International Trade Law

Proposed De minimis Rules

2025-01-23T18:07:00.005-06:00

Last week, Customs announced a proposed change to the rules for de minimis procedures. After reviewing the proposal, I’ve summarized the key points below.

Currently, there are two methods for de minimis clearance:

Manifest Clearance (Section 321 Line Release):
- This method allows for filing shipments, including those subject to quota, ADD (anti-dumping duties), CVD (countervailing duties), or PGA (partner government agencies) requirements.
- However, under the proposed rule, the line release process will no longer be available.
Type 86 Entry:
- This will become the primary process for de minimis shipments.
- Eligible shipments under Type 86 exclude those subject to ADD, CVD, and any shipments "precluded by law."
- The proposal does not clarify what "precluded by law" means, leaving room for interpretation. For example, a handgun without an ATF permit may be ineligible, but one with an ATF permit and Form 6A might qualify.

The comments on the rule also noted that shipments subject to quotas or IRS taxes (e.g., alcohol and tobacco) would not be eligible. However, the proposed rule itself does not explicitly mention these exclusions.

$800 Per Person Rule:

The $800 per person de minimis threshold will remain in effect. Customs has been testing enforcement and will require informal entries if they identify multiple shipments purchased by the same person on the same day, even if from different sellers, totaling over $800.

Who Can Make Entry?

Entries can be made by:

The owner (seller or manufacturer),
The consignee (e.g., a 3rd-party receiving warehouse),
The purchaser, or
A Customs broker appointed by any of the above.

Although Customs brokers are not required, I believe we offer valuable expertise in data processing that makes our services worthwhile.

Required Data:

For Type 86 entries, the following information will be required:

House bill of lading
Country of origin
Shipper’s name, address, and country
Name and address of the exemption claimant
Specific description of the goods
Manifest quantity
Shipment weight
Fair retail value
Name and address of the final delivery recipient

Enhanced Data Requirements:

The enhanced process will require additional details, such as:

Tracking number or house bill of lading
Export country
10-digit HTSUS classification (with a procedure to waive this in certain cases, e.g., for websites selling a variety of apparel)
Supporting documentation, which may include:
- URL to marketplace listing
- Product pictures
- X-rays by the consolidator
- Product identifiers
Seller’s name and address
Purchaser’s name and address
PGA documentation
Advertised retail description
Marketplace website or contact information

Other Key Points:

Section 301 duties (tariffs) are rumored to be excluded from this procedure, but I could not find this in the proposed rule.
On today’s bi-weekly trade call, we learned that Lacey Act declarations will not be required for de minimis shipments.

Comment Period:

There is a 90-day public comment period for this proposed rule. I have several questions I’d like to ask and would appreciate hearing others' thoughts. Please share your comments or insights!

Presidential Investigation of Aluminum and Steel Imports Launch under Section 232 to Protect National Security.

2017-07-14T16:18:00.001-05:00

On April 20, 2017, President Trump issued a memorandum, requesting the Commerce Department initiate a section 232 investigation on steel imports. A week later, April 27, 2017, the President issued another memorandum to investigate aluminum imports. The preliminary hearing for the steel investigation was held on May 24, 2017 and the preliminary hearing for the aluminum investigation was held on June 22, 2017.

A 232 investigation refers to section 232 of the 1962 Trade Act. It is encoded in law under 19 U.S.C. 1862. It allows the executive branch to place column 1 rate of duty on imports, or apply other trade remedies, on imported products to protect national security interests. The stated goal is to guarantee that the U.S. domestic production remains sound enough to meet the needs of the military. The law allows control of imports when the national security is at stake.

The procedure, for creating a section 232 remedy, starts with a request to investigate. After the Commerce Department receives a request, to initiate an investigation under section 232, the Commerce Department will notify the Defense Department of the investigation. Then Defense Department with communicate with the Commerce Department the supply needs of the Defense Department of those subject imports Originally the Treasury Department was assigned these investigations, but since 1979 it has been handled by the Commerce Department.

The Commerce Department investigates and determines the current needs of the military compared with the current domestic production. The Commerce Department is required to issue a report detailing its finding as to whether imports are damaging national security within 270 days of receiving the request. Commerce presents the report to the President. The President, based on the report, then decides, if there is a threat, what action to take.

History of Section 232 Investigations.

Section 232 was passed, in 1962, during the cold war. When the law was passed there was a fear that United States industries might become too reliant on foreign producers. If those industries were weakened, the United States might not to be able to provide defense in case of an attack. Since the law was passed, there have only been 26, Section 232 Investigations in 55 years.

Of those 26, Section 232 Investigations, Commerce or the Treasury Department, determined that there was no threat to national security in 15 investigations. After four other investigations, the President determined that there was no action required to protect national security. Seventy-three percent of the Section 232 Investigations have ended with no action.

Of the remaining cases, there were four cases that had to do with oil. Two of the oil cases were country specific, and lead to total embargoes against Libya and Iran. These definitely were more geopolitically motivated. They had little to do with maintaining supplies of domestic resources for the purpose of national security. The other two petroleum investigations, also achieved very little to affect trade. One actually eliminated petroleum quotas, and imposed a fee system, that was later overturned by court order. The result was the Section 232 Investigations removed restrictions on importing oil for national security.

The final two Section 232 Investigations, also had minimal effects on trade. One case lead to a voluntary restraint agreement (VRA). Japan and Taiwan, both agreed to restrict exports of machine tools for five years. The other merely resulted in a plan, for the Defense Department, to stockpile certain ferroalloys, for a ten year period. The farthest a Section 232 Investigation has ever gone, was the imposition of VRAs, on certain machine tools, from two countries.

Why are Steel and Aluminum Being Targeted?

Steel making is extremely capital intensive. Turning raw iron ore into steel is a process that requires coke production, and basic oxygen furnaces. Coke production is expensive to stop once started. Coke is made by heating coal up to very high temperatures for 14 to 36 hours in ovens that are stacked side by side to transfer heat between the ovens. Once a set of ovens is started, it is more cost effective to keep them running continuously.

In the words of economists, the supply curve of steel is inelastic. It is very difficult to either increase supply, or decrease supply. Typically in market economics when the price of a good goes up, the ability to supply that good increases, causing the price to stabilize. The contrary is also the case when the price of good goes down, the market should cause players to leave the market, and lower the production.

The extreme capital intensive costs of steel production, combined with plants that cannot be turned on and off efficiently, means players cannot easily exit the market. When that happens there is an inelastic supply curve. The price of steel, is therefore, highly dependent on demand. When there is high demand the prices soar quickly. When demands tapers even a little, this leads to a precipitous fall in prices. Steel and aluminum production both have very high barriers to exit.

Plates steel world export FOB price for example ran up to a price of $1200 back in April 2008. By December 2015 (seven years later) the world F.O.B. price for steel had dropped to $375.00. If we were to imagine paying $6.00 for a loaf of bread one year and $1.85 seven years later, that is how inflexible steel production is. The key to steel price and profitability is demand. Aluminum is very similar. Demand creates large swings in prices.

