Monday, December 29, 2008
Monday, December 22, 2008
What I do think is interesting is the comparison to the U.S. market. What do you think would have to happen to get Americans to take to the streets to protest an increase in customs duties? The U.S. has basically banned some forms of caviar, made so-called "conflict diamonds" contraband, and maintains high rates of duty on fancy foreign shoes. So, I surmise it is not luxury items that would cause a riot.
I posit that an increase in the effective rate of duty on Red Stripe, Corona, and Pilsner Urquell would cause an uproar among the pretentious young intellectual crowd. Keep in mind, I write this while sitting in this T-shirt. I think that makes me an over-the-hill pretentious intellectual wannabe.
For me, if this stuff lost its NAFTA status, I'd consider moving to Mexico.
Lacey Act Declaration form.
Plant classification database.
And here, for good measure, is the APHIS Lacey Act home page.
Wednesday, December 17, 2008
First, just so CBS knows, my firm has an office in New York and we are happy to come by for a meeting. We'll bring sandwiches if you want.
The story is that upon wrapping the 17th season of its reality show Survivor, CBS shipped a container of goods back to the U.S. The show had filmed in Gabon, West Africa. Note surprisingly, the shipment contained lots of Africana including animal skulls and hides, ceremonial masks, ostrich feathers, shells and various bones.
OK, first things first, people familiar with Fish & Wildlife regulations should have that tingling of Spidey-sense. What kind of shells and bones? Do we have a Convention on the International Traffic in Endangered Species problem? What were the masks made of? Could there be elements from protected species used to decorate those masks?
As John McLaughlin would say, Issue Two: The merchandise was apparently infested with termites and other vermin including some linked to Ebola virus. What? Skip APHIS and call the CDC right away. Ebola virus is supposedly the most deadly virus on earth. According to The Hot Zone by Richard Preston, which I highly recommend, people infected with Ebola quickly fall apart inside and bleed to death from every orifice of their body. Now, I am not saying Ebola was in the container, the story just says that there were pests associated with Ebola in the container. That's good enough for me to be wary. I hereby pass on any invitation to spend New Years Eve at Jeff Probst's house.
Issue Three: The manifest data for the shipment identified the goods as American Goods Returned. At first, I was floored by this. How could ceremonial masks and ostrich feathers be US goods returned? Then I started thinking about the importer. After all, this is CBS--a television production company. If there is one thing they are likely to have, it is a giant warehouse of props. They probably have stuff from Tarzan movies and old episodes of Daktari to recycle as Tribal Council chotzkes. So maybe they are are US origin. I certainly don't know. If it was actually US goods returning, I am sure that CBS has the necessary documents to support the claims.
Issue Four: The CBP spokesperson says in the article that ALL packages containing US goods are inspected to ensure that foreign merchandise is not commingled. Really? All such packages? Clearly there are more inspectors out there than I had known.
Last thing: Was that Erin Moran in Daktari the same as Joanie Cunningham in Happy Days and Joanie Loves Chachi? Who knew?
I will now extinguish my torch and leave Tribal Council.
Tuesday, December 16, 2008
Washington is in pre-inauguration limbo and a lot of businesses are quiet either due to the economy, the cyclical nature of their business, vacations, or just the weather. It seems to me that there hasn't been much about which to write lately. (Perhaps I should post on whether it is worth sounding pompous to avoid ending a phrase with a preposition.)
So, I will pass on this item about festive articles. After years of litigation, Customs and Border Protection has issued new guidance on how to classify festive articles in the wake of Michael Simon Design, Inc. v. U.S. This guidance does not go to bakers' wares at issue in the ongoing Wilton case, nor does it cover costumes, which were previously resolved.
The upshot is that for entries post February 3, 2007 utilitarian articles like tableware, apparel, and bed linens are excluded from Chapter 95 by virtue of new Note 1(v). Following Michael Simon Design, the exclusionary note does not apply to entries prior to that date (although CBP argued that it should).
As a result, liquidation instructions appear to be as follows:
Entries prior to February 3, 2007
Utilitarian article with festive designs may be classified in 9505 as long as the design is closely associated with a festive occasion and they are unlikely to be displayed at other times.
Entries after February 3, 2007
Utilitarian articles with festive designs are to be classified according to constituent material and as tableware, linen, etc. pursuant to Chapter 95, Note 1(v). But (and this is a big but), if the design of the product is so closely associated with a festive occasion that displaying it at other times of the year would be unlikely (or "aberrant"), CBP is going to withhold liquidation pending the creation of a special Chapter 98 classification to guarantee rate-neutrality. What that is all about is the fact that if goods were previously properly classified as festive articles, the rate of duty should not increase when the classification changes as a result of the amended Chapter Notes. This has to do with the fact that the law requires amendments to be as revenue neutral as possible.
Keep in mind that your purely decorative (i.e., non-utilitarian) and festive merchandise stays in Chapter 9505.
Now . . . as the holiday season rapidly approaches and as I watch the snow pile up outside my window, I have the opportunity to expound on my personal, sure-fire test for whether something is a festive article. I call it the Rabbinical Test. Take any arguably festive article associated with Christmas or Easter and show it to a rabbi. If the rabbi says, "I would never have that in my house," it is a festive article. For example, take a serving platter in the shape of a snowman--top hat, corn cob pipe and all. There is nothing overtly religious about this item. Yet, everyone knows it is a Christmas item. If you tried to give it to a rabbi, the response (whether spoken or not) would be, "Oy, a chotzke I don't need. More mashugana chazerai from the goyim."
Take this pitcher. The only way it gets into my house is by accident. It's festive, and I'm not even a rabbi.
This works in reverse. If you show a Seder plate or Hanukkah sweater (if there is such a thing) to a priest and he says "I have no use for that," we know it is festive. Of course, you need to tailor the test for the festive occasion. I believe certain sects do not celebrate birthdays or Halloween, so they get those items for review. I think you see my logic.
