Saturday, December 29, 2007

I'm Off

I'll be offline for the next week or so. If anything major happens, feel free to post it in the comments. Otherwise, I'll try and catch up when I get back.

Happy new year.

Monday, December 24, 2007

Happy Holidays and Sorry About the Opium

I hate to be the bearer of bad news. But, if you are expecting a picture frame, Aqua Dots, or Louis Vuitton handbag for the holidays, your gift might not arrive.

According to this news item, Customs and Border Protection seized a shipment of picture frames with opium concealed inside the frames. Seem like good police work in the ordinary way, but is even more surprising considering that it was a UPS shipment at the UPS hub in Louisville. Given the volume passing through that border, it is amazing the shipment was caught.

In other seizure news, you won't be getting your Aqua Dots from Seattle nor will you get your fake handbags from Atlanta.

On an unrealted note, today I saw the movie No Country for Old Men. It is a really good movie if you are interested in well-made character studies of the criminally insane and slow talking Texans. I mention this only to note the poor showing Customs and Border Protection had in the funny characterization of a Border Patrol Agent on the U.S.-Mexico Border. Given the merger of the Border Patrol into CBP, I need to add this to my list of movies featuring appearances by Customs.

Thursday, December 20, 2007

Spicy Seizure

I like hot peppers as much as the next guy. Maybe more so. I am particularly fond of hot Italian-style giardiniera. Scala's Packing (click on Italian Style Peppers) in Chicago makes the best. But, I am also fond of the humble jalapeno, which may be why this story caught my eye.

It seems that someone smuggled several bricks of marijuana into the U.S. from Mexico by submerging them in bottles of pickled jalapenos. Perhaps they figured no Gringo would stick his or her hand into the jar just on a hunch. Or maybe the thinking was that a dog could not smell through the peppers to find the pot. Hard to tell. Either way, Customs and Border Protection did its job and found the drugs.

But, Dude! I wonder whether . . . you know . . . the weed . . . if smoked . . . would have had a spicy Chili's Tex-Mex kind of harsh to kill the mellow. Only Otto Mann would know for sure.

Now I am hungry.

Wednesday, December 19, 2007

Gearing Up for a Trade War?

Since 2001, Mexico has been entitled under the NAFTA to send trucks into the U.S. Since 2001, the U.S. has refused to allow that in any meaningful way. First, before I get any e-mail or comments about the danger NAFTA represents to our sovereignty, keep in mind that the U.S. has so far refused to do what it agreed to in the NAFTA. This is not a sovereignty issue. The U.S. government still controls the borders, at least in a legal sense (if not always in a practical sense).

The current Bush administration created a pilot program to permit authorized Mexican trucking companies to operate in the U.S. Now the funding for that program is at risk in Congress. Based on this article, it seems that Mexico is getting fed up with waiting and is contemplating retaliation. Under NAFTA, retaliation means imposing duties on U.S. merchandise shipped into Mexico at a level equivalent to the harm Mexico suffers as a result of the truck blockade.

This is not good news for the farmers and ranchers who ship goods to Mexico duty-free under the NAFTA.

Monday, December 17, 2007

Ford News Flash

If you have an interest in NAFTA, this is big news.

As you know, Customs & Border Protection has been pursuing a $42 million recordkeeping penalty against Ford for failing to produce backup documents supporting certificates of origin from a Mexican supplier. For background see this earlier post.

Earlier today, and despite winning a preliminary ruling, CBP agreed to settle the case for zero penalty from Ford. The settlement is done and a stipulated dismissal has already been filed with the District Court. According to industry sources, the only statement the government has made regarding the substance is that it is re-evaluating is policy regarding NAFTA recordkeeping.

This is tremendously good news for NAFTA importers. As I have said previously, we all owe Ford a debt of gratitude for fighting the good fight. Ford's counsel deserves congratulations as well.

Friday, December 14, 2007

Check Your Journal of Commerce

For those of you who get the paper copy of the Journal of Commerce, the most recent issue includes an interview with me. Once I get permission, I'll put up a link to the article. For now, I'll leave it to you old-school readers to enjoy the article.

While we're at it, I was also quoted in the November 19 edition in a piece on NAFTA enforcement. That article is online, but you'll need a JOC username and password to get to it.

