Customs Law

Judicial challenges to the grading of the customs brokers license exam are not very common, but they happen. Usually, I have not been super supportive of the plaintiffs. See my maybe too mean-spirited post from 2006. On the other hand, I have gained a lot of respect for Mr. Byungmin Chae, who has been fighting with Customs over his score since taking the April 2018 exam. As background, broker license applicants who fail to pass the 80-question CBLE with a score of 75% or more may ask Customs to reconsider the grading on questions for which applicants believe they should have received credit. 19 CFR § 111.13(f) . If Customs does not change the grade, applicant may seek further review by the Executive Director of the Office of Trade. Any applicant that is not satisfied with the results of that review may sue the United States and ask the Court of International Trade to review the exam scoring.  Photo by Museums Victoria on Unsplash Mr. Chae missed passing the exam by eight questions...

In United States v. Zhe "John" Liu , the defendant was accused of a running a scheme to avoid antidumping duties on wire hangers from China by transshipping them through other countries and incorrectly stating the country of origin. The government is seeking to impose a penalty of just under $1 million, which is the domestic value of the merchandise. The defendant moved to dismiss the complaint arguing that it is barred by the statute of limitation and that Mr. Liu is not a proper defendant because he did not import the goods. Let's pause for a moment. First, the fact that this penalty is the domestic value of the merchandise may seem odd. It is not. The complaint asserts that the violation occurred as a result of negligence. Under 19 USC 1592 , the penalty for negligence is usually up to twice the loss of revenue, which will usually be much less than the entered value of the merchandise. However, the statute says that when the violation results from negligence, the penal...

The Court of International Trade decision in Otter Products, LLC addresses a novel question about how loss of revenue is calculated in the context of a prior disclosure. Grab a snack, this is complicated.  First, for anyone who needs a reminder: An importer that makes a material false statement or omission in connection with the entry of merchandise as a result of negligence, gross negligence, or fraud has violated 19 U.S.C. 1592 and is, therefore, susceptible to penalties. Penalties can be severe, up to two times any unpaid duties when the violation results from negligence and four times the unpaid duties when the violation results from gross negligence. Plus, the importer must pay the duties. In the case of fraud, the penalty is up to the domestic value of the merchandise, which is the entered value plus duties and other adjustments to try to get an approximate retail value in the United States. Given that the statute of limitations is five years, this can add up very quickly. ...

 If you are bothering to read this blog, you likely know that most goods entering the United States are appraised on the basis of transaction value, which is the total price paid or payable for the merchandise when sold for export to the United States. For most transactions, that means the invoice price. But, the invoice price is usually based on some underlying assumptions about the nature of the goods. For example, if I order 1000 buckets for $250, I am doing so with the expectation that the buckets will actually hold water without leaking. When I enter the buckets, I will declare $250 as transaction value because, at that point, I still think the buckets will not leak. Customs will assess duty on the buckets using $250 as the value. In the ordinary course, that is how things should work. Creative Commons License Every now and then, things go haywire; and the buckets leak.  Now what? The customs regulations provide an opportunity to secure a refund of the excess duties paid ...

 Kent International has been in a dispute with Customs over the classification of "Kangaroo Carrier" child safety seats for bicycles for so long that it has generated six judicial opinions. We last covered it here . In what imight be the last word, the Court of International Trade has handed a limited win to Kent . Photo by James Wainscoat on Unsplash This decision is not really about the classification. On the merits, the Court previously found that the seats are classifiable in Heading 8714 as accessories to bicycles. What was at issue in this decision is whether Kent was entitled to have some of the entries liquidated as "seats" in Heding 9401 because Customs and Border Protection's prior liquidations constitute a legal "treatment" of the merchandise as such. A "treatment" is analogous to a ruling, except it just happens as a matter Customs' actions on entries. It is relevant here because once a "treatment" is established, ...

The Court of International Trade has issued a decision in the lead case challenging the Section 301 duties on products of China covered by List 3 and 4A.  This case is almost unique in the number of plaintiffs and law firms involved. The most similar prior circumstance involving as much of the customs and trade bar was the litigation involving Harbor Maintenance Tax, which went all the way to the U.S. Supreme Court in 1998 resulting in a decision called United States v. U.S. Shoe Corp .  For purposes of this blog, this raises an issue. My firm, like dozens of other firms, has plaintiffs asserting the same claims. The matter is ongoing and, therefore, I don't want to say much about anything. So here is the short version. The Court previously remanded the matter to the USTR to provide a better explanation of how the record demonstrates that the agency properly engaged with public comments in opposition to the List 3 and 4A tariffs including the size of the remedy and whether th...

UPDATE: A kind reader let me know I misattributed the quote. It is not from Thoreau as originally reported. Thanks for the feedback.  There is a saying, attributed to Ralph Waldo Emerson that “Foolish consistency is the hobgoblin of little minds.” The point of that seems to be that doing something the same way solely for the reason of maintaining consistency is a poor strategy. For trade compliance that is often true. The fact that a manager who retired from accounting in 1995 once said that none of your company’s tooling expenses are dutiable is not a solid reason for failing to report dutiable assists in 2023. Maybe in 1995 all the tooling was in the U.S., and it is now all over the globe. Consistency for the sake of consistency is not a good enough reason to maintain a compliance process. There should be some underlying reason to believe the process is legally correct. On the other hand, inexplicable inconsistency can be evidence of fraud. An ongoing penalty case in the Cour...