Of course it will fall apart when Starbucks cleverly tries to get a Mormon to declare coffee a festive article.
Friday, December 12, 2008
So far, I am unimpressed. I don't know who would want to virtually follow a lawyer around a mundane day. But, should you want to do so, feel free to follow me at http://twitter.com/customslawblog. I'm not going to commit to lots of tweets. We'll see.
While I'm at it, I created a new e-mail account for this blog. E-mail generated from my blog profile had been sent to my Riding Circuits account. I don't check that very often. This should work better. The new address is email@example.com.
Have a good weekend.
Thursday, December 11, 2008
A South African man accused of trying to smuggle hundreds of rare chameleons, snakes, lizards and frogs out of Madagascar inside his jacket and luggage was convicted Tuesday and sentenced to a year in jail. Jo van Niekerk, 29, a zoology student from Pretoria, was arrested in November at Antananarivo Airport with 388 animals, among them several species found only on Madagascar, including a fanged snake and a nocturnal leaf-tailed gecko. Around 100 lizards and frogs were pulled from the lining of his jacket, including a dead lizard, officials said.100 lizards and frogs in your jacket seems crazy. Read the book; when you see the amount of money involved, you'll understand.
Tuesday, December 09, 2008
As the phones came on, the news of the arrest quickly spread throughout the plane. People spontaneously started discussing it. The out of touch flight attendant was suddenly interested.
The thing about it is that we will probably never be involuntarily separated from news again.
When I was in law school, the Challenger exploded during the day. Hours went by without any news of the event leaking into my brain. I found out on the train home when I read the paper over the shoulder of the guy ahead of me. That will never happen again. The kids in the law school classes I teach now sit behind laptops connected to the internet. The airlines are rolling web access out on planes. Airports of TV news running in gate areas. I have been on cruise ships in the Caribbean with perfectly acceptable internet access.
I realize that none of this is news, particularly to people who read or write blogs. But I think even the people who do not embrace technology, like my judgmental flight attendant, are marinating in data whether they like it or not.
I'm going to make a general exception here, without going into details. The first reason is that a loyal reader tipped me to the story. This indicates that it has some level of interest in the community. Second, it illustrates that the reality of compliance is often not the same as the government's abstract notion of compliance.
The story is that a CBP employee has been charged with employing an undocumented worker to clean her home. It is pretty clear that the CBP employee knew the legal status of the worker because the CBP employee advised the worker not to leave the county and try and re-enter. Here is the full story.
In the first year of law school, you have to learn torts. Intentional torts are the large and small attacks we face. Battery, for example, is the intentional, unauthorized, and offensive touching of another. (See, Prof. Trubow, I was listening.) So battery might be a punch in the face or a shoulder brush in the hall (assuming it could reasonably be considered offensive for some reason). What happens to first year law students is that they start to see battery, trespass, libel, and and other torts in perfectly normal human interactions. It takes a while for students to figure out that technical torts (or crimes for that matter) are not always pursued by the victims or authorities because they don't really matter and aren't worth the resources.
Sometimes, people find supposedly principled reasons for failing to comply. Ask any kid with a bunch of illegal music downloads why he or she should not pay damages to the copyright holder. You will get a bunch of tired justifications. "Information should be free," for example, or "the record labels make enough money."
The immigration laws in this country are very similar. At the retail level, where individuals hire baby sitters, housekeepers, and landscapers, the cost of compliance is high. Verifying status is not easy for individual employers and authorized workers are likely to be significantly more expensive. I am not making an excuse to justify it, just pointing out a fact. Large employers with resources and expertise should absolutely be held accountable. All I am saying is that human nature may well dictate that going 55 on the highway is not really expected when everyone around you is doing 70.
In her personal life, this CBP employee was acting like most Americans. Of course, when that behavior comes into direct conflict with her government position, the outcome will not be good. The real question, it seems to me, though, is whether the law needs to be aligned with the realities of modern America.
Does this apply to customs compliance? Should giant importers be given a pass in the name of trade facilitation. While there certainly may be circumstances in which CBP should exercise discretion, in the ordinary course, probably not. But, what about the new or unsophisticated importer? I hope CBP keeps them in mind when drafting regulations and rulings. I hope someone is looking out for the individual or small company who is, in all likelihood, just acting like a regular person.
Wednesday, December 03, 2008
I generally stick to customs law here, but in real life I do export and trade work as well. With that in mind, here is a story I should have covered earlier. It's a sailing story, and I like those. It is also an international trade enforcement story, so that makes it doubly interesting. It seems that the Bureau of Industry and Security charged Michele Geslin and Peter Goldsmith with violating the export control regulations for helping to organize a regatta to Cuba. According to BIS, that constitutes exporting their respective vessels to Cuba without a license and that is illegal. Apparently, BIS had gone so far as to show up at the launch party to explain that export licenses were required for any vessel intending to visit Cuba. The result was a fine of $11,000 each and the denial of export privileges for three years.
The details are interesting. But, more important is that the reported decision is instructive in its explanation of the process. Read it and you'll learn about charging letters, the roles of the Administrative Law Judge, the Recommended Decision and Order, and the role of the Undersecretary of Commerce in reviewing the ALJ decision.
Related to this, I heard today that post-election polling is showing a major shift in the opinions of Cuban-Americans with respect to the Cuba embargo. Apparently, the hard line is melting. Given the important role Florida plays in presidential elections, it will be interesting to watch whether U.S. policy toward Cuba changes.
Monday, December 01, 2008
Harmonized Tariff Schedule Online Reference Tool
The ITC has launched a cool site that makes navigating the Tariff Schedule easier and links 10-digit HTS numbers to related Customs and Border Protection rulings.
Thanks, ITC. We appreciate the effort.
Tuesday, November 25, 2008
Regarding enforcement, Customs has said that it will show restraint during a transition period as importers and carriers implement 10+2 systems. This restraint, though, is dependent on a showing that importers are making satisfactory progress on good faith efforts to implement the requirements. This period of flexibility will last for about a year from the effective date of the rule. That means until about January 26, 2010. After that, an importer's compliance efforts can be considered as a mitigating factor in an enforcement action.
In case you are wondering, enforcement of 10+2 (technically known as Importer Security Filing, Vessel Stow Plan, and Container Status Message Requirements) will apparently rely mostly on liquidated damages claims. This means new conditions need to be added to customs bonds requiring that the principal (i.e., the importer) comply with the reporting requirements. Failure to comply might result in liquidated damages equal to the value of the merchandise. Similar requirements will be added to international carrier bonds. Violations relating to the vessel stow plan may result in liquidated damages of $50,000. Violations relating to the container status message may result in liquidated damages of $5,000 for each violation up to $100,000 per vessel arrival.
Customs has expressed a willingness to be flexible with respect to some of the required data. According to its Fact Sheet:
In lieu of a single specific response, importers may submit a range of responses for each of the following data elements: manufacturer (or supplier), ship to party, country of origin, and commodity HTSUS number. The ISF must be updated as soon as more accurate or precise data becomes available and no later than 24 hours prior to the ship's arrival at a U.S. port.
For example, questions had been raised about changes in the ship to party that might occur while the goods are in transit. So, that flexibility might be helpful.
There will also be some flexibility on the timing of reporting certain data. Again, according to the Fact Sheet:
One last thing that surprised me: there were comments filed suggesting that CBP adopt a 100% screening of cargo approach in lieu of this data collection. I get that 100% cargo screening would reduce the risk of the tools of terrorism reaching the U.S. in a cargo container. I also get that the 10 + 2 proposal is intended to improve CBP's ability to target risky shipments and avoid delays for legitimate trade. What surprised me was that someone commented in favor of 100% screening. Usually when this comes up in informal conversation the context is that anyone in Congress who thinks that 100% screening is a good idea does not understand trade and that it would lead to devastating delays. I'm not certain that is true. There are pilot screening programs ongoing, so we need to see how they work. I'm just registering my surprise that someone went on the record suggesting it as an alternative.
The ISF will also need to include two data elements that must be submitted as early as possible, but no later than 24 hours prior to the ship's arrival at a U.S. port. These data elements are:
- Container stuffing location; and
What do you think, is more screening a better alternative to the Importer Security Filing and Additional Carrier Requirements?
Saturday, November 22, 2008
Thursday, November 20, 2008
I moderated a panel on New Developments in Customs Law. Basically, we talked a lot about rule making and modifying policy. The point of most debate was the extent to which Customs and Border Protection can find ambiguity in a statute that the Court has found to be clear on its face. I say they can't but opinions differed. The speaker on this point will say that is an unfair characterization and I am willing to be corrected, but that is what I took from it. Another point of debate is what counts are an interpretive ruling and decision for purposes of triggering the notice and comment requirements for revoking or modifying a ruling under 19 U.S.C. 1625. I think it was an interesting panel.
I would be more than thrilled if folks who were there would consider this a space to continue that discussion. If you were there and have a thought, please drop a comment.
Papers from the panels have been posted here. My paper is here. My topic, which did not get discussed, is whether it makes sense to apply the test for persuasiveness from Skidmore to non-binding WCO materials. It makes a certain sense to me. Thanks to Christine Martinez who took a bunch of scraps of text and random thoughts and turned it into the article.
Also, the American Bar Association has asked me to post this link to a survey on law firm business in the current economic environment.
Sunday, November 16, 2008
- Sent a screen shot of the error message to EA
- Sent a DirectX diagnostic log to EA
- Configured my Windows Firewall to give Spore permission to access the internet
- Configured by McAfee firewall to do the same
- Configured my wireless router to open the required ports
- Confirmed with my ISP that they are not blocking any ports
- Set a bunch of netsh global parameters that I honestly do not understand
- Located the Spore patch on an independent server and applied it
Thursday, November 13, 2008
The Federal Circuit reversed that decision and remanded for a new determination. According to the Court of Appeals, 1505(c) does not provide authority for the Court to award interest as part of a penalty case. The second time around, the Court of International Trade awarded the maximum penalty allowed in the prior disclosure (i.e., the interest owed) plus pre-judgment interest. Today, the Federal Circuit affirmed the maximum penalty and reversed the pre-judgment interest. Here is the opinion.
In analyzing the maximum penalty, the Federal Circuit noted that how the Court of International Trade weighs the factors in coming to a penalty amount is within the discretion of the lower court. The Federal Circuit found no abuse of discretion and upheld the penalty.
The more interesting part relates to pre-judgment interest. First, the Court held that pre-judgment interest is not available for awards of punitive damages. Since, section 1592 sets up a penalties scheme, it is clearly punitive. Further, where the amount of the claim is uncertain, pre-judgment interest is not permitted. This is interesting. The Court held that the interest penalty in a prior disclosure is not necessary fixed at the full amount due. Further, if there is litigation, the amount of the penalty is up to the trial judge. Consequently, at the time of the penalty notice, the ultimate penalty is not fixed. Based on these two factors, the Federal Circuit reversed the award of prejudgment interest.
Saturday, November 08, 2008
- What constitutes a violation
- Understanding the concept of materiality
- Quantifying possible exposure
- The prepenalty/penalty process
- What is subject to mitigation vs. cancellation
- The prior disclosure process
- When does it apply – admissibility issues, currency,
- trademarks etc.
- Understanding the seizure/forfeiture process
- Avenues of relief from remission to court
- Demands for redelivery
- Marking duties
- Enforcement of other agency’s laws
- Avenues for relief
- Record keeping violations and the assessment of penalties
- When does this apply
- What is the process for relief
- Canceling demands
- Understanding when a possible problem could arise
- Contracts and indemnity agreements
- Quality control
Wednesday, November 05, 2008
- Fewer safety tests
- Faster access to laboratories for testing
- Permitted destruction rather than redelivery
- Special training
Sunday, November 02, 2008
First, I am peeved at myself for taking the small chainring off my bike. I had a three-ring crank set and took the small ring off to save weight. This image will give you an idea of what I am talking about, although it is not my exact gear.
