Saturday, April 30, 2011

More on Congressional-Executive Agreements

Many thanks to Brenda Jacobs of Sidley Austin who sent me some additional background on Congressional-Executive Agreements as a tool for implementing free trade agreements. This relates to to a previous post in answer to a question about how the pending FTA's might get implemented if President Obama lacks Trade Promotion Authority (FKA "Fast Track").

Brenda sent on a Congressional Research Service document answering the question "Why Certain Trade Agreements Are Approved as Congressional-Executive Agreements Rather Than as Treaties." The document explains that Congress has previously granted the President temporary trade negotiating authority. The most recent authority under the Bipartisan Trade Promotion Authority Act of 2002, though, has expired. Trade agreements negotiated under that authority, including agreements with Colombia, Panama, and South Korea, remain eligible for approval under the TPA process (although Colombia is not subject to expedited procedures because because the bill was submitted without required coordination with Congress). That process relies on an implementing bill sent to both houses of Congress for approval by a majority vote. The Senate's treaty ratification process is not involved. This leaves open the status of the Trans-Pacific Partnership, negotiations for which began in 2009, after TPA expired.

The legal background on this relates to the constitutional delegation of authority to Congress of the power to regulate trade with foreign nations. This proved unwieldy. Letting every member of the House and Senate have input to the terms of a trade deal would make negotiating difficult. Plus, would the trading partner have faith that the agreement it reached with some negotiators survive the legislative process. If not, it would come back to Congress for amendments and the process might go on for ever. As early as 1890, Congress decided to delegate its negotiating authority to the President. Subsequently, the Supreme Court upheld this delegation as constitutional. Most recently, a challenge to the constitutionality of the NAFTA was defeated when the 11th Circuit declared the questions to be a non-justiciable political question.

Through various statutory delegations, the President has negotiated and Congress has approved the GATT, the NAFTA, and the Uruguay Round WTO Agreement.

So, all of that dances around the question that was originally posed: What procedure will be used to if the Trans-Pacific Partnership is to be implemented? The short answer it that I don't know. Absent a statutory delegation of authority, it would appear at first blush that the agreement would go to the Senate as a treaty for ratification. But, that seems excessively technical. The terms of the trade agreement, once reduced to a statute (rather than a self-executing treaty), are easily characterized as a domestic statute regulating foreign trade. In that light, there is no reason to go through the treaty process. A simple vote by both houses would be sufficient. But, absent TPA, the expediting procedures such as restricting amendments would not apply. In other words, TPP would be subject to all the normal sausage making that goes into domestic legislation.

In an effort to avoid that, Senate Bill S. 98 (Portman) would extend TPA through 2016. Having seen the budget debate and the looming question of the debt ceiling, I am all in favor of S. 98.

Monday, April 25, 2011

When Does Cycling Season Start?

Here in Chicago, I am starting to see hearty souls out on their bikes. I'm not that hearty. It is still in the low 50's and has been raining, it seems, for weeks. But, I have moved my bike from the basement to the garage, so that is progress.

While I contemplate a ride to work, I also think about the danger of "dooring." Apparently, Governor Quinn has been thinking about it as well. According to an AP report, the Illinois Department of Transportation wants data on dooring incidents. One can only hope that means the government is interested in doing something to reduce the risk.

For those of you who don't know, "dooring" is the name for the dangerous accident that occurs when a cyclist crashes into an opening car door. The rider often ends up head over heels and can be severely injured. Drivers, remember to check for bikes before opening your door.

Thursday, April 21, 2011

U.S. Can't Keep AD Duties

I don't usually cover trade remedies cases on this blog. Nevertheless, I feel like I am seeing more questions than ever from importers about dealing with trade remedies. And, this is just an interesting opinion, which hits both customs and trade issues.

