Customs Law

One of the issues I have long had with Customs' enforcement activities is what I perceive to be a lack of effort to differentiate between counterfeit goods, which should be seized, and unauthorized parallel imports, which are usually (but not always) perfectly admissible. Parallel imports, also known as gray market goods, are legitimate goods that are purchased abroad and imported without the authorization of the U.S. trademark or copyright holder. Image finding a case of expensive brandy at a fire-sale price in Iceland. If you think you can make a buck reselling the goods in the U.S., buy the goods, and import them, you are a parallel importer (and there is nothing wrong with that). Unless, as is often the case, the goods really are counterfeit and you are being duped, but that is not what we are talking about here. The problem is that when your brandy arrives at the port, Customs and Border Protection has to decide whether you are entitled to import the goods. As a general matt

President Obama has signed the Presidential Proclamation authorizing the implementation of the World Customs Organization's 2012 update to the Harmonized Tariff Schedule. Here is a link to the source document . There are changes throughout the tariff schedule. However, they seem to cluster around food and agricultural products and products with an environmental impact (good or bad). On that note, I wish you all a very happy, healthy, and successful 2012.

There is a lot going on. Unfortunately, I am in the land of terrible internet access. Thus, I give you these two headlines and links. Customs and Border Commissioner Bersin is leaving his post at the end of the month. The Federal Circuit has ruled the U.S. law does not permit the application of CVD law to Non-Market Economies, including China. More to follow.

"Bioreactor" sounds like a good name for a heavy-metal band, or possibly for a post-apocalyptic video game. But, in reality, it is a machine in which living organisms, typically bacteria, perform some useful chemical function. For example, you might want to feed complex carbohydrates like barley to yeast and end up with beer. For industrial purposes, you might be feeding bacteria something and ending up with an antibiotic. Applikon Biotechnology, Inc. v. United States is a Court of International Trade case about the tariff classification of bioreactors. For reference, here is a page full of the plaintiff's products , all of which look like props from a sci-fi movie except for the green one, which looks like it comes from Kang and Kodos of the Simpsons. The question here was whether Customs and Border Protection properly classified the bioreactors in 8419 as machinery, plant or laboratory equipment for the treatment of materials by a process involving a change o

Tariff classification disputes are rarely very sexy. On the other hand, that is not always the case. A recent pair of decisions from the Court of International Trade are good examples of the latter. Both involve the tariff classification of an upper garment for women described as a top with "shelf bra" or as a "bra top." You can probably see where this is going and, if you are offended by the sort of humor that comes from 12-year-old boys, you might want to avoid this post. The two cases are Lerner New York, Inc. v. United States  and Victoria's Secret Direct LLC v. United States . Both of the decisions are preliminary determinations having to do with an important evidence question. What it comes down to is whether a woman, whose professional work is in part to serve as a fit model, may testify as to the functioning of the imported merchandise in providing support for her bosom. Solely for purposes of providing context to my readers to ensure an adequate under

The last month has been extremely busy and December does not look to be any less so. Consequently, you are about to get the shortest court decision summaries possible. Catch me in January, when it looks like I will have more breathing room, and I will do better. Ford Motor Company v. United States Ford, which is rapidly becoming the go-to litigant for interesting issues, challenged Customs' denial of a post-entry NAFTA claim in which it had failed to provide NAFTA certificates. The Court of International Trade dismissed Ford's challenge on the grounds that it failed to properly make the claim and, therefore, the Court lacked jurisdiction. The Federal Circuit reversed (see this prior post ) holding that the lack of a NAFTA certificate was not jurisdictional. Rather, the Court had jurisdiction and the question to be decided was whether the claim was properly made. On remand , the CIT had to decide whether Customs and Border Protection properly denied the post-entry claim. A

Sometimes, people complain that lawyers can't speak or write in simple English. Usually, I am sympathetic to this complaint. But, there are time when lawyer language has to be complicated to anticipate and avoid later arguments about what some text means. If your argument in a contract dispute is "We all know I was not supposed to paint the house in the rain," but you can't point to that in the contract, you are in a weak (but not untenable) position. If you have a contract that covers when, how, and in what conditions you are supposed to paint, it will be easier to resolve the dispute. So, up to a point, legalese has a place. Hitachi Home Products is all about how courts grapple with bad drafting and important points left out of laws. Here is the regulation relating to how Customs and Border Protection is supposed to decide protests (19 CFR 174.21): Except [for protests relating to exclusions], the port director shall review and act on a protest filed in accordan

