Wednesday, April 29, 2009

The Winkowski Job

FYI, if you get an e-mail from Assistant Commissioner of Customs and Border Protection Thomas Winkowski stating that CBP intercepted a diplomat carrying a sack of money consisting of your inheritance from a long-lost (and apparently foreign) relative, press delete.

Or, if you have some time on your hands, a sense of adventure, and promise not to hold me responsible, hit Reply and ask the person trying to scam you for some earnest money that you can use to make arrangements to receive the cash inheritance.  Make it small, just to get started.  If the scammer takes your bait, try and set up a meeting at a remote and expensive location.  Maybe Grand Cayman.  Don't show up.  Repeat as desired.  Remember, don't give out any real personal information (the fact that they have your e-mail address is bad enough).

For other ideas based on baiting Nigerian 419 fraudsters, visit The Scam Baiter.

Second Front on Mexico Trucks

A Mexican truckers association has filed a claim under Chapter 11 of the NAFTA seeking damages for the U.S. failure to open its market to Mexico-domiciled truckers.  

The original notice of a demand for arbitration was filed April 2, 2009.  [Tip to Todd at for the document.]  Under the NAFTA rules, the notice creates an obligation for the parties to consult on the issue.  This article provides some background.

The claim here is that the moratorium violates key provisions of Chapter 11 including national treatment, most-favored-nation treatment, and the minimum standard of treatment under customary international law (sometimes summarized as "fair and equitable treatment.").  National treatment seems clear:  Mexican carriers are barred from the U.S. market by virtue of their status as Mexican.  Most-favored-nation treatment is equally clear: Canadian carriers are permitted to operate in the U.S.  The minimum standard issue is more amorphous and harder to get a quick read on.  But, the claimant only needs to prove one violation, not all three.

The notice asserts that Mexico is harmed to the tune of approximately $2 billion per year and states it is working on quantifying the damages to the carriers.

This is an interesting case in that it applies the Chapter 11 protections provided to investors to what had previously been handled as a state-to-state dispute under Chapter 20.  The prior Chapter 20 process resulted in a decision favoring Mexico under which Mexico has no imposed retaliatory (really "offsetting") duties on certain U.S. products entering Mexico.  In the Chapter 11 case, it seems liability is all but assured.  The Chapter 20 decision went against the U.S.  Moreover, in the list of reservations in the NAFTA itself, the U.S. all but admits that the moratorium on Mexican trucks in the U.S. interferes with Mexican investment in a way that is inconsistent with the Agreement.

Monday, April 27, 2009

CVD for Vietman?

Historically, countervailing duties were not applied to so-called "non-market economies." Basically, NME's are communist or socialist countries where the economy is centrally controlled rather than acting at the whims of the marketplace as it usually does in free-market economies. Well, unless a company or sector gets "too big to fail," then apparently even the U.S. puts the brakes on the rough and tumble of the marketplace.  But, I digress.  And, note that I am not judging the policy, just noting that it exists.  Personally, some of my favorite people and companies are in the too big to fail category.

That said, the problem with NME's from a countervailing duty perspective is that when the government sets prices and industrial policy from the top down, basically everything is subsidized.  How is the U.S. Department of Commerce going to figure out the amount of the subsidy (i.e., a financial benefit provided to the producer) when the whole economy is jerr-rigged?  

For example, a subsidy might exist where pig iron costs $200 per ton on the world market but the government (or the proletariat) controls the means of production and sells it to local manufactures at $150 per ton.  This looks like a simple $50 subsidy, and it is.  But so is the labor rate and the cost of every other material, and conceivably even he national health care system and pension plan.  [Trade lawyers, please don't nitpick.  I know a WTO Green Light Subsidy when I see one.  We're just using examples here to prove a point.]  

