Customs Law

I am barely back from a brief vacation. I note that in the ramp up to being a way from the office and while I was gone, the U.S. Court of International Trade did not stop pushing out decisions. So, this is the first in what should be a small group of catching-up posts. Unit ed States v. Alejandro Santos is an action to recover a civil penalty from a licensed customhouse broker. That, in and of itself is relatively unusual. In the ordinary circumstance, the importer bears the brunt of the penalty. If you see a broker penalty case, you can usually assume there is some interesting story in the background. In this case, we don't get much in the way of background because the defendant failed to respond to the complaint. Thus, the only question here is whether the uncontested facts as asserted by the government are sufficient to establish its right to recovery. The bottom line is that the government was able to plead facts sufficient to satisfy the Court that it was entitled to a de

R.T. Foods, Inc. v. United States involves the tariff classification of prepared tempura vegetables. Somehow, I was surprised to find out that this is an imported product, though a mental walk through the frozen food isle reminded me that just about any food product can be bagged, frozen, and shipped. In this case, the specific products were a tempura vegetable medley and tempura vegetable bird's nests. The medley consisted of a mix of sweet potato, carrot, something called "wing bean," green bean (or long bean), and eggplant. The bird's nests were julienned carrots, onion, and kale mixed together. Both products were dipped in tempura batter, frozen, packed and shipped. Before it could get to the classification issue, the Court of International Trade had to deal with a jurisdictional issue. Remember that for the Court to have jurisdiction to hear a classification case, the importer must have filed a protest within 180 days after the date of liquidation and filed a

Russia and Moldova to get Permanent Normal Trade status. Canadians and Americans indicted for smuggling narwhal tusks. It's the holiday of your choice season. Be on the lookout for counterfeit goods .

Generally, if I fall behind in my effort to report on decisions of the Court of International Trade, it is because I am busy. Such is the case currently. I have been traveling about the country for various events and business meetings. At the present, I am in Detroit having just enjoyed a shwarma dinner and a brief interlude with an elliptical machine. Now, I will take advantage of free WiFi to catch up on a relatively interesting case that I have so far failed to cover. That case is International Custom Products v. United States . If that sounds familiar to you it is because this case has been in the Court of International Trade and the Federal Circuit in one form or another since 2005. The basic underlying issue is whether a prepared food product is classifiable as a dairy product or as a sauce base. This matters a lot because if it is a food product and the entries at issue were made without proper quota, the rate of duty owed increases 2400%. That is the very definition of a cl

For ages, the trade has been expecting a bill to continue funding Customs and Border Protection and to make changes to facilitate legitimate trade. A bill has been introduced by Ways & Means Trade Subcommittee Chair Kevin Brady (R-TX) covering some of that ground. Here is a link to the bill summary . Here is the full text . A few highlights include: Section 102(b) creates the office of Trade Advocate to serve as a liaison between the trade and Customs and Border Protection Field Operations would be transferred to the Office of International Trade under Section 102(d) The creation of an inter-agency Customs Review Board to provide comments on proposed regulatory changes Under Section 203, CBP must provide to Congress a report on its plans for completing the implementation of ACE A prohibition on agencies using ITDS from also using other electronic systems for cargo clearance It appears that cargo data previously only used for cargo safety and security will now be available

Yesterday was the Judicial Conference of the U.S. Court of International Trade, which is the biennial meeting of the judges and bar of the Court. There were some very interesting discussions about efforts to harmonize WTO dispute law, Customs seizures, and practice before the Court. Congratulations to the planning committee and the Court of International Trade staff for putting together the program. If you are interested, you can read the papers here . During the conference, it was announced that the Supreme Court had acted on two petitions for review in Customs cases. In the first, the Supreme Court denied certiorari in Hitachi (see here  and here ). As a result, Customs has no obligation to decide a protest before the two-year deadline. This means that if an importer wants to force a decision, it has no choice but to use the accelerated disposition process, which might be better termed "accelerated denial." The Supreme Court also denied certiorari in Alden Leeds (see