Airflow Technologies is one of my favorite cases of the past few years. In it, the Federal Circuit reversed the Court of International Trade and held that the tariff description "straining cloth" in HTSUS heading 5911 only applies to cloth used for straining solid particles from liquids. Whatever clearing the air or other gases of particulates may be called, it is not straining. The Federal Circuit remanded to the Court of International Trade for additional consideration. The CIT has now issued its remand decision , and it is interesting. Filter media is complicated to classify for two reasons. First, the media itself can be made of various materials from paper to fiber glass to textiles. Second, the imported product is often not just the media but the media housed or supported in some way. Think about a basic furnace filter as an example. Although everyone calls those things "furnace filters," Customs and Border Protection tends to think of them as the just the

On Thursday, I did a very dangerous thing. I talked about trade law in a room of about 100 trade lawyers and judges from both the Court of International Trade and the Court of Appeals for the Federal Circuit. This was at a CIT and Customs and International Trade Bar Associations sponsored event in DC, which was a great success. The topic was the identification of situations in which judicial review raised more questions for the relevant agencies and parties than it resolved. As it turns out, that phenomenon is more easily found in antidumping and countervailing duty law than in customs law. We discussed issues like zeroing, the ITC's causation analysis where non-subject imports are in the market, and the application of adverse facts available. In all cases, the trade lawyers on the panel expressed concern about the courts swinging from one position to another or injecting new elements into what might have been a settled analysis. My role was to moderate, so I had little to add.

Despite having been repealed in 2005, the Continuing Dumping and Subsidy Offset Act (known as the Byrd Amendment) is still in Court, although maybe not anymore. In Furniture Brands Int'l v. United States , a three-judge panel of the Court of International Trade was asked to decide a number of motions most of which were directed at dismissing the case for failing to state a claim on which relief can be granted. The point of the CDSOA is to allow members of the domestic industry to receive an allocation of funds collected from importers. These funds were intended to offset the expense of pursuing the case incurred by the petitioners and domestic interested parties who supported the petition. Thus means that domestic interests who opposed the petition are not entitled to CDSOA funds. The Court of International Trade had held in previous cases that this petition support requirement violated both the first amendment guaranty of free speech and the fifth amendment guaranty of equal pro

To cut to the case, the President signed the Korea-FTA legislation last. As a result, the MPF changes in that bill will control. That means that Merchandise Processing Fee will increase to .3464% retroactively to October 1, so expect a bill from Customs and Border Protection. For now, the system will not accept payments at the higher rate. Customs is expected to provide about a week's notice before the program is done to implement the increase. Note that the change in rate does not affect the $25 minimum or the $485 maximum. Thus, large commercial shippers, who are likely to have the cap apply to most shipments, will see no real change in their total landed cost. On the other hand, small shippers will likely absorb the increase in MPF collected. That seems like something else to anger the Occupy Wall Street crowd.

Sometimes the most important case in the world is your own. In that context, I give you Firstrax v. United States . The issue in this case was the tariff classification of collapsible pet crates used to provide a portable home for dogs and an aesthetic alternative to wire crates. Some of the smaller crates involved included a handle on the top. This created a superficial similarity in appearance to pet carriers, which these products are not. The primary distinction between the two is that pet carriers tend to have a rigid bottom for the comfort of the animal and these crates rely on the floor or ground to provide a rigid surface. Customs and Border Protection wanted to classify these products in HTSUS Heading 4202 on the theory that they are similar to travel bags used to transport, store, protect, and organize personal affects. The Court of International Trade disagreed with this on almost every front. According to the court, a living, breathing pet cannot be "stored" an a

I have a couple interesting cases to cover. The first is Tianrui Group v. International Trade Commission , which is a Section 337 exclusion case. We don't usually cover 337 cases here, so some background is appropriate. The law permits a U.S. holder of intellectual property rights to bring an action in the International Trade Commission seeking to exclude from the United States imported products that infringe the intellectual property. Usually, but not always, the IP rights involved are from patents, but 337 applies to copyrights, trademarks, and other rights. To be technically correct, 337 also applies to other methods of unfair competition including some antitrust violations. If the ITC finds a violation, it can issue an exclusion order, which tells Customs and Border Protection of prohibit the entry of infringing merchandise. Appeals from the ITC are heard by the Court of Appeals for the Federal Circuit, bypassing district court review There is a lot in this case. If you are

