Wednesday, November 28, 2007

News Review: Excellent Article on Myth of the NAU

My groundbreaking work debunking the myth of the North American Union has, once again, been snubbed. Nevertheless, this article by Drake Bennett of the Boston Globe is excellent. The author not only discusses the facts but also the political and social reasons that the myth persists and is gaining traction.

While we're at it, David Brook's recent New York Times piece covered similar ground and, more important, took a much needed pot shot at Lou Dobbs.

Finally, here is more on the great Honduran sock debate.

Tuesday, November 27, 2007

Counterfeit News of Interest

Customs and Border Protection is responsible for preventing the importation of counterfeit merchandise. This news item from CBP says it recently intercepted a shipment of 20,000 fake "Coach" belts from China in Seattle. Clearly, the holidays will be less bright for the fashion conscious bargain hunter this year. Which, by the way, is as it should be.

A more interesting story is this piece from the New York Times. Famous luxury merchant Tiffany has sued famous online auctioneer eBay to force eBay to get counterfeit merchandise off its web site. This creates some interesting questions concerning eBay's role in the transactions. eBay argues, I'm paraphrasing here, that it just provides a communication channel connecting buyers and sellers. The way eBay sees it, the seller is liable to Tiffany, not eBay. Tiffany, of course, disagrees. Among other things, it points out that eBay profits from the sale of fake merchandise on its site.

Assume that eBay is held liable as a contributory infringer, what exactly is it supposed to do? Tiffany (and Nike, and Coach, and Rolex, etc.) have the expertise to identify fake merchandise. eBay does not. Further, eBay has no way of physically examining the merchandise private parties all over the world offer for sale on its site. Of course, neither does Tiffany.

The problem for eBay is that a difficult business process is not in and of itself a legal defense. Getting customs valuation correct is hard, that doesn't mean importers don't have to do it. I'm not making light of this; both Tiffany and eBay have a serious problem. Perhaps the judge will find that eBay's profits are so remote from the actual sale that it is not liable. That would make more sense if eBay charges a flat fees for posting. I'm not sure how their pricing works, so I am not offering an opinion. This will be interpreting to watch as it might have a fundamental impact on eBay's business model and the liability of Internet service providers large and small for the sale of counterfeit goods over their services.

Two-fer Tuesday

This goes in the customs news of the weird category:

Customs and Border Protection stopped a driver on the southern border attempting to illegally enter a U-Haul full of cheese and two parrots. Upon being pulled over for secondary inspection, the driver readily confessed to smuggling the merchandise. One must wonder (at least I must), if the two categories of contraband are somehow related? Do the birds like the cheese? Were the parrots destined to become part of some nasty domestic bird pannini ? We can only hope the Department of Agriculture tells us the details.

This goes in the category of proof that I may not be that bright:

I have not been on my bike in a while, a long while. Recently, I bought a new trainer so I can pedal in my basement through the dark and cold winter. Two nights ago I decided it was time to get on the bike. That's smart. The not-so-smart part is that I made that decision immediately after dinner, which consisted of a burrito and (uncharacteristically) a beer. As you might imagine, no personal bests were accomplished.

Also showing my lack of common sense, I have had a self-inflicted bad eggnog experience. I like eggnog. This is not exactly a product I grew up drinking and my experience is limited mainly to grocery store nog of the cardboard carton variety and an exceedingly potent version made by a law school professor of mine. Either way, I like the stuff. The problem is, store bought eggnog is not good for you. Even the "lite" variety is not a particularly healthy choice. Thus, I was happy to discover soy nog ("snog?") in my grocery store. A comparison of the nutrition labels indicated it is a healthier choice. To save you all aggravation and disappointment, let it be known that soy nog stinks. The stuff has the consistency of milk and very little taste. Here is confirmation in a Slate article, although my offending nog is of a different brand. Don't say I did not warn you.

On the other hand, these people seem to like it for those same reasons.

Saturday, November 17, 2007

Cool Hand Customs

Sometimes the law turns on the strangest of details. Samuel Aaron, Inc. v. United States, a Federal Circuit decision affirming the Court of International Trade is a good example.