In Canadian Wheat Board v. United States, the question was whether the United States could legally keep antidumping duty deposits on unliquidated entries Customs collected in the enforcement of an antidumping duty order that a NAFTA binational panel invalidated. In reality, the panel has no authority to invalidate an order. Rather, it ordered a remand to the ITC to reconsider injury. On remand, the ITC found no material injury. The NAFTA panel affirmed that finding and Commerce revoked the order. But, Commerce instructed Customs and Border Protection to stop collecting cash deposits as of the revocation date and stated that the revocation would not affect the liquidation of entries prior to that date. In effect, that was an instruction to liquidate prior entries with the cash deposits. Importers then went to the Court of International Trade seeking an injunction against liquidation and the return of the deposits.

On its face, this seems like a strange position for the government to have taken. According to the Federal Circuit, "[This] action is so bizarre and unfair that we would be most reluctant to sustain it unless we could say with complete assurance that there was no doubt that Congress intended that result." Further, the Court said that "Neither the statute nor its legislative history 'suggests the Congress intended to produce such an inequitable result.'" The Court characterized the action as "extraordinary and seemingly arbitrary . . . ."

It is clear how this is going to turn out. The interesting question for us in why the government pursued this position at all. I don't think it had much to do with the duties. It appears that if this were not a panel case but had been reviewed initially by the CIT, the government might have seen it differently. That is my speculation, but stick with me.

The government's first argument had nothing to do with the merits of retaining the deposits. Rather, it focused on whether this case was an attempt to enforce the decision of the NAFTA panel. The law is clear that a final NAFTA panel decision is not subject to judicial review (19 USC 1516a(g)(2)). If this case is about reviewing the substance of the NAFTA decision, then the case should be dismissed. The Court, however, found that the case now focused on the implementation rather than the substance of the panel decision and it was not barred.

Second, the government argued that NAFTA panels can only provide prospective relief (see 19 USC 1516a(g)(5)(B)). Granting a refund of unliquidated cash deposits would be retroactive relief. This also makes some sense, but the Court held that the treatment of unliquidated entries depends on what happens at liquidation and that is prospective in nature.

Thus, the government lost on the merits. But, if you look at it in the broader context, this seems like exactly the kind of argument the Justice Department should make. There is little law on the implementation of NAFTA panel decisions. This decision might impact future actions in dumping and countervailing duty cases not just in the U.S., but in Canada and Mexico as well. So, this might be an important step in understanding how panel decisions are to be implemented. And, the fact that it came out in a way that seems both logical and just, is a bonus.

Trade Agreements without Fast Track

In response to my cry for reader-generated content, I received a question from textile guru David Trumbull, the gist of which is:
If President Obama negotiates a Trans-Pacific Partnership free trade agreement and submits it to congress without Trade Promotion Authority would it be subject to the "Treaty Clause" (2/3 vote in Senate with no House vote needed)? Or, would it be treated as a congressional-executive agreement and would need a simple majority vote in both houses as would any other law?
Personally, I have always been suspicious of the congressional-executive agreement as a means of managing international relations (including trade). It simply does not show up in the Constitution, which specifies that the President can make treaties with the advice and consent of the Senate. On the other hand, Congress has the power to regulate trade with foreign nations. So, the congressional-executive agreement is basically a delegation of authority from Congress to the President to negotiate a deal, which then goes before both the House and Senate for approval by a simple majority. It sounds a lot like Fast Track (now "Trade Promotion Authority"), but is more ad hoc. Some scholars have opined that the process is unconstitutional, but the Supreme Court has upheld it (at least according to Wikipedia).

I don't know the answer to the questions. I invite those who might know or just want to express an opinion to do so in the comments.

Friday, April 15, 2011

Greetings from Chicago & Happy Blogoversary

Yes, I am here. Things have been very busy the past several weeks. That is a good thing; I am not complaining. Also, I have not seen much in the way of developments that merit a much analysis. Of course, I am behind in my reading, so there may be things in the pipeline.

On Wednesday, this blog celebrated its sixth anniversary. As blogs go, that is fairly remarkable and I am still pleased with both the content and the traffic. Thanks for helping to make the blog both satisfying for me to write and, I hope, enjoyable for you to read.

