Customs Law

[Note: Updated to properly identify the organization supporting the litigation.] I often tell students and other lawyers that the great thing about my practice is the lack of human drama. In most cases, getting to the right result in a dispute with Customs and Border Protection is about knowing the law and making sure everyone applies it properly to the facts. Usually, no one cries and rarely is anyone subject to imprisonment. But, that is not always the case. One thing we do in my office is help people with currency seizures. Just to be 100% clear on this: It is illegal to bring over $10,000 in or out of the country without declaring it to Customs. This is very useful information for law enforcement on a number of fronts. The money might be from illegal activity, it might be going to support terrorist organizations, it might be part of a money laundering scheme. When entering the country, there is an obvious time and place to make this declaration. If you are using a paper decla...

If you were in customs compliance during the Clinton-years, you might remember Customs and Border Protection taking the public position that it was in the business of facilitating legitimate trade and that it would be a "kinder and gentler" agency. U.S. government people actually said that, or possibly I dreamed it. To me, it is real. That was before 9/11/2001, the creation of the Department of Homeland Security, and the shift toward border security as an existential issue of national security. By which I do not mean to denigrate that position at all. CBP's security job is important. Today CBP announced a possibly small program that is 100% in line with the kinder, gentler agency of yore and helps to facilitate U.S. exports. That's good for the economy. The program is the opportunity for exporters to request assistance on tariff classifications and customs valuation in other customs territories. Here is the pre-publication notice . It should show up in the Feder...

The KORUS presidential proclamation is out, just in time for the March 15 implementation. The real meat of implementation will be new General Note 33 to the Harmonized Tariff Schedule of the United States. You can find the HTSUS modifications here. For those of you exporting textiles to Mexico and who read Spanish, here is a notice allegedly modifying the labeling requirements. The new Export Enforcement Coordination Center (E2C2) is open for business. Please do not confuse it with C2E2 , which is much more fun

The State Department's Directorate of Defense Trade Controls has taken a solid swing at the freight forwarders discussed in the previous post . Here is a link to the notice . The upshot of this is that these forwarders will be able to work through existing authorizations. Pending requests for new authorizations will be returned without action unless they contain a transaction exception request. They can be resubmitted. New requests involving these forwarders must contain a transaction exception request or they will be returned. It's hard to see how these requests for exceptions will be treated except to deny them, but that is not a forgone conclusion. Maybe this is a shot over the bow of the forwarding community and requests will be granted until the debarments end. Or, DDTC could play hardball, which will make life very difficult for the forwarders involved and defense companies that use them.

UPDATE: Take a careful look at Jim Dickeson's thoughtful comment on this item. He correctly points out that there is an exception to the requirement that freight forwarders register and seek licenses. And, that exception makes perfect sense in an environment in which the shipper is the exporter and subject to the licensing requirement. Nevertheless, the brokering regulation does list freight forwarders as parties subject to regulation. The distinction appears to be whether their role is limited to forwarding or whether they take the next step and act as an importer. Read what follows with that in mind. And, thanks to Jim for the input. _________________________________________ I don't typically cover exports here, although it is part of my practice. I am making an exception because this issue has now come up from a number of sources. So, I want to do what I can to clear the air. But, I do not have a conclusion for all involved. The fact is that six prominent freight forwar...

I am a big proponent of the harmonization of international standards. This is mainly because I am cheap and believe in efficient, practical solutions to problems. I have always thought that the U.S., Canada, and the EU, for example, could merge their drug approval processes making for a one-stop shop. Once approved by this international body, the drug would be approved for sale in all three jurisdictions. I realize that is far easier said than done. The problem is that every country wants to be able to protect the health and safety of its citizens. And, at a very detailed level, the different organizations may have different approaches. Those details can become stumbling blocks and eventually stymie the whole thing. But, it can be done. Another objection to this is that the U.S. will be giving up sovereignty and allowing "foreign bureaucrats" to make decisions about the medicines (or foods, or whatever) Americans can use. This, to me, is a red herring. As long as t...