The issue here was whether protests were timely filed. The case is more complicated than most because the relevant liquidation was a reliquidation and the only notice of reliquidation was an off-line binder in the customhouse that was separate from the normal binder of printouts generated by ACS. Later, after generating bills for unpaid duties, Customs placed ACS notices in the binder of bulletin notices. What we have here is a first liquidation notice separate from the electronic status report, separate from the paper courtesy notice, separate from the binder of regular liquidation notices, and then a second notice in the regular binder with an icorrect reliquidation date. Is that a failure to communicate?

The Court of International Trade dismissed the plaintiff's challenge to its denied protest finding both that the reliquidation was valid and that the first liquidation notice, while sloppy, was legally adequate notice.

On appeal, the plaintiff's first argument was that reliquidation did not really occur until Customs and Border Protection ran the entries through ACS and corrected the amounts to be billed. This was later than the liquidation date noted in the bulletin and within 90 days of plaintiff's protest. Specifically, there were two errors in the notice. First, one entry that was entitled to GSP was listed as needing to be reliquidated. Second, the amount of duty owed on a second entry was corrected at the time of billing. The CAFC found that these correction of minor discrepancies after liquidation did not amount to liquidation.

If you are interested in this part of the decision, you need to read the case in detail. I have some doubts about whether Customs had finally determined anything until it prepared bills for the importer. But, the CAFC found that liquidation had occurred and the protest clock was running.

I think the more interesting issue is the question of notice. The law has long been clear that the official notice of liquidation is the posting in the customhouse at the port of entry. The notice must be in a place conspicuous to a prudent importer. The question here is whether the second "off-line" binder of notices was conspicuous particularly given that the regular ACS binder did not provide notice to check the other binder. The CAFC found that the reasonable importer would know that off-line liquidations occur and would have looked for that binder.

The next question was whether the off-line notice needs to be on or designated as Custsoms Form 4333. The CAFC found that the binder contained all the necessary and relevant information regarding the reliquidations. Thus, the failure to designate the form as such did not invalidate the notice.

This is one of those unfortunate cases where the law does not help the sympathetic plaintiff. It is hard to tell from the case as published, but it seems safe to assume that had the protest been filed on time, the plaintiff would have been entitled to refunds. Customs made a hash of communicating with the importer. Part of the blame for that goes to Congress, which routinely lets the GSP lapse and the renews it retroactively. But what is the outcome? The U.S. received duties to which it is not entitled as a result of a liquidation and re-liquidation that many reasonably importers might have misunderstood.

Maybe it is time to replace paper bulletin notices with electronic notices of liquidation. At least that would eliminate arguments on whether a notice was conspicuous, on the proper form, or delivered to the correct address. There is, however, a much bigger question of whether individual entries should really be the basis for all subsequent dealings with the importer. A common analogy goes that if the IRS worked like Customs, you'd have to file a tax return after every pay check and fight the taxes collected on each pay check individually. Given the number of entries at issue for most importers, it seem like CBP's activity summaries, reconciliation, and similar programs are just nibbling around the margins of the problem. Maybe Congress needs to take the big bite and revamp the law to permit post importation reporting without individual liquidations.

Wednesday, November 14, 2007

Is Customs Working Too Hard?

Look at this story.

The thing about having a job to do as a professional is the ability to exercise discretion. Digging ditches is an honorable profession. But ditch diggers rarely get to decide how deep or wide to dig. They follow directions and do what is required for the particular job. It is left to some engineer to determine what this particular ditch needs to look like.

To some extent the same goes for Customs and Border Protection. There are times when the "by the book" or "just following procedure" approach does not make sense. One example is the story noted above where a fire engine from Quebec was trying to enter New York to keep a building from burning down. CBP ran the vehicle and the firefighters through the normal process and held the truck up for 8 minutes. Apparently, one of the firefighters had a criminal record. OK, that makes sense if he was in a Winnebago with a bunch of frat boys and a keg. But this was a firetruck responding to a fire.

