Sunday, December 19, 2010

Pre-Break Update

I am going to be off the grid next week (more or less). So, to keep everyone happy while I am gone, here are some things to contemplate:

The House passed its Omnibus Trade Act of 2010 on December 15. The bills contains an 18-month extension of GSP and an 18-month extension of ATPA/ATPDEA but only for Ecuador and Colombia, not for Peru. Here is a link to the bill text. The bill also contains many temporary duty rate reductions. The Senate is expected to take up the bill soon.

The final text of the Anti-counterfeiting Trade Agreement has been published and the USTR is seeking comments on it before February 15.

Monday, December 13, 2010

Costco: Tie Goes to the Circuit Court

The Supreme Court has decided the Costco grey market Omega watch case. We discussed that earlier here. Unfortunately for those seeking clarity, the case was "decided" by an eight-judge panel. Newest Justice Kagan was excluded because she worked on the case at the Justice Department. As you Supreme Court scholars know, a tie decision results in a non-precedential affirmance of the lower court decision. Thus, this is entirely anticlimactic.

Friday, December 10, 2010

Pleading

I have never intended this blog to be nothing more than a repository of case law from the Court of International Trade and the Court of Appeals for the Federal Circuit. My goal is that this blog serves as a place to find analysis of developments in the area of customs law and compliance. Early on, I blogged on more general topics involving corporate compliance and regulatory changes. Lately, I have not had much inspiration to do so. I want that to change. In fact, for 2011 I resolve to post more often on regulatory and compliance developments. If you want to help me improve the blog for next year, feel free to send me questions or post ideas. My friends and readers out there have been of great assistance in making this blog work. So, to the Retired Customs Guy, the Broker in Texas, to Matt, and to Anonymous, keep the comments and questions coming. It helps keep the bold interesting for all involved.

Now that I am done pleading with you, I will talk about a pleading case from the Court of International Trade: FAG Holding Corp. v. United States.

This is another of those cases where the procedural rules got in the way of the plaintiff getting a decision on the merits. That is not to suggest that the decision is unfair or incorrect. It is just a reminder to all of us that the technical aspects of presenting a case to the CIT matter. Given the current state of the law, I think it is fair to say that these things matter more than they have in the past.

The law requires that a complaint present "sufficient factual matter, accepted as true, to 'state a claim to relied that is plausible on its face.'" That is a mash-up of two Supreme Court cases: Ashcroft v. Iqbal and Bell Atl. Corp. v. Twombly. That means that the complaint must be more than speculative. That was not always the case. Prior to these Supreme Court cases, it was possible to file a complaint asserting a right to relief on the assumption that the plaintiff's lawyer could use discovery to find facts sufficient to show a right to relief. Today, the lawyer needs to know and assert the facts that make out a plausible right to relief. And, since we can't just assert facts we do not have some basis to believe, this change in burden is meaningful.

FAG involves the application of dumping duties to to two entries. Plaintiff protested the application of the antidumping duties, claiming that the entries had liquidated by operation of law without the antidumping duties. To make out a case for deemed liquidation, the plaintiff needs to allege and prove that (1) the suspension of liquidation from the dumping case terminated, (2) the Customs was notified that the suspension terminated, and (3) that Customs failed to liquidate the entries within six months. Those are pretty specific requirements.

For the plaintiff to have a right to relief, it needs to allege in its complaint the date of entry of the merchandise. This is a prerequisite to determining the dumping review period and, therefore, the date of suspension of liquidation. In this case, the Court looked to the physical entry documents to determine the entry date. "Entry" in this context is the filing of documents necessary to secure the release of the merchandise. Here, the importer used the "immediate delivery" process to secure a quick release of the goods. Under this process, the time of entry is defined in the regulations as the time the entry summary document is filed in proper form with estimated duties attached. This is a week or so later than the date alleged in the complaint. That puts the entries in a subsequent antidumping review period and means that the suspension of liquidation had not terminated at the time of liquidation.

Based on those facts, the Court held that the complaint did not allege facts sufficient to create a plausible right to relief. As a result, the Court dismissed the action.

On the Horizon


The Court of Appeals for the Federal Circuit has decided the appeal in Horizon Lines v. United States. Interestingly, the CAFC affirmed the Court of International Trade but found that the lower court had committed harmless error in its legal analysis.

Since you follow these things, you probably remember that this case involved duties assessed by the United States for ship repairs undertaken outside the U.S. Horizon Lines challenged the duty assessment on the grounds that the work performed on the ship was not a dutiable repair but was actually a non-dutiable modification. I know this kind of semantic distinction makes non-lawyers crazy, but there it is. That is how the law is written and that is what Customs and the Court must apply.

The modification in question was an improvement to the container guide system used to place containers in appropriate locations in the cargo hold. The change improved the speed and ease of loading the ship and improved safety during the loading operation.

The CIT found no evidence that the container guides were in need of repair. Consequently, the CIT held the work to be a non-dutiable modification. Although noting that the container guides were in good working order prior to the modification, the CIT held that fact to be irrelevant.

On appeal, the United States argued that the CIT took too narrow a view of "repair" as meaning restoring a feature to good working condition after sustaining damage. Rather, the government suggests that repairs include systematic improvements to the operation of a vessel.

The Federal Circuit agreed with the CIT's more narrow definition of "repair" in this context. Further, the Court held that the condition of the modified parts is relevant to determining whether the modification is a repair. If the part is in good working order, there would be no need for a repair. This is where the CIT got the analysis wrong, but the error was not important to the ultimate decision.

Thus, when faced with deciding whether to undertake some ship modification, carriers should note that if the work is done to "mend" or "restore" a system after it has been damaged or decayed, that expense is likely to be dutiable (unless another exception applies).

Thursday, December 02, 2010

Slow News Edition

It looks like imports from Canada will be subject to the same requirements for fumigating or heat treating wood packing materials that apply to the rest of the world. FR Notice.

Also, the ITC report on modifying the tariff treatment of certain festive articles has been delayed until December 13.

Here is a CBP Fact Sheet on import safety.

Updated list of countries cooperating in the Arab League Boycott.