Customs Law

For discussion: I will go anywhere in the world to open new markets for American products. And I will not stand by when our competitors don’t play by the rules. We’ve brought trade cases against China at nearly twice the rate as the last administration – and it’s made a difference. Over a thousand Americans are working today because we stopped a surge in Chinese tires. But we need to do more. It’s not right when another country lets our movies, music, and software be pirated. It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized.   Tonight, I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trade practices in countries like China. There will be more inspections to prevent counterfeit or unsafe goods from crossing our borders. And this Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing finance or new markets...

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.

In my last post, I referenced the internet in the lower case. The spell checker built into Blogger wanted me to capitalized it. That is consistent with the spell checker in Word. This may generate as much controversy as the apostrophe in Customs' . According to Grammar Girl , my go-to source for these things, "Internet" is a proper noun referring to a specific network. Hence, it is properly capitalized. That advice is apparently consistent with several style manuals. The Grammarist goes the other way. I don't think of the internet as a single network anymore, even though it is technically interconnected. Rather, it is now a medium for the dissemination of of information. Like radio and television. That is no longer a proper noun, but a common noun. No capitalizing "internet" for me. I'm with the Grammarist. How about you?

Estee Lauder  is a Court of International Trade case involving the tariff classification of the plaintiff's "Blockbuster" cosmetics kit. This kit consists of an outer case, several cosmetics (e.g., lipsticks and eye shadows), a cosmetics case, cosmetics brushes, and a brush case. All of it was imported together in a gold carton. If the internet is working properly, this is a picture of what we are talking about: There were no questions as to what the merchandise is, so the court decided this on a motion for summary judgment, which means this is entirely a legal question. The government proposed to classify these kits as separate items while Estee Lauder argued that the kits qualify as retail sets under the Harmonized Tariff Schedule. In the alternative, the Government argued that if the kit is a retail set, then the essential character is imparted by the case, which puts the entirety in the a tariff provision in Heading 4202 with a 20% rate of duty. Cosmetics, on the...

I realize it has been very quiet here the past couple weeks. That is generally a sign that I have been busy with client work and life. If you need it, please be reassured that I am alive and well and plan to catch up shortly. On my plate are two Court of International Trade Cases and Customs and Border Protection's proposal to change the way it views transfer pricing in transaction value scenarios. Be back soon.

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...

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...