Saturday, August 17, 2013

Do I Amuse You?

Remember when I said I was trying to catch up? I know it looks like a lie. It's not. I'm just running around on a real work for real people and on real end-of summer efforts to not waste good weather. That said, I am still reading court cases.

I'm going to make short work of Spring Creative Products Group v. United States, a decision of the U.S. Court of International Trade. The case involved the proper tariff classification of a craft kit for the making of a fleece throw. The kit contained two 48 by 60-inch fabric panels and materials used to knot them together into a single throw. Most of the kits included a panel printed with a character from a popular cartoon, comic book, or children's movie. Customs and Border Protection classified it as pile fabric of man- made fibers in 6001.22.00. The importer challenged that classification and asserted that the correct classification was as a toy in Heading 9503.

The Court of International Trade made a lot of findings of fact and conclusions of law, all of which were helpfully set out in numbered paragraphs. That makes the decision technically precise but, frankly, a little tough to read. But, we can bottom line this easily enough.

Because of Section XI, Note 1(t) of the HTSUS, if the goods are classifiable in Heading 9503, they are excluded from Section XI, including Chapter 62. The relevant part of Heading 9503 is a use provision meaning that the principal use of the merchandise must be as a toy. Customs has long held that the distinguishing characteristic of toys is that they are designed primarily for amusement rather than for some utilitarian purpose. Toys provide a pleasurable diversion.

The Court applied the famous (among a small group of people) Carborundum factors to determine whether these kits are of the class or kind of merchandise that provides amusement and diversion. In a nutshell, the Court found that both the physical characteristics of the merchandise and the expectations of purchasers indicated that the kits were principally used as toys. Contrary to the argument put forward by the Department of Justice, the fact that the importer was not a toy company and the kits are not sold in toy stores did not negate the fact that the goods are toys. As a result, they are properly classifiable in 9503.

Thursday, August 15, 2013

Importing from Myanmar?

I don't usually do this, but here it is expedient. Rather than summarize Customs and Border Protection's guidance on imports from Burma, I'll just repeat it. I cannot quite figure out where this is placed on the CBP website, but it is called "burma_august2013.doc."

Certain Burmese Rubies, Jadeite and Articles Containing Burmese Rubies or Jadeite Are Prohibited from Importation into the United States

In light of the expiration of the Burmese Freedom and Democracy Act of 2003 (the “BFDA”) (Public Law 108-61), as amended by the Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008 (the “JADE Act”) (Public Law 110-286), on August 7, 2013, the President issued an Executive Order (“EO”) that prohibits the importation of “any jadeite or rubies mined or extracted from Burma and any articles of jewelry containing jadeite or rubies mined or extracted from Burma.”  This EO amends Executive Order 13310 (July 28, 2003), in relevant part, by revoking the section of that order imposing a prohibition on the importation into the United States of any article that is a product of Burma.  Therefore, with the expiration of the BFDA, as amended by the JADE Act, and with the new amendment to Executive Order 13310, there is no longer a general ban of “any article that is a product of Burma,” and certain provisions of the JADE Act and the Presidential Proclamation 8294 of September 26, 2008 (the “Proclamation”) will no longer be enforced.  As such, CBP is removing the JADE Act regulations at 19 CFR § 12.151.  CBP will no longer enforce certain provisions of the JADE Act and the Proclamation, such as the exporter certification requirement for the importation of “non-Burmese covered articles.”   

Imports Prohibited

CBP will continue to enforce the import prohibition of Burmese jadeite and rubies, and articles containing Burmese jadeite and rubies, as defined in the August 7, 2013 EO. 

For purposes of the import prohibition in the EO, the following definitions apply: 

(a)       the term "jadeite" means any jadeite classifiable under heading 7103 of the Harmonized Tariff Schedule of the United States (HTS);

(b)        the term "rubies" means any rubies classifiable under heading 7103 of the HTS;

(c)        the term "articles of jewelry containing jadeite or rubies" means:

(i) any article of jewelry classifiable under heading 7113 of the HTS that contains jadeites or rubies; or

(ii) any article of jadeite or rubies classifiable under heading 7116 of the HTS.

