Customs Law

Unless something big happens, this will be my last post for the year. Happy holiday of choice to all of you. Here's to a happy, healthy, and productive 2015. The U.S. Court of Appeals for the Federal Circuit has affirmed the Court of International Trade's decision in Belimo Automation v. United States . The issue in the case is the tariff classification of specialized actuators used to move dampers in HVAC systems. The actuators include an electronic circuit that senses the damper angle and adjusts it to maintain proper alignment. The importer argued that these items should be classified in HTSUS item 9032.89.60 as an "automatic regulating and controlling instruments and apparatus; parts thereof." The Federal Circuit disagreed and affirmed the Court of International Trade, which is a win for Customs and Border Protection. Chapter 90, Note 7(a) provides that Heading 9032 only applies to Instruments and apparatus for automatically controlling the flow, level,

Customs valuation is subject to its own rules and requirements. Importers apply those rules and requirements when reporting the value of merchandise to Customs and Border Protection. As you likely know, when the buyer and the seller are related, the sales price between the parties is suspect and Customs can seek to determine whether the relationship affected the sales price. If so, the related party price might be rejected as a basis for transaction value, causing Customs to apply a different basis for valuation. That is a compliance hassle that no one wants. Over on the income tax side of things, they have their own statutory rules and tests to determine whether transfer prices are an acceptable means of valuing products. The problem for customs compliance professionals is that the IRS tax compliance often drives transfer pricing and customs compliance must find a way to make due with the result. IRS compliance is sometimes the big dog that wags customs valuation as a small tail. Wh

It has been said, possibly only by me, that every object will become the object of obsession for at least one person. In the Internet age, people who share an interest or passion for something mundane can find one another and form tribes of fellow aficionados willing to obsess over their chosen totem. Here are a few examples: spoons , fishing lures , antique bottles , pepper mills , and my personal favorite old computers  (that's the first computer I ever purchased). It turns out, that there are also pencil aficionados ( here , here , and here ), one of whom was the unnamed plaintiff in United States ex rel. John Doe v. Staples, Inc. et al. Let's backtrack a bit. The False Claims Act is an 1863 law enacted to fight fraudulent claims for reimbursement by the government following the Civil War. Under the FCA, the government can bring a case against anyone making a false claim seeking payment from the government and against anyone who makes a false statement to avoid making a pa

GRK Canada, Ltd. is a big deal. I have already posted about it twice ( here and here ) and this is a third time. It goes to the very heart of how Customs and Border Protection and the U.S. Court of International Trade should interpret the Harmonized Tariff Schedule of the United States. If you are a diligent compliance professional, this is likely far more important to your day-to-day work life than is the decision in Trek Leather , which has caused much teeth gnashing. Recall that the issue in GRK is the proper tariff classification of "wood screws." The Court of International Trade looked very closely at the physical characteristics of the screws and did not focus on the apparent common use of the screws, which is to fasten wood. Unable to differentiate between wood screws and self-tapping screws on the basis of physical characteristics, the CIT employed General Rule of Interpretation 3(c) and classified them as self tapping screws, the last tariff provision in numerica

This is the last of the cases I have in my cue. General Mills, Inc. v. United States  is one of those cases only a lawyer would love or would hate, depending on which side of the dispute you happen to be. The problem for General Mills is that it wants the Court of International Trade to review a ruling in which Customs and Border Protection determined that Brussels sprouts from Belgium that were packaged with frozen butter sauce chips in Mexico are not entitled to duty-free entry to the United States under the North American Free Trade Agreement. Part I: The Ruling Let's start with with ruling, so that I can also call this my Ruling of Last Week 17. The relevant ruling is HQ H212296, which is in the January 29, 2014 Customs Bulletin  starting at page 89. The NAFTA portion of the ruling is in dispute and is interesting. Keep in mind that the imported product is just frozen Brussels sprouts from Belgium packed in pouches in Mexico with frozen butter chips. The finished produc

Hydrogen fuel cells are likely to play a significant role in powering the future. We are on the cusp of seeing passenger cars powered by fuel cells . Fuel cells are used in spacecraft and in more mundane setting like the devices that spray air fresheners in public washrooms. The nature of a fuel cell was also front and center in the recent U.S. Court of International Trade decision in Rubbermaid Commercial Products, LLC v. United States , which involved air fresheners and a similar device that squirts cleaners into public toilets. Here is a little science that will help explain the legal issue. Keep in mind that water is two hydrogen atoms bound to a single oxygen atom. A fuel cell consists of zinc and water with a cathode and an anode. The cathode is a negatively charged electrode, which attracts positively charged particles. The anode is positively charged and attracts negatively charged electrons. In the fuel cell, the zinc and water are chemically reacting with the oxygen in th