I'm sure CBP is not happy with this either and I am not trying to pile on. But, I think some people in CBP may have lost site of when and how to exercise discretion. That is a very important skill for government employees, particularly law enforcement officials. In some ways, it separates good government from a bureaucratic mess.


I was going to leave this alone, but it is getting a lot of press coverage. Bottom line is that an ambulance carrying a cardiac patient to a hospital in Detroit from Windson was also stopped at the border. The cause seems to have been a computer generated requirement for a more intensive review. I understand that there is an international border involved and that an ambulance (particularly a private one) might be used as a ruse to get bad guys into the country, but there should be a way to avoid treating an ambulance with lights and sirens going and a nearly dead guy in the back the same as a bus of conventioneers returning from the Windsor Ballet.

Monday, November 12, 2007

Customs & Border Protection at Work

More on the international trade importance of socks. It seems CBP intercepted Chinese socks transshipped through Ghana. The socks not only avoided quantitative restrictions but also claimed benefits under AGOA.

Breaking up a scheme right out of a 1960's sitcom, CBP found a man in a suitcase in the back of a car crossing in from Mexico.

Finally, Customs arrested a man entering the U.S. from Canada who is wanted on an Interpol warrant for war crimes in Croatia. The strange thing about this arrest is that the guy was driving a tractor-trailer bound for Florida carrying what I assume was a commercial shipment of recreational benches and soap. I assume he was working in Canada as a trucker.

Friday, November 09, 2007

NAFTA Expansion?

The House voted on the Peru Free Trade Agreement yesterday. There is a lot of campaign season politics involved in this vote. The Senate still needs to pass the bill before the agreement can be implemented. That's fine. There are so many FTA's now that the passage of a new one is of little note as far as the trade community is concerned.

What I find interesting is the number of people, mostly bloggers, who insist on calling new free trade deals--particularly in the Americas--an expansion of NAFTA. See here, here, and here. Its not true. NAFTA is a free-standing deal as are the deals with the CAFTA-DR group and the pending agreements with Columbia and Panama. The main reason this is not an expansion of the NAFTA is that for companies wanting to take advantage of the NAFTA and also CAFTA, for example, the Canadian and Mexican content counts against them.

The Peru agreement, if passed, will require that merchandise originate in the U.S. or Peru. The rules of origin will generally require that non-U.S. and non-Peruvian content be processed to produce significant changes in the material and add significant value in the U.S. or Peru. So, a company that is heavily invested in Mexican content or manufacturing as a means of establishing NAFTA origin, will be in worse shape when trying to qualify goods for preferences under the Peru agreement. In some ways, all these new agreements are the anti-NAFTAs, not an expansion of it.

I know that some of these writers are thinking that these new agreements in the western hemisphere are an attempt to build a Free Trade Area of the Americas. If it ever gets off the ground, the FTAA might reasonably be called an expansion of the NAFTA as Canada and Mexico would be included in a free trade area stretching from the Yukon to Tierra del Fuego. But, that deal has little momentum. These deals create a patchwork of competing trade agreements that is a far cry from an integrated hemispheric trade bloc.

Thursday, November 08, 2007

On Bismarck and Brokers

Otto von Bismarck is reported to have said "Laws are like sausages, it is better not to see them being made." Clear evidence of that is Senate Bill 2045. This bill, introduced in September by Senator Mark Pryor of Arkansas is intended to sure up consumer product safety by reforming the Consumer Product Safety Commission.

Section 15 of the bill states:

Section 17 (15 U.S.C. 2066) is amended by adding at the end thereof the
(i) The Commission may--
(1) designate as a repeat offender, after notice and an opportunity for a hearing, any person found by the Commission to have committed multiple violations of subsection (a); and
(2) refer any such person to United States Customs and Border Protection with a recommendation that the person's import license be terminated in accordance with that agency's procedures.

The subsection (a) referred to is the provision that allows Customs to refuse admission into the United States of merchandise that does not comply with U.S. standards, is defective, or is hazardous.

Here is the question, who is going to be a repeat offender? One would think that it would be the importer of shoddy merchandise. The problem with this interpretation is that importers almost never have anything called an "import license." There are exceptions for guns and other controlled merchandise, but an import license is generally not required in the United States.

Unless, of course, Congress is talking about customhouse brokers. Brokers are licensed by Customs to engage in customs business on behalf of importers. Is that the license the CPSC might recommend Customs and Border Protection revoke?

It seems impossible that Congress wants to force brokers, who are agents of the importer, to confirm that the importer's merchandise does not violate U.S. safety standards. That is just not part of their job, not within their normal skill set, and not a reasonable expectation.

On its face, it appears that this bill was originally drafted by someone with little if any knowledge of how trade works. It looks as if the bill was intended to allow the CPSC to prohibit importers from further importations. But, it seems that the brokers are the ones facing the sanction.

According to the National Customs Broker and Forwarder Association of America, the bill has now been marked up by the Senate Committee on Commerce, Science and Transportati0n. Apparently (and I admit I have not seen the amendment), the Senate decided to make it explicit that its intention is to go after brokers' licenses. This, of course, has the look of a face-saving move intended to send the message "We know there is no such thing as an import license; we always meant to target the brokers."

Geez. I am hopeful that someone will come to their senses before this sausage is thrown on the grill and served up Chicago style.

UPDATE (11/22/2007): Word on the street is that brokers have been removed from the line of fire of this loegislation. I guess someone on the Hill was listening.

Monday, November 05, 2007

Customs News of the Weird

Shopping cart crime.

Apparently, the aftermarket for Home Depot shopping carts in the Caribbean is robust enough to spawn their theft and smuggling out of the U.S.

Edwards confused on the borders of North America.

According to John Edwards, NAFTA has caused the recent flood of unsafe toys from China. I'm not sure why that would be given that China is a long way from North America.

Colbert on the North American Union.

Great fun and actual information. I can't and don't vouch for anything else on the linked page.

Sunday, November 04, 2007

Heartland Cleanup

Heartland By-Products is one of those cases that seems to never quite end. The basic facts are that Heartland wanted to import sugar syrup from Canada to the U.S. and sought to arrange its manufacturing in a way that avoided the potential high rate of duty for out of quota shipments. To make sure it had engineered its process properly, it requested and received a ruling from Customs that its product was not subject to quota. Following the ruling, Heartland started importing sugar syrup.

Apparently, the U.S. industry did not appreciate this plan and it asked CBP to reconsider. CBP obliged and eventually revoked the ruling. Seeking to prevent the revocation ruling from becoming final, Heartland went to the Court of International Trade for a declaratory judgment that the revocation was invalid. This happened under 28 U.S.C. 1581(h), which gives the CIT jurisdiction to review negative prospective customs rulings if the importer can show the ruling will cause irreparable harm. This is tough to do. But, the CIT found irreparable harm and that the revocation was invalid. So, Heartland kept on importing.

The government, however, appealed. Importantly, it did not ask for a stay of the CIT's judgment. Eventually, the Federal Circuit reversed the CIT and held that the revocation was proper. Now, this leads to the current question: How should CBP liquidate the entries that Heartland made up until the Federal Circuit's decision was final (i.e., the time of "mandate")? Customs wants to liquidate at the higher out-of-quota rate. Heartland believes the CIT decision should apply to all entries up until the date of the mandate.

The Court of International Trade held in this most recent decision that the Federal Circuit's decision does not apply retroactively to nullify the 1581(h) decision. Rather, it applies only to entries made after the date of the Federal Circuit's mandate. Any other conclusion, according to the CIT would render its decision a mere advisory opinion without practical effect (and Courts generally don't like to do that). Thus, the Court required CBP to liquidate the affected entries in accordance with the original decision.

The wider impact of this decision is probably limited. First, this all might have been avoided had Customs sought a stay of the CIT's original decision until the Federal Circuit decided the appeal. Customs might also have been able to simply seek an agreement with Heartland to hold off on liquidations. But, the bigger point is that (h) cases produce judgments that have practical impact and results. They are, in effect, injunctions against contrary action by CBP until the Federal Circuit says otherwise. That seems to be new law for these unusual circumstances.