Exception to the Import Prohibition

Section 6 of the August 7, 2013 EO states that there is no prohibition of the importation of any jadeite or rubies mined or extracted from Burma or any articles of jewelry containing jadeite or rubies mined or extracted from Burma that were previously exported from the United States, including those that accompanied an individual outside the United States for personal use, if they are reimported to the United States by the same person who exported them, without having been advanced in value or improved in condition by any process or other means while outside the United States. 

Parties who are temporarily exporting from the U.S. “any jadeite or rubies mined or extracted from Burma or any article of jewelry containing jadeite or rubies mined or extracted from Burma” are advised to register those articles prior to export through one of the following methods:
CBP Form 4455 - Certificate of Registration

CBP Form 4457 - Certificate of Registration for Personal Effects Taken Abroad

A carnet issued by the U.S. Council for International Business. This is more suitable for commercial samples and items for trade shows and exhibitions.

If one of the above-referenced documents is not presented to CBP at the time of re-importation into the United States, the importer must present documentary evidence that supports the claim that subject articles were exported and re-imported by the same person without having been advanced in value or improved in condition by any process or other means while outside the United States.  Without such documentation, the articles are subject to seizure by CBP.

For questions regarding the import prohibition in the August 7, 2013 EO, contact CBP’s Partner Government Agencies (PGA) Branch at

Executive Order - Prohibiting Certain Imports of Burmese Jadeite and Rubies

U.S. Economic Sanctions Against Burma – See U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)


Thursday, August 08, 2013

This is a test.

Let me know if this works and what you think. And, as always, it is not legal advice.

Saturday, August 03, 2013

Changes in Latitude, On Me

About this time in the summer, I am thinking I gotta fly to St. Somewhere for some boat drinks. Unfortunately, that is not in the cards. I'll make due with homemade margaritas and reading Latitudes International Fragrances, Inc. v. United States so that you don't have to go insane. [My apologies to Jimmy Buffett for those five references.]

This case has to do with the proper tariff classification of glass bottles imported empty. In the U.S., the bottles were combined with other merchandise to form a scented oil diffuser kit. U.S. Customs and Border Protection classified the bottles in HTSUS item 7013.99.50 as glassware for indoor decoration. That resulted in a still rate of duty of 30%. Plaintiff believes that the correct classification is in 7010.90.50 as bottles for the conveyance of oils, which has a rate of duty of free. Note that both of these provisions are principal use provisions. Consequently, it is the use of the class or kind of merchandise that controls the classification, not the use of the actual imported merchandise.

According to the plaintiff, these bottles are used to convey the scented oil to the ultimate consumer and that it is the oil that the consumer is purchasing. Defendant, on the contrary, argued that the bottles are an attractive decorative item similar to a vase.

To sort this out, the Court of International Trade applied the so-called Carborundum factors to determine the class or kind to which the bottles belong. That means that this post will have at least seven more paragraphs, which is not what I had hoped.

1. General Physical Characteristics of the Merchandise

Yes, the bottle is attractive and decorative. On the other hand, it has a stopper that is designed to prevent the fragrance oil from leaking out of the bottle. Further, the bottle's shape facilitates inserting those cattail-like reeds used to suck up the oil. On this point, the Court tilted toward conveyance.

2. Expectations of the Ultimate Purchaser

The bottle is only sold to consumers as part of a kit with oil and reeds. While it is attractive, the expert testimony that consumers would keep and refill the bottle was not sufficiently probative to make a finding. Further, the bottles are a small portion of the value of the kit (about $0.50 out of $18), indicating to the Court that the consumer expects to be purchasing a defuser kit and to discard the bottle.

3. Channels of Trade

The bottles are imported empty and are not offered for sale to retail customers in their imported form. Thus, the channel of trade is distinct from the channel for vases and decorative items.

4. Environment of Sale

Defuser kits are advertised and sold to retail end users. The bottles are not sold, advertised, or displayed separately by retailers. That makes them unlike vases.

5. Use in the Same Manner as Merchandise That Defines the Class

There was limited evidence that the bottles are reused. That means that there was also limited evidence of their decorative use being predominant. In other words, the main use appears to be holding oil in defuser kits. Thus, this factor also points in the direction of bottles for the conveyance of oils.

6. Economic Practicality of So Using the Imported Merchandise

The cost of the bottle is apparently so low that is does not make economic sense for the importer to offer refills of oil and defuser sticks. This factor also tilts in favor of 7010.