Hartford was a surety in the marketplace Sunline imported crawfish from abroad Sunline says to Hartford, "Man, I need your cash" And Hartford says this while it shakes Sunline's by the hand Obligor, obligee, goods come in Lala, how the goods come in If you are visiting this blog, you probably know that most importers use a bond secured by a surety company. The surety agrees that if the importer defaults, the surety will pay Customs and Border Protection any duties owed. In return, Customs agrees to release the merchandise to the importer before the entry is liquidated and duties paid. The surety bond is the oil that lubricates the whole system. Without the security of the bond, Customs would hold on to merchandise until it had cash in its metaphorical agency hands. Surety bonds are a common means of insurance for all kinds of deal including your local bail bondsman to complicated financial transactions. As a result, there is a lot of law surrounding the relation

The U.S. Court of Appeals for the Federal Circuit has affirmed the decision of the Court of International Trade that "BetaTab," a mixture of beta-carotene, antioxidants, gelatin, sucrose, and corn starch, is not "particularly suitable" for a specific use. Rather, it is properly classified as "provitamins, unmixed" under HTSUS item 2936.10.00. The reason Roche Vitamins, Inc. v. United States is a tricky classification case has to do with HTSUS Note 1 to Chapter 29, which states that "Except where the context otherwise requires, the headings of this Chapter apply only to: [certain products] with an added stabilizer (including anticaking agent) necessary for their preservation or transport." Furthermore, the Explanatory Notes to Heading 2936 states: The products of this heading may be stabilized for purposes of preservation or transport:  by adding anti-oxidants, by adding anti-caking agents(e.g., carbohydrates), by coating with appr

I just got around to reading Chasing Aphrodite: The Hunt for Looted Antiquities at the World's Richest Museum by Jason Felch and Ralph Frammolino. Anyone interested in the compliance aspects of the trade in cultural properties and antiquities should read this book. The details of the illicit trade and the evolution of thinking within the museum community are fascinating. The book is well researched and travels between illegal excavations in Italy to the NY apartments of wealthy collectors, and finally to the halls of the Getty Museum in California. There is not a lot of legal background here other than references to the 1970 UNESCO convention and the National Stolen Property Act. But, this is not a legal text. It is more about the culture of the antiquities trade. From a legal perspective, this is a great case study on how our clients can sometimes self-blind and delude themselves into believing they have compliance. Or, more cynically, how companies can create the appearance of

I am surprised to learn that I did not cover the Court of International Trade's classification decision in Alcan Food Packaging v. United States, because the Court of Appeals for the Federal Circuit has now affirmed that decision. Like the last Ruling of the Week, Alcan is an important decision in that it counsels against the desire importers sometime have to jump to "essential character" or "relative specificity" to decide between two possible tariff classifications. You can't do that until you have fully exhausted the text of the headings and any relative chapter and section notes in the Harmonized Tariff Schedule of the United States. In this case, the product is a packaging film made of a layer of aluminum foil and two or more layers of plastic. There is more plastic than aluminum but both materials are necessary for the material to perform its function. That function includes hermetically sealing U.S. military ready-to-eat meals. Alcan, the imp

I have mentioned before that one of the side effects of being a customs lawyer is exposure, directly and indirectly, to all sorts of strange and interesting products. Take, for example, the dance shoe sizing kit. The kit consists of several left shoes in a spectrum of sizes and a ruler for measuring feet. The shoes and the ruler are marked "Sample Not for Resale." The tariff classification for this kit was determined in NY N257784 (Nov. 18, 2014) . The purpose of this kit is, as you might expect, is to solicit sales of dance shoes from potential customers in the U.S. As is often the case in rulings issued by the NY office of Customs and Border Protection, there is not a lot of analysis in the ruling, just a result; which we will get to in due course. The first question to ask is whether the shoes and rulers constitute a retail set that should be classified as a whole under General Rule of Interpretation 3(b). If so, the sample shoes and the sample rulers, if put up for r