Panama and Colombia, too. Here is an article from the Atlantic about the deals, focusing on Korea. I feel as if I should have something insightful to say and that I should take a position on the economic impact these deals will have on the U.S. as a whole, on jobs in particular, and possibly on compliance professionals. The truth is, I am somewhat numb to trade deals. Far and away, the trade agreement that gets the most commercial traction is the NAFTA. We are 17 years into NAFTA and every day (really, every day) I answer questions about how to do the documentation. That is because the rules are very complex. I am happy for the opportunity to help and I truly understand the complexities of the data gathering necessary for compliance. But I also know that adding additional trade deals adds exponentially to the compliance difficulties. For this, I blame the WTO's inability to get a comprehensive trade deal done during the Uruguay Round. As it is, the NAFTA was used as a model

Here is a news item stating that Immigration and Customs Enforcement's Homeland Security Investigations special agents raided a number of Florida sites to execute search warrants relating to possible counterfeit goods. In the end, they collected 50,000 counterfeit items with a total retail value of $28 million. That's not surprising. If the government created a flee market and push cart squad, it could find counterfeits with little effort. As a general principal, that is a good thing. Counterfeiting is theft and vendors of counterfeit goods free ride on the value of brands to which they have no claim. However, every time I hear about about one of these events, I wonder whether any of the goods were actually genuine but gray market products. As a general rule, gray market goods that are not materially different from the authorized products sold in the U.S. are entitled to entry. This is a rule that recognizes that the vendor has been fully compensated in the first, legitimate

The Federal Circuit has affirmed the Court of International Trade's decision in LeMans v. United States  and has broken my heart in the process. LeMans involves the tariff classification of apparel designed for motocross participants, which Customs and Border Protection classified in HTSUS Chapters 61 and 62. LeMans protested and challenged the classification in the Court of International Trade, which upheld Customs. LeMans' argument was that the merchandise should be classifiable as sports equipment in Chapter 95. I posted about the lower court decision here  and even opined in the comments that I expected a reversal. I was wrong, and it has me annoyed. In a case called Bauer-Nike, the Federal Circuit previously held that hockey pants, which include pads, are necessary, useful, and appropriate to the sport of playing hockey. As a result, consistent with the Explanatory Notes, hockey pants are sports equipment, not apparel. This was primarily by comparison to "pads&quo

This is old news I inexplicably missed. Thanks to Rafael for the tip. The story is that in 2010, the Customs authorities in French Guiana stopped a Dutch traveler with a suspicious pair of pants. They found a pouch full of humming birds. From the picture s, I would assume the beaks were not at all comfortable. Follow the link to see the truly strange pictures.

Customs is floating an idea to reinterpret the value law with respect to transfer pricing to give related party importers more flexibility with respect to post entry adjustments. Here is the notice asking for comments . This is a long-awaited notice, but it is just a request for comments rather than an actual proposal. The issue this notice seeks to address has to do with the application of transaction value in cases where the related parties have a transfer pricing policy that requires periodic adjustments to the sales price of the goods. Usually, this is done to ensure that the selling entity earns the appropriate amount of profit over the fiscal year or other period. Hitting that target is often an important consideration for tax planning. Consequently, companies spend a lot of time and effort working with accounting firms to establish an acceptable transfer pricing policy that meets their tax needs. In some case, these policies can be validated by one or both of the governments

Here is something else I missed while I was away. Maybe you missed it too. Senator Claire McCaskill has introduced legislation directed at creating policies to make it harder for companies to evade the payment of customs duties. In essence, this seems similar in goal to the ENFORCE Act, which my partner David Forgue covered in this interesting white paper . The new proposal focuses in part on the relationship between brokers and importers by imposing a "know your customer" requirement on brokers. In addition, the bill would eliminate bonding for new shippers in antidumping casing and require cash deposits like other importers. Apparently, this is intended to prevent new shippers from making a lot of entries and then defaulting when it comes time to assess the dumping duties. Here is a press release from Senator McCaskill.