7. Recognition in the Trade of this Use

The last Carborundum factor is the recognition of the use in the trade. There was not a lot of evidence on this point.

Following that review, the Court of International Trade noted that its own examination of the bottles indicated that their features are consistent with bottles for the conveyance of materials. The primary consideration in this part seems to have been the presence of a stopper designed for use with defuser reeds.

The last bit of the case is interesting. The Department of Justice asserted that the ruling Customs and Border Protection issued to the importer is entitled to judicial deference under a Supreme Court decision called Skidmore. What Skidmore says is that this sort of decision (which was not subject to public notice and comment) is entitled to deference consistent with its degree of persuasiveness. Thus, I always wonder why the judges don't say "Yes, it get's Skidmore deference" and move on to the question of how much deference. Instead, the Court seems to look at the ruling and make the binary decision of whether it is persuasive enough to be entitled to deference. That is an analytical question that I think matters, but probably not very much.

In this case, the Court was not impressed with Customs and Border Protection's comparison of the bottles to jars and its application of the relevant Explanatory Notes. Consequently, it held that the ruling was not so thorough or logical to warrant deference.

All of which adds up to a win for the plaintiff.

Now, before I blow out my flip flops, where are my limes and my tequila? [That makes six.]

Friday, August 02, 2013

Next: La Crosse Technology or "The Return of Oscar Outlook"

When we last left Oscar Outlook, mascot of La Crosse Technology, the United States Court of International Trade determined that several combinations of meteorological instruments and clocks had the essential character of clocks or various weather related instruments for purposes of tariff classification and were not properly classifiable as meteorological instruments. Now we have the Court of Appeals for the Federal Circuit stating its disagreement with that determination.

As background, the Federal Circuit stated that all of the devices at issue in the appeal include  wireless instruments to measure outdoor conditions and a base unit to measure indoor conditions. The devices have an LCD display, a barometer, and a microprocessor. The processor is programmed to analyze historical barometric readings and predict the weather. The forecast shows up on our friend Oscar Outlook in the form of his clothing. And, it is important to note, they all include a clock.

The first issue here was whether this case can be decided on the basis of General Rule of Interpretation 1, which states in relevant part that "classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ." According to La Crosse, Heading 9015 covering meteorological appliance is sufficiently broad to cover all of the products without resort to any other rules of interpretation. The Court, however, determined that this undervalues the contribution of the clock. Because Heading 9015 does not cover clocks and clocks are "substantially in excess" of the features of the articles in Heading 9015, the Court moved on to General Rule of Interpretation 3(b).

Rule 3(b) addresses composite goods. A composite good is an article composed of two or more dissimilar articles. Imagine a teddy bear with a corn popper in its belly and you will have an idea of what is happening in General Rule of Interpretation 3(b). The rule states:

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

According to the Federal Circuit, all of the devices in question monitor weather conditions and provide forecasts. These are not features performed by clocks. In addition, the weather functions add significant cost over the clocks alone. Consequently, the Court found the essential character to be imparted by the meteorological capabilities.

This did not resolve the matter. At this point, all we know for sure is that the merchandise is not clocks. There were still two competing headings: Heading 9015 covering meteorological appliances not covered elsewhere and 9025 covering thermometers, barometers, hygrometers, etc. and combinations thereof. Because of the weather forecasting capabilities of the devices, the Court of Appeals reversed the Court of International Trade and held that the goods are properly classified in 9015.80.80. According to the Court, "[T]he forecasting feature is central to the devices at issue and takes the devices at issue out of the narrow scope of instruments described by 9025, and into the broader category of meteorological devices described by Heading 9015, and more specifically by subheading 9015.80.80."

Dissenting Circuit Judge Bryson had a different and important take on the clock issue. He agreed with much of the analysis and, in particular, that this is a GRI 3(b) case involving composite goods. Where Judge Bryson differed was on the determination of essential character. He noted that the so-called "clock models" had very prominent clock features including alarms, calendars, and the ability to project the time onto walls. Also, the clocks were advertised as such.

According to Judge Bryson, when the Court of International Trade determined that these models had the essential character of clocks, it made a factual determination. To reverse a finding of fact, a federal court of appeals must find that the lower court committed clear error. Judge Bryson did not find clear error in the decision of the Court of International Trade and, therefore, would not have reversed.