Customs Law

I don't moderate comments. I don't get enough to worry about and almost all have been on point and respectful. I've noticed that I am attracting a few more spammy comments and at least on company that sells a NSFW product has posted numerous spam comments. For now, I am going to leave the situation alone. Rather than moderate comments, I'll assume everyone understands that anonymous comments don't come from me. If it does get worse, I'll move to moderating comments. Unless anyone can tell me whether I can block comments from a specific visitor in Blogger. That would be the better solution.

Over at Public Citizen's Eye on Trade blog, they are complaining that CAFTA has no means by which the US can eject a country that has undertaken some anti-democratic action, failed to adopt the rule of law, or otherwise misbehaved. The blog compares that to AGOA, a program in which the President has exactly that power. Recently, Niger, Guinea, and Madagascar lost AGOA benefits following undemocratic transfers of power . Why not, Public Citizen wonders, do the same under CAFTA where Honduras has had a similar experience. The reason is that AGOA, GSP, and other unilateral preference programs belong to the United States. The US made the rules and can kick out a country that fails to satisfy the rules. CAFTA, like NAFTA and the other bilateral or multilateral trade agreements, are different. The rules were negotiated between and among the parties. Since no one will agree to negotiate and implement a trade agreement from which they might be ejected, the agreements contain no suc

As the 2009 winds down, the Court of International Trade appears to be clearing its collective desk. Storewall, LLC v. United States involves the classification of wall panels used as store display systems. The panels are made of plastic and affix to a wall via a plastic locator tab. The panels are grooved to accept shelves, baskets, and other display items. The importer claims that the merchandise is classifiable as furniture in Heading 9403, while Customs asserts that the correct classification is as articles of plastic in Heading 3926. The problem for the plaintiff is that Chapter 94 Note 2 defines furniture as something designed to be placed on the floor or ground. The display systems mount on a wall. But, the note contains an exception for items designed "to be hung, to be fixed to the wall or to stand one on the other." That exception is intended to cover "cupboards, bookcases, other shelved furniture and unit furniture." The wall-mounted panels are cl

This case follows in the footsteps of the decision in Aectra Refining and involves the question of what is necessary to perfect a claim for drawback. In this case, the claim was for the drawback of the Harbor Maintenance Tax and the Merchandise Processing Fee. It is also a good life lesson about the importance of the confirming memos we lawyers use to get things on paper (real or virtual) when others are content to leave them un-memorialized. As background, you need to understand that in Aectra, the plaintiff did not claim drawback on MPF and HMT because, at the time of the initial claim, the law did not support the drawback-ability of those fees. Following a Federal Circuit decision in Texport Oil Co., the law provided for drawback of MPF but not HMT. Congress made HMT eligible for drawback in 2004 and retroactively applicable to pending claims. The specific issue in Aectra was whether Aectra’s protest was enough to establish a claim for drawback of HMT and MPF that was not assert

Agro Dutch Industries is technically a dumping case, but it deals with the issue of the impact of liquidation by Customs and Border Protection, so I will deal with it here. This case involves the review of the dumping order covering preserved mushrooms from India. Commerce issued its determination and Agro sought to challenge it. To preserve its rights, Agro moved for an injunction with the consent of the United States. The injunction was necessary to prevent Customs from liquidating the entries. The general rule is that once liquidation happens, there is no relief available and the case is moot. So, the injunction was important and both sides knew it. In the background is the fact that Agro waited beyond the allowed 30 days to seek the injunction, but that provides context more than anything else. At the request of the government, the injunction included a five day grace period before it became effective. The grace period was intended to prevent Customs people from accidentally