The Court of International Trade has issued the much anticipated (at least by me) decision on the merits in Cyber Power Systems (USA) Inc. v. United States . It's a bit of a roller coaster ride. The plaintiff clearly hits some bumps along the way, but there is a thrilling conclusion. So, buckle up. The case is about the country of origin of five models of uninterruptible power suppliers ("UPS") and one surge protector. The UPS is essentially a glorified backup battery for computers and other devices. In the event of a power failure, the UPS kicks in to power the device and may assist in a "graceful shutdown." Modern UPS include printed circuit board assemblies that monitor the battery to ensure it is fully charged, monitor the available supply of electricity, switch to the battery when needed, provide status reports and other functions. All of that takes some firmware stored in chips on the boards. The surge protector is a simpler, but still electronic device, t...

Remember Meyer Corp. v. United States ? We discussed the original CIT decision in this post from 2021. That decision caused many quizzical discussions among trade nerds about whether the fact that a multi-tiered sale starts in China, a non-market economy, undermines an importer's ability to claim valuation for duty on the basis of the first sale. The Court of International Trade suggested that the Court of Appeals for the Federal Circuit might have to clarify. If none of this seems familiar to you, go back and read the earlier post. In August of 2022, the Federal Circuit provided that clarification . That must have happened while I was in the "Blog Black Hole" of 2021-2022, which I am trying to dig out of now (you may have noticed). The decisive part of that decision states: The trial court misinterpreted our decision in Nissho Iwai to require any party to show the absence of all “distortive nonmarket influences.” There is no basis in the statute for Customs or the cour...

Section 232 of the Trade Expansion Act of 1962 allows the President, following an investigation by the Department of Commerce, to adopt a plan of remedial action to protect the national security from harm caused by imports. The statute has several procedural requirements including that the Commerce Department complete its investigation within 270 days and that the President decide within 90 days of receiving the report whether the President concurs in Commerce's finding. If so, the President must come up with a plan of action, including the steps that "must be taken to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security." For this discussion, the key point is that the President must implement the plan within 105 days of the findings in Commerce's report. On March 8, 2018, President Trump imposed 25% duties on listed steel products in an effort to ensure that U.S. steel production was operating ...

Welcome back to what I hope is a more consistent flow of updates. I have a couple in the hopper, so come back soon. Importers of goods subject to antidumping and countervailing duties often find themselves dealing with unexpected compliance issues. Acquisition 362, LLC v. United States , a recent decision from the Court of Appeals for the Federal Circuit, is a good example of how this can go sideways.  Aquisition is an importer of tires from China that are subject to a countervailing duty order. As a result, Acquisition deposited CV duties at the rate of 30.61%, which was the rate applicable to tires from "all-other" producers and exporters at the time of entry. When Commerce instituted a review of the deposit rate, it instructed Customs to continue to suspend the liquidation of entries from companies participating in the review, including a company known as Shandong Zhongyi, which was Aquisition's nominal suppler.  Unfortunately for Aquisition, Shandong withdrew from the...

Over the years, I have seen many importers in trouble with the government because of inaccurate or possibly fraudulent information provided by a supplier. Many of those importers have performed layers of due diligence and sometimes still end up on the wrong side of a Customs penalty or seizure. While importers are and should be responsible for the goods they import and the representations they make to the government, it is frustrating for importers who tried to comply with the law at least in part relying on supplier representations. After ruminating on that, I wrote this musing on the burdens of international trade, which Law360 was kind enough to publish. You can access Law360 on a trial subscription.  Here is a link to the article . Or (consistent with the Law360 agreement), there is a PDF you can read here . 

 Hello. Yes, it has been a while. All is good here. Hope you are doing well too.  The reality is that for the last 2 years, the thought of writing for my own pleasure (which is 80% of why this blog exists) has been swamped by actual client, firm, and other commitments. But, I am coming up for air (at least for the moment) and want to address an important decision from the Court of International Trade. The case is Eteros Technologies USA, Inc. v. United States , which addresses the interplay between federal drug paraphernalia laws and state laws permitting the commercial exploitation of cannabis. This is important partly because of the explosive growth of the cannabis industry and also as an illustration of the way in which the details matter in the application of laws. Photo by Avery Meeker on Unsplash We have discussed CBP's role in interdicting drug paraphernalia before. See, for example, here  and here . A lot has changed since I wrote those posts in 2017. Under the f...

Looking to read a judicial opinion that is not a leaked draft?  U.S. v. Katana Racing is a fascinating look into how Customs and Border Protection tried to hold a company responsible for entries someone else made fraudulently and the risk of making a prior disclosure while also maintaining that no violation has occurred.  The facts are that Katana had been importing passenger and light truck tires from China. After the U.S. began assessing safeguard duties on these tires, Katana sought to find new suppliers. Rather than lose the business, one of its existing suppliers proposed that it would assume the responsibilities of importing the goods and the parties negotiated a new price for the tires. This is a Delivered Duty Paid arrangement and makes the seller responsible for customs clearance and the payment of duties, taxes, and fees. Shortly thereafter, the supplier asked Katana to execute a Power of Attorney with the stated reason that it was necessary to allow the supplier to...