There are things that happen in Washington that are a complete mystery to me. One such mystery is this kabuki dance that happens periodically when the Generalized System of Preferences expires. Everyone is pretty confident that it will eventually be renewed. But, despite that knowledge, Congress spends time futzing around with it (and similar programs like AGOA). It gets attached to other things that some legislator wants and used as leverage in negotiations. Here's a crazy idea: Someone should introduce a bill just making it permanent unless and until repealed. Presumably, this could be coupled with a new set of rules defining beneficial developing country, if that is part of the political problem. If that were to happen, traders would know what to expect and there would be none of this administrative hassle of retroactive application. Until something that reasonable happens, we have to put up with the sausage factory that is Congress. So, with the preamble, I am letting you

I am just back from Paris. Despite being a middle aged, well educated, reasonably well traveled person, I had never been to Paris (or anywhere in France) before this trip. I had an excellent time meeting with lawyers from throughout Europe and the North America to discuss our various practice areas. As is usually the case with these things, we had interesting discussions coupled with some exceptionally good meals and a bit of seeing the sites. I narrowly escaped an airport fiasco on the way back when I realized that I had failed to pack a bottle of wine in my checked bag. For a moment, I considered being the person in the airport you marvel at when he or she sits down to eat their smuggled sausage or when they abandon a gallon of conditioner at the security line. I blame my lack of foresight on too little sleep. A quick reshuffle of dirty clothes from the big bag to the carry on created room for the wine without undue delay to others checking in. The locals were nothing but nice an

The MPF and GSP renewals have made it through the House and will now go to the Senate. The MPF will, assuming the bill passes, increase for formal entries to %0.3464. However, all indications are that the $485 cap will remain the same. That means that importers of small value merchandise are likely to feel the brunt of this increase more than importers of high-value imports. If this blog contained political commentary, which it doesn't, one might wonder about the politics of that decision. The House bill also retroactively renews GSP. It appears that if entries were flagged using the A SPI while GSP had lapsed, the entries will be liquidated with GSP benefits. Of course, that remains to be seen, so don't rely on that for your internal procedures. In his jobs speech, the President encouraged Congress to act to implement the already-negotiated trade agreements with South Korea, Colombia, and Panama. Reliable sources in Washington say that those agreements need to be submitted

But, like a brain eater from Zombieland or the upcoming World War Z , it may be back. Remember, always double tap. Tomorrow, Customs will publish a Federal Register Notice making technical corrections to the Part 102 rules of origin and officially withdrawing the proposal that the U.S. implement tariff shift rules of origin for all commodities. The specific changes relate to pipe fittings and flanges, greeting cards, glass optical fiber, rice preparations, and certain textiles and apparel. If you import those goods, please check the FR Notice when it comes out. I am not giving a link because the link will to tomorrow's Federal Register will be dead tomorrow after the official version is published. Regarding the proposal to adopt uniform rules of origin primarily based on a tariff shift methodology, Customs reports that it received a total of 70 public comments, 42 of which expressed opposition to the July 25, 2008 proposal. As a result of these comments, Customs and Border Pro

As you know, I am a sucker for a story about people with reptiles in their clothing. Here is the latest. TSA in Miami stops man for a pants-load of snakes and tortoises - South Florida Sun-Sentinel.com Update: here is a story about smuggled jaguar pelts. http://www.sun-sentinel.com/news/local/breakingnews/fl-jaguar-skins-arrest-20110830,0,685309.story Keep up the good work South Florida Sun-Sentinel.

Someone at Fish & Wildlife must hate rock 'n' roll.  Gibson Guitars was raided again this week for alleged violations of the Lacey Act. This time, the violation appears to relate to the interpretation of Indian law relating to whether the wood was harvested correctly. My prior post on Gibson is here .

The Court of International Trade decision in Kairali Decan, Inc. v. United States has been kicking around for a couple weeks and I have struggled with whether comment on it. I have recently decided that purely procedural decisions are of interest to only a small segment of readers of this blog. Also, procedural cases generally do not turn on broadly applicable principles of law (which make for good posts). But, this case has an interesting fact pattern and I have seen it covered elsewhere (I’m looking at you Adonica Wada ). Also, someone recently thanked me for reading these cases so he doesn’t have to. So here are my two cents. The underlying facts are that someone imported food from Sri Lanka. I say “someone,” because it seems pretty well established that the importer was not the plaintiff in this case. Rather, someone who is regularly in the business of importing food from Sri Lanka stole the identity of the plaintiff and made entry using its information. As a result, when the

Here is an  interesting piece on border searches from the Comic Book Legal Defense Fund. The Fund is focused on border searches of electronic and traditional media where any of various forms of comics, graphic novels, and related literature are involved. That would include anime ,   manga , yuri  and other genre that might cross the creepy line for some readers. On the other hand, the creepy line is what makes first amendment law important and interesting. Creepy can be a long way from obscene. Plus, many of the arguments raised in this context relate to the protection of children from harm and exploitation, neither of which happens when no live models.