In case you have not heard (which is a fancy way of saying that I am catching up on this), the President wants congressional authority to merge several key trade-related functions into a single agency. Most of these are not enforcement agencies and, therefore, do not show up in this blog space often. On the other hand, they are trade promotion agencies. The agencies under consideration for merger are: U.S. Department of Commerce’s core business and trade functions The Small Business Administration The Office of the U.S. Trade Representative The Export-Import Bank The Overseas Private Investment Corporation The U.S. Trade and Development Agency.   Here is the  White House fact sheet on the proposal.  I do not know whether Commerce's "core business and trade functions" include Import Administration and, therefore, dumping and countervailing duty cases.

Compliance people all understand that export controls law is almost impossibly complicated. It is hard to image a more complicated set of laws, especially when criminal enforcement is involved. But, is the law so complicated that it is unconstitutionally vague? That is the question the Ninth Circuit Court of Appeals addressed in United States v. Zhi Yong Guo . Just or background, for a criminal law to be enforceable, it must be written in a way that allows people to understand what is illegal and to adjust their behavior accordingly. When the speed limit is set at 55 MPH, we all know what is expected. If, however, the speed limit we written as "Travel as fast as is appropriate given the circumstances described in a chart published in the official regulations and assuming the Governor has not let his executive order expire," would you know how fast to go? The Defendant in this case conspired with others to export FLIR thermal cameras  to China without the required licenses...

This, ladies and gentlemen, is why Customs and Border Protection searches laptops and other digital media. I'm not saying I agree with the current state of the law on this topic. I am particularly worried about maintaining privilege and the very person nature of some of the information on digital devices. But, there is a real law enforcement benefit to being able to do this. The article linked below is an example. Interestingly, the article says Customs got a search warrant to look at the laptop. That was nice, but probably unnecessary. Defense contractor charged with stealing secrets on laptop - Computerworld

The regulations regarding the export of encryption software are among the most convoluted in the trade world. The problem is not so much that the regulations are poorly written. The problem is that the technology is complicated and the average trade person does not necessarily have the expertise needed to interpret the regulations. That situation is slowly easing as the Obama administration simplifies various aspects of the export laws and regulations. For example, in this Federal Register Notice , the Bureau of Industry and Security is announcing  that certain mass market, publicly available encryption software in object code with symmetric key length greater than 64 bits is no longer subject to EAR. While they were at it, BIS also announced that "publicly available" encryption object code classified under Export Control Classification Number (ECCN) 5D002 on the Commerce Control List when the corresponding source code meets the criteria specifi...

A few news items on note: Festive Articles Customs and Border Protection has asked the ITC to study a proposed tariff change to correct the tariff treatment of so-called festive articles that have utilitarian functions. This follows from successful litigation undertaken by my firm that showed that holiday-themed articles, even those that have utilitarian functions, can be entitled to duty-free entry under Chapter 95 of the tariff schedule. The problem is that in an effort to "correct" what Customs viewed as this erroneous classification decision, the modifications to the 2007 tariff schedule made non-revenue neutral changes, which is not a favored result. This tariff study is aimed at correcting that by changing the tariff classification but preserving the duty-free status of the goods. Should this happen, the change will be effective for goods entered on or after February 3, 2007. Lacey Act APHIS has published a proposed definition of "common cultivar"...

In one my rare forays into blogging on exports, I will point out this reminder from the Bureau of Industry and Security. This interim final rule will amend the Export Administration Regulations to clarify that CCATS determinations by BIS only tell the applicant the relevant ECCN for the product. Having it classified for export purposes, however, does not mean the product is actually subject to the EAR. Currently, BIS does not issue jurisdiction rulings as the Directorate of Defense Trade Controls (DDTC) does for ITAR. The Federal Register notice solicits comments on this rule. Perhaps the thing that might be valuable to tell BIS is that it should start issuing jurisdiction rulings. Maybe this will be moot if and when the export regimes are merged and there is a single list administered by a single agency. Wouldn't that be nice?

Yes, I do exports too, although not often here. But, this is important news, so I am passing it along. In a policy speech yesterday , Defense Secretary Gates proposed a sweeping overhaul of the U.S. export control process. Under the current bifurcated system, the State Department controls the exports of munitions and the Commerce Department controls the exports of dual-use technology. According to the proposal, following a three-phase retooling, there will be a single agency charged with licensing and enforcement and a single list to check for licensing requirements. According to the White House press release, implantation will go like this: Phase I makes significant and immediate improvements to the existing system and establishes the framework necessary to create the new system, including making preparations for any legislative proposals. This phase includes implementing specific reform actions already in process and initiating review of new ones. Control List – refine, understa...

