorites is Saint Lucia. It is clean and modern, bordering on the Star Trek-ish.

Some clever person over at Google Blogoscope realized that the internet transcends national borders and we now need internet flags. I particularly like number 4 for Bulkmail Solutions.

The second link is in the category of best e-commerce site selling cookies made by the guy who remodeled my kitchen. The cookies are good, really.

Happy Independence Day.