For years, Commerce's policy was not to apply CVD law to NME's.  But in 2007, at least with respect to China, Commerce decided it was able to do the math and sort out the subsidy amount.  This had to do with the growth of private enterprise in China and the fact that even government-owned entities have to compete in the world market.  It also has to do with the principal of administrative law that an agency is permitted to change course so long as it provides notice and a rational explanation of why the change is warranted.  Subsequent to the change in policy with respect to China, the courts affirmed that the ITA's changed policy was consistent with the law under the Chevron test.

Now the question is what to do with Vietnam?  There is a petition pending relating to plastic retail carrier bags.  Vietnam is an NME.  The ITA would like comments on how to treat the request for the imposition of countervailing duties on products from the Socialist Republic of Vietnam.

P.S. I would like extra credit from the Department of Political Science and the University of Illinois at Urbana-Champaign for properly making an allusion to Marx and correctly spelling "proletariat."

Friday, April 24, 2009

Is it Time for a New GSP?

Several organizations ranging from non-governmental relief agencies to retailers have written to USTR Ron Kirk suggesting first that the USTR pursue early renewals for all U.S. unilateral preferences to support the world's poorest countries.  The letter also suggests that the Generalized System of Preferences and other unilateral trade programs such as AGOA be combined into one simple, unified preference program for all developing countries that meet clear eligibility standards. The letter recommends a clear and consistent rule of origin applicable to all products and enhanced benefits for the least developed and sub-Saharan counties.

The proposal makes a lot of sense.  The difference between AGOA and GSP are minimal and in the details. which makes them annoying.  Moreover, the general purpose of both programs is the same: to give developing countries access to the US market and, therefore, incentives to attract investment and develop infrastructure to support an export economy, which generates jobs.  The US consumer gets access to quality products and reasonable prices.  It's a win-win.

Here's hoping the letter gets Mr. Kirk's attention.

My Ironic Carbon Footprint

Today, for the first time this year, I rode my bike to work.  Well, sort of.

I haven't been great about getting exercise in the now officially over off season.  So, I was leery of just heading out of my garage for the office.  From door to desk, it is 20 miles.  Instead, I loaded the bike into the car and drove to close to the top of the Lakeshore bike path.  For the locals, I parked at Lawrence.

Normally, I would take the train.  That would entail  a 2 mile car ride to the station.  Instead, I drove 10 miles to bike the rest of the way.  That means, I am using more fuel and creating more greenhouse gases by virtue of my half-commute by bike.

I felt lousy, by the way.  By the time I got to Addison, I was cursing myself for not taking better care of myself.  At North Ave., I was contemplating a rest stop at the chess pavilion.  But, I stuck it out and made it to the office just fine.  No taking the train home since my car is parked by the Lake, I need to ride back and retrieve it.

Thursday, April 23, 2009

No New NAFTA Negotiations

I think I already tweeted this (  I'm finding it difficult to figure out what to blog and what to just tweet.  Tweets are more toss-off little items that don't merit a blog post.  On the other hand, sometimes a simple link to some news item is important and should get a blog post.  We'll muddle through.  Just be glad I am not yet podcasting or vlogging, although I do have a nice web cam . . . .

Anyway, several press outlets have reported that the Obama administration has signaled that there is no need to open negotiations to strengthen NAFTA.  This article from The Star indicates that the countries will look for ways to strengthen the Agreement without renegotiation.  

I think the best possible translation of that is: we will focus on enforcement.  Maybe it also means that legislative moves toward enhanced Trade Adjustment Assistance will get a bigger push from the White House.

NYT: Drugs in the FAST Lane

Another example of a shipment of illegal drugs from Mexico coming through via the Free And Secure Trade channels.  These are important examples of two things.  First, CBP being alert and doing its job by finding these attempts at smuggling.  Second, the fact that ultimately C-TPAT, FAST, and other trusted shipper programs depend upon people.  That means there will always be risk.

Wednesday, April 22, 2009

Overdue Updates

I promised to get back to you on two things that I did not do.  I've been criticized in blog comments before for this, and I realize I should be careful about it.  On the other hand, it is my blog and sometimes I lose interest in something.

