Customs Law

Lawyers often have a tendency to wrongly believe that some question of particular interest to them is wholly unique and has never been addressed. The resolution of the matter, therefore, will “make new law” and put the lawyer into the legal history books. The opposite also happens. We often believe we know something to be true and assume that there must be precedent supporting whatever proposition we hope is the law. Such was the case with the impact of a bankruptcy filing in the course of a civil penalty case at the Court of International Trade. There had been an understanding among some importers and certainly among some members of the bankruptcy bar that filing for bankruptcy protection would automatically stay the penalty case pending the outcome of the bankruptcy process. The stay derives from 11 U.S.C. §362 (a), which states the following: Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application ...

Home Depot and stores if its ilk are one of the many places I go to find out how little I know about a great many things. Generally, I employ a "three step test" for home improvement projects. Under that test, if the project requires more than three process steps or three steps up a ladder, I outsource the job. That means there are vast arrays of hardware items to which I have had little or no exposure. On the other hand, I have done a lot of tariff classifications of power tools, hand tools, lawn and garden products, and home appliances (and parts thereof). Consequently, when I do wander into a Home Depot I sometimes pick up the odd lock washer or large forged hand tool and ask questions like "Is this in scope?" or "Is this really Made in USA?" The actual Home Depot company , on the other, recently asked the U.S. Court of International Trade to classify various pieces of door hardware. The merchandise consisted of packaged exterior door knobs and trim, ...

XYZ, it turns out, is a company called Milecrest Corporation. This is the next chapter of the modern XYZ affair at the Court of International Trade. If you are not up to speed on what is happening, read my earlier posts ( here , here and here ). In this Court of International Trade case, Milecrest has asked the Court of International Trade to review the decision by Customs and Border Protection to grant Lever Brother protection to Duracell-branded batteries. Granting that protection, as explained in the earlier posts, would make it more difficult for Milecrest to import and sell Duracell batteries. To do so, they will need to be marked indicating that they were not intended for the U.S. market and that they differ materially from the authorized product. At this stage, Duracell and the United States have moved to dismiss the case arguing that Milecrest has not stated a claim for which it is entitled to relief or, in the alternative, that the Court of International Trade do...

I never make an effort to watch Shark Tank . However, for some reason I am always running across it. I always get sucked in. I think the discussions of business valuation and strategy are interesting. I am certain they are very distilled through the editing process, but hearing successful investors critique an entrepreneur's pitch is fascinating to me. Not long ago, I saw a guy pitch an iPhone case that has a monochrome screen affixed to the back. Using its own battery and Bluetooth connection to the phone, the second screen continuously displays updates, pictures, and other data. The device is called a popSlate (review) . How would you classify that? It turns out, not as a radio transmitter/receiver of 8517, which is where CBP previously classified smart watches that use Bluetooth to get updates from the phone. In this case, CBP held that the screen provides the essential character. As such, Customs classified it as an other machine or apparatus having individual func...

Remember the Irwin Tools Case? That case considered whether certain locking pliers were properly classified as wrenches or as either pliers or clamps. The Court of International Trade held that the plaintiff had overcome the presumption that Customs correctly classified the pliers as wrenches. But, because Irwin had not moved for summary judgment, the Court could not give a final classification. Subsequently, Irwin moved for summary judgment and the government moved for reconsideration of the original decision. If you have not read my original post on this case, please do so. The CIT has now handed Irwin a complete victory. The gist of the prior ruling is that a wrench has a head that fits snugly over or around the head of a fastener and a single handle that can be turned to apply torque. Pliers, on the other hand, have two handles and two jaws that pivot and must be squeezed to grasp an object. A clamp has a frame of some kind and two opposing surfaces that can be adjusted by a ...

You may have noticed that I am not doing a particularly good job of blogging these days. I have no good excuse for that other than the fact that I have a job that is not blogging. But, I realize and am gratified to know that people read this blog and expect it to be up to date. I am making an effort to do that. I will have a lot of time in airplanes this week, so I’ll try and knock out some updates. Kent International, Inc. v. United (Slip Op 17-123) addresses the question of whether Customs and Border Protection had an “established and uniform practice” or a “treatment” applicable to the classification of a product known as the “WeeRide Kangaroo” child bicycle seat. We talk about this product previously here . In the phase of the case we are discussing now, the United States has moved to dismiss the counts of Kent’s complaint alleging an established uniform practice and a treatment. At this juncture, the question presented is whether Kent has alleged sufficient facts to suggest tha...