As an experiment in blogging, I am willing to crowd source the blog. If you have something related to customs compliance, trade law, export controls, cycling, or technology that merits a mention in this blog, send it to me. Keep it to about 100 words or less. If I think it is interesting, I will post it and give you credit. Competing law firms are not excluded but entirely commercial messages will not make the cut.

I am here for you 365 days a year. I rarely ask for anything. Just this once, in my hour of need, toss me a bone.

Sunday, April 03, 2011

CAFC Reverses storeWALL

As the post title might suggest, the Federal Circuit has reversed the Court of International Trade decision in storeWall v. United States. My previous discussion of this case is here.

You may recall that this case involves the tariff classification of home storage systems. Specifically, the imported merchandise was specially designed mounting hooks (called tabs) and wall panels. The panels can accept all sorts of storage accessories from baskets and shelves to simple hooks. If you are having trouble picturing this, visit the plaintiff's web site here.

The Court of International Trade held that the products were possibly "unit furniture" or parts thereof of heading 9403 based upon the dictionary definitions of the words "unit" and "furniture." According to the Explanatory Notes, unit furniture is designed "to be hung, to be fixed to the wall or to stand one on the other or side by side, for holding various objects or articles . . . ." With respect to parts of unit furniture, the Explanatory Notes also state that the term expressly excludes coat, hat, and similar racks and other similar articles. Based on this (and more) information, the CIT held that a complete storeWALL system might be classifiable as furniture. But, if the complete unit consisted only of the wall panel and hooks or pegs (similar to coat racks), then it was excluded from classification as furniture in 9403. Because the merchandise was not always used to make "furniture," the Court reasoned that it was not prima facie classifiable in 9403. Consequently, the CIT classified the merchandise in Chapter 39 as articles of plastic.

The first issue on appeal was the application of the "rack exception" from the Explanatory Notes. Generally, I am not a big fan of the Explanatory Notes when the tariff language is clear. And, the Federal Circuit has usually said that the Explanatory Notes cannot be used to introduce a limitation into the tariff heading that is not present in the text. Thus, I figured the the rack exception was about the be deflated. I was wrong about that.

Rather, the Federal Circuit held that the CIT properly consulted various sources to determine the common and commercial meaning of "unit furniture." These sources included dictionaries and other sources. Similarly, the CIT was correct in consulting the non-binding Explanatory Notes. The Federal Circuit characterized the Explanatory Notes as "clearly relevant guidance" but added the important caveat "where a tariff term is ambiguous." OK, I can live with that. The Court also reiterated its decision in Airflow Tech. in which it said that "When the language of the tariff provision is unambiguous and the Explanatory Notes contradictory, we do not afford the Explanatory Notes any weight." [Note: that is not a direct quote, but the meaning is correct.]  Since the rack exclusion does not contradict the tariff language, the CIT was correct to rely on it.

But, the Federal Circuit did disagree with the CIT regarding the classification of a storeWALL system consisting entirely of hooks. The CIT felt that that as imported the merchandise did not have a fixed function. The Federal Circuit, on the other hand, considered this flexibility to be indicative of the flexible nature of "unit furniture," which is intended to be assembled in various ways to suit the consumer's needs. Even if a particular installation of a storeWALL consisted solely of hooks, it is still capable of accepting shelves and brackets. A simple coat rack does not have that flexibility. Thus, the merchandise was properly classifiable as parts of unit furniture in 9403.

There is an interesting concurring opinion in which Judge Dyk argues that the tariff provision at issue is a use provision. The heading and subheading language does not expressly indicate that it is a use provision, but Judge Dyk finds evidence for that in the relevant legal notes and Explanatory Notes which define "unit furniture" based on how it is used. As a result, Judge Dyk would analyze this case under U.S. Additional Note 1(a) and classify the goods based on their principal use. According to the Judge, there is evidence to support a finding that the principal use is as unit furniture. Thus, he gets to the same place, though in a possibly more textually consistent way.