Samsung International, Inc. v. U.S . proves that point. If you are interested in Samsung litigation that does not involve Apple, read on. At its base, this is a case about whether plasma televisions and video monitors made in Mexico are entitled to be treated as originating under the North American Free Trade Agreement. If so, they may enter the United States free of duty and merchandise processing fee. The problem for Samsung is that the imported units include an assembly from Korea that consists of a plasma flat panel and various support electronics. Under the relevant NAFTA rules of origin, if that non-originating Korean assembly is classifiable as a "flat panel screen assembly" of 8529.90.53 in the HTSUS, then it fails to satisfy the tariff shift requirement of the NAFTA rule of origin. So, the question is whether two specific configurations of subassemblies are FPSA's. It turns out that is a complicated question because FPSA is not defined in the tariff nor in t

After the very successful DiCarlo Lecture at John Marshall this week, I was talking to colleagues and students about the history of funny tariff classification cases. The topics of G.I. Joe and X-Men came up. This lead to a discussion of my moot court argument over to what species Luke Skywalker and Han Solo belong. The result of that question impacts whether their plastic likenesses are dolls or other toys. Because people may be looking for that, I offer this link to the older post.

Read them here. That is all.

It is not often that case at the Court of International Trade takes on the flavor of a courtroom drama. It does happen, such as in the case of international intrigue and an an importation gone wrong . Recently, the Court decided another case that has the possibility of being turned into the most boring legal thriller ever, which is a step up from the usual customs case. By way of background, it is important to know that not everything that transits the United States actually enters the commerce of the nation or is subject to a customs entry. One exception to the normal consumption entry process is the entry for transportation and exportation. See 19 USC § 1553(a).  Under this process, merchandise arrives at a port in the United States and is transported under bond to another port for export. The bonded carrier has certain responsibilities to prove exportation and, if it can't, then it risks being responsible for the duties owed and possible penalties. That was the situation in

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But tunafish in pouches is hard to classify. In Del Monte Corporation v. United States , the Court of International Trade had to determine the correct classification of tunafish in microwaveable pouches from Thailand. The nub of the problem here is that the tuna was packed with sauces of various descriptions. Specifically, there was tuna with lemon and cracked pepper and lightly seasoned yellowfin tuna. The problem here is that tuna in airtight containers is subject to a 6% or 12.5% rate of duty when not packed in oil (depending on origin, etc.). On the other hand, tuna packed in oil is subject to a 35% rate of duty. For comparison, look at 1604.14.22, 1604.14.30 and 1604.14.10. Thus, the ingredients in the sauce became the key issue. The lemon pepper sauce contained sunflower oil along with water, vinegar, and other materials. The oil made up about 2.48% of the weight of the product. The lighlty seasoned sauce also contained sunflower oil and other materials. In this pouch, the oi

Despite what casual readers of this blog might think, customs law is not all about classification, value, and NAFTA. It actually covers a wide range of issues, many of which involve regulations that Customs and Border Protection enforces for other agencies. By way of example, you may already know that I have a strange fascination with the illegal (and reprehensible) trade in endangered species . Another interest of mine is the legal and illegal trade in cultural property . A recent decision of the United States Court of Appeals for the Fourth Circuit discusses the regulation of trade in cultural property with respect to ancient coins. By way of background, the Convention on Cultural Property Implementation Act ("CPIA") permits foreign governments, known as State Parties, to request that the United States prohibit the unauthorized importation of culturally significant items. The intent here is to staunch the traffic in illegally looted artifacts. To be eligible for protect

I was recently in Toronto to speak to the Canadian Transport Lawyers Association about the so-called Beyond the Border Action Plan . One of the initiatives under that project is a pilot at the Prince Rupert port of entry in Canada to harmonize cargo screening. The ultimate goal is to move to an environment in which cargo can be screened once and admitted twice. Here is the text of the U.S. announcement of the pilot: U.S. and Canada Announce New Pilot to Strengthen Cargo Security (Tuesday, October 23, 2012) Washington — The United States and Canada announced the launch of the Prince Rupert Pilot to strengthen cargo security at the Canada-U.S. border as part of the Integrated Cargo Security Strategy in the Beyond the Border Action Plan. The pilot focuses on harmonizing the screening process for maritime cargo between the two countries. “The Prince Rupert pilot implemented under the Integrated Cargo Security Strategy is key to the ongoing efforts to facilitate legitimate trade