Also, as long as I am engaged in shameless self-promotion, I will be speaking at the annual Georgetown Law CLE International Trade Update. Last year, we had lots of fun with an oral argument on whether Luke Skywalker and Han Solo are human for purposes of customs classification. This year is sure to be a good program; although my part will be a more mundane discussion of internal reviews and prior disclosures.

Thursday, December 13, 2007

One Last Thing

I was going to steal this from Wayla-guy. I am too tired for that. Instead, go here and read his take on the Republican debate. And, in particular, watch the linked You Tube video in which the candidates discuss how to "fix" NAFTA.

Decisions, Decisions

I haven't commented on a court decision in a while, so now I will comment on three.

In U.S. v. National Semiconductor, the CIT (via Judge Musgrave) went back to the question of what interest might be due on unpaid duties where the violations were the subject of a prior disclosure. In a typical disclosure case, the importer pays the duties and the only penalty is the interest on the withheld amounts. The avoidance of larger penalties is the value of the the disclosure process. I blogged about this case previously when Judge Musgrave both declined to mitigate the interest penalty and ordered the importer to pay compensatory damages to make the U.S. whole for the loss of the time value of the money. That decision was overturned in part and sent back to the CIT for a new determination that does not award compensatory interest.

Now, in the remand decision, the Court of International Trade, at the urging of the United States has awarded pre-judgment interest in addition to the interest penalty under 19 U.S.C. § 1592. The basis for this is the Court's conclusion that the interest penalty is not punitive but is a form of liquidated damages. Liquidated damages are generally considered to be compensatory. Prejudgment interest, according the the Court, also makes the U.S. whole and is, therefore, appropriate.

The result may be legally correct. I suspect the Federal Circuit will see this issue as well. If the decision becomes final, it is certainly not going to encourage prior disclosures.

Another interesting case is Esso Standard Oil Co. (PR), v. United States, which may well be the last of its breed. This is a 520(c) case. This particular provision of the law allowed importers to request reliquidation of an entry up to a year after liquidation but only to correct mistakes of fact and inadvertences. The problem was that everyone who missed a protest date styled their claim as a mistake of fact or inadvertence and 520(c) cases became exercises in creative writing for lawyers and hair splitting for the courts. The whole mess was repealed when the protest period was extended to 180 days.

This case involved a clear mistake. Customs collected Harbor Maintenance Tax on transfers between the U.S. Virgin Islands to Puerto Rico. This was improper. Since 1988, the law had exempted these shipments from HMT. Despite that, Customs did not get around to changing its regulations or the automated systems until sometime after 1997. Looking at the regulations and relying on the automated system Esso, went right ahead and paid.

I suspect a lot of judges may have ruled differently than did Chief Judge Restani. The easy path for this case would be to say that when the "importer" paid the tax, it was making a judgment as to the legal requirement and, therefore, this is a mistake of law rather than a mistake of fact or inadvertence. The Court, however, started with the recognition that the law surrounding HMT is a mess; it is unclear that Congress fully contemplated how it would be administered. The Court then held that the payment under these circumstances was an inadvertence; defined as an oversight or involuntary accident.

The inadvertence, however, was not just the payer's failure to note the change in the law. Interestingly, the inadvertence (read that as "oversight") was also Customs' failure to update the regulations and its affirmative collection of a tax that was not legally owed. Ultimately, the Chief Judge said, "It is simply inexcusable for the master of the Customs laws to fail for almost a decade to amend the applicable regulation that governs the conduct of port officials collecting HMT and to continue to authorize incorrect software."

If that's the law, Customs and Border Protection ought to take a look at 19 CFR 10.16(c)(3), which purports to limit painting U.S.-origin components in a foreign assembly operation for purposes of 9802.00.80 to preservative, non-decorative painting. That has not been the law since 2004 when we won this case. Now I wonder how many importers have continued paying duty on painted U.S.-origin components.

Motorola, Inc. v. United States, is the last case. This is a Federal Circuit decision finishing up litigation over the classification of cell phone battery components. The interesting part of this case is that it cleans up a bit previously left dangling over whether two pre-importation ruling letters are sufficient to create a "treatment" requiring Customs and Border Protection to go through the steps of modifying or revoking the ruling before acting inconsistent with it. Turns out, to Motorola's bad fortune, that they are not. These PRL's apparently have very limited application. Too bad, it was a nice argument.