Despite all the evidence to the contrary, people really believe that these price swings are a result of foreign supply and not demand. In testimony before the Steel 232 investigation hearing, Congresswoman, Marcy Kaptur, Democrat from Ohio stated, “America today faces a national steel crisis. Rising, unprecedented global overproduction coupled with unfair dumping threaten the viability of our United States' steel industry like few times before.”

She pointed to Duke University study in 2016 that China produces 2,300 million metric tons of steel while the global is only 1,500 million metric tons. She focuses on countries China, South Korea, Russia, and Vietnam. She points out that these countries are state run and the nations are subsidizing their steel industries. In the case of South Korea the state is subsidizing the electrical cost. The study was funded by the Alliance for American Manufacturing a Washington DC based lobbying group.

What is Likely to Happen.

The nature of these investigation is quite novel. So far there have only been two investigations initiated by the President himself. One resulted in the commerce department finding no threat to national security. The other resulted in Sanctions against Libyan Oil only. Clearly the President has some power to steer these investigations, to get the results he wants.

The auto market for in the US is expected to decline. New auto sales are one of the major uses of new steel. If United States auto demand drops, this could lead further to the loss of steel jobs and lower of steel prices. Lower prices will create more pressure on the industry to close plants and more belief that the national security in steel is at stake.

In 2001, there was a similar Section 232 Investigation on steel. Commerce determined steel imports did not threaten the U.S. national security. No action was taken. The demand for steel for the National Defense was 325,000 tons per year. Today the US produces around 1,750,000 ton per week. At present and or the foreseeable future, there is plenty of domestic production to meet the requirements of national defense.

Increased demand will save steel profits. There is already some evidence of both increasing prices and increasing demand in emerging markets. If the largely expected infrastructure spending is passed along, with strong buy America provision, it will likely to shore up demand and increase prices for steel and aluminum.

For the past ten years, the United States imported on average 25 billion dollars in steel products. In that same period, the US exported on average 18 billion dollars. The only year the US had a trade surplus of steel products was when the price dropped, after the 2008 housing market crash. There was a precipitous drop in steel prices that year, and ironically enough an export surplus of steel products.

Furthermore, there are other facts making it hard to argue that sanctions are necessary for national defense. China has actually been cutting production, while raising consumption, of their own steel. Imports of steel from China have dropped over the past two years. The drop started after antidumping and countervailing duties were placed on steel products. These trade remedies seem perfectly apt to protect the United States Steel producers.

It is difficult, to make the argument, additional sanctions are necessary for national security. Compounding the problem for the administration is that the political appointee, who could steer the investigations toward a more political outcome, the Undersecretary for Industry and Security, has yet to be nominated. Acting Undersecretary, Daniel Hill, is currently running the investigations. The Secretary of Commerce, Wilbert Ross, is the only Trump appointee who could be involved in politicizing the investigation.

Even if nominated tomorrow, the average confirmation period is 45 days, the investigation will be halfway over, before the nominee takes office. The administration is left with, Daniel Hill, a Bush appointee, and longtime civil servant. It is doubtful career civil servants would steer the investigation to an incorrect, but expedient political, result. The Commerce Department has until January 2018, to issue it’s report. However, in public hearings, Commerce Secretary Ross claimed the they had no intention of using all 270 days to finish the report and claimed he thought they should be done before the end June. It is now July.

Judicial Review.

One largely uncharted territory with the Section 232 Investigations, is whether or not, and to what degree, could any 232 sanctions be challenged legally. Prior to now there has never been any need for judicial review. It is clear, separation of powers should guarantee, some kind of judicial review. Based on the above information, there are serious questions as to whether any 232 sanctions are actually needed for national security.

Typically, when a law allows the executive branch the ability to investigate and issue a rule the executive branch is afforded “Chevron” deference. Meaning the Court, will uphold the administration's rule, so long as it is not ‘arbitrary or capricious.’ Section 232 sanctions under these circumstances, could very well fail arbitrary and capricious standard.

However, the nature of a 232 sanction, is national security. The standard of review of the President's National Security decisions might be based on “facially legitimate and bona fide” justification of protecting national security. That might be more difficult to challenge. The administration just has to show a legitimate justification. Without looking too deep, into whether or not, the justification is real.

If the court somehow upholds section 232 sanctions, or remedies, the last option would be for affected nations to file with the World Trade Organization’s Dispute Resolution Body. Any sanctions created under Section 232, would not likely be in accordance with the United States World Trade Organization obligations. However, it would take years of dispute resolution, before any retaliatory sanctions could be placed on the United States, which would prompt the United States to drop the section 232 remedies.

Conclusion.

Section 232 of the trade act of 1962, has rarely been used, and for the most part, has had no effect on trade. It is striking how quickly the new administration pushed the Section 232 Investigations. There is evidence of a severe threat to domestic production which would threaten the United States national security. These investigations appear to be politically motivated. The outcome is unpredictable. Judicial review is limited. World Trade Organization disputes will take many years to resolve any ill conceived sanctions. It is possible, no matter how unlikely, that these investigations might result in serious challenges to trade.

Get Ready for FDA's New Foreign Supplier Verification Program.

2016-02-16T10:12:00.001-06:00

Foreign Supplier Verification Program.

In 18 months, June 2017, the Foreign Supplier Verification Program will be mandatory for importers. Importers or their US Agents will have to have documentation on hand at the ready, that they have developed a Foreign Shipper Verification Program, for each they product import. These programs will most require a number of enumerated documents, 1) Hazard Analysis, 2) Foreign Supplier Evaluation, 3) Verification of Activities, and 4) Corrective Actions. There are different rules for foods from very small importers from very small suppliers, and dietary supplements. There are also several exemptions and consequences of non compliance.

1. Hazard Analysis.

The importer or the US agent must identify and list all the hazards reasonable likely to cause illness or injury. There are three types of hazards to identify: 1) biological, chemical, and physical. Then the importer or agent must analyse how they could occur, either naturally, unintentional or intentional for economic gain. In order to do this analysis an importer must employ or outsource a qualified individual. A person with adequate, experience, education or training to conduct such analysis.

Finally the importer must evaluate these hazards, list the controls in place to prevent hazards, and evaluate the likelihood and severity of illness if these controls were not in place. The following factors must be considered for each hazard evaluation. The formulation of the food, the equipment used to process the food, raw materials used, transportation practices, harvesting s, raising processing, the packaging, labeling, storage, distribution intended use, foreseeable use, sanitation, hygiene, and any other factors.

An importer may have a third party perform this analysis, or rely on the customer doing their own analysis, but they must independently review the analysis for themselves. then they must document that they reviewed it. However, imports of raw agricultural goods, fruits and vegetables, needs to follow extensive rules for fruits and vegetables.

With the exception of fruits and vegetables, if there are no hazards requiring control, importers do not need conduct a foreign supplier evaluation for approval or verification of activities. Nonetheless, they must document conducting the hazard analysis described.

2. Foreign Supplier Evaluation for Approval

After completing the hazard analysis every imported of food, the importer must evaluate the foreign supplier, and approve or refuse the foreign supplier. Everything that hazard analysis identified as requiring controls must be addressed. The importer must review the foreign supplier’s procedures process and practices compare those with current FDA safety regulations. They must also review the foreign supplier safety history. all of this again must be documented.