The U.S.-Panama Trade Promotion Agreement comes into effect on October 31, 2012. According to the USTR, 87 percent of exports from the U.S. will become duty-free when the agreement is effective. That includes 56% of U.S. agricultural exports to Panama. To the best of my knowledge, Customs and Border Protection has not yet published a memo on making claims under the UPTPA. I would anticipate the formalities to be similar to other TPA procedures (including these for Peru ). I'll do my best to update this when something is posted.

If you want, that is. Here are the details  courtesy of my law firm. I remain skeptical of ISA benefits for companies that are sufficiently compliant to be in ISA, but that may just be me.

OK, I admit that is a strained pun. This particular Wilton case  apparently has nothing to do with cake decorating paraphernalia. Rather, it has to do with hand operated decorative paper punches. These are items used by people who understand the term "scrapbook" to be a verb. I gather the punches are similar to this item , although Wilton describes it as for making edible shapes for cake decoration and not for the production of scrapbooks and similar crafty pastimes. For a brief time, my mother was a freelance cake decorator. As a result, I ate far too many practice and rejected butter-cream roses in my youth. Thus, this die-punch system seems like cheating to me. The tariff provisions at issue were Heading 8203, which covers, among other things, "perforating punches and similar hand tools" and 8441, which covers "Other machinery for making up paper pulp, paper or paperboard, including cutting machines of all kinds, and parts thereof . . . ." P

As you might gather from the title of this post, there has been more activity in the Active Frontier case. I previously posted about the question of whether the United States had properly pleaded the materiality of an allegedly false statement of origin. After the previous decision, the Court of International Trade gave the United States 30 days in which to amend its complaint to set forth facts showing that it is entitled to relief. In response, the U.S. filed a motion to amend but failed to attach an amended complaint to the motion. Rather, the motion stated that the government would amend the complaint with respect to the element of materiality within three days of the Court granting the order. This implies (at least to me) that the amended complaint was pretty much ready to go. But, without the document to review, the Court found no way to determine whether "justice . . . requires" allowing the amendment. Thus, the Court denied the motion, adding that the amendment s

Remember how excited I was about CBB Group Inc. v. United States ? That was the case about the exclusion of merchandise from the United States and reminding the world that exclusions, which are not seizures, are protestable events. Denied protests of exclusions end up in the Court of International Trade. In a recent case, PRP Trading Corp. v. United States , the Court revisited this topic, but with an unfortunate twist. The goods involved were aluminum extrusions allegedly from Malaysia. Customs and Border Protection detained that merchandise on the suspicion that it might have a different country of origin. While not discussed in the case, this likely relates to the fact that there is an antidumping duty order on aluminum extrusions from China. Once the importer provided the merchandise to Customs for examination, Customs had 30 days to decide what to do with the merchandise. For two of the entries, the 30 days elapsed without a decision, causing the goods to be legally "deem

Hat tip to my friend Paul who alerted me to this story . Read the article.  The upshot is that police officers are being charged with smuggling American-origin cheese into Canada for sale to pizzerias. Apparently, American-origin cheese (as opposed to "American cheese") costs roughly a third of the equivalent in Canada. Thus, the officers were making $1 thousand or more per run to the U.S. cheese monger. Mayor McCheese could not be contacted for a statement.

In CIBA VISION Corporation v. United States, the Court of International Trade waded into one of those legal issues that I wonder about when my head is not occupied with more useful thoughts concerning beer and comic books. Specifically, the question of whether the meaning of a tariff term is a question of law or a question of fact. The case involves the tariff classification of something called Nelfilcon Polymer Solution, which is used in the production of disposable soft contact lenses. This material is made through the acetalization  of polyvinyl alcohol. You are on your own to figure out what that means (though I did provide a handy link). Apparently, after this process, the resulting material is 95% acetalized PVA (meaning Nelflicon) and used exclusively for molding into contact lenses. Customs treated the material as "Polymers of vinyl acetate or of other vinyl esters, in primary forms; other vinyl polymers in primary forms: Other: Other: Other (3905.99.80). CIBA proteste