The Federal Circuit has reversed a decision of the Court of International Trade involving whether the surety on a customs bond should have filed a protest to challenge Customs' collection efforts. Hartford Fire Insurance Co. v. United States is interesting for a couple reasons. First, the courts don't see a lot of suretyship cases. Second, this one was handled successfully by my partner Rick Van Arnam; so I say it is interesting. This is one of those cases that is all about whether the Court of International Trade has jurisdiction to review a decision. The underlying issue is whether the surety is liable for the importer's default. Hartford, the surety, filed a suit in the CIT seeking to prove that it was not liable for the debt due to what might have been criminal acts by some employees of the importer. Customs defended that claim by arguing that Hartford should have raised the issue in an administrative protest at Customs rather than in Court. For administrative law st

So, I've been busy. It happens. One of the many things I need to post is that Customs and Border Protection has finalized a rule to eliminate the mailed paper copy of the courtesy notice of liquidation for entries that were filed electronically via the Automated Broker Interface. As it stands, CBP provides an electronic notice of liquidation to the broker via ABI and mails the paper courtesy notice to the importer. Going forward, importers who want to monitor liquidations will have to do so via the Automated Commercial Environment Portal. If you are one of the small percentage of people who file paper entries, you will still get paper courtesy copies. As a practical matter, this may not make much difference. The official legal notice (which almost no one ever sees) is the posting at the customhouse. Many importers simply assume liquidation happens 314 days after entry. Others get reports from their broker. This state of affairs, together with the estimated $3 million in annua

Isaac Industries is an odd little Court of International Trade case that does not really present a discussion of law that is likely to apply generally. It relates to whether a protest was timely filed to challenge Customs and Border Protection's denial of a drawback claim. The issue arose because Customs closed the Miami drawback center and consolidated that operation in Los Angeles. The claim was filed in Miami and denied in Los Angeles but the liquidation notice was posted in Miami where the protest was filed. The question is when responsibility for the claim was transferred from Miami to LA and where the protest should properly have been filed. The Court basically found that the relevant Federal Register notices were clear and that the protest was filed in the wrong port, making it untimely. What I think is interesting about this case is that it really turns, for all intents and purposes, on the Federal Register Notice. The Court treats the Notice as if it has the full force

The Federal Circuit has affirmed the Court of International Trade decision in Arko Foods Int'l  regarding the proper tariff classification of mellorine. As you may recall from this post, mellorine is a dessert product similar to ice cream but made with animal or vegetable fat rather than all or some of the butterfat. Customs and Border Protection classified the mellorine in HTSUS item 2105.00.40 as a dairy product. The importer, seeking to avoid the application of import quotas, argued initially for classification as fruits and nuts (0811) or other edible preparations (2106). The CIT rejected those arguments and addressed where in Heading 2105 the product falls. Eventually, the CIT agreed with the importer that because milk is not the chief or essential ingredient, it does not the preponderant ingredient. That made the mellorine classifiable as 2105.00.50. The United States appealed. The Federal Circuit decision  affirmed the CIT. The government's main argument appears to ha

Giving away trinkets with a pro-U.S. business message can be hard. We have already discussed whether pens the U.S. Customs and Border Protection gave out at some event were properly marked. Now, with a hat tip to Wayla-guy comes word that the state of Missouri has run into issues with trinkets promoting jobs in Missouri. Based on this article , it seems the state ordered a bunch of novelty carabiners from a Missouri based business. The carabiners were emblazoned with a logo and web address for a state jobs service. Unfortunately, when the carabiners arrived, someone noticed that they were labeled as having been made in China. [Insert annoying sing-song "Awkward" here.] Being plucky Midwesterners, the state officials in charge asked for volunteers to help remove the labels. Also consistent with the Midwestern setting, volunteers were enticed to give their time with the promise of doughnuts. Eventually, the labels were removed. Readers of this blog are likely to know wher

I know you are all holding your breath waiting for my review of the Federal Circuit's decision in Ark Foods. I promise to get to it soon. In the meantime, if I may make a shameless plug for myself, please support my blog in the ABA's quest for the Blawg 100. Here are the details: Dear Blawgger: We're working on our list of the 100 best legal blogs, and we'd like your advice on which blawgs you think we should include and/or what practice areas you'd like to see represented in the Blawg 100. Use the Blawg 100 Amici form to tell us about a blawg——not your own——that you read regularly that you think other lawyers should know about. If there is more than one blawg you want to support, please send us additional amici through the form. We may include some of the best comments in our Blawg 100 coverage. But keep your remarks pithy——you have a 500-character limit. Editors make the final decisions about what's included in the Blawg 100; this isn't a scenario in w