This review may also consider regulations and safety procedures of the country from which the manufacture is located, if FDA recognizes the exporting country as comparable or equivalent to the U.S. FDA standards. The importer will be required to have information about these plus and testing results, audits, and the foreign supplier responsiveness in correcting problems. Again, all of this evaluation must be documented.

3. Verification of Activities.

After identifying hazards controls, process and procedures of foreign suppliers, the importer will then be responsible for verifying these results. This maybe in the way of quality testings, on site visits, review of safety records, and any other ways, to verify the foods safety and hazards are minimized. The risks, and severity of illness or injury, must be evaluated to determine the frequency of each review. The default will require at least annual reviews, on site audits, and lab tests. Less frequent audits may be warranted only if the results of the Foreign Supplier Evaluation indicate it would be appropriate.

Importers may use the services of qualified third party providers to run these test. Importers may rely on outside audits, conducted by authorized parties, other that the foreign supplier. However, importer must document their review and assessment of appropriateness of the the third parties verification activities. Included in that review must also determine the party conducting the review was a qualified individual.

4. Correction Actions.

Finally if any hazards are found, or if there is a chance of persisting to cause illness or injury, the importer must also document all corrective actions that are taken to prevent risks. Importers must review, verify, and update the Foreign Supplier Verification Program if a new corrective action is taken.

If it is determined, through the verification activities, that a supplier does not produce food in compliance with safety standards the importer must take steps to discontinue accepting food from that supplier, or if it possess a risk conduct a recall. Importers also must have a documented recall plan.

The consequences for not documenting a Foreign Supplier Verification Program include refusal of admission of those foods items from being imported into the US. Another consequence may also be a mandatory recall of that food item. All the records may be kept electronic form or in physical form but they must be available to be produced to the FDA upon request within a reasonable time. Failure to produce these records in a timely manner may result in refusal of admission of imported food.

Disclaimer and Exceptions

There are many exceptions and other inter threading rules. Each particular food item may have specific regulation addressing it. An Importer will need to examine each food item to address the regulations for that item. Such exceptions are seafood, alcoholic beverages, small importers, food not consumed without further processing, shell eggs, etc. It is likely every importer will need some more consultation.

2012-12-28T21:57:00.002-06:00

I haven't posted in a while but I thought I should post an update on the GPX Tire Case.

I had thought the matter was closed once this judgement was handed down. I was under the impression that all China (NME) anti-dumping and countervailing cases from commerce would be remanded. In my article

However, I didn't follow the lobbying effort. After this case was decided the courts were over ruled by Congress. I found out about it from an article written here. Congresspassed a law retroactively allowing commerce to asses countervailing and anti-dumping duties on NME (mostly Chinese) imports.

So after that China has just filed with the WTO. the case was just started on December 17th 2012. Case DS449 will now run its long and winding course. It will be a long time before the case is heard. Longer before an decision. Then an appeal is likely followed by potential sanctions. After the sanctions then it will be up to the Executive Branch to change its policy back to Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986).

GPX Tires. The end of CVD from NME's?

2010-10-05T17:06:00.002-05:00

When this case was first decided and remanded to the agency, I thought then that it was pretty remarkable. See my blog from 2009. It was remarkable because the court decided that the when applying antidumping and countervailing trade remedies for non market economies, the margins for the additional duties could not be double counted. If they could not be double counted I did not see how they could be counted at all.

There are three types of trade remedies in US law: 1) countervailing remedies covered in 19 USC 1671, 2) antidumping remedies covered in 19 USC 1672, and 3) unfair practices cover under 19 USC 1337. Of these the first two are used most frequently. They both create the imposition of additional duties to products deemed in violation.

Countervailing duties are extra duties on the subsidies that the foreign governments give to their exporters. For example, if a foreign government pays a company to export a product, then the amount of that payment is added on to the duty amount as a trade remedy. This balances out the government's subsidy so that companies can compete fairly despite that government's subsidy.

Antidumping duties are extra duties on products being imported, at less than fair market values, as determined by two different methods. The preferred method is the difference between the market price in the country of exports an the imported price. When there is not enough information to accurately establish a home 'market' price then a normal value may be constructed.Then the margin is the difference between the normal value and the imported price.

The second method of calculation antidumping duties is used when the economy the goods come from is considers a 'non market economy' or state controlled economies (NMEs). Then the price is constructed by using comparable surrogate prices,. In this method presumes that government meddling int he prices is so pervasive that the export market price is unreliable.

For many years the agency charged with enforcing the trade remedies refused to apply countervailing duties to antidumping cases, where the NME method of calculating was used. Many US importers challenged this decision and the court ruled that is was a permissible interpretation of the statute, to refrain from imposing countervailing duties on products where, the NME method of calculating antidumping duties was used. (See Georgetown Steel) But he court in those years never said the agency could not apply countervailing duties only that is was within their discretion not to apply them.

In 2007 the Agency, Commerce Department, began trying to add countervailing duties to antidumping cases where NMEs were involved. Currently the major NME is China. Since then there have been quite a few cases of joint countervailing and antidumping cases being made against Chinese products. The GPX tire case is one of them.

The plaintiffs, US importers and Chinese importers, in this case challenged the Commerce Department's imposition of countervailing and antidumping duties arguing that it amounted to double counting of the countervailing duties. The court agreed in GPX I and remanded back to the agency to come up with an acceptable method to insure that the countervailing duties would not be double counted.

Well at long last the commerce depart has came back its chosen methodology and the court found that it was not able to prove that it could eliminate the double counting. In GPX II the court found that the commerce department was not able to show it could eliminate the double counting and order the commerce department to forgo the countervailing duties.

The decision will likely be appealed and if the appellate agrees with the ITC it could mean the end of countervailing duties for all other Chinese countervailing cases as well.

This is a list of the current extra countervailing duties for goods from China. The list has the shipper names with duty rates. There are additional antidumping cases for these which are not listed.

Circular welded stainless pressure pipe C-570-931

Countrywide rate 1.1%
Winner Stainless Steel Tube 1.1%
Froch Enterprises 299.16%

Circular welded carbon quality steel line pipe C-570-935
Citric Acid case C-570-938

Countrywide 8.14%
TTCA Cop., Ltd 12.68%
Yixing Union Biochemical Co. 3.6%
Anhui BBCA Biochemical 118.95%

Prestressed Concrete Steel C570-946

Countrywide 27.64%
Fasten Group Import and Export 9.42%
Jiangyin Hongyu Metal Products 9.42%
Fasten Group Corporation 9.42%
Jiangyin Walsn Steel Cable Co., Ltd. 9.42
Jiangyin Hongshen Co., Ltd. 9.42%
Xinhua Metal Products Co., Ltd. 45.85%
Xinyu Iron and Steel Joint Stock Limited Company 45.85%
Xingang Iron and Steel Joint Stock Limited Liability Corporation 45.85%

Kitchen Appliance Shelving and Racks C-570-942

Countrywide rate 13.3%
GuangDong Wireking 13.3%
Asber Enterprises 170.82%
Ghangzhou Yixiong Metal Products Co., Ltd. 149.91%
Foshan Winleader Metal Products 149.91%
Kingsun Enterprises149.91%
Yuyao Hanjun Metals Works 149.91%
Zhongshan Iwatani Co. Ltd 149.91%