The Court of International Trade, like all courts, sometimes puts on its collective professor's hat and does a little explicit teaching to the trade and, possibly, to the Court of Appeals for the Federal Circuit. I am not sure who was the intended audience for this lesson, but Telebrands Corp. v. United States is pretty explicit about the lesson for the day. The underlying issue in Telebrands is the classification of something known as the PedEgg pedicure set. This is one of America's great "As Seen On TV" products; just behind the pocket fisherman , the in-the-egg egg beater , and spray-on hair .  The PedEgg is similar to a cheese grater used to remove hard calloused skin from the foot. The genius of the PedEgg is that it conveniently collects the skin remnants inside the plastic egg shaped body. Important for our purposes, it also comes with two adhesive emery pads that are intended to be applied to the PedEgg body and used to finish the skin surface.

One might reasonably assume that if Customs and Border Protection sues a company in the United States Court of International Trade to collect a penalty and the defendant company never shows up to defend itself, that it would be a slam dunk for the U.S. Usually, it is not too difficult to get a default judgment. But, sometimes it is. That was the case in United States v. Active Frontier International, Inc. The case involved allegedly false declarations of origin on apparel imports. Customs asserted a penalty under section 592 of the Tariff Act of 1930 (19 USC 1592). AFI did not respond to the pre-penalty notice or the subsequent penalty notice. When it was sued in the Court of International Trade, AFI did not respond to the summons and complaint. That allowed the United States to seek a default judgment against AFI. The problem for the U.S. was that to collect a penalty, the United States needed to assert that AFI had made a material false statement or omission in connection with th

Just when I though I had some breathing room, things are getting busy again. Not that I am complaining. The Courts have been busy too. The Federal Circuit just issued a decision in a drawback case called Shell Oil Company v. United States  in which is affirmed the Court of International Trade's decision. Oddly, I can't find  a post on the earlier case. You can read the opinion here . Shell involves drawback claims for Harbor Maintenance Tax and Environmental Tax Shell paid on petroleum imports that were then exported or substitute merchandise was exported. Shell made the claims but, because the ability to claim drawback on HMT and ET were being hotly contested at the time, it did not include those amounts in its calculation of the amount claimed. Subsequently, in 1999, Congress amended the drawback law to clarify that any duty, fee, or tax imposed under federal law because of importation could be the subject of refunds under drawback. To facilitate this, Congress also created

I should read my own blog. Apparently, I know all about how lobsters are processed at Canadian plants. See this post for background. Image via Amazon. Go buy a can of Maine Goodness .

A statute of limitations is a tough thing. Miss filing within the provided period and you most likely lose your ability to have the case reviewed at all. This is particularly true in customs cases where an importer is trying to sue the United States. As a general principal, the U.S. government is immune from suit unless it has waived that immunity. A party that tries to take advantage of a waiver of sovereign immunity needs to satisfy the legal requirements of the waiver. At its heart, that is what Sears Holdings Management Corp. v. United States is about. Sears filed a protest concerning the tariff classification of some footwear. Customs and Border Protection then denied the protest. At that point, the limitations period began to run giving Sears 180 days (until May 15, 2010) to file a summons in the Court of International Trade, unless something stopped the clock. Lawyers call that "tolling the period." Sears exercised its rights under 19 USC 1515(d) by requesting that

I have noticed an uptick in comments that do not relate to the topic at hand or which relate just a bit but remain simultaneously devoid of content and yet filled with irrelevant links.  So, I am turning on Comment Moderation. That means, I will read and approve comments before they are posted. I hope this is not inconvenient for you or for me. Matt, please keep those excellent snarky comments coming.