I know things have really slowed down here when my family complains that I am not posting often enough. I have not done a completely off-topic post in a while. And, the on-topic world has been personally fairly busy of late while at the same time not particularly full of interesting developments. So, here are a couple updates culled from the recent news. None involve animal smuggling. The Justice Department has announced a new task force on intellectual property enforcement. In many ways, I think this is great. Intellectual property really is the engine that drives vast swaths of our economy. But, I admit to feeling a little queasy every time I hear about increased IPR enforcement involving imports. The reason is that I know that many well-intentioned small business people inadvertently get caught up buying counterfeit merchandise and end up losing money and merchandise as a result. I am not making excuses for them, I just wonder whether they have a voice with the government. More wor...

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...

Entrapment is a funny legal concept. People who feel that they got a ticket or were arrested when the police used unsporting means often claim entrapment. But, hiding a police car behind a hedge to catch speeders is not entrapment in the technical sense. It's a trap, but not a defense. Why? Because the speeder was speeding and obviously was perfectly willing to do so. The hidden cruiser did not make the driver speed. I'm thinking of this because I noticed in today's Federal Register that a local man has been debarred from exporting due to violations of the International Traffic in Arms Regulations. Here is the Immigration and Customs Enforcement press release from his sentencing last year. This guy worked at O'Hare and had security clearance to go just about anywhere. ICE was tipped off that he would, for a fee, arrange for the illegal export of currency on commercial airplanes. In a sting operation, ICE did that a couple times, but did not arrest him. Instea...

I tweeted this story (see my problem?) but it was recently tipped to me from another lawyer, so I'll give it some coverage here. It seems that Jesus Argandona has been sentenced to a year in prison and a $200,000 fine. His offense: arranging the illegal export of $600,000 in blank CDs into Mexico. Two others received lesser sentences for similar offenses involving the use of a bonded warehouse to illegally export CDs from China to Mexico. This raises a question that I'm not willing to investigate. Maybe one of you has the info handy. What's the duty on blank CDs going into Mexico? It must be pretty big to justify this level of criminal enterprise. Is the problem that there is an antidumping duty order in Mexico? This whole thing seems kind of crazy to me. Maybe In Mexico, Philips brand CDs are particularly desirable.

On May 20, the House Foreign Affairs Committee passed legislation that, in part, would modernize U.S. export control policy.  The bill seeks to both improve national security and also permit more defense-related foreign sales.  The bill also seeks to eliminate the backlog of pending State Department license applications. Under the bill: DDTC (the Directorate of Defense Trade Controls) would be required to have 1 licensing officer for every 1,250 applications by fiscal 2011; DDTC would be required to have three people to review commodity jurisdiction requests; Commodity jurisdiction decisions would need to be published on the internet; A performance goal of 60 days to process license applications, and 30 days to process applications for close allies would be established. These, and the other changes included in the bill, are valuable efforts at facilitating export trade in defense articles.  In particular, the publication of commodity jurisdiction determinations will give exporters a f...

Thanks to a number of people who sent this list to me. Here is a link to the Spanish-only list.

UPDATED TO FIX LINK (I hope). I generally stick to customs law here, but in real life I do export and trade work as well. With that in mind, here is a story I should have covered earlier. It's a sailing story, and I like those. It is also an international trade enforcement story, so that makes it doubly interesting. It seems that the Bureau of Industry and Security charged Michele Geslin and Peter Goldsmith with violating the export control regulations for helping to organize a regatta to Cuba. According to BIS, that constitutes exporting their respective vessels to Cuba without a license and that is illegal. Apparently, BIS had gone so far as to show up at the launch party to explain that export licenses were required for any vessel intending to visit Cuba. The result was a fine of $11,000 each and the denial of export privileges for three years. The details are interesting. But, more important is that the reported decision is instructive in its explanation of the process. Read i...