Thursday, March 15, 2012

Water Clearer after Alden Leeds

I almost missed this: The Federal Circuit has reversed the Court of International Trade's decision in Alden Leeds. For some reason, the Court has labeled it as nonprecedential. To me, that usually means, "don't bother reading this." But, since I covered the CIT decision and the Federal Circuit decision is interesting, I am happy to have received the anonymous tip to read the case.

If you don't remember the facts, you should read the original post. In summary, Customs and Border Protection improperly liquidated entries subject to a dumping case at the 25% deposit rate rather than the correct 4% assessment rate. Customs published a notice of the liquidation, which CBP claims occurred by operation of law. Alden did not notice the liquidation notice and asserted that the liquidation was void, making the notice a nullity. As a result, it went to Court seeking a refund of the duties. The Court of International Trade found in favor of Alden despite a Federal Circuit decision in a similar case that went the other way.

The issue before the CAFC was whether the Court of International Trade correctly decided that it had jurisdiction to resolve the case. The government asserted that to get into the CIT, Alden should have filed a protest of the admittedly erroneous liquidation. Alden said that because there was no valid liquidation, there was nothing to protest.

Unfortunately for Alden, the Federal Circuit has previous said that "all liquidations, whether legal or not, are subject to the timely protest requirement." That is on page 10 of the 16 page opinion. Had the Court led with that statement, we could have saved some time and paper because it is, as I learned in law school, "The Decisive Utterance."

What this means, as the Court pointed out, is that importers must monitor their entries for liquidation, whether or not that liquidation is legitimate. Failure to note and timely protest a liquidation will likely result in the protest becoming final and not subject to challenge. One interesting footnote (literally, it is footnote 3), distinguishes between agency suspensions of liquidation and violations of court imposed injunctions. If CBP liquidates contrary to an injunction, that liquidation is null and void. In addition, the fact that Alden's entries were deemed liquidated rather than actually liquidated was not a basis for a different decision. The Federal Circuit had already settled that question in another case.

That is likely a bitter pill for Alden to swallow, but it is probably not dirty pool (which is something Alden Leeds can help with).

Wednesday, March 14, 2012

Possible Amendments to Lacey Act

The Lacey Act is apparently the current poster-child for the excessive regulation of business. I know that because ON February 2, Senator Rand Paul has proposed FOCUS, the Freedom from Over Criminalization and Unjust Seizure Act. Under the bill, the criminal sanctions in the Lacey Act would be replaced with civil penalties. The bill also excises any reference to "foreign law" from the Lacey Act.

The Lacey Act is intended to prevent U.S. importers from benefiting from trade in plant and animal products that were illegally obtained. In other words, someone in the U.S. should not be in a position to benefit from elephant poaching in Kenya. But, it is only "poaching" when defined as such in Kenya, which is foreign law. 

According to a web site for Senator Paul's campaign, "The Lacey Act as currently codified is overly broad, imprecise, vague, and subject to abuse by overzealous prosecutors and activist judges." Oddly enough, I think it is a compliance mess that is extremely difficult to manage. That said, I think the notion that we cannot recognize foreign laws in situations like this is silly. It is not exactly the same thing, but if this is successful, I bet there will be efforts to loosen restrictions on conflict minerals, blood diamonds, and similarly regulated products. Again, I understand that compliance with these rules if difficult and that enforcement needs to be based on common sense and reasonable business possibilities. But, there is a baby and the bathwater problem here as well.

Tuesday, March 13, 2012

KORUS Instructions

Customs and Border Protection has posted the instructions for making claims under the U.S.-Korea Free Trade Agreement. Thad document is here. The crazy thing, which I mentioned in an earlier post, is that the rules of origin are based on the 2002 Tariff Schedule and have not been updated for the 2007 or 2012 revisions. As a result, CBP is instructing importers and certifiers to analyze their products under the 2002 rules and to indicate both the 2002 and 2012 tariff classifications.

Monday, March 12, 2012

Monday Morning News

The KORUS presidential proclamation is out, just in time for the March 15 implementation. The real meat of implementation will be new General Note 33 to the Harmonized Tariff Schedule of the United States. You can find the HTSUS modifications here.

For those of you exporting textiles to Mexico and who read Spanish, here is a notice allegedly modifying the labeling requirements.

The new Export Enforcement Coordination Center (E2C2) is open for business. Please do not confuse it with C2E2, which is much more fun

Wednesday, March 07, 2012

Everyone Talks About the Weather

The Court of International Trade has issued a decision in La Crosse Technology v. United States, which concerns the tariff classification of devices combining, to varying degrees, clocks, weather sensors, and weather forecasting devices. Thus, this is mostly a case about composite goods. But, not entirely.

The main instructive point in this case is that the Court of International Trade did a careful review of how to apply the General Rules of Interpretation and, in particular, GRI 3 in slightly differing circumstances. Initially, the Court dismissed the notion that this case could be resolved under GRI 1. Because the tariff headings in question describe only part of the products, the Court moved on the GRI 3, which states:

3. When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
 (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
 (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
 (c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
The parties seem to have come into this case thinking they were dealing with composite goods of 3(b).  The  Court, however, noted that the definition of composite goods in the Explanatory Notes requires that the components be attached (whether inseparable or separable), provided that the components are adapted to one another, are mutually complementary, and form a whole that would not normally be offered for sale in separate parts.

Looking at the specific combinations involved in the case, the Court noted that the simpler "Clock" models and "Professional" models come with external sensors that connect wirelessly to the base unit. Because these wireless parts for not attach to the base unit, they do not constitute part of a composite good. Rather, according to the Court, this is a retail set under 3(b). The analysis was different for the "Weather Stations," because the relevant heading (i.e., 9205) includes combinations of instruments and "parts and accessories." The Court found that the the weather stations are combinations of instruments for purposes of Heading 9025 and the base units are composite goods.

Whether classified as composite goods or retail sets, the question still turns on essential character. For the Weather Stations and professional models, the Court found that the weather-related features predominate over the clock features. For Clock products, the clock features predominated. Thus, they were classified in 9105 as clocks.

The remaining interesting question was the difference between 9015 meteorological instruments and 9025 which covers, among other things thermometers, barometers, hygrometers, and any combination thereof. It would seem that 9015 should cover only single meteorological instruments other than those listed in 9025 while 9025 would cover certain meteorological instruments and combinations thereof. But, as is often the case, it is a little more complicated.

The Explanatory Notes attempt to clarify the distinction between 9015 and 9025 by stating that 9015 does not cover thermometers, barometers, hygrometers or combinations of them. But, the Note to 9025 states that it covers combinations of instruments "except when the addition of one or more other devices gives the combination the character of equipment or appliances covered by more specific headings (e.g., heading 9015 as meteorological equipment)." Crikey.

Plaintiff argued that the weather stations are combinations that take on the character of meteorological instruments by virtue of their ability to perform analysis and predict the weather. And, by the way, in some models that prediction is conveyed via an icon of "Oscar Outlook," who would more likely be working for E! than for the Weather Channel. The Court disagreed that the Weather Station was anything other than a combination of instruments of Heading 9025. On the other hand, the Professional models also include wind and rain sensors and the ability to upload (n.b., not download) weather data to a computer for further analysis. According to the Court, this created a meteorological instrument of Heading 9015.