It turns out that the relatively minute amount of weight is completely unnoticeable. I would do much better trying to take 20 pounds off the saddle (if you know what I mean) than saving a few grams on the bike itself. Moreover, on those occasions when my chain jumps off the chainring, it now becomes almost hopelessly entangled in the lugs where the granny ring used to attach. It is very annoying. I know I need a new chain and that I should lubricate more often, but I still find this makes me feel very stupid. To make matters worse, I have no idea where that chainring went; so I can't replace it.
So, to avoid a similar fate, I as this question: Does anyone have experience with rigid boom kickers in lieu of a topping lift? If that question makes no sense to you, don't sweat it. But, If you know the difference between a topping lift and a downhaul and have used a boom kicker, let me know what you think. My curiosity stems from the fact that I have swapped out my main for a fully battened, loose footed version that is slightly wider aloft. That means the topping lift sometimes get stuck on the sail leach. Specific experience with a poptop Catalina 25 would be most valuable.
The issue I raised came down to whether Customs and we should assume that importers who end up presenting fraudulent origin documents to CBP are victims or accomplices. Obviously, there will be cases in which either one will be correct. But overall? What do you think?
The commenter said this:
My experience just does not line up with that. Companies, at least the ones that I have had the pleasure of dealing with, do not want to waste the considerable and time and effort it takes to fight with CBP. Keep in mind that, for the most part, the presumptions favor Customs and the importer needs to prove the origin of the merchandise. Customs, and the lawyers at Justice, can go a long way simply by raising questions as to origin. Plus, despite what the commenter suggests, my experience is that CBP will be more than happy to pursue a case at least as it relates to marking penalties, liquidated damages, or 1592 penalties. I agree that getting an Assistant U.S. Attorney interested enough to pursue a forfeiture case is another story, but I have been there as well (although in the copyright context).
The importer is almost unfailingly complicit when these types of dual documents are used. And these companies have no reservations in challenging adverse determinations against their false documents because the government does not have the resources to verify overseas production (ICE did not and will not take this kind of case, leaving CBP to its own devices). Attempts at informed compliance in these instances do not lead to future compliance as you suggest; it acknowledges Customs' inability to successfully prosecute violators, notifies them of possible investigative action, and emboldens them to open shell companies to import with or otherwise brazenly continue defrauding the government. Hiding behind the facilitation of legitimate trade and complaining that Customs is playing "gotcha" is always a nice route to take when you know the government can't prove your culpability.
I certainly respect the commenter's opinions and I would really like to know if that person is in CBP. Individual opinions are formed by experience. My experience differs; so, therefore, do my opinions. I genuinely believe that if CBP helped importers identify fraudulent documents, compliance would improve. Maybe, to provide a level of comfort to CBP, that information could be shared only with ISA members or some other select group and subject to some sort of non-disclosure agreements. I know people might call that naive, but I say, "So?" Trust can be a valuable commodity in business and in government. Working to build trust can earn dividends for both sides.
Tuesday, October 28, 2008
On the plane, I read a couple rulings that I found interesting.
The facts are the kind of oddball thing that only comes up in this area. None of my friends out there writing contracts or litigating injuries will ever see a case like this. Here is how Customs and Border Protection describes the merchandise:
The merchandise at issue is identified as the "Maison Tropicale." It is a structure constructed from sheet steel and aluminum. It was designed by the French architect Jean Prouvé in 1949 and produced in 1951. The Maison Tropicale was created in response to a French government-sponsored competition beginning in 1947 to develop ideas for low cost housing for the French colonies. It measures 59 feet by 32 feet by 16 feet tall and features fork-shaped portico supports of bent steel and an outer shell of aluminum. The walls are made of a series of sheet-metal panels that slide into different positions on overhead tracks. The panels feature 27 portholes of blue tinted glass. Maison Tropicale was built in sections which were shipped from France to the Congo to be assembled on site. Only three Maison Tropicales, of slight varying design, were constructed as it proved to be more expensive than what could be built locally and it did not appeal aesthetically to its intended constituency. The Maison Tropicale was restored after years of abandonment and neglect. It was imported for the express purpose of being put up for sale at auction.
The importer wanted the "piece" classified as a collector's piece of historical interest in Heading 9705, rather than a a prefabricated building. The importer argued that the piece is of historical interest because of its influence on later architects and its connection to the renowned designed.
It seems to me that if the Tate Modern is interested in this thing, it is a collector's piece. No such luck. Customs believes that articles of historical interest must relate to a particular period, like a Civil War cannon. Further, Customs seemed influenced by the fact that the piece was to be auctioned off for private use, rather than placed in a collection (although it might be after the auction). Accordingly, CBP classified it as a building subject to a 2.9% rate of duty.
In a blatant plea for attention, I ask any Pulitzer Prize winning Chicago Tribune architecture critic to give me guidance on this. Is the Maison Tropicale an article of historical significance to collectors? If so, why?
Next issue: What's its value? I'm guessing it's a lot. Frankly, it is late and I know almost nothing about architecture, but if you pulled a judge with an appreciation for this sort of thing . . . .
This just goes in the category of "You learn something every day." The merchandise is a spring action replica of an M-16 rifle. Here's a picture. Basically, the upshot of this is that replicas of guns are classified as if they were the real thing. For some reason that strikes me as odd. Does that apply in other areas of the tariff schedule? Is fake fur classified as if it were a deceased mink? Is I Can't Believe It's Not Butter actually butter for tariff purposes?
Here's another questions: Exactly what does someone do with a spring-action M16? This is what you do with the electric version:
Wednesday, October 15, 2008
In the Court of International Trade, Western Power claimed that the general denial of the protest without specifically listing the reasons for the rejection violated constitutional and administrative law rights.