I am back in the mix for the Expert Institute legal blog competition. Do me a favor and vote here .

Our next case to discuss in The Gerson Company v. United States , which involves the tariff classification of artificial candles in the form of tea lights and candles. These are “artificial” because rather than being consumable candles with a wick that burns, they are translucent plastic or wax with a battery that powers an LED that simulates the appearance of a burning wick. You have probably seen these at a million restaurants that drop the tea lights into decorative holders on the table to create artificial ambiance. Customs classified these items in Heading 9405, which covers lamps and lighting fittings including search lights and spotlights, and parts thereof, not specified elsewhere. The importer’s primary argument was that the faux candles are classifiable in Heading 8543 as electrical machines and apparatus, having individual functions, not specified or included elsewhere in Chapter 85. Specifically, the importer claimed the correct classification was as electric luminescent l...

As we know from my previous post , XYZ is the pseudonym of a company that imports Duracell batteries through channels that are not authorized by Duracell. That makes XYZ a “parallel importer” or “gray market importer.” Putting the best possible spin on its business model, XYZ finds opportunities to bring quality products to consumers at lower prices by taking advantage of imbalances in Duracell’s global pricing. In this model, Duracell has been fully and completely compensated through its foreign sale and is trying to thwart XYZ only to keep its U.S. price high. So, XYZ is arguably the champion of the common consumer. XYZ is, of course, operating in the realm of many righteous warriors for freedom and justice who have adopted a nom de guerre or “code name” to protect their identity from evil doers. Young Bruce Wayne could only do so much to protect Gotham. Batman, on the other hand, can operate at (or well passed) the edge of legality to take on the enemies of justice. Spider-Man ha...

Here's a question. Assume pots and pans from Thailand individually qualify for duty-free entry into the United States under the Generalized System of Preferences ("GSP"). That means they have 35% of their value derived from Thai-origin materials or costs and are shipped directly from Thailand to the U.S. So far, so good. Now assume that glass lids for the pots and pans are added to the imported goods and those lids are from China, which is not a GSP-eligible country. Do the pots and pans continue to qualify for duty-free entry under GSP or is the entire set disqualified due to the presence of the lids from China? That is the question presented in Meyer Corporation US v. United States . The tricky thing about this situation is keeping separate tariff classification rules, entry documentation, and GSP eligibility. The classification of the pots and pans plus the lids is controlled by General Rule of Interpretation 3(b), under which the retail set is assigned a single clas...

Since I promised and because it is important, here is my more detailed analysis of the Court of International Trade decision in Ford Motor Co. v. United States, Slip Op. 17-102 . The background is pretty well known at this point; here is the short version. Since the 1960's there has been a 25% duty assessed on motor vehicles for the transport of goods (i.e., trucks). This is the result of U.S. retaliation in a trade spat over European duties on U.S. chicken. As a result, the 25% duty on trucks is known as the "chicken tax." The rate generally applicable to motor vehicles for the transport of people (i.e., cars, passenger vans, and SUVs) is 2.5%. That difference creates an opportunity, which Ford has tried (so far successfully) to exploit. What if you were to import a passenger van, pay 2.5% duty, and then convert it to a cargo vehicle prior to delivery to the dealer or customer? Would that be legal? That is the question addressed and decided by the Court of Internatio...

The important legal and possibly philosophical question to be answered in Mondelez Global LLC v. United States is whether the unflavored, and largely chemical, base for chewing gum is classified in HTSUS Heading 2106 as a food preparation or in Heading 3824 as a chemical preparation. While that is an interesting question, the most interesting thing about his case may be the procedure used to get it this far. It appears that the United States made a motion for partial summary judgment to ask the Court to decide a question of law as early as possible. This makes sense when there is a possibly dispositive question of law that can be resolved without discovery or the introduction of factual evidence. The answer to that question of law might lead the parties to resolve the case by settlement or, at a minimum, the answer provides guidance on what are the important questions of fact. Addressing the legal questions early, therefore, can be an efficient way to manage customs litigation. At...