I skipped a post on a prior case from the Court of International Trade called United States v. Tenacious Holdings, Inc. , on the grounds that it seemed to be a one-off without a lot of general applicability. I appear to have been wrong. There is already a new case along similar line. That case is Sigma-Tau Health Science, Inc. v. United States . Both cases involve a motion to have a case referred to Mediation. In Tenacious , the Court of International Trade granted the motion. In Sigma-Tau , the Court denied the motion. As background, you need to understand that the Court of International has a process called Court Annexed Mediation under Rule 16.1 . The idea is that before a case moves to a trial or motion for summary judgment, the judge assigned the case can ask a different judge to take a look at the case as a judge-mediator. The goal is to promote the settlement of cases. But, the process does not happen particularly often at the CIT. There may be lots of reasons for that, but

I often run into questions about whether a NAFTA CO is acceptable backup for a NAFTA claim or to support another NAFTA CO. Here is what Customs and Border Protection has to say on the issue: CSMS #14-000598 This posting seeks to clarify the meaning of the terms “valid NAFTA Certificate of Origin,”  “invalid NAFTA Certificate of Origin” and “defective NAFTA Certificate of Origin”.  Additionally, CBP reminds importers that preference will be denied when possession of a valid NAFTA Certificate of Origin at the time of the claim cannot be substantiated. A NAFTA Certificate of Origin is valid if it: 1. Lists the good in question 2. Covers the period in question 3. Includes the exporter’s or his agent’s signature in block 11a “Authorized Signature” 4. Was in the importer’s possession at the time of the claim, as demonstrated by 1) a block 11e “Authorized Signature” date prior to the date of the preference claim, and 2) submission upon request of a CBP official A NAFTA Certificate

Jean-Marc Clement, a Canadian customs and trade expert with BCF in Montreal has started blogging from a Canadian perspective. Read his first entry here.  It involves the tariff classification of swivel chairs and is an entertaining and interesting piece.

There is an antidumping duty order covering honey from China. That means that exporters and importers will look for clever ways to stay outside the scope of the order. Some of those will be legal; finding a new supplier in Vietnam, for example. Others will be decidedly illegal; like labeling honey as rice syrup. One interesting possibility is diluting honey until it is no longer 50% honey by weight. At that point, it is outside the scope of the antidumping duty order. In this game of cat and mouse, Customs and Border Protection needs to continually find ways to identify the presence of honey and its origin. HQ H187175 (May 14, 2012) illustrates part of that problem. The imported merchandise was reported as "honey and rice syrup mixture" from China. If the mixture is 50% by weight or honey, it is subject to antidumping duties. As entered, the goods were classified in HTSUS item 1702.40.40 as glucose and glucose syrup, containing in the dry state at least 20 percent bu

Having now read the second opinion in Puerto Rico Towing & Barge , I'll just say that I am not going to do a full recap. This is an effort to have the Court of International Trade change its original judgment in favor of the United States. The company raised a few points about alleged errors in the Court's prior analysis, but the Court did not see anything substantive there. So, the original decision stands . My second quick update is to Rockwell Automation v. U.S., which is the case about the functioning of the Court of International Trade's Reserve Calendar. For background, read the original post here. You will recall that an issue in the case is whether several motions for extensions of time to remain on the Reserve Calendar were timely. The relevant rule is Rule 83(d), which says: (d) Extension of Time. The court may grant an extension of time for the case to remain on the Reserve Calendar for good cause. A motion for an extension of time must be made at lea

I'm working on work which is making working on things that are not work, a bit of a chore (which would be work). I know I have a Jones Act case and a second look at the Reserve Calendar to cover. I promise to work on getting to that particular piece of activity which is not work even though it may appear to be work. Mostly, I hope my non-work effort makes your work less of a chore (which would still be work).

Ever wonder what happens to scrap printed circuit assemblies? They get mined for valuable metals, primarily for copper. I know that because I read HQ  H218910 (Dec. 17, 2013). The issue in the ruling is the classification of the scrap PCA's. They might reasonably be classified as waste and scrap of plastic (which is the substrate) or of metal. They might also be classified as various electronic components such as resistors or as electronic assemblies such as control boards. Waste and scrap is not defined in the tariff schedule, but there are cases that address the concept. The Courts have collectively arrived at a definition of waste as material with no original value or no value for the ordinary or main purpose of manufacture. That means that lower grade or inferior products that are otherwise functional and saleable are not waste, they are just inferior. Think factory seconds or day old bread. In the metals context, Note 8(a) to Section XV defines "waste and scrap&qu