Often, I disagree with a position adopted by U.S. Customs and Border Protection. That is the nature of my job. Sometimes I am right, sometimes, I am wrong, and often reasonable minds may differ. What I don't do is see everything that CBP does through the lens of Washington policy makers. That is primarily a result of years of experience dealing with the agency and also my Midwestern practicality. Rarely do I see any coordinated conspiracies. For example, there was a lot of hubbub a while back about a CBP proposal that would have effectively banned the importation of a category of pocket knives that have spring assisted opening mechanisms but have not heretofore been classified as illegal switchblades. Some people believed this to be a stealth effort by the Obama administration to slowly limit personal rights which would ultimately result in the repeal of the Second Amendment and the loss of gun rights for all Americans. I seriously doubt that. In fact, I am willing to bet th

Customs and Border Protection has posted its annual report on the seizure of counterfeit merchandise. Here are some highlights: Almost 15,000 seizures of counterfeit merchandise The seizures amounted to $260 million in domestic value There was a small decline in seizures, which was far smaller than the decline in overall imports China was the leading source for counterfeits Footwear was the leading commodity seized Here is a link to the full report .

Customs has seized a $1.6 million in counterfeit toys. The merchandise included "knockoff" Barbie dolls and riding toys with unauthorized Jeep labels. Here is the news story . IN a separate event, Customs and Border Protection seized $1.7 million in merchandise bearing counterfeit sports team logos. Wayla-guy would be offended to know that Cubs logos were included among the counterfeits. Here is that news story . Normally, I would not post simple news reports on seizures. But, I just taught on this topic last night. So, this is to let my student know that these things really happen in the real world. My student, I hope, also now understand how very difficult it can be for a good faith buyer to differentiate between a counterfeit and legitimately imported gray-market goods. For all you budding retail entrepreneurs, note that this is a risky business.

Just when I thought there was nothing new to blog about . . . . According to news reports , the Gibson Guitar company has been raided by federal agents of the Fish and Wildlife Service enforcing the Lacey Act amendments. The underlying investigation appears to be focused on imports of rosewood from Madagascar. Under the Lacey Act, importers of many products that are or include plant materials are required complete a declaration identifing the botanical genus and species being imported and to certify that the plant materials were harvested and exported legally. From a corporate compliance stand point, that can be difficult because the direct supplier often will not know the origin or legal status of the wood it purchased. This requires that importers set up a system a tracking the plant material back to it's origin. It is not unlike NAFTA tracing for automotive companies.

Sometimes it takes a while for things to actually hit the front of my brain. Such is the case with a June 2009 decision of the Seventh Circuit Court of Appeals involving an appeal from a criminal conviction under ITAR. In the spirit of "better late than never," here is a summary of U.S. v. Pulungan (No. 08-3000, decided Jun. 15, 2009). Mr. Pulungan tried to export some riflescopes to Indonesia. Believing there to be an arms embargo on Indonesia, he planned conceal the actual destination by transshipping via Saudi Arabia. In reality, the embargo had been lifted in 2005, two years before the attempted export. The scopes, however, are arguably controlled by the International Traffic in Arms Regulations as riflescopes "manufactured to military specifications." Importantly, the law provides that the designation "in regulation" of items as defense articles is not subject to judicial review. As a result, the district court instructed the jury to accept th

Here is an interesting footnote to my recent post on Customs and Border Protection's enforcement of intellectual property rights. First, I received an e-mail from some well-respected customs lawyers expressing concerns over Customs' enforcement. The concerns included the timing of infringement decisions and, surprisingly, the fact that Customs' has seized legitimate merchandise bearing registered a trademark on the theory that the registered trademark infringed another registered trademark. That sounds like CBP has stepped into the Patent and Trademark Office's territory. Another interesting point is this post by Seattle Trademark Lawyer Michael Atkins. According to the post, another Seattle trademark lawyer has filed a suit under the Freedom of Information Act seeking the release of all seizure notices relating to counterfeit merchandise. From the post, it is not clear whether the suit goes so far as to seek records of detentions and Notices to Redeliver. Either

It has been a while since I have done a purely off-topic post. For purposes of efficiency and recognizing that most visitors to this blog are looking for specific and useful information, I have avoided the "whatever strikes my fancy" kind of post. Facebook has also given me a more appropriate outlet for those topics. That said, I am moved to write about an episode of Batman: The Brave and the Bold . I am not a fan of classic American musical theater. I would rather do just about anything than sit through another production of Oklahoma!, Camelot, or Bye Bye Birdie. On the other hand, I have enjoyed more modern musicals including Rent, and Les Miserables. The stage production of Tommy was one of the best musicals I have seen. That is background. The next piece of background is that I read comic books, or "comics" as we in the know say. Specifically, I read a couple series on the DC side of things (although I am dabbling in Marvel's effort to bring Captain

I'm only posting this link because I know there continues to be interest in the policy questions surrounding Customs and Border Protection warrantless searches of electronic storage devices such as laptops and phones. This guy was pulled from the customs line following a cruise. He was already a convicted sex offender. That, no doubt, accounts for the heightened scrutiny. When CBP reviewed the contents of his computer, it found child pornography. As a result, the passenger is now headed to prison for 15 years. The article makes the usual references to civil libertarian concerns and possible statutory changes. The problem with the cases is that the defendants are so unsympathetic. Who in Congress will stand up for the rights of perverts and terrorists to be free from border searches. The problem, of course, goes much deeper because it is not just perverts and pornographers who might be searched. It is everyone and that means privileged medical records, attorney-client commu

Customs and Border Protection has established a new continuous bond category for intellectual property rights holders to use to secure the release of samples of allegedly infringing merchandise. This will simplify the process of getting samples for analysis for companies that often work with CBP to interdict counterfeits or infringing merchandise. Rights holders can also use a single transaction bond, if they prefer. Here is the notice from Customs, which includes an contact number for more information. While we are talking IPR, Customs has also finally republished the Informed Compliance Publication on CBP Enforcement of Intellectual Property Rights . All this activity is probably evidence of Customs' continuing focus on IPR enforcement. Here is a nagging question I have. Does anyone in Customs represent the innocent legitimate importer in enforcement policy. The reason I ask is that I have seen clients with legitimate, non-infringing merchandise suffer very serious expense an

The Court of International Trade has once again dashed the hopes of Arthur Schick to regain his customhouse broker’s license without re-applying for a license from scratch. I previously reported on Mr. Schick’s plight . He had his license summarily revoked after failing, due to illness, to file his triennial status report as required by 19 U.S.C. 1641(g). Mr. Schick’s lawyers made a valiant effort, raising a number of arguments that Customs and Border Protection improperly revoked the license without a hearing and, therefore, the revocation is invalid. These arguments were based upon the customs regulations, the Administrative Procedure Act, and the Fifth and Eighth Amendments to the Constitution. The latter arguments were based on the premise that the lack of a hearing violated Mr. Schick’s due process rights and that the revocation was an excessive punishment. In the first opinion from the Court of International Trade, the Court dismissed the case finding that it had no

I know this is short notice, but if anyone is going to be in Miami tomorrow for the ABA Section of International Law Fall Meeting, please say hello to me. I will be helping to moderate a panel on transfer price for customs and income tax Thursday at 8:30 AM. Apparently, the ABA felt the driest possible topic should start off the morning. Friday there is a tour of MIA Customs and Border Protection cargo facility. I am not sure if I will make that because I have a flight to catch Friday evening. While I am thinking of it, if you are in Chicago next week, I'll be introducing U.S. Court of International Trade Judge Timothy Stanceu at the annual DiCarlo lecture. This lecture is named in memory of "my judge," Dominick L. DiCarlo who was Chief Judge of the Court of International Trade. Judge DiCarlo had three successive John Marshall grads as law clerks. Judge Stanceu is, I think, the eight judge to speak in the series. Information is available here .

It's been a pretty busy couple of weeks and will continue to be. Earlier this week, I participated as co-counsel for the plaintiff in a mock trial sponsored by the Customs and International Trade Bar Association . The trial went reasonably well, although I was surprised by a document I created on which I failed to check the math. Note to self: Don't do that in real life. There have been a couple developments recently that deserve some blog coverage: Here is video of testimony on the Customs Reauthorization bill. Customs and Border Protection has published a Federal Register Notice regarding the use of sampling methodologies and offsetting overpayments in audits. This is interesting because statistical sampling in audits and prior disclosure perfections has been somewhat ad hoc. The issue has generally been whether the importer and the auditor could come to an agreement on a reasonable means of calculating the duties owed. Both sides generally understand that it is ofte

Recently, I answered a question posted on the ICPA listserv. The question was interesting enough that I will review the substance of it here. Most people generally think of the NAFTA preferences in terms of criteria A through D. These cover the vast majority of compliance issues with B being the leader. The ICPA question was about preference criterion E. What, you ask? Never heard of it. Well, it is of limited use, but if you are in the IT sector, it is a terrific rule. Preference E states simply that certain goods listed in NAFTA Annex 308.1 are considered originating simply by virtue of having been imported duty paid into the NAFTA region. [If you struggle with tariff shifts and RVCs, pick your jaw up off the ground.] What this means is that a 100% Japanese content computer imported duty paid into Mexico, for example, is originating when it is later transferred to the United States or Canada. In other words, for the IT sector, NAFTA sets up a mini customs union. That's

This is a tricky question that was answered in Funai Electric Co. v. United States . The underlying issue has to do with a determination by the International Trade Commission that certain imported digital televisions infringed a U.S. patent. As a result, the ITC issued an exclusion order requiring Customs and Border Protection to prohibit entry of the infringing televisions. This all happens under 19 U.S.C. sec. 1337 in what is called a 337 case. Following the exclusion order, some of the infringers developed a work-around to produce what they believed to be non-infringing televisions. They then went to Customs to get a ruling confirming the admissibility of the new televisions. Customs provided the ruling . Seeing the value of their exclusion order evaporate, the patent holder went to the Court of International Trade seeking a declaratory judgment or other relief holding that Customs has no authority to determine the scope of an ITC exclusion order. Rather, that task should fal

I read Rodrogue, so you don't have to. United States v. Rodrogue involves a technical issue in which the United States attempted to cure defective service on the defendant. Service is the means by which a defendant is notified of a claim against it. If service is not made properly, the Court does not have jurisdiction. In this case, the US sought leave of the Court to extend the 120-day service period by an additional 90 days and to permit service by public notice. Public notice service is based on the legal fiction that people actually read the legal notices buried in the back of the newspaper. The gist of the facts is that Customs repeatedly tried to serve the defendant's at the wrong addresses. One defendant was finally served, but after the statute of limitations and the 120-day period for service had run. The other defendant was never served. The upshot is that the United States needed to show good cause for its failure to serve. If it does show good cause, the Cou

Back in August on 2008, I blogged the story of a customs broker who was being investigated after having gone to the Federal Reserve to turn in some battered currency for clean new money. According to the original story , the money was found in Mexico. Yesterday, the Washington Post ran an update on the story. The money involved totaled some $6.4 million and was found buried at a warehouse in Mexico. As it turns out, and contrary to my first post, the broker involved appears to have crossed all the t's and dotted all the i's to properly bring the currency into the U.S. Still, there is something fishy going on as there was a settlement payment made to the U.S. Assuming this were truly just found money, it's not clear to me that there would be any need to settle anything. So, is there something more to this? Even with that tail hanging just a bit, it's nice to have an end to the mystery.

We are in the final stretch. I hope this is the last post on this case. Kahrs's ( grammar note : that looks awful) final argument has to do with 19 USC 1625 and the rule that once Customs has issued an interpretive ruling or settled on a uniform treatment of merchandise, it has to respect that practice. To change practice, Customs is required to go through a public notice and comment process. Kahrs takes the position that prior denied rulings, multiple intensive reviews, and hundreds of liquidations count as interpretive rulings, which cannot be undone via a simple CF-29 Notice of Action. Initially, the Court held that denied protests are not interpretive decisions within the meaning of the statute. The law does provide that "protest review decisions" are interpretive rulings. Simple denied protests, however, are outside the scope of 1625. Ditto the liquidation and intensive examinations. To make things worse for Kahrs, the Court noted that is 2001, Customs did go

UPDATED BELOW: Garner's The Elements of Legal Style, Rule 2.6 (Oxford, 1991)(emphasis in original) states the following: 2.6 Form Singular Possessives by Adding 's to the Singular Form of the Noun The rules holds true regardless of how the word ends: thus, witness's, Jones's, Congress's, and testatrix's . There are three exceptions to the rule. First, the word its is possessive, it's being the contraction for it is. Second, your and hers , which are absolute possessives, take no apostrophe. Third, biblical and classical names that end with a -zes , or -eez sound take only the apostrophe. Thus, Jesus' Moses' Aristophanes' Socrates' If the possessive form seems awkward to you, rephrase: the laws of Moses instead of Moses' laws , the action of Congress or the congressional action instead of Congress's action . Given the treatment of Customs as a singular entity, I take it from Garner (my go-to grammar guy) that the CAFC was c

Here I sit, painfully aware of my promise to my loyal readers to digest and summarize this Court of International Trade decision in a way that is both accurate and entertaining (well, entertaining to customs lawyers). The opinion is a dry 88 pages long. My task is daunting. I feel like I am standing at the base of some reasonably tall mountain with too little food and without an experienced Sherpa. I wonder whether there is any meaningful principle of customs law to be taken from this case. In other words, why am I bothering? [Pause for much time spent staring into space waiting for some sort of sign from heaven telling me what to do. None arrives, I continue reading.] Kahrs imports wood flooring which it classified in 4418 as builders' joinery. Customs and Border Protection classified the merchandise in 4412 as plywood. Kahrs filed suit and asserted as its causes of action: Improper revocation of prior rulings via a CF-29 Acts in opposition to an established and uniform p

Before I get to Kahrs III: The Search for Refunds, I want to take a look at Faus Group, Inc. v. U.S., which the Federal Circuit issued yesterday. There are a number of reasons for that. First, Faus is short. Second, it's brevity seems to raise something of an issue. Third, it relates to some of the same legal questions. Fourth, it raises a truly important grammar question. Faus involved the classification of laminated flooring panels as either fiberboard under heading 4411 or as "builders' joinery" under 4418. The Court of International Trade had upheld Customs and Border Protection's classification in 4411. The merchandise is pre-cut, tongue-and-grooved flooring consisting of a fiberboard coated with a photographic image to simulate natural wood. The pieces are not structural and are designed to be installed on a secure subfloor. Within heading 4418, Faus asserted that the proper classification was in 4418.30.00 as parquet panels or in 4418.90.40 as other

Returning now to the saga of Kahrs International , we have some more evidence questions to resolve. Before that, and with all due respect to the guy who complained about my Audi post , I say, "Hey Kahrs, nice floors you have there." I notice only because my kitchen floor is a wreck. In this second published opinion , the government moved for summary judgment, in part, on the basis of two declarations from Customs personnel. Kahrs moved to strike portions of those statements. Motions like this are decided on the basis of the judge's sound exercise of discretion and can only be reversed if the judge abused that discretion. In other words, the judge has pretty wide latitude here. The motion to strike comes down to an ages-old question in customs litigation: Are Customs Import Specialists "experts" for purposes of giving testimony in court. A run of the mill witness is generally only allowed to testify as to facts. "The light was green." "It w