Laminated woven sacks C-570-917

Country Wide 226.85%
Shandaon shougang Jiayuan Chun Company Ltd 352.82 %
Zibo Aifudi Plastic OPackaging Co. Ltd 29.54%
Han Shing Chemical Co. Ltd 223.74%
Ningbo Yong Feng Packaging Co., Ltd. 223.74%
Shandong Qilu Plastic Fabric Group. Ltd 304.4%

Lightwalled rectangular pipe and tube C-570-915

Countrywide 15.28%
Zhangjiagang Zhongyuan Pipe Making co Ltd 15.28%
Kunshan Lets Win Steel Machinery Co., Ltd. 2.17%
Qingdao Xiangxing Steel Pipe Co., 200.58%

Lightweight thermal paper C570-921

Countrywide 13.63%
Guangdong Guanhao High Tech 13.63 %
Shanghai Hanhong Paper Co., Ltd 0%
Shanzhen Yuanming Industrial Development Co., Ltd. 138.53%
MDCN Technology 124.93%
Xiamen Anne Paper Co., Ltd. 124.93%

New Pneumatic Off Road Tires C-570-913

Countrywide 5.62%
Guizhou Tyre Co., Ltd. 2.45%
Tianjin United Tire and Rubber International Co., Ltd. 6.85%
Hebei Starbright Tire Co., Ltd. 14% (GPX International Tire)

Raw Flexible Magnets C-570-923

Countrywide 109.95%
China Ningbo Cixi Import Export Corporation 109.95%
Polyflex Magnets Ltd. 109.95%
Jingzhou Meihou Flexible Magnet Company Ltd. 109.95%

Sodium Nitrate C-570-926

Countrywide 169.01%
Shanxi Jiaocheng Hongxing Chemical Co., Ltd. 169.01%
Tianjin Soda Plant 169.01%

Steel Grating. C-570-948

Country wide 62.46%
Ningbo Jiulong Machinery Manufacturing Co., Ltd. 62.46%

Tow Behind Lawn Groomers C570-940

Countrywide 13.3%
Princeway Furniture 0%
Jiashan Superpower Tools Co., Ltd. 13.3%
Maxcheif Investments Ltd 264.98%
Qingdao Ea Huabang Instrument Co., Ltd. 264.98%
Qingdao Hundai Tools Co., Ltd. 264.98%
Qingdao Taifa Croup Co., Ltd. 264.98%
World Factory Inc. 264.98%

Pottasium Phosphates Contervailing Duties

2010-04-07T13:36:00.001-05:00

Commerce published their preliminary findings for countervailing duties for potassium phosphate salts imported from China.

Potassium phosphate salts are food additives and fertilizers. The order covers three types of these salts, one of which, monopotassium phosphate, is an ingredient in Gator Aid, for example.

The period of investigation is from January 1st 2008 to December 31st 2008.

Apparently both suppliers of these salts decided to stop selling potassium phosphates in the U.S. as Commerce claims both parties, and the Chinese government, did not respond to questionnaires aimed at determining whether there was dumping, and how much.

When parties shipping to the U.S. are charged with dumping the Commerce Department, or more specifically the Import Trade Administration (ITA), sends them questionnaires about pricing, costs, etc. They use the data collected from the questionnaires, other pricing data, and the dumping petition, to make determinations of countervailing margins and/or antidumping margins. The margins are percentages which translate into additional duties above the tariff schedule added to products already imported and imported in the future.When parties do not send back their questionnaires, partially fill them out, or send them back late, the ITA will then use the "adverse facts available" to find dumping or countervailing duties margins based on the assumption when in doubt the margin is higher.

When using "adverse facts available" the result should be a "reasonably accurate estimate of the respondent’s actual rate, albeit with some built-in increase intended as a deterrent to non-compliance. " F. Lii de Cecco Di Filippo Fara S. Martino S.p.a. vs. United States (App. Ct. Fed Cir. 2000) The ITA should make an accurate estimate of what the countervailing and anti-dumping margins should be and then add a little to punish the companies for not complying with the questionnaires.

So the rate should be "reasonably accurate." But in this case, for the potassium phosphate salts, the preliminary findings for only countervailing are a rate of 119% in additional duty. That means for every good that is exported, the Agency found that a reasonably accurate subsidy of 55% is being paid to the exporting companies by the Chinese Government. This seems quite improbable. For every dollar in exports the Chinese government is paying the exporting companies $0.55 of it.

Some of their methods used seem arbitrary. The findings showed China has a 33% income tax rate. But instead of figuring out the effect the income tax on the profit would be on the price of the exported product, they simply added 33% to the other subsidies. Income taxes are based on income which is revenue less expenses. The manner the ITA chose to make its calculations there would be no cost of production. I would like to run a business in whatever world the ITA is living in.

In addition to the absurdly high countervailing duty the ITA also has a concurrent non market economy (NME) antidumping duty case. Non market methods of calculation are done with countries such as China because government run companies have internal price controls making the domestic value unreliable.

Because it is hard to tell where the company begins and the government ends the antidumping duty uses a method that catches that and all the government subsidies. But if the NME methodology catches the subsidies and the countervailing duty counts the subsidies then there will be double counting or doubling of countervailing margins by using both methods concurrently.

Fortunately, for principle of fairness, if nothing else, the Court of International Trade (CIT) recognized this double counting was not correct. GPX Tires v. United States. CIT 09-103. The Court found it is permissible for the ITA to use both NME methodology for antidumping duties and make a finding of countervailing duties if they can come up with a methodology to insure that there is no double counting. I personally do not see how they will be able to do that. I think the only solution would be to apply countervailing duties only on the parts of the antidumping margin that do not use the NME methodology, or what has been termed the 'bubbles' of market economy within the the NME.

But the ITA does not co-ordinate the antidumping and countervailing investigations, other than trying to synchronize the schedule. They have the same data but they do not try to co-ordinate the determinations in a way that will avoid double counting as of yet. In this case especially they seem to be operating as if the above court decisions do no exist. Maybe they will fix it by the final determinations but it seems like they will keep doing whatever they want until challenged in court.

The importers of potassium phosphate salts for 2008 are the ones that might pay the penalty for this quagmire. If the Chinese government and companies who manufactured these potassium phosphate salts and exported them to the United States decided, like it seems, to just abandon the U.S. market at the hint of a injury investigation, then the importers are left holding the bag with little recourse.

The importers can and should make the challenges I mentioned above, but real amelioration of these margins in the help of real cost data from the suppliers would be much better. Finally results are due out over the summer and then we could be looking at litigation after that.

Zeroing Classic Conflict of Law and Rational.

2010-03-26T11:48:00.002-05:00

After explaining what zeroing is here. Then explaining the legal background here. I now conclude with my personal critic of practice.

The idea that a dumping margin should be calculated by subtracting one average price by another not so average price is a little perverse. It breaks the rules of math. The amount the normal price exceeds the export price should equate to the amount the normal average price exceeds the export average price. Adding, subtracting or multiplying the same number or effect to each side of the calculation is the basis of algebra. The export price can not equate to the average export price, where not all prices are averaged but are altered to make some equal to the normal values, and the rest averaged. It breaks the rules of math, it makes apples oranges and grapes peaches. If the these rules were applied to everyday purposes planes would fall out of the sky and building would collapse.