In 1989, with torches and pitchforks, Congress chased the Tariff Schedule of the United States away from our black and white villages, never to be seen again. Where did it go? What happened to its arcane rules like "chief use" and the "more than doctrine?" Unfortunately, we now know. Dispatches from the Court of Appeals for the Federal Circuit show that its unmarked grave is empty. Shuffling marks in the dirt lead to the Courthouse where the Federal Circuit has taken up and decided  Victoria's Secret Direct, LLC v. United States . This may be the final edition of a horror tale subtitled, "Rise of the TSUS." I have two prior postings on this case here and here . Sadly, the photo of the fit model used as demonstrative evidence has been removed. You should go back and read those posts. The terrifying issue here is the correct tariff classification of knit tops for women that provide both body coverage and bust support, eliminating the need for a bras

The Jones Act is an aspect of customs law we don't often cover. It is, however, disproportionately represented in the rulings Customs and Border Protection issues. It is, therefore, worth a brief look. The part of the Jones Act with which we are concerned regulates coastwise transport and is 46 U.S.C. § 55103. Under the law, to be a coastwise-qualified vessel, the ship must have been made at a U.S. shipyard, documented in the U.S., and owned by a citizen of the U.S. Only coastwise-qualified vessel can carry passengers or cargo from one U.S. port to another. A non-coastwise-qualified vessel may not transport passengers or cargo from one U.S. port to another U.S. port without risking a $300 penalty. Many ships are documented in Panama, the Bahamas, and other countries where the fees and regulations are favorable. This is why cruises departing the U.S. return to the port of departure. Customs is often asked whether a person who happens to be on a ship is considered a passenger for

This really more of a case review than a ruling in that it comes from the Canadian International Trade Tribunal, which is not Canada Border Services Agency and is clearly not U.S. Customs and Border Protection. But, it is an interesting issue and Canadian customs law has a slightly exotic air about it. So, here we go, eh. There are a growing number of coffee artisans and coffee snobs. I find myself among the latter as I make excellent but highly inefficient cups of coffee in my AeroPress contraption. I also spend too much time and money at Intelligensia Millennium Park  where I occasionally purchase an individually prepared, single cup filtered, lovingly agitated, and perfectly heated cup of exotic coffee. It is delivered with a small carafe of the remainder for your refill. On the espresso side, the macchiato is a work of art and perfectly paired with a glass of sparkling water. If it is morning, the buckwheat scone is a delightful addition. But, I digress and leave myself open to

To the realm of cooking tools I never knew I needed, add " Grilling Claws ." Apparently, this is the proper way to shred barbecued meat. I don't know how I have gotten along this far in life without a set. And, if I were importing these particular grilling claws, the tariff classification would be 7323.99.9030, Harmonized Tariff Schedule of the United States (HTSUS), which provides for…kitchen…articles…of…steel…: other: other: not coated or plated with precious metal: other: other…kitchen or tableware suitable for food or drink contact. The rate of duty will be 3.4 percent ad valorem. I know this because the Ruling of the Week is N256578 (Sept. 24, 2014).

I am doing this quick. It is, for me, a Holiday today and I am behind on blog posts. Happy New Year to those of you celebrating. Streetsurfing LLC v. United States is a classification case from the U.S. Court of International Trade that revolves around one of my favorite topics: what is sports equipment as opposed to a toy, apparel, or some other general use product? In this case, the product is a sort of high-tech skateboard-ish gizmo called a casterboard . The traditional solid deck is split, creating two independently moving platforms connected by a joint. By opposing pressure on the front and back platforms, the thing moves the rider along, including uphill. Here's a video that makes it pretty clear what we are talking about. With that in mind, here is the bottom line question: Is that a wheeled toy (9503.00.00, duty free) or is it sporting goods for general physical exercise (9506.99.60, 4%)? The starting point here is noticing that 9503.00.00 is a principal use p

For those of you who might not know it, botulism is bad for you. According to Wikipedia, it is a rare and potentially fatal condition caused by toxins produced by certain bacteria. A common cause of the rare condition is improper food preservation. But, there is an upside to botulism, particularly for the Hollywood red carpet set and others worried about the perception that they may be aging. Where that perception is caused by fine lines on the forehead and face, the botulism toxin , when properly administered, might be just what the dermatologist ordered. As it turns out, that means that some of this stuff is imported for cosmetic use. And therein lies the rub. We have botulism toxin imported for cosmetic use. How should that be classified? We get the answer from the current Customs Bulletin , in which CBP proposes to revoke its prior decision in Ruling N209720.  The new ruling will be HQ 227295. The two products here are FDA approved Botox and Botox Cosmetic. [Note from Larry: