Friday, March 28, 2014

Slides from ICPA: Tariff Engineering

I am very happy to say that I had very favorable feedback on the presentation I did at the ICPA conference in Orlando last week. While the slides themselves may lack some of the content we discussed, you may find them useful.  I think you will get the gist.

You may have to tell your browser to display all content to see this.

Wednesday, March 12, 2014

Cheese Fight

When you buy Parmesan cheese, do you think it is from Parma in Italy? Is feta, which comes from the Greek word for "slice," always Greek? The list goes on to include Cheddar (England), Muenster (Germany), and Roquefort (France).

That question has popped up in the negotiation of the Transatlantic Trade and Investment Partnership. The EU wants to protect its cheesy names. That, of course, will meet resistance from U.S. producers who want consumers to understand what it is they are buying. The cheese mongers will argue that Parmesan and feta have overcome their parochial historical geographic connections and now generically refer to the type of cheese.

Taking a quick look at the history of these issues including tequila, champagne, and Hawaiian Punch (OK, that's a joke), it seems the domestic side is likely to lose this important battle. I predict that in five years, American-made feta will be labeled as feta-style cheese as surely as California champagne is now sparkling white wine. Here is a release from U.S. Senators Toomey and Schumer asking the USDA and USTR to support the cheese makers. And, here is an article on the Canadian experience.

Sunday, March 09, 2014

Second Best Key

I have been sitting on this for a while. Sometimes I need to find the time and properly Zen-like mental state to read a 27 page opinion in enough detail to post a summary. As it happens, a chess tournament in which parents are sequestered away from the players and given free wifi is such a setting.

You should re-read the original post on Best Key to understand what is going on here. The underlying issue is that Customs originally classified certain imported yarn as metalized, which has a HIGHER rate of duty than non-metalized yarn. Subsequently, Customs revoked the ruling and reclassified the yarn as non-metalized with a LOWER rate of duty. That circumstance almost never produces controversy. However, Best Key knows that garments made of metalized yarn are subject to a lower rate of duty than garments made of non-metalized yarn. As a result, the revocation of the ruling creates a disincentive to use Best Key's yarn in garment production for products to be imported into the U.S. That is why Best Key is attacking the application of a lower rate of duty.

In this case, the Court is reviewing the revocation decision under the Court of International Trade's so-called residual jurisdiction. This is different than the review of denied protest. According to the Court, this is on-the record review and Customs' decision will be upheld unless it was arbitrary and capricious, which is a very deferential standard. For those who care, the actual level of deference is less than full-on Chevron deference. Instead, revocation rulings are entitled to Skidmore deference which depends on the written decision's power to persuade the court that it is correct.

In that context, the Court reviewed the revocation decision to determine whether it was arbitrary and capricious. The plaintiff raised numerous traditional classification arguments about, for example, the application the Explanatory Notes and the application of tariff language to later developed products. None of these were persuasive to the Court.

One argument that stands out is that the decision was unduly influenced by input from the domestic industry or its paid lobbyists. The gist of this is that the decision was not objective and that the administrative record provided to the Court of International Trade did not reflect the role of the domestic industry in influencing Customs and Border Protection. In a similar vein, the Plaintiff argued that Customs failed to accord adequate weight to its technical comments, while giving undue weight to the conclusory opinions of the domestic industry.

This line of argument is completely rational and also shows the frustration sometimes experienced by importers and foreign producers who have to deal with Customs and Border Protection. The appearance that Customs might be making result-driven decisions to support U.S. industry tarnishes the standing of Customs as an objective decision maker. The hard question is whether it is true and also whether a party can prove it. In this case, the Court did not find compelling evidence of the unseen hand of industry unduly influencing a decision. The problem for litigants is that finding proof of that is extraordinarily difficult. If, and note that I am saying "if," Customs and Border Protection were to act as a protectionist tool, it should only do so in accordance with a mandate from Congress.

Absent a congressional mandate, Customs and Border Protection should, to quote a respected long-term CBP official, stick to "calling balls and strikes."

Friday, March 07, 2014

We Have A Commissioner!

If you did not live in Chicago during the mayoral transition from the late Harold Washington to Eugene Sawyer, you won't get the hilarity that is the title for this post.

Be that at it may, the Senate has provided both advice and consent on the nomination of Gil Kerlikowske to serve as Commissioner of Customs and Border Protection. According to the official announcement:

Gil Kerlikowske is Director of National Drug Control in the Office of National Drug Control Policy at the White House, a position he has held since 2009.  From 2000 to 2009, he served as Chief of Police in Seattle, Washington.  From 1998 to 2000, he was Deputy Director of the Office of Community Oriented Policing Services at the U.S. Department of Justice.  From 1994 to 1999, he was Police Commissioner of Buffalo, New York.  He began his law enforcement career serving in the St. Petersburg, Florida Police Department from 1972 to 1987.  Mr. Kerlikowske served on active duty in the U.S. Army from 1970 to 1972, and in the Army Reserve from 1972 to 1976.  He received a B.A. and an M.A. as well as an D.H.L. from the University of South Florida. 

Thursday, March 06, 2014

Trek Leather Rehearing

Trek Leather is a really important decision from the Court of Appeals for the Federal Circuit. It held that the duty of reasonable care attaches to the importer of record and not to third parties. That is an important consideration for corporate officers and employees who provide information to Customs and Border Protection and has a major potential impact on how Customs brings penalty cases.

The Federal Circuit has accepted a petition for rehearing en banc in the case. That means the entire Court will review the issue. This does not happen often and indicates that there is disagreement among the judges of the Federal Circuit. So, this will be important to watch.

The Federal Circuit has specified the following questions as central to its review:

A) 19 U.S.C. § 1592(a) imposes liability on any "person" who "enter[s], introduce[s], or attempt[s] to enter or introduce" merchandise into United States commerce by means of fraud, gross negligence, or negligence by the means described in § 1592(a). What is the meaning of "person" within this statutory provision? How do other statutory provisions of Title 19 affect this inquiry?
B) If corporate officers or shareholders qualify as "persons" under § 1592(a), can they be held personally liable for duties and penalties imposed under § 1592(c)(2) and (3) when, while acting within the course and scope of their employment on behalf of the corporation by which they are employed, they provide inaccurate information relating to the entry or introduction of merchandise into the United States by their corporation? If so, under what circumstances?
C) What is the scope of "gross negligence" and "negligence" in 19 U.S.C. § 1592(a) and what is the relevant duty? How do other statutory provisions in Title 19 affect this inquiry?