The fact that this is somehow fine is linked the the permissible statutory interpretation doctrine from Chevron. Basically, there are words here, and they say something, but it is possible to read them differently. The two step process is, ask first if the words of the statute are ambiguous, then ask if the interpretation is permissible? Well the statute is almost always ambiguous. Otherwise why would it be challenged in court? Then the interpretation is almost always permissible. It is much easier to find an interpretation permissive, than not permissive. This is the deference given by the courts to the executive branch in interpreting statutes. Theory behind the deference to the executive branch in interpretation the statute is that if the executive branch interprets that differs from Congresses intent, Congress is in a much better place to correct them than the court politically and the executive is also more accountable as a political branch to the people than the court.

But in this case law of dumping duties is derived from a non-self executing treaty. Which means a treaty was negotiated, and instead of being adopted as law, Congress passes it into law as a US domestic law. Then the executive branch interprets the law. But usually, the executive and Congress, would prefer to interpret a treaty that benefits their domestic political base. If the executive chooses to interpret in a way the that penalizes unfairly foreign companies on behalf of U.S, domestic parties Congress is not about to pass a law to rectify it. So both the executive branch and the Congress have no, or limited interest, in trying to interpret a trade treaty fairly. The only branch left to interpret a statute based on a treaty fairly is the judicial branch. But if the judicial branch decides it best to leave the question to the political branches, as it does with other domestic law, then the only recourse left is external.

So faced with the inability to get a fair hearing in the United States system, the foreign companies must challenge the practice zeroing in the WTO dispute settlement body (DSB). But, WTO rulings are not binding on the US courts, nor are they binding on the executive branch. The court defers again the the executive to uphold, or squirm around, WTO rulings, whichever it prefers. If the executive does nothing, or not enough, then the recourse, of the foreign interests is trade barrier retaliation. That sets off a trade barrier retaliation that is calibrated to cause enough damage to domestic industries, to get the domestic industries to pressure the executive the change the offensive policy. Is this anyway to run a railroad?

Obviously its no way to run a railroad. The zeroing interpretation should not have been held permissible in the first place. But like a kid who can not back down from a fight, when the WTO ruling against the practice came down, the US courts could not back down. There are plenty of reasons why a WTO DSB ruling should not be binding on a US court. Maybe using the Charming Betsy doctrine in conjunction with WTO ruling to change the executive interpretation of a treaty, also would set a bad precedent. But if all three branches of government have no interest in upholding trade treaty obligations then the only course will always be the WTO DSB and trade retaliation. Even in clear cut poorly interpreted statutes like this one.

The Court of International Trade prides itself, and rightly so, as one of the few courts in the world where foreign and domestic companies can come and challenge the enforcement of trade policy. It is better than most nations offer their trading parties. Many rulings are a testament to fairness. But it still would be better for the court to decide cases such zeroing in light that it is the last chance of fairness before the convoluted remedies WTO DSB are used.

History of Zeroing

2010-03-03T12:16:00.002-06:00

Last blog entry I explained what "zeroing" was. I also knew, "zeroing" had been contested for a long time, but I was surprised to see how far back it went.

The earliest case I could find contesting the method of zeroing was, Serampore Indust. v. Dep't of Commerce. 11CIT 866 (1987). After that there was Bowe Passat Reinigungs-und Waschereitechnik Gmbh v. United States 20 CIT 558 (1996). In both these cases the use of "Zeroing" (explained in my previous blog entry) was considered a permissible interpretation of the statute. Both of these cases are too old for me to find online for free, so I would have to run down to my alma mater's law library, or pay to read them.

The standard of review on this is based on the reasonable interpretation statute know by many as the Chevron Doctrine. If the use of "zeroing" was a "finding" then the standard of review would have upheld Commerce's finding unless "unsupported by substantial evidence." However, the us of zeroing was considered an "interpretation" of the statute. Under the Chevron Doctrine the courts will up hold the agency "interpretation" of an ambiguous statute if it is a "reasonable" interpretation.

The statute everyone is arguing about reads as follows: the "dumping margin is ... the amount by which the normal value exceeds the export price..." 19 U.S.C 1677. (emphasis added) So the Commerce Department read that to mean that there weren't supposed to use any negative margins, i.e. only margins where the normal value "exceeds" the export price are written into the statute. See Timken Slip Op. 02-106. Now that might be fine if they weren't calculating margins using average prices over periods of a year. Because it just disregards the rules of math. The difference of one average between another average is the difference between the whole. The difference between one average and a construct is not the difference of the whole. It is apples and oranges being added together.

The first time the practice of zeroing was found inconsistent with WTO obligations, it was the European Union not the Untied States who was doing it. In 1998 India charged European Union was improperly calculating dumping margins by using zeroing in their calculations of bed linens from India. WT/DS141/AB/R. The WTO dispute settlement body, of course, has a different standard of review. It can look at the treaty and decide whether or not a practice is consistent or inconsistent with the treaty.It does not have to provide any deference to one side or the other.

But when applying the treaty to domestic law, the WTO treaty is not what they call "self executing." This means that after the executive branch negotiates the treaty, then they have to bring it back for United States for the Congress to write it into law domestic law. Some treaties negotiated and ratified by the Senate become US Law automatically and are on par with every other Federal law. U.S Const. art. II sect. 2 and U.S. Const. art.IV. But for the purposes of law, the much unjustly maligned WTO treaty, is actually more aspirational then it is binding on the United States.

Immediately after the WTO decision against the European Union, United States plaintiffs began trying to use it in U.S. Courts. See Timken (2002). Corus Staal (2003). The argument being the old "Charming Betsy Doctrine" that when interpreting U.S. law, courts will find that Congress intended the law to comport with accepted international law. See Murray v. Schooner Charming Betsy. 6 U.S. 64 (1804) (citing a U.S. Supreme Court case from 1804 is also pretty impressive.) Therefore an interpretation that is consistent with international law is reasonable and one that does not is not reasonable. If the WTO ruled that the interpretation of the statue is inconsistent with our treaty obligations then Congress must not have intended that and zeroing would not be a reasonable interpretation of the statute.

But the CIT for in both cases 1) the treaty doesn't specifically prohibit zeroing, 2) the Bed Linen case was not a reason enough to strike Commerce's interpretation, 3) WTO DSB decision are not binding on U.S. Courts and 4) WTO DSB decisions are not "self executing," they require Congress to change the law for them to have effect. Corus Staal Slip Op 03-25

So then the United States was challenged directly on it's use of zeroing this time by the European Union. WT/DS294/R. (2003) The EU hot off being called out on it's questionable antidumping practices immediately points its fingers elsewhere. The WTO DSB found U.S. zeroing practices specifically inconstant. End of the story right? Not quite. The DSB decision for all their worth only suggest other member to change their ways or face possible sanctions. They ndo not have the power to reach in and change any countries domestic law.

Plaintiffs again challenged zeroing in court after the panel report in 2005 to no avail. See NSK Bearings v. Untied States Slip Op 05-1 . and then Corus Staal BV v. United States. Slip Op. 05-85. The same result that the court backed up Commerce's interpretation. The court was uhelp in both cases on appeal.

The U.S. appealed the WTO decision, and finally lost in the WTO appellate body, on April 18th 2006. So on March 6th 2006 commerce announced it would stop using the method of zeroing on new investigations. See 71 FR 11189. and then the final decision 73 FR 74932, Dec. 10, 2008. Commerce would start using average to average price comparison when calculating dumping margins in investigations. But it maintained it would continue to use zeroing on closed investigations under administrative review or sunset review.

Then not using Zeroing was challenged. In Searing Industries the court ruling that Commerce could refrain from using zeroing. Zeroing in initial investigations is no longer used and the Court has ruled that not using zeroing in initial investigations is also a reasonable interpretation if the statute. CIT. Slip Op -09-129.

But Commerce still uses zeroing in administrative reviews. These are dumping cases that have already had a final investigation and once a year they receive an annual administrative review if any of the parties request it. The use of zeroing in the administrative reviews was upheld by the court as well. See SKF v. United States. Slip-Op. 09-121

So the state of zeroing is that it is no longer used in the U.S. for investigations, but is still used in sunset reviews, new shipper reviews, and annual administrative reviews. 19 CFR 351.218, 19 CFR 351.214 , 19 CFR 351.213 and read with 19 CFR 351.414 (c) 1 and 2.

And that is were it stands. Zeroing may continue for much longer in the future. The last DSB ruling is a mixed bag and complicated the matter. It found certain measures the US took complied with the WTO finding and certain did not. Further, the appellate body previously allowed zeroing in context of reviews, while zeroing in investigations where "inconsistent." WTO DS294.

Latest Zeroing Cases

2010-02-17T16:05:00.001-06:00

The latest two Zeroing cases added to a long history of Zeroing cases:

Dongbu Steel Co. Ltd. v. United States 2/4/2010 Slip Op. 10-13.
Corrosion-resistant carbon flat steel products from the Republic of Korea.
Use of zeroing in context of administrative review sustained.
Andaman Seafood v. United States 2/4/2010 Slip Op.10-12
Frozen warm water shrimp from Thailand.
Sustained zeroing as commerce could apply the decision to stop using zeroing prospectively and not on already decided cases

"Zeroing" is a method used by the International Trade Administration in calculating "Antidumping Duties."

"Antidumping Duties" are extra duties levied on products being sent tot he US at less than fair market value. The two requirements are that a 1) US Industry is being injured by import and 2) the reason is that the injuring imports are being sold less than fair market value.

It is often explained as analogous to predatory price protection under Antitrust laws. However, the key distinction is that under anti trust laws the complainant must show that the offender has the intention of driving competitors out of business to recoup monopoly profits in the future. Antidumping is much easier to prove.

The remedy for dumping is additional duties calculated by figuring out what the fair market price should be and taxing the subject imports until they are that fair market price. So the difference between the higher 'fair market' price and the lower actually imported price is the dumping margin and the dumping duties. The higher the fair market price is when compared to the prices the foreign companies sell in the US the higher the duties.

"Zeroing" is a method of calculating the average price the foreign company sells the products in the United States. Over a period of time, the International Trade Administration the "Agency" averages the price in the home market, or fair market price, for a period of time usually a year. Then the Agency calculates the average sales price over time. Except, ever time that average sales price is over the fair market price the agency "zeros" it out to make it equal but not over the fair market price.

A brief example would be if month one the "home" market price is $3.00, then in month two it is $5.00, and in month three the price it $4.00. The average home market price for the three month period would then be $4.00. ((3+5+4)/3=4). Now lets say the same three month period the company sells the products to the US for the same price as the home market. Normally, there would be no dumping because the prices int he home market match the sales price to the US. But with the introduction of "zeroing" we have a different result. The $5.00 price would be "zeroed" out to the average home market price of $4.00. So the average sales price to the US becomes $3.66. ((3+4+4)/3=3.66) So where there should be no dumping the Agency finds a 9.2% dumping margin.

So when price of a product varies frequently, there is almost a guarantee there will be a dumping margin. The fair market price is arrived at by taking all the numbers and averaging them. The imported price is arrived at by taking all the numbers that are less than the fair market price and changing all the numbers that are high to the fair market price and then averaging them. You are always guaranteed to get a number less than the fair market price and hence always guaranteed to find a dumping margin.

More on the history of zeroing. Looks like this might be a three part blog series.

UPS Customs Brokerage Skates Free

2010-01-29T11:59:00.005-06:00

In a brief 54 page opinion Judge Carmen doles out the what is hopefully the end of the on going saga which could be titled "UPS, Tricky Cathode Ray Classification and the Revenge of the Ten Factors."

For those who indulge in dry reading the novel chapters are as follows:
Chapter I The Saga Begins: The Disputed Amount Will be a Mere Pittance.
Chapter II Plead to a Higher Power For Guidance on Hard Questions
Chapter III Hard Questions Are Best Left Unanswered
Chapter IV Cathode Ray Tubes Might be Everywhere: Let the Trial Begin.
Chapter V The Verdict is in Guilty: But the Hope Lives On.
Chapter VI The Tale of Ten Factors: Hard Questions Remain Unanswered.
Chapter VII The Fatal Gang of Ten Factors Let the Prisoner Go Free.

Will there be another Chapter? I certainly hope not.

I can't believe the end of this case. After Customs wins the ability to penalize a broker with a $75,000 fine, UPS appealed that decision, but also argued that that customs did not consider ALL of the ten factors listed in 19 CFR 111.1. when issuing the penalty.

Many, myself anyways, thought this would just then be sent back to the agency to reconsider all ten factors. (My blog from August 11th. Lawrence Friedman's Blog From August 13th.) Then after considering all ten factors it would go back to court with the same conclusion. So that finally the question of whether the maximum penalty issued to a broker can exceed $30,000.00 would be answered. I suppose we will never know that answer.

But now the Court concludes that if Customs failed to look at all ten factors at the time the penalty was issued then the penalty ab initio was faulty. The Court didn't say exactly that but the Court ruled the "failure was tantamount to a failure ... to meet its burden of proof." US CIT Slip-OP 10-11 at 53. This indicates that Customs must present at trial that it considered all ten factors before it can perfect a broker penalty.

UPS is off the penalty Scott free. My jaw dropped I was so stunned. I guess I need a life.

Why it took Judge Carmen 54 pages to come to the conclusion is another story. I suppose he likes to be thorough.

Must congratulate the lawyers arguing for UPS. Picking up on the ten factors listed in 19 CFR 111.1 was a thorough job and a creative argument. Broker penalties will have to change. They are few and far between in the first place.

Will UPS try to claw back the penalties it already paid... Maybe the Saga is not over yet.

WTO Panel formed for challenging the emergency tire restrictions

2010-01-21T13:05:00.000-06:00

Back on September 11th 2009 there was a well publicized presidential proclamation adding additional duties to tires imported from China. When China joined the WTO back int 1997 they made an "accession agreement" which allowed countries to add additional duties to safeguard industries in the occurrence of a market disruption due to steep rises in imports.

The duties were for a small market of tires. The duties are graduated from year to year the highest being the first year as follows:

35% for the first year September 2009 to September 2010.
30% for the second year September 2010 to September 2011.
25% for the third year September 2011 to September 2012.
No additional duties after September of 2012.

Its a relatively small number of tires. It somehow raise allot of anger with Chinese. They immediately challenges the duties with the WTO DSB (DS399). They claim:

The Chinese imports did not increase rapidly enough to warrant a market disruption.
The imports were not in suffciant quantities to damage U.S. industries.
The U.S. industries are not materially injured
Even if they are injured the rates are excessive to remedy the problem
The measures are lasting too long to prevent what ever injury there might be.

The U.S. on the other hand says tire imports from China tripled in four years, the, production in the U.S. dropped 25%, and 14% of the workers in the industry has lost their job. Seems like a pretty goods cause for a safeguard.

On September 26th China requested consultations, December 9th a panel, and today the panel was chosen.

Within another year they might have preliminary decision, which could be appealed, and maybe after three years we might actual a decision where they can retaliate. The decision will probably not be reached by the time the tariffs expire so this whole exercise seems moot to most observers.

This is probably the smallest but most publicized part of the trade war that is growing between China ind its trading partners. The largest unreported part of the trade war is the explosion of antidumping and counervailing cases being filed in the U.S. and Europe. Another large isue coming to light is the allegations of Chinese government hacking into private companies and foreign government computers.

Could be difficult times for relations ahead.

Narrow Woven Ribbons with Woven Selvedge

2009-12-14T16:35:00.000-06:00

The International Trade Administration made its preliminary determination today on Narrow Woven Ribbons with Woven Selvedge. These are ornamental ribbons. Selvedge is a self finished edge.

There were only two companies they reviewed. One they basically found no countervailing and theother they found using "Adverse Facts Available" a duty rate of 118.68%

In there determination they said "In previous CVD investigations into products from the PRC, we have adapted this practice to use the highest rate calculated for the same or similar programs in other PRC CVD investigations." 74 FR 60093. However, instead of doing that they basically double the country wide rate.

I have to read the calculation memo but this seems to be contrary to recent court rulings that even when using AFA the rate should be calculations, "have a probative value of a 'reasonably accurate estimate of respondents actual rate, albiet with some built-in increase as a deterrent to noncompliance'." (Fujian Lianfu Forestry v. United States. slip Op. 09-81. (CIT 2009)(citing F.LLI De Cecco di FilippoFara S. Martino v. United States. 216 F3d at 1032 (Fed. Cir. 2000)))
See my blog entry for August 11th.

This using the highest possible rate was also challenged in Zhejiang Native Produce & Animal By-Prods. Imp. & Exp. Corp. v. United States:
See my blog from August 17th.

The preliminary anti-dumping determination is not due out until February 4th, 2010. The final combined ruling is due out April 19th 2010.

At which point it will be interesting to see if the antidumping and countervailing duties for China amount to double counting. Commerce needs to find a way to asses both NME and CVD without double counting. GPX International Tire v. United States. Slip Op. 09-103.

New fish and wildlife/USDA requirements for wood imports.

2009-12-09T14:06:00.001-06:00

The 2008 farm bill amended the nations oldest environmental enforcement bill protecting endangered species. The new amendment now is trying to stop the trade of endangered trees. In doing so they are asking all importers of wooden items to report the genus, species and harvesting locations of every wooden thing imported into the US. They are also making it then a crime to declare falsely the species of wood being imported.
    It is unclear if the intention is to place a large burden on trade or just to add additional crimes to prosecute importers of endangered species. I believe the intention is solely the latter but that they succeed in accomplishing both. They are phasing in different wood products. April 1st 2010 will be the next phase in date that will incorporate many new products. Other products will also be incorporated. Below is the list of goods and their phase in date:

Phase II               April 1st 2009
___________________________
HTS    Commodity
4401    Fuel Wood
4403    Hoopwood, Pole, Piles and Stakes
4406    Railway or Tramway Sleepers
4407    Wood Sawn or chipped
4408    Sheets for veneer
4409    Wood continuously shaped
4417    Tools, tool handles, broom handles
4418    Builder joinery and carpentry of wood

Phase III                  October 1st 2010
___________________________
4402    Wood charcoal
4412    Plywood veneered panels (except 44129906 and 44129957)
4414    Wooden frames
4419    Tableware, Kitchenware
4420    Wood marquetry, caskets, statutes .

Phase IV    April 1st 2009
____________________________
4421    Other articles of wood
6602    Umbrellas, Walking sticks, Riding crops.
8201    Hand tools
9201    Pianos
9202    Stringed instruments
9302    Revolver handles
9305    Pistols parts
940169    Seats, Chairs.
950420    Pool cues, and Billiard accessories.
9703    Wooded art work, and Wooden sculptures

    We are sending this out now due to the additions coming up in April. Now would be the time to find out from your suppliers the particular species of wood they use and where they get it if from. We foresee this might take some time to find out where actually the wood was harvested from. For finished goods the wood is bought from lumber suppliers, who buy from saw mills, who buy from loggers, plus any number of distributors along the way.

    So we advise importers to begin finding this information out now. We will all have to brush up on our taxonomy. The government requires the scientific name and not familiar name. The USDA states over and over again that they will need both the genus and the species. They are aware that many times it is impossible to know the exact species in a genus. However, they expect importers to state all possible species that the item maybe made from.
    The USDA states in cases where it is impossible to state the exact species it is not acceptable to state all possible species of the genus. The importer must state each individual species which the wood might possible belong to, based on harvest location, and species in that location. The importer must know and state all the possible species individually. So, the importer must state the genus and if there are multiple species that the wood was derived from each individual species that the wood may belong to.
    The declaration may be made on the forms provided by the USDA. The form is call the PPQ form 505. We are attaching the form for you to look at, or it can be found at the USDA web site: http://www.aphis.usda.gov/plant_health/lacey_act/downloads/declarationform.pdf. We also can file these forms electronically with the entries. But to file them for you we will need the above information. You may send it to us separately or on the invoices suppled by your supplier.
    Any false declaration will be punishable by criminal statutes and potential fines. The importer is responsible for any information supplied to the broker. There will be more products added to the list mentioned above. The final implantation of the full list is set to take place by August 31st 2010. It is likely that there will be a new list sometime between now and February and we will be keeping an eye out for. The full list of products will likely include as follows:

HTSUS
4405     Wood wool
4410     Particle board
4411     fiberboard
4412     Plywood including 44129906 and 44129957
4413     Densified wood
4415     Packing cases boxes crates and drums
4416     Casks Barrels vats tubs
4701     Mechanical wood pulp
4702    Chemical wood pulp, dissolving
4703    Chemical wood pulp, sulfate
4704     Chemical wood pulp, sulfite
4705    Combination chemical and mechanical wood pulp.
4801    Newsprint
4802    Uncoated writing paper
4803     Toilet or facial tissues
4805    Other uncoated paper
4806    Vegetable parchment
4807    Composite paper and board
4808    Corrugated paper and board
4809    Carbon paper
4810    Coated paper and paper board
4811    Paper coated
6601        Umbrellas
6603        Umbrella parts
9205         Wind instruments
9401        All seats
990330    Wooden office furniture
940340    Wooden kitchen furniture
940350    Wooden bedroom furniture
940360    Other wooden furniture
940381    Furniture of, cane, osier, bamboo, rattan, or similar materials
9504        Articles for arcade, table, or parlor games. (Parlor???)

