Monday, February 27, 2006

My New Best Friend is in Africa

I have a limited ability to see who is visiting this site thanks to the good people at www.sitemeter.com. So, I know a couple things in addition to the overall number of visitors. For example, I know that mentioning Saab cars generated far more traffic than mentioning Angelina Jolie. I also know that certain of my professional colleagues--a euphemism for competitors--visit regularly. I am gratified by the number of visitors I get from the U.S. government and in particular Customs, the DOJ and the courts. This site has been visited by folks on every continent but Antarctica. Thanks for all of that.

Another thing I can see is the search used to bring visitors here. Often these are general searches such as "customs laws." Other times, the searches are very specific such as "festive articles customs," or, as was recently the case, "Kris Kristoferson Salvador."

But, without a doubt, the best search ever recently brought a visitor from South Africa. Clearly, this person is an educator or trainer of the highest order. This person was in Cape Town and used Yahoo to search "'tariff classification' AND examples AND interesting." Interesting examples of tariff classification! Really? Based on his or her underlying assumption that there is such a thing as an interesting example of tariff classification, this visitor deserves our collective support and assistance.

To that end, I offer the following: NYRL J82174 (Mar. 31, 2003). The ruling shows how it is possible to have a number of essentially identical products classified in different headings and in only the exception does the eo nomine provision apply. Read it over and discuss among yourselves.

Wednesday, February 22, 2006

Port Ownership Brouhaha

This flap over the so-called ownership of port facilities is great theater. But, despite the Shakespearian hand wringing, it seems to be about as deep as a Benny Hill skit.

First off, the United Arab Emerites is not buying any U.S. harbor or port of entry. Ports are generally owned by the local governments or, more often than not, a municipal corporation such as the Port Authority of New York and New Jersey or the Illinois International Port District (which uses a catchy rendition of Anchors Aweigh on its web site). Selling a harbor or port to a foreign country would be like selling Manhattan Island to a group of tourists who arrived unannounced with a handful of trinkets. Oh, wait . . . forget I said that.

What might happen (if the President gets his way), is that the company responsible for port operations at several U.S. ports might be sold to a company controlled by the United Arab Emerites. Read that carefully. It means that the only thing changing hands is the ownership of the company that holds the contracts to load and unload vessels, control truck access, and otherwise manage the port facilities. Also, based on good reports from NPR (1 and 2), with respect to NY/NJ, the only operation in play is one of six terminals only two of which are currently operated by American companies.

The political problem is that this proposed sale comes in the midst of the continuing focus by the White House, Customs & Border Protection, the Coast Guard, and others on cargo security. The message the administration has sent commercial importers is that cargo security is the government's current primary focus. That is why so much pressure is being put on importers to participate in C-TPAT and why the U.S. is asking trading partners to participate in the CSI (that's Cargo Security Initiative, not TV crime drama).

Stick with me here. What I am about to say will sound racist. It is not.

It kind of looks bad to the average Joe or Jane for the administration to be outsourcing any part of the port operations (including some elements of security) to a middle eastern nation with "Arab" in its name. Couple this with the fact that the UAE figured tangentially in the 9/11 attacks in that some of the hijackers traveled through the country and its banks were apparently used to handle the necessary cash. Two other factors come into play. First we are talking about the Port of New York here. Lower Manhattan is visible from the port. The World Trade Center stood on land owned by the Port Authority of NY & NJ. So, people are bound to be sensitive. Second, we are in the middle of midterm election season. If there is political hay to be made, now is the time to do it. Everyone wants to look strong on security and this is an issue tailor made for tough sounding soundbites.

But, we need to dig a little deeper. We need to keep in mind that the port operators are, in the words of NPR, the baggage handlers. They are not the front line of port security. That front line is Customs and the Coast Guard. Security clearance starts with the electronic transmission of manifest data prior to loading the vessel in the foreign port. That data is reviewed by Customs and the Coast Guard for targeting. Customs can order the ship not to leave the foreign port if it is concerned about the manifest data. The Coast Guard can intercept vessels prior to arrival.

Upon arrival, Customs inspectors have another opportunity to physically inspect the vessel and the cargo. While only a small percentage of cargo is physically inspected by a human, the issue is not the quantity of inspections but the quality of targeting which cargo to inspect. Part of that targeting equation is whether the importer is a C-TPAT member. A greater percentage of cargo is subject to electronic inspection including x-rays and radiation detectors. In addition, containers are now required to have secure seals that show tampering. Truckers are not permitted to enter the port area without proper clearance. There are, in other words, lots of layers and most are not within the control of the port operator. Cargo security is surely not perfect but there is no such thing as perfect security.

So, what is going on here? Well, the President screwed up by not being more up-front with the local authorities, Congress, and his own party about this. Also, a full review by the Committee on Foreign Investment should have been conducted to avoid charges that the sale was pushed through. With the politics aside, the administration could have focused on the facts of its case.

But, as it is, they seems to have shot themselves in the foot. Which, given recent events, is an improvement in aim.

Tuesday, February 14, 2006

Cook County Politics at its Finest

Chicago is a strange place when it comes to politics. Indictments of public officials are common.

But, things have been stranger than usual lately. There is a fight going on between city inspectors and the County Clerk over whether there are rats or mice in the basement of the County Building. For those who don't know, the County Building and City Hall are, effectively, the same building, with wings dedicated to each operation. There are different addresses only to reflect that there are different doors available. City inspectors are accusing the County of poor housekeeping while the County says the City is blaming the victims rather than dealing with the rodent (of whichever species) problem.

In the meantime, the City Clerk has resigned after being indicted for bribery. This is Chicago, so that is not too surprising.

But, the strangest story we've had in while is this one. It appears that a guard at the Cook County Prison actually allowed a prison break to take place just to embarrass the outgoing Cook County Sheriff and possibly influence the upcoming election. Chicago has a long history of fixing pot holes, delivery garbage cans, and other street-level incentives to vote. Letting convicted felons out on the street seems to be a new strategy. In the end, the cons were re-captured making the Sheriff's Department look well managed and up to the job.

Sometimes You Need A Customs Lawyer on Your Speed Dial

This woman clearly needed help clearing her souvenirs on her return home from Haiti.

Thursday, February 02, 2006

Still want to buy a Saab?

I have always liked Saabs. Really. They have quirky good looks that stand out in the parking lot and what appears to be good performance. I recently drove a 9-3 2.0t and enjoyed the ride.

What does this have to do with Customs law? Read Saab Cars USA, Inc. v. U.S. and you'll get an interesting look at the inner workings of the auto industry. Saab, like other car companies, is aware that the customs regulations permit an importer to seek an adjustment in the value of merchandise that is, at the time of importation, damaged. This comes from 19 C.F.R. § 158.12, for those following along. Saab also knows that it has warranty expenses for the cars it imports. There is a reasonable argument to be made that if a car needs a repair covered by a warranty, that the car was--shall we say--less than perfect when imported. After all, if the car was not latently defective, it would not have needed a repair.

So, Saab filed some protests seeking a value adjustment. This is where the details get complicated. Some of the repairs were made right at the port immediately after importation. Others were made at some time later. But, in all cases, Saab knew the specific car repaired (based on VIN) and the exact cost of the repair. Consequently, Saab was able to link the cost of the repair to a specific entry of merchandise. Accordingg to Saab, that should permit a value adjustment.

But, there were all sorts of issues in the case. It is hard to decide where to start. One issue related to the protests. Some of the repairs were actually done after the date of the protest. Given that a protest must be specific enough to inform Customs of the issue and also clear enough to show the Court what the importer had in mind, it is hard to see how an importer can legitimately file protest about something it has not yet discovered. How would it have that defect in mind or communicate it to Customs? The Federal Circuit held that Saab could not properly file a protest covering undiscovered defects because importers would then be able "to file blanket protests of the appraisal of all its entries based solely on a probability that some portion of the entries will, in the future, turn out to be defective."

Another new question was what standard of review applies when the CIT makes its decision based on an agreed statement of facts in lieu of a trial. This is technical, feel free to skip ahead. On a motion for summary judgment, the Federal Circuit looks at everything de novo; looking only for errors in the interpretation of the law. That is because no disputed facts are involved. But following a trial, the Federal Circuit applies that standard only to questions of law. On questions of fact, the Federal Circuit gives greater deference to the CIT and applies a "clearly erroneous" standard. Until now, it has been unclear whether a decision after an agreed statement of fact in lieu of trial was more like summary judgment or more like a trial. Now it is clear. According to the Federal Circuit, the proper thing to do is treat it like a trial because the CIT has to draw inferences from the stipulated facts in a way not permissible in a summary judgment proceeding. Thus, the factual determinations should be over turned only if clearly erroneous.

One more thing, there was an interesting tussle over what the government has to do to overcome a motion for summary judgment. When the plaintiff supports its motion with affidavits or other evidence, it is not enough for the government to simply deny that the plaintiff is right. It has to come forward with something to counter the evidence. Unless, and this was the problem for Saab, what the plaintiff put forward is not enough to cover its own burden of proof. In that case, the defendant is able to sit back and say, essentially, "So what?" to all the evidence.

The question now is whether anyone wants to buy a Saab knowing that they come into this country with latent defects that need repair. The way this is discussed in the opinion, it would lead one to believe there were lot of such defects on lots of Saabs. I doubt it. There is nothing in the opinion about the scope of the defects. Are we talking scratched paint or are we talking warped heads? Don't know. My guess: far more minor things than big problems. Moreover, I still like the looks of that 9-3. Still, I am not sure about a car in which the average person can't find the ignition switch. For now, maybe I'll nurse my 10 year old Camry along.

The Secret Service, Really?

So the President has named a successor to Commissioner Bonner. Drum roll please . . . It is not me!

No, it is W. Ralph Basham, Director of the Secret Service, of all things. I have no insight by which to judge the quality of the nominee and would not do so here any way. But, it is going to be interesting to see how his experience translates into a job which, we must remember, is at least in part still about facilitating legitimate trade. Will a guy who was once responsible for protecting the Vice President really want to focus on whether Customs needs to go through the process of formally revoking a ruling it made in error (as was partly the question in International Custom Products at the CIT); or whether the Periodic Monthly Statement process is ready for portal and non-portal accounts; or the hundred other things commercial interests worry about?

Again, I have no reason to doubt that Mr. Basham is up to the task. He seems to have had a distinguished career in law enforcement and Customs is in the law enforcement business. I also know that he will have good, experienced, career Customs officials to work these commercial issues with him. We in the trade community will wait and see.