False Copyright Claims

Interesting piece from Boing Boing. False copyright claims are a lucrative business for sleazoids - Boing Boing

Think about this the next time you buy a print or a coffee mug at a museum gift shop. No one, anywhere owns the copyright to a Da Vinci or Rembrandt. The question is whether taking that public domain piece of art and placing it on a coffee mug, sweatshirt, or note pad creates a new work. Even if it does, the public domain parts of the new work (i.e., the original painting, which is the true value of the chotchky) can be taken and re-used at will. It's in the public domain, so you already own it.

Also, remember that works by Picasso, Jasper Johns, Jackson Pollack and many other artists still remain under copyright. So don't go into business selling Edward Hopper Nighthawks-brand baby wipes and say I told you to do it.

For good measure, I give you this picture by Hieronymous Bosch, who has been dead for almost 500 years. Thus, I feel safe that it is in the public domain.





Monday, December 10, 2007

Snubbed

Clearly I have no friends in the highest reaches of the American Bar Association, an organization to which I have given years of effort and cold cash in the form of dues, travel expenses, and time away from work. And yet, hard as it may be for you--my dedicated readers--to accept, once again I have been snubbed. For reasons that can only relate to an ongoing conspiracy to silence and discredit me, I have been left off the Blawg 100!


Sure, I am less snarky than David Lat of Above the Law and not nearly as prolific as Denise Howell of Bag & Baggage, Lawgarithms, and Between Lawyers. Nor am I as high-brow as Mr. Becker's and Judge Posner's The Becker-Posner Blog. But, so what? What do those guys know about the tariff classification of control knobs for appliances? Nothing, I tell you; and that is not an uncomplicated topic.

I will soldier on. No doubt, like van Gogh or Pauly Shore, my true genius will only be recognized after my death.

Wednesday, December 05, 2007

Update and Legislation

This piece updates the status of Goran Pavic, the trucker Customs and Border Protection arrested on an Interpol warrant for war crimes in Croatia. He remains in custody in Detroit although the magistrate on the case seems to be questioning the arrest.

Rep. Nancy Boyda of Kansas announced that she plans to introduce the NAFTA Accountability Act this week. The bill contains five conditions for continued U.S. participation in NAFTA. Those conditions and the U.S. party responsible for the determination are:

  • Gains in U.S. jobs and living standards (by the Secretary of Labor)
  • Increased U.S. domestic manufacturing (by the Secretary of Commerce)
  • Improved health and environmental standards, with respect to food imports and to U.S.-Mexico border areas (by the Secretary of Agriculture, the Administrator of the Food and Drug Administration, and the Administrator of the Environmental Protection Agency)
  • Reduced flow of illegal drugs from Mexico and Canada (by the Attorney General)
  • Mexican democracy and human freedoms (by the President)

As best I can tell from this summary, the point of the bill is to punish U.S. consumers (including manufacturing companies), U.S. exporters, Mexico, and Canada if the U.S. does not experience an improved standard of living and increased domestic manufacturing. Somehow, I missed those parts of NAFTA that control business cycles, imprudent mortgage lenders, business conditions in China and India, the price of fuel, health care expenses, and a million other variables that make up the economy.

Tuesday, December 04, 2007

Peru is a Done Deal


Today the Senate approved the Peru Trade Promotion Agreement by a vote of 77 to 18. This clears the way for the president to sign it into law. Here is a NY Times article on the passage. As these things go, this is not a very big deal in terms of economic impact for the U.S. Total trade between the U.S. and Peru is less than $8 billion per year, accounting for less than half a percent of the total U.S. trade volume.
Peru has a population of about 28 million and a land area slightly smaller than Alaska. Economically, Peru is heavily dependent on its mineral wealth for exports. From 2002 to 2006, there was consistent economic growth and currency stability although the need to improve infrastructure has limited foreign investment. In addition to copper, gold, and petroleum, major exports include textiles and guinea pigs. Major imports to Peru are plastics, machinery, and vehicles. The U.S. is the largest exporter to Peru followed by China, Brazil, and Ecuador.

In case you are wondering, these are not the kind of facts I generally have in my head. I took them from the CIA Factbook. Because it comes from America's intelligence community, this information is entirely reliable and should be used as the basis for important policy decisions.

Even without the agreement, nearly all Peruvian products enter the U.S. duty free. Thus, the value of this agreement is in better market access by U.S. exporters to Peru and in certain legal reforms undertaken in Peru. According to Article 23.4, this agreement will enter into effect 60 days after the parties exchange letters saying they are ready. I believe the letters are to be left in a mayonnaise jar on Funk & Wagnell's porch.