I have updated my post on the decision regarding the Byrd Amendment by adding a comment summarizing the dissenter's analysis.  Frankly, I think it makes a lot of sense.  That post is here, check the comments for the short update.

Regarding the case against the sureties, it turns out that I have direct dealings with lots of people on both sides of the case and may have a possible interest myself.  So, you're not going to get anything more on that at least for a while.

OK?  Are we up to date?  I hope so.  Trust me, when I say I'll get back to something I have every intention of doing so.  But, in the great scheme of things blogging sometimes has to move down the list of priorities.

Saturday, April 18, 2009

Last Thing

Three posts in one night! I am trying to make up with you.

I don't have the details on this because the ruling seems to be unpublished as of today. But, I know I read a summary in the Customs Record. Look for H019364. The issue is whether the toys put inside boxes of cereal have to have their country of origin marked on them. For some reason, I was surprised to discover that they do. A similar older ruling is HQ 733839 (Jan. 31, 1991).

Marking is a funny thing. The purpose of it is to alert consumers to the origin of the product so that consumers can decide whether or not to buy it. It is kind of like government supported private discrimination. I guess since it is perceived to favor Americans, that is an OK policy.

What if consumers really don't care? It seems to me that my anecdotal experience indicates that consumers don't. I realize that is an old debate that I will not settle here.

The thing that struck me about the toy in the cereal box is that the consumer not only doesn't care, but likely would not change his or her purchase on the basis of the origin of the toy. If Jr. wants Lucky Charms, he will get Lucky Charms whether the magic shamrock decoder ring is from China or . . . who are we kidding, its from China. If Mom and Dad want to find a $0.05 magic shamrock decoder ring made in the U.S., have at it.

There, though, is a new wrinkle to this: product safety. I wonder whether parents who are more careful than me would have a greater level of safety fear over a Chinese versus American $0.05 piece of plastic. I'm letting the kid eat tiny, hard, fluorescent marshmallows for breakfast. Clearly, I am not the proper role model.

Value Adjsutment Case

I like the tenacity of VW in working on its efforts to get value adjustments for defective cars imported into the U.S. There have been several cases on this, including cases by Saab as well. The general theory makes lots of sense. If VW, Saab, or anyone else, contracts to purchase defect free cars and pays a set amount for them, but later finds out that the cars had defects, then the importer overpaid. If the importer overpaid, it should be able to get a refund for the duties it overpaid. That's the upshot of 19 CFR § 158.12. The problem is proving that the defect existed at the time of entry and the amount of the adjustment.

In the most recent case, the Court of International Trade found that VW is entitled to a value adjustment for cars subject to government-mandated recalls. Actually, the CAFC held that in a previous round, but now the CIT is applying the rule. The CIT held that VW is entitled to a value adjustment for the cost associated with a Federal recall for an emissions problem.

NAFTA Ruling

I saw a couple rulings this week that I think are interesting, so I will pass them on. Plus, I feel like it's been too long since I posted and that makes me think you are all off reading some other customs blogs. I guess I am very insecure.

The first ruling is HQ H044166 (1/23/2009). This ruling raises the many perennial questions about returning used and scrapped parts from Mexico or Canada. It seems that many people make the assumption that since the used car, sewing machine, or camera lived its life in North America, that parts taken from it somehow become originating when returned to the U.S. That's not necessarily the case, although it may work out that way in the end.

In this ruling, Sony has a facility in Mexico where it repairs its consumer electronic products. Typically, Sony would scrap the defective parts in Mexico. But, California, Connecticut, Minnesota, and Michigan have laws requiring that the replaced parts be returned to the consumer. So, Sony needs to start shipping them back to the U.S. These defective parts might have a country of origin marking on them.

Sony asked a bunch of questions including: Are these parts NAFTA originating, what is the proper origin marking, how should the parts be valued, and how are they to be classified?