I am just back from a week in Boston with a side trip to Portland, Maine. A few lobsters gave their lives for me and my family. Ditto a few dozen clams and sundry other sea creatures. While we were in Maine, the local news was covering a dispute between Maine lobster-men and their New Brunswick, Canada counterparts. Because of the glut of lobsters, prices have fallen. The New Brunswick industry wants to keep low priced Maine lobsters out of the market and protested by literally blockading the Maine lobster boats from dropping their haul at New Brunswick processing plants. This raised several questions in my head. First, what "processing" is done to lobsters? Most are pegged or banded in the boat and then live out the remainder of their lives in tanks waiting to be steamed or otherwise prepared. I suppose there are also industrial producers making frozen tails, lobster meat salad, and other goodies. The second question I had was whether anyone was taking any legal

Remember the Hitachi decision in which the Court of Appeals for the Federal Circuit upheld a Court of International Trade decision that Customs and Border Protection is under no legal obligation to decide a protest within the two-year period provided in the statute and regulations? We discussed it here . A related issue was addressed in Norman G. Jensen, Inc. v. United States , which we discussed here . The Federal Circuit has now decided the appeal in Jensen . And, in what is probably not a surprise, has affirmed the dismissal of the case. Jensen is different than Hitachi in that Jensen tried to force Customs to decide the protest via a legal tool known as a writ of mandamus. Jensen brought its case under 28 U.S.C. 1581(i), which is the residual provision giving the Court of International Trade jurisdiction to review decisions relating to the administration and enforcement of the collection of revenue on imports, provided there is no other adequate means of securing judi

The Court of Appeals for the Federal Circuit has reversed a decision from the Court of International Trade concerning Ford's effort to secure refunds of allegedly excessive duties paid. The complication in this case is that Customs and Border Protection had not yet liquidated the entries and also had not sent Ford a notice of the suspension of the liquidation. After Ford filed a suit in the Court of International Trade challenging the duty payments, Customs liquidated and reliquidated the entries via the Reconciliation process. As might be expected in the ordinary case, Ford then protested the liquidations and the protests were denied. For our purposes, the important thing to note is that the court case was initiated prior to liquidation and, therefore, did not challenge a denied protest (although Ford did initiate separate litigation following the denials). If you understood all of that, you can guess that the government moved to dismiss the claims because Ford could have wait

The content and timeliness of customs protests is a perennial topic of discussion. I covered here , for example, and probably in a dozen other places. Two recent decisions from the Court of International have had to wade back into that swamp. First, some background. Except in unusual circumstances, when Customs and Border Protection liquidates an entry, the liquidation and all of Customs' decisions wrapped into it become final and conclusive. This is what prevents Customs from trying to collect duties from an importer after liquidation. There are a few exceptions. The first is where the importer was negligent, grossly negligent, or committed fraud in connection with the entry. In that case, Customs can collect the amount owed plus assess a penalty. That protects Customs in the event it liquidated an entry based on bad information. The flip side is that an entry is not final if the importer files a valid protest within 180 days of liquidation. This protects the importer in the eve

I am making progress on my continuing effort to catch up. Evidence of that is that I am about to do a post on a case from June: Salem Minerals Inc. v United States . The merchandise at issue in this case is a little hard to picture. It consists of small glass vials containing a clear fluid with specks of gold leaf and topped with a small figurine. Happily, the plaintiff has a web site that includes pictures of its products, including this one: The gold leaf fragments are "very small in weight per vial" and are not worked or formed during production. The anionic solution in the vial serves to magnify the appearance of the gold leaf. The themed caps are cast of tin alloys and may be electroplated with 18k gold. The gold leaf constitutes about 38% of the value of the imported products.  The vials are sold to tourists rather than through fine jewelry stores or other high-end outlets. Customs and Border Protection classified these products under Heading 7114 as "Art

Corporate compliance is tricky enough without having to worry about whether the compliance person is actually committing a violation simply by doing his or her job. This actually comes up because the law regulating customs brokers requires that no one engage in "customs business" on behalf of another party without having a broker's license. This makes perfect sense when thinking about an independent professional conducting business on behalf of others for money. That person should be licensed. On the other hand, importers can manage compliance on their own. The law requires that importers act with reasonable care and define that, in part, as having internal customs experts. Corporate importers do this by having compliance managers to oversee import (and export) operations. The problem is that many companies are part of families of related entities.  Often, there is a corporate parent and multiple subsidiaries and possibly subsidiaries of subsidiaries. Usually, these c