This is a discussion of the jurisdictional merits of XYZ Corporation v. United States . If you are not up on the ins and outs of parallel (or "gray market") imports, read Part 1 of this post. Remember what is happening here: Plaintiff, going by the pseudonym XYZ Corporation, wants a preliminary injunction to prevent Customs and Border Protection from granting Lever Rule protection to Duracell batteries imported in bulk or in retail packaging. The first question the Court has to decide is whether it even has jurisdiction to resolve this dispute. The Court of International Trade, like all federal courts, is a court of special and limited jurisdiction. It can only act if Congress gave it the authority to do so. There are two possible bases of jurisdiction in this case. The first is 28 USC 1581(h) , which states in full (with my emphasis): The Court of International Trade shall have exclusive jurisdiction of any civil action commenced to review, prior to the importation...

Every now and then a case shows up at the Court of International Trade that does not fit into the normal baskets of what tends to happen there. One such case is XYZ Corporation v. United States . Here is some background. U.S. law says that only the trademark owner or someone authorized by the trademark owner can import products into the United States bearing the mark. That makes sense and it is how the law is usually described. But, it is also incomplete. The law also provides that once someone buys the physical item bearing the mark, that person can do pretty much what he or she wants with it, including resell it and import it. That is the principal of trademark exhaustion. The idea is that through the authorized sale, the trademark owner has been fully compensated and has no lingering rights to control the further disposition of the product. That creates an opportunity for entrepreneurs. If a company can find a good deal on shampoo , chocolates , or Mexican cola in some forei...

Turns out that I am still alive and still consider this to be an active blog. I have been working very hard on a number of fronts and simply have not had the time to keep you all up to date. I'll be back soon. I know I will be back soon, because this showed up on the docket at the Court of International Trade in Ford Motor Co. v. United States: Order entered on 8/9/2017 Judgment: ORDERED that Plaintiff's motion for summary judgment is GRANTED; it is further ORDERED that Defendant's cross- motion for summary judgment is DENIED; it is further ORDERED that judgment is entered for Plaintiff; it is further ORDERED that the subject merchandise is correctly classifiable pursuant to subheading 8703.23.00 of the Harmonized Tariff Schedule of the United States ("HTSUS"); it is further ORDERED that Customs and Border Protection, United States Department of Homeland Security ("Customs"), reliquidate the entry which is the basis of this case under the aforesaid ...

The Federal Circuit has affirmed the Court of International Trade's holding that a surety is be liable for statutory interest but not for equitable interest when the importer defaults on the payment of antidumping duties. What follows is heavy on law, short on fact, and important to sureties and also importers. The case is United States v. American Home Assurance Company . When importers fail to pay duties, taxes, and fees to the U.S. government, the government can collect interest on the unpaid portion. If the importer defaults, the surety becomes liable up to the value of the bond, unless the surety has a defense it can assert (and [spoiler] actually asserts it). In this case, the importer defaulted on the payment of antidumping duties and Customs tried to collect the duties and interest from the surety. There was no question about the liability for the duties. The questions presented has to do with interest. There are multiple bases for the interest. First, interest is avail...

The United States Supreme Court has made it easier for discount retailers and "off-brand" Amazon resellers to import and sell refurbished goods, which is good news for bargain seekers. First, a little background. Intellectual property rights like patents, trademarks, and copyrights are a deal that inventors, artists, and brand innovators make with the United States government. To promote the activity of these creative enterprises, the government grants a limited monopoly on the sale or exploitation of the work. That is why you can't make a copy of Star Wars Rogue One for 95 years, at which time it will fall into the public domain. Similarly, you can't start making your own version of the latest antibiotic because the company that put in the effort on research and development most likely owns the patent. But, the scope of intellectual property rights is limited. With respect to patents, the law give the patent holder the "right to exclude others from  making, ...

The Court of International Trade has taken an interesting hard look at the Nairobi Protocol to the Florence Agreement on the Importation of Educational, Scientific, and Cultural Materials, which is popularly known as just the Nairobi Protocol. For purposes of Sigvaris, Inc. v. United States , the important point is that the Nairobi Protocol permits duty-free entry to the United States for articles that are specially designed or adapted for the use or benefit of the blind or other physically or mentally handicapped persons. The merchandise at issue here is graduated compression hosiery, arm-sleeves, and gauntlets. The merchandise is all designed to apply a certain amount of pressure the extremities to help prevent the pooling of blood or other fluids as might happen in people with certain vascular and lymph conditions. The hosiery was designed for use by people with early stage chronic venous disease. The arm sleeves and gauntlets were for people with lymphedema, which causes sever...