Regarding origin, Customs held that the defective parts, which have no value other than for the recovery of raw material, are waste and scrap not susceptible to repair. As a result, they are NAFTA originating under GN 12(n)(ix)(B).

So how is Sony supposed to mark this stuff? Because the merchandise meets the definition of "scrap" or "waste," it is wholly obtained or produced in Mexico under 19 CFR § 102.1(g). Consequently, the origin for marking purposes is also Mexico. As a bonus, "scrap and waste" is a J-list item, so the goods are exempt from marking except on the outermost containers. Customs suggested the label "Defective part processed in Mexico." But, if the part has a contrary prior marking on it, Sony is supposed to place a label over that conflicting mark.

On valuation, it is clear that there is no sale so transaction value will not apply. There was also no U.S. sale to use as a starting point for deductive value, no data on the cost of production for computed value, and no sales of similar merchandise. There was, therefore, nothing but the fallback method of valuation. Sony had accounting used data in an attempt to show that the scrap value of the parts is generally no more than 5% of the original product cost. CBP was unconvinced and suggested valuation based on the sale of similar parts to scrap dealers or the 5% methodology if Sony is able to convince the relevant port director of the accuracy of that measure.

That's it; but that's a lot. This is a comprehensive ruling that covers lots of issues. If any of my JMLS students are reading this, it sounds a lot like an exam question. Darn! Now I can't do that.

Monday, April 13, 2009

Suit Filed Against Sureties

This is too interesting to wait for me to digest it.  On April 10, an 82 page complaint was filed in an attempt to start a class action in the Court of International Trade.  The complaint alleges that several sureties negligently issued bonds in antidumping new shipper reviews to companies that were thinly capitalized and otherwise not likely to pay.  Those importers defaulted and Customs and Border Protection has not moved to collect the antidumping duties from the sureties.  As a result, interested parties in the U.S. have been injured be the lack of meaningful remedial antidumping duty collection and by the loss of available funds under the Byrd Amendment.  According to the complaint, the amount involved is in excess of $700 million.

To an extent, I am inclined to think I hallucinated this whole thing.  I am currently in the wrong time zone and it is late even at home.  I'll read it over thoroughly when I can and will provide more detail.  In the meantime, those of you with CM/ECF access, should look at the complaint in Court No. 09-00141.

Sunday, April 12, 2009

Commercial Shipment of Pot

This story was tipped to me from a couple sources in response to my previous post about how C-TPAT is being marketed wrong.  I'll give the nod to the Blog Man O' Law for the link.  The article shows that yes, indeed, smuggling happens in commercial shipments.  Apparently, it also happens in the Free and Secure Trade (FAST) environment.

Keep in mind, my point was not that this does not happen.  My earlier point was only that Customs and Border Protection's presentations rely too heavily on non-commercial, terror- and drug-related shipments to make the point in an audience of sophisticated business people.

Wednesday, April 01, 2009

Customs News of the Weird

Who bothers to smuggle bouillon?  I don't mean gold bullion, I mean chicken bouillon.  The answer is: The same kind of person who makes their own soap and hides a dead bird in it.

More on the UP Case

Here is an interesting article from JOC on the continuing effort by the United States to assess penalties against Union Pacific for its alleged negligence in allowing contraband to be smuggled into the U.S. via its trains from Mexico.

The theory is that UP is transmitting manifest data to Customs and that the manifest data is often wrong due to the fact that it fails to disclose the illegal drugs that UP does not even know are there. The proposed penalty is $33.6 million.  Another suit in Texas seeks $4.1 million.

I hereby declare that I may have a bigfoot, D. B. Cooper, and the Ark of the Covenant in my trunk, but I don't know that for certain.

Assuming UP is a C-TPAT member, isn't the better approach to kick it out of C-TPAT and figure out a way to increase inspections until UP, the Mexican railroad that control over the rail cars before they cross the border, and Customs and Border Protection can find a mutually agreeable way to sure up the security?