President Obama has finally nominated Alan Bersin to serve at Commissioner of Customs and Border Protection. Here is his official bio: Alan Bersin was appointed by Homeland Security Secretary Napolitano in April, 2009 as Assistant Secretary for International Affairs and Special Representative for Border Affairs in the Department of Homeland Security (DHS). In that capacity, he serves as the Secretary's lead representative on Border Affairs and Mexico, for developing DHS strategy regarding security, immigration, narcotics, and trade matters affecting Mexico and for coordinating the Secretary's security initiatives on the nation's borders. Prior to his current service, Bersin served as Chairman of the San Diego County Regional Airport Authority. Previously, Mr. Bersin served as California’s Secretary of Education between July 2005 and December 2006 in the Administration of Governor Arnold Schwarzenegger. Between 1998 and 2005, he served as Superintendent of Public Education

This post is really background to the next couple posts. The Court of International Trade is not known for disputes over discovery or the admissibility of evidence. But, if you want to see a customs case involving hard-fought battles over evidence, look no further than Kahrs International v. U.S. The first opinion in this matter involved a highly unusual motion by the United States to have the Court withdraw deemed admissions. This week, two more opinions came out. Let's deal with them in order. The underlying dispute has to do with the treatment of wood veneer flooring strips. The defendant failed to timely respond to several requests to admit from the plaintiff. A request to admit is a discovery tool through which one side simply asks the other to admit some fact as a means of taking it off the table as an issue. If the other side does not respond, the fact is deemed to have been admitted. The Court, however, has discretion to relieve the party of it's deemed admissions whe

As a far too occasional bike commuter, I feel I should be offended by this ad for the Audi diesel. Audi seems intent on lumping bike commuters, strap hangers, and Segway owners into a larger category of nerds and losers. Of course, only the kick-scooter commuters belong there. Oddly, I'm not offended. Instead, I'm thinking the S5 is pretty hot looking . Damn you Audi!

Here is a little something for those of you out there trying to convince management that compliance is worthwhile. Some folks in Hollywood were apparently not paying attention to the Foreign Corrupt Practices Act . It seems they decided that the best way to get the contract to run the Bangkok Film Festival was to bride the relevant governmental official to the tune of $1.8 million. Under the FCPA, with very limited exceptions, it is illegal for a U.S. person to make a corrupt bribe a foreign governmental official to secure or retain business. There are very limited exceptions for what are often called "grease payments." A grease payment is made to expedite a ministerial task that is certainly going to happen. The difference has to do with whether the bribe is to get someone to exercise discretion in your favor as opposed to just do their job. Still, if your theory is that you are making grease payments so it is all good, you are treading on some very thin legal ice. Th

On the regulatory front, Customs and Border Protection is delaying enforcement of the rule requiring the entry of previously considered empty containers if there is residue in the container. For now, they can be treated as empty. The implementation of this change is delayed until further notice. After this comes into force, the residual goods will have to be entered. Quantities may be estimated, but if a more accurate quantity is later determined, the entry should be updated. In case you spent the past 48 hours under a rock or in a cave, President Obama has decided to levy new duties on tires for passenger cars and light trucks from China. This is a Section 421 case based upon the theory that there has been a surge in imports and the U.S. industry needs some breathing room to adjust. The duties will begin at 35%, go to 30% in the second year, and then to 25%. This is the first time an industry has successfully sought relief from the Obama administration. Here is the USTR press r

UPDATED TO FIX THE LINK: Generally, I worry about any court opinion that requires its own table of contents, but in my effort to fill the gaps in my recent blogging, I will jump into ENI Technologies v. United States . The merchandise involved is RF generators that take AC electricity, convert it to DC and then produce electrical current at specific frequencies and power. The frequencies are high enough to be in the range of radio energy, but the output is just electrical current at a certain wattage. In this case, the wattage is in the order of thousands of watts. The output is used to create plasma useful in the production of semiconductors, to which it is integral. Although there are other applications, semiconductor production appears to be the primary use. Customs classified the merchandise as static converters. The importer had a number of alternative classifications starting with parts of plasma processing systems. This required an analysis of Section XVI, Note 2, which controls