According to the Court, the constitution only requires that the agency alert the interested party to the issue and provide a reasonable opportunity for the interested party to object. Since the protest denial stated that documentation did not substantiate the claimed origin, the notice alerted Western Power to the issue at hand. Further, the protest denial alerted Western Power to the availability of judicial review in the CIT. Thus, everything was constitutionally kosher (which is a phrase I like better than “constitutional muster”).
Regarding administrative law rules, Western Power argued that Customs is required to provide a rationale for its decision. This follows, in part, from CBP regulation 174.30, which says that a protest denial shall include “a statement of the reasons for the denial . . . .” The Court held that the blanket statement that the documents did not support the claim is sufficient for this purpose.
OK, I get that as a legal determination. Here’s the problem: has CBP advanced the ball in any way that facilitates legitimate trade? Let’s assume that some of the documents were falsified. There is no reason to doubt that. It is probably safe to say that the importer is not responsible for that fraud. If Customs worked with the importer to help it understand what was wrong with the documents and to spot false paperwork, Customs would be facilitating future compliance. Also, the importer might be able to cure the defects (although that seems likely in the case of fake rather than missing documents).
But Customs has a legitimate reason not to do that. If importers know how to spot false documents, then they might also know how to make better false documents. That, of course, would make it much harder for Customs to engage in necessary enforcement activity. Customs, therefore, has grounds to just say, “Sorry, fake documents.”
Does this approach lead to bigger issued? Does it lend credibility to the feeling that Customs wants to play Gotcha with legitimate importers? I don’t believe that is true, but it makes it look that way.
So, I ask you, should Customs be running seminars entitled “Spotting false business records for textile importers?” If not, it sounds like a business opportunity for somebody.
Apparently, Mr. Delgado does not argue that his conviction on 14 counts of violating 26 U.S.C. § 5601(a)(11) was proper. He might, but that is not the point for us. What he argued at the Court of International Trade was that his felony convictions did not relate to the importation of merchandise nor did they arise out of the conduct of customs business. 19 U.S.C. § 1641(d)(1)(B).
To cut to the chase, the Court disagreed. First, the fact that the plan was never to export the goods from the warehouse but to divert them to the U.S. commerce does not mean the plan did not involve exports. Rather, the statute only requires that exports be involved or closely related to the transaction and this was related enough. Further, the Court pointed out, the goods involved had been exported previously and were relanded before diversion into the U.S.
The Court also found that the completing the documents showing the putative exportation was an activity arising out of the conduct of Mr. Delgado’s customs business.
In Travelers Indemnity v. United States, the Court of International has, as far as I can tell, let us all off the hook when it comes to knowing what is in the Bulletin. The facts are important here, so I will summarize.
Travelers was the surety for an importer of televisions subject to an antidumping duty order. At the time of entry, the importer deposited estimated dumping duties 1.38%. Liquidation of the entries was suspended during litigation. After all the litigation was final, the assessment rate was set at 7.43%. During the course of litigation, the importer dissolved, leaving the surety on the hook for the resulting increase in duties (up to the limit of the bond).
The relevant timeline goes like this:
May 27, 1997 final termination of all litigation, suspension lifted
October 22, 1997 Customs published the final judicial decision in the Customs Bulletin
February 4, 2005 Commerce sent liquidation instructions to Customs
March 18, 2005 Customs liquidated the entries
When Travelers received the bills, it properly asked itself “What happened between May of 1997 and March of 2008?” This question is relevant because under 19 U.S.C. 1504(d), entries not liquidated within six months of the lifting of the suspension are deemed liquidation by operation of law at the rate applicable at the time of entry.
For deemed liquidation to occur, Customs has to have notice of the lifting of the suspension. Previous cases have held that the Courts’ publication of their decisions do not constitute notice to Customs. Why? I don’t know, but it is true.
But, what about the Bulletin notice. Surely, if Customs knows enough to publish notice of the decision it can follow the results of the case. Apparently not.
This is what we learn from Travelers:
Customs’ officials are trained to rely on the electronic message from Commerce for liquidation instructions
Customs employees charged with liquidating merchandise do not receive copies of the Bulletin
Customs employees charged with liquidating merchandise are not responsible for reading the Bulletin
Customs employees charged with liquidating merchandise are affirmatively trained and instructed not to rely on it
The government prints 2,421 copies of each Bulletin, 2,000 of which are sent to CBP employees
The timing of the Bulletin’s publication of “Decisions . . . Concerning Customs and Related Matters of the Federal Circuit . . . .” is inconsistent
Based on these facts, the Court of International Trade concluded that the Bulletin is not an unambiguous source of information FOR CUSTOMS EMPLOYEES. In other words, CUSTOMS EMPLOYEES are not deemed by law to know the contents of the Bulletin and, therefore, CUSTOMS EMPLOYEES can’t be required to act according to the information it contains. So, the deemed liquidation period did not start to run until February 4, 2005 and the merchandise was properly liquidated at the final assessment rate.
You know where I am going with this, right? If the agency that puts out the Bulletin has gone to federal court to say that it is inconsistent in publication, not widely circulated internally, not used as an authoritative source, and generally not considered legal notice, then why should the rest of the world be held to anything in the Bulletin. What happens when CBP publishes a notice in Bulletin that it is changing the classification of some merchandise? Does the importer who did not act accordingly get to argue that it exercised reasonable care because the Bulletin is not widely circulated and is considered unreliable by Customs? To me, that seems to follow from this case.
Now, there are some fine points to consider. First, when Customs is serious about some change in policy or regulation, the notice goes in the Federal Register. The Courts uniformly agree that a Federal Register notice constitutes legal notice. Also, Customs might be able to show actual knowledge of something in the Bulletin. So, obviously, fact matter. Still, I am surprised Customs and Justice took this position in litigation.
Wednesday, October 08, 2008
Monday, October 06, 2008
Thursday, October 02, 2008
I do have some upcoming events that may be of interest. Preparing for these have been part of the distractions:
On October 16, I'll be in NY helping with a CITBA program on courtroom skills. This should be a fun program. We are going to be doing mock-trial segments in front of Judge Wallach who will tell the us all what we did right, did wrong, or could do better.
On October 29, I'll be in Toronto at the IE|Canada meeting to discuss customs valuation. Here are the details on that event.
October 30, 2008 I will be speaking on NAFTA at a program near Chicago sponsored by the World Trade Center of Illinois. Here is a link to the brochure.
Lastly, I'll be back in NY in November for the 15th Judicial Conference of the U.S. Court of International Trade. I'll be moderating a panel on customs law developments. The theme for the event is "Testing the Boundaries of Customs and Trade Litigation." The judicial conference is usually a fun meeting; if fun to you is being in a room completely packed full of customs and trade lawyers.
I have already turned in my Judicial Conference paper. The upshot of the paper is that the Court and lawyers appearing before it might benefit from a more objective test to determine the persuasiveness of WCO materials including the Explanatory Notes and WCO HSC rulings. To fill that gap, I propose applying the same Skidmore analysis the Court currently applies to informal ruling making from Customs. I'm not sure whether that idea advances the ball very far but it does build upon basic administrative law concepts.
Friday, September 26, 2008
Here are the highlights:
- Profile is not the most flattering view
- What is happening to my hair?
- Remember when I exercised?
- Do I always sound like Kermit the Frog?
Other than that, you can judge for yourself.
Tuesday, September 23, 2008
Monday, September 22, 2008
Here is a review from a paper in Malaysia, where much of the action apparently takes place. Sounds like a good read; although awfully close to work for pleasure reading.
Thursday, September 18, 2008
Customs and Border Protection seized 484 pounds of marijuana from a privately owned bus entering from Mexico. I am hopeful that Ruben Kincaide will be able to get Danny and Keith out of jail before their next gig.
If you don't get the hilarity in that post, you are under 40.
Practice Safe Computing
Finding irony in advice from DHS not to take your laptop abroad because a foreign government or private entity might compromise the privacy of your data.
CBP Returning Artifacts to Mexico
No word yet on the Elgin Marbles.
More info is here. Note that the article linked in the previous post is 10 MB.
Remember, I am not a journalist nor am I your lawyer. This is just a rumor for now.
I will resist the urge to ask whether Cagney will be on time.
Friday, September 12, 2008
The NAFTA requires the U.S. to open its market to Mexico-based long-haul truckers. This was supposed to have happened years ago. There has already been a dispute panel finding that the U.S. is in violation of the agreement. Hat tip to NAFTAclaims.com for the document.
So, it is somewhat depressing (you know, in a rule of law sense), that compliance has once again been dealt a serious blow. This time, the obstacle is the House Committee on Transportation and Infrastructure. Where was the opposition to this program in 1994 when both houses of Congress voted to approve it?
Note to students in my NAFTA class: PAPER TOPIC ABOVE!
Speaking of palm trees, I did a piece on the Lacey Act amendments for the National Customs Brokers and Forwarders Association of America. I don't have too many details in the article, but I think this is important stuff. If you've been visiting this blog for any length of time, you know I tend to focus on the big picture and assume the details will get worked out in the trenches. So, the fact that I am actually worried about this one should mean something.
Personally, I think this is a bigger deal than the proposed uniform rules of origin.
Friday, September 05, 2008
Am I the only one who's noticed that this is essentially the same game as Sim Earth, which I played 15 years ago? Much better graphics, of course.
UPDATE: Jr. found an Easter Egg in the free download of Spore Creature Creator. In the main screen that shows the galaxy, click and drag to spin the galaxy. If you spin it fast enough, in either direction, a human face pops up. It is Will Wright, the creator of Spore. So, in the context of the game, it is the face of God.
Wednesday, September 03, 2008
In a completely different universe are those tiny colored rocks found in Lucky Charms. Over the years, I have referred to them as marshmallows or marshmallow bits. It turns out that is not correct. Instead, those "charms" are "marbits," which are described by Customs and Border Protection as dried marshmallow confections. Here is the full description from HQ H014873 (Jun. 5, 2007):
The samples are dry, brittle, multi-colored pieces, approximately ½-inch wide and ¼-inch thick, in the form of hearts, half-moons, hats, and other objects. The ingredients breakdown provided with your November letter states the pieces are composed of approximately 51 percent sugar, 19 percent water, 11 percent corn syrup, 10 percent dextrose, 7 percent corn starch, 2 percent gelatin, and less than one percent flavoring. The laboratory analysis found the sample contained 66.2 percent sucrose and 14.8 percent glucose on a dry weight basis.
Sounds appetizing, doesn't it? Funny thing is that in the context of a bowl of Lucky Charms, they rock.
Well, CBP has recently decided that its original classification of these marbits as food preparations not elsewhere specified or included was wrong. On August 8, 2008, CBP issued a notice (go to page 17) revoking several earlier marbit rulings and proposing to classify the products in HTSUS item 1704.90.35 as other confections, which is where CBP classifies marshmallows.
I just thought you'd want to know.
Thursday, August 28, 2008
Apparently, the anti-qat forces (if there are any) have got to get better media people. They need a Reefer Madness-style movie extolling the evils of qat and a clever commercial. "This is Haile. This is Haile's brain on qat."
Wednesday, August 27, 2008
You may recall that the issue was whether simply possessing explosives while making a false declaration to Customs was sufficient to constitute the crime of carrying an explosive "during the commission of a felony." The false statement was the felony. The defendant's argument was essentially that the false statement had nothing to do with the explosives. The Ninth Circuit Court of Appeal agreed that the "during" element means that the explosive has to have something to do with the felony.
The Supreme Court, in an 8 to 1 decision, disagreed with the Court of Appeals. Here is the decision. Mr. Justice Breyer dissented. He took the position that the Court's reading of the statute is overly broad and criminalizes behavior Congress did not intend to make criminal. His primary concern is that people have legal and legitimate reasons to carry explosives (which are defined as including a number on non-explosive chemical compounds). So, if a farmer carrying fertilizer happens to get the urge to rob a bank, he or she should be charged with bank robbery and not the added offense of also carrying explosives during the felony. A more worrisome example is the trucker carrying a load of diesel from Canada who fails to declare to Customs and Border Protection the presents he bought while in Canada.
Given the outcome of the case, please take my advice and be very careful about what you are carrying whenever you commit a felony.
In the meantime, I totally want to figure out how to take a month off and do the Grand Illinois Trail. It's 535 miles, so in theory I could do it comfortably in 10 days and probably in a week. I bet it is hilly out west. I'm not used to that.
To add insult to injury, the boat gets hauled out soon.
I hate this time of year.
Tuesday, August 26, 2008
In yesterday's Federal Register notice regarding the data reporting requirements for first sale valuation, Customs and Border Protection tossed in the following statement with little fanfare: "CBP is withdrawing the notice of proposed interpretation." In other words, the effort to eliminate first sale valuation is dead for now. Despite that, Congress has mandated data collection, so that will go on. It is kind of like a movie I remover seeing as a kid in which a hand is separated from a dead body and continues on its merry way. Without a proposal to change the interpretation of "sold for export," this data is the tale wagging a dead dog. But, unless Congress acts, it seems CBP is stuck with the requirement. Frankly, this doesn't seem like a very big burden for importers. Let me know if I am wrong.
Farm Bill Lacey Act Amendment
I guess I should mention the other big data collection program. Under Farm Bill Amendments to the Lacey Act, plant and plant product imports will need to be reported and certified as not having been taken in violation of local law or regulation. This is going to be a hassle because it covers everything from paper products, to furniture, to wooden toys. December 15 is set as the start date for that program, which will require paper filings.
The New Zealand Problem??
I majored in Political Science at the University of Illinois at Urbana-Champaign (except that back then it was Champaign-Urbana). While there, I participated in an arms control and disarmament program because, at the time, it seemed vitally important. I did my honors paper on the then-tumultuous relationship between the U.S. and New Zealand. This was 1985 or so. NZ had kicked U.S. navy ships out of the country because the U.S. refused to disclose whether the ships were carrying nuclear weapons. This lead to a meltdown in the Australia-New Zealand-U.S. (ANZUS) Pact, which was a sort of NATO of the South Pacific.
Well, I don't want to get people too riled up, but it seem like New Zealand is trying to sneak into the U.S. commercial market via the backdoor of NAFTA, namely Mexico. Read this article. Tricky Kiwis. First they take the America's Cup, now they invade NAFTA.
Actually, this is perfectly legit. If a NZ company wants to do production in Mexico, that is good for Mexico and presumably consistent with the NAFTA's goal of encouraging investment in the region. I have no problem with that. I just think it is funny that all the NAFTA safeguards intended to prevent "export platforming" seemed to have been targeted at Asia. Instead, we might be seeing an invasion of Kiwi products. Other than Dame Kiri Te Kanawa, I'm not sure what that would be.
Wednesday, August 20, 2008
For anyone in the Chicago area, my NAFTA and Free Trade Agreements class at the John Marshall Law School Center for International Law gets started September 12. It runs in a four-day seminar format. I run a very practical course that is long on compliance and short on theory. There's still room.
Friday, August 15, 2008
I have been having a lot of discussions about Customs and Border Protection's proposal to implement tariff-shift based rules of origin and do away with the old substantial transformation approach. For background, see here.
Here is what I want to know? Do we think this is legal?
One argument goes that CBP has the authority to implement the marking requirements through regulations and that agencies have the ability to change their policies by changing regulations. They just need to go through the proper notice and comment steps and explain the change rationally. So this is routine and permissible.
Another argument goes that agencies can only regulate when given express authority or to fill gaps in ambiguous statutes. When the Supreme Court decided that an origin determination is made by finding the last substantial transformation, it removed the ambiguity in the statute leaving the agency without authority to regulate a different test. A contrary approach leads to the absurd result that Court decisions are meaningless except with respect to the individual case that was decided because agencies can regulate their way around any judicial interpretation.
Are there more arguments out there?
I know that there are lots of customs lawyers reading this. I also know people are often hesitant to talk about live issues that might end up in court. But come on, throw the trade community a bone. What do you think?
By the way, note that I affirmatively did not say what I think. Unlike the rest of you, I am not anonymous.
It seems that a customs broker on the southern border has been going to banks--including the Federal Reserve Bank--and directly to the Bureau of Engraving with large amounts of dirty old cash to exchange for crisp new bills. By "large amounts," I mean around $20 million in $100 bills from the 1970s and 1980s. The story as to the origin of the money seems to be somewhat fluid and a criminal investigation is underway. We do know the money came from Mexico. Oops, that's a problem. While finding money and exchanging old for new currency is perfectly legal, importing it from Mexico without the proper disclosures is illegal. It appears this customs broker overlooked that legal requirement.
It's a crazy story. I know I have readers in the brokerage community in Texas. Does anyone have any inside info on what is going on with this case?
Thursday, August 14, 2008
- 56% of you visit one to five times per month and 21% visit one to seven times per week.
- 65% of you get here via a saved shortcut, favorite, or similar method.
- 93% of you are customs compliance professionals. The remainder must be my family and the occasional visitor wondering about bike panniers.
- 53% of respondents are in industry, 18% in law firms, and 15% in in-house law departments.
- The top three areas of interest are customs law, trade law, and related litigation.
- While a large majority find my off-topic posts to be "not a problem," a vocal minority find them annoying and a slightly larger minority apparently find them witty and charming.
- A number of you had helpful suggestions for the Blog Roll on other useful web sites. I'll get around to adding some links. I'll admit to some hesitation to post links to direct competitors, especially without a reciprocal link. I need to work that out in my own head.
- Happily, 62% of respondents have visited my firm's site.
- Non-US survey responders were from Canada and the UK but about 95% were from the U.S. I find this a bit interesting because my traffic reports show visitors from all over the world. I have even had a visitor from a research station in Antarctica. This map shows the locations of my last 100 visitors:
As to things I can do better, here are a smattering of responses:
A picture of the sail boat (Thanks, Dad. See below)
Publish more frequently (I'll try)
Better follow up to earlier posts (Point taken)
More on CIT and CAFC decisions (Really?)
My work :) (That can be arranged, for an appropriate fee.)
Refueling dock at Reefpoint, Racine, Wisconsin
Where I sleep. It's not unlike of coffin.
Racing a storm into DuSable Harbor, Chicago.
Monday, August 11, 2008
Here is the full text of HR 6702.
This is an interesting issue that seems likely to dog CBP for a while. I think it is safe to say that your average American does not understand the current law on border searches. I also suspect that many would be outraged if they did. That said, the Supreme Court has been clear in stating that border searches are reasonable because they are border searches. Unless Congress acts, people better be prepared to turn over their data when they arrive in the U.S. As the wise man once said, if you would not want the information on the front page of the Chicago Tribune, you should not carry it across the border.
All that said, I do wonder about what is actually happening at the border. Inspectors have a lot of discretion in deciding who to search and to what degree. I have no reason to think that CBP is abusing that discretion. But the media seems to have latched on to this pretty tightly. It seems like CBP needs to get out ahead of this on the PR front if it wants to avoid a nasty drubbing in the court of public opinion.
Thursday, August 07, 2008
Due to the dearth of comments, I gather nothing of particular importance happened while I was gone. I guess that is good.
I started my week away with the move of our office to new space within the building. The sad part of that story is that even when you move within a building, you still need to pack. The new space is a much better configuration than what we had and represents a more modern view of office design. By that, I mean it more closely represents my view of office design. As a result, I have a very nice office with a view of the Chicago River. I also have about 30% less floor space than I had. At the same time, I claimed a desk that is about 50% larger than my previous desk. Can you do that math? Apparently, I could not.
I am now sitting with my back to the long wall and my right side to the window. This is not an ideal arrangement. I am looking at a wall and would rather look toward the door. The desk takes up an inordinate amount of room. So much so that the movers, who were a bit slap happy at close to midnight, laughed as they tried to situate it for me. Now I need a new desk and, frankly, have limited interested in going shopping. I would like one or more of those Walter E. Smithe brothers (that may be a Chicago-centric reference) to miraculously show up with a desk for me. I'll be in one of their clever commercials if they do, I promise.
On my vacation jaunt I learned a couple things:
- Southern Indiana is riddled with caves.
- Daniel Boone had a younger brother named Squire who explored some of those caves.
- The Cincinnati area has an inexplicable obsession with a pork and oatmeal sausage called goetta. I even attended Goettafest 2008, although I declined to partake.
- When it is hot, a water park beats an amusement park.
- Never let someone who has no kids tell you whether a roller coaster is suitable for an 7-year old.
- Graeter's makes an outstanding black raspberry chip.
- XM radio rocks.
Monday, July 28, 2008
In the meantime, here is a topic for discussion:
SSAB v. United States: Another case of good law making for a bad result?
One other note, as of tomorrow, my office is relocating to another floor of the same building. If you need to send me anything, the new suite number is 1020. All other contact info is the same as it has been for the past nine years. And, just to gratuitously vent about moving a law firm: What a hassle!
Thanks for listening.
Friday, July 25, 2008
The substantial transformation rule states that merchandise originates from the country in which it last changed its name, character, or use. The first articulation of this test was in a 1908 Supreme Court decision involving Anheuser-Busch. The question was whether cleaning and coating beer bottle corks (!) produced U.S.-origin corks. The Court held that the corks remain foreign because no new product emerged from the operations in the U.S. The most famous substantial transformation case is U.S. v. Gibson-Thomsen (1940) in which the Court of Customs and Patent Appeals found that wooden brush blocks and toothbrush handles without bristles became articles of the U.S. when bristles were added.
This approach has given importers and their lawyers a fair amount of leeway in arguing over origin. Finding a name change is gold. When that fails, you need to look for more subjective changes in character and use. This has led to a variety of strategies including things like whether the imported merchandise is a "producer's good" as opposed to a "consumer's good."
As early as the NAFTA negotiations in the early 1990s, it was clear to some (I suspect mainly in Canada and Mexico) that this test was too unpredictable. As a result, NAFTA introduced the concept of tariff-shift based origin rules. Keep in mind that we are not talking about the preference origin rules of HTUS Note 12(t). For this purpose we are talking about the so-called NAFTA Marking Rules of 19 CFR Part 102.
In today's notice, CBP has pulled the trigger on its long-stated desire to apply the NAFTA Marking Rules across the board. The only exceptions will be where an international agreement requires the use of substantial transformation. So the preference origin rules under NAFTA will not change. Also not proposed for change are preference determinations for goods--other than textiles and apparel-- under the U.S.-Israel and U.S.-Jordan FTAs. For other FTAs and programs that rely on origin determinations, the Part 102 rules will apply in addition to the other requirements of the programs.
So, you might be wondering, what about the Generalized System of Preferences? Remember that the rules for GSP require a substantial transformation (or double substantial transformation for non-BDC materials) plus 35% value added and direct shipment. Under this proposal, the rule will be based on tariff shifts, 35% value added, and direct shipment.
At first blush, I'm not sure I see much to complain about here. In a case called Bestfoods, the Federal Circuit said that CBP has the legal authority to dispose of substantial transformation. And, from an administration perspective, this will likely produce more predictable results for importers. The real trouble, of course, will be in the implementation details. There are very likely to be pockets of importers who are suddenly going to have to mark as foreign products they have been selling in the U.S. without origin labels. Based on my experience, this will drive the marketing people nuts. It will take some time for those issues to surface. Now would be a good time examine your origin determination process and see what might change. Comments are due in 60 days on September 23, 2008.