    As mentioned before we will can file this electronically, but we will need the information on the invoice or provided for us separately or in the form of the deceleration. We will monitor the new products and let you know when we find out about them. It is important for imports of the new Phase IV products to begin getting the species, genus and harvest information as soon as possible. Or require your suppliers to begin putting the information on the invoices.

FDA new PREDICT system

2009-12-03T15:21:00.005-06:00

FDA new PREDICT system changes the cargo screening method.

The Food and Drug Administration (FDA) is changing its computer system to utilize more technology and streamline the process of differentiating between high risk food and drugs, and low risk foods and drugs. The Predictive Risk-based Evaluation for Dynamic Import Compliance Targeting (PREDICT) system is replacing the Operational and Administrative System for Import Support (OASIS) system.

As can be told by the acronyms the new system will use computer technology to target foods that are high risk and use less "human" based assets. There will be less people deciding what might be dangerous and more computers deciding what might be dangerous. At the same time they are moving more inspectors into the field overseas. What this means for importers can be both good and bad depending on the importer. The FDA stresses it depends on the accuracy of the data provided to them which will decrease the need for detentions, reviews, exams and sampling.

The more accurate the data provided to the FDA the less likely that goods will be reviewed. For importers that have good data from the manufacturers and the information provided is “consistent, accurate and complete,” then the inspections, request for documents, and reviews will be fewer than the previous system. They emphasize the more the importer concentrates on insuring "CAC" the less exams, sampling, and detention there will be.

Most importers are not aware of the data we provide the FDA for their imports so I will briefly explain it. There are three basic data elements that the FDA is looking for to decide the risk, the 1) Manufacture Identification, (MID), 2) the PN registration number, and 3) the product code. The FDA wants these data elements to be “consistent, accurate and complete.”

The Manufacture ID is a code used to identify the manufacturer of the food product. The FDA conducts routine inspection of overseas food facilities, therefore it is important to know that your manufacture is producing safe food. The MID is constructed by using the address of the facility. The first two letters are the country code, the next three letters are the first three letters of the manufacturer’s first name, the second three letters are the first three letters of the manufacturer’s second name, the next four digits are first four digits of the manufacturer’s street address, and the last three letters are the first three letters of the manufacturer’s city.

For example if the company was: Food Makers Inc. 123 Main Street, Big City France. The MID would be FRFOOMAK123BIG. This is simple but many times shipper give different information on the bill of lading, the commercial invoice and their web site as to their address and company name.

The FDA claims that it is typical for one manufacturer to have 6 different manufacturer’s ID codes. The problem is that overseas address systems are different than our own. Some times the letter from one language will translate to different roman characters by different people. Furthermore, many overseas producers have several names they use concurrently for their businesses. It is often hard to differentiate on the invoice between town, county or province.

For example, Aziendia Agricola, precedes many vineyard names. But many times they will use the commercial name of the vineyard on invoices. To be consistent it would be best to get a copy of the exact name and address as they filed with their Prior Notice registration. It is also important though that the information they used to filed with the FDA prior notice be accurate.

It would be good for us to go over with you and the information given by your supplier to make sure we are on the same page and that we have consistent information used to file. Even if we have been handling you products for many years it will be worth the time to spend a little time ensuring that we have and file using accurate information. Then in turn we would help to ensure that your products continue to enter the U.S. smoothly and quickly.

The third area that we should also check to help insure that your product are imported easily is ensuring we are using the proper “Product Code.” The product code is two digits three letters and two more digits. The first two digits are the general product division. The first letter and last two digits are the specific product divisions. These are pretty self explanatory as long we have a decent description of the goods then we can figure these out consistently. It is the second two letters where accuracy and consistency issues arise.

The first letter is the packaging that is used. Many invoices do not specify the packaging method. It is important that we get this information from your supplier in order to use the proper product code. The second letter that poses problem represents the sterilization method used. The possible sterilization methods and packaging codes are as follows:

Packaging:                      Sterilization Method:

A-  Fabric                       Acidified

B- Ceramic Earthenware         Aseptic Packed

C- Glass                        Commercially Sterile

D- Laminated                 Cultured/ Cure

E- Metal                        Heat Treated

F- Paper                        Not Specified

G- Plastic                   Naturally Dried

H- Non Flex Plastic   Package  Food Not Commercially Sterile

J- Wood                      Pasteurized

M- Multiple Containers         Raw, Frozen

V- Vacuum Packed               Raw, Fresh

W- Wax                           Raw Refrigerated

Y- Not Specified              Ultra pasteurized

Based on the specific food it is easy to foresee that it should fall in under a particular sterilization method. If sterilization method and packaging method do not match up with the food it is easy to see why the food should not be admitted into the US. The broker will need to have accurate information from the importer, from the supplier, or have detailed information on the invoices. Especially where is not obvious, however, for a bottle of beer, we would know that it is packed in glass and cultured. But other items are not so obvious.

If the broker can get this information they can help you to have fewer problems with the FDA. Most customers never have any problem and never know what information we file to clear their shipments. However, it would still be a good idea to insure we are using the accurate data to insure we have no problems in the future. On the other hand customers who have had problems should talk with us to get the right information and eliminate problems with the FDA.

The new system can really help the good importers insure that they have fewer problems with the FDA and that products are delivered faster and safer.

ICDISCs

2009-12-02T11:33:00.002-06:00

Introduction.

   With the recession dragging on it is a wonder more small businesses are not taking advantage of one of the largest legal tax breaks given to them. A tax break that will help drive American exports, improve our nations competitiveness, and help the balance of trade account.

   Small business owners are largely missing out on one of the largest tax benefits given by our government for exports. This tax break could effectively change a business owners tax rate from 35% to 15%. The legal way to make a small business owners who export the lowest taxed people in the nation outside of the very poor.

   This tax break is called the “Interest Charged Domestic International Sales Corporation,” IC-DISC, allows profit made on exports to be taxed at a lower rate. The IC-DISC does not pay any tax provided its profits are 95% from exports. The IC-DISC Is a paper corporation that exists to export only and is associated with an actual corporation that manufactures, distributes or provides services.

   Since the 1970's exporting companies have complained ro Congress that European and other nations used the VAT system, which offer a tax rebate on exports from these countries. Due to the different tax system this left US companies at a trade disadvantage to companies based in Europe and elsewhere using the VAT system. Congress responded with a number of attempts, for example the foreign overseas sales corporation, that where challenged by other countries in the World Trade Organization Dispute Settlement Body as an illegal subsidies on exports.

   Finally Congress passed the IC-DISC provisions into the US Tax code. It allows small companies to lower their taxes on the profits they make from exports. In order for them to avoid the taxes the need to set up a separate corporation, the IC-DISC, the paper corporation mentioned above. All this is filing few papers and making a few accounting adjustments and cashing in on tax savings. Although it does not level the playing field it can help some small businesses.

   But small businesses are not using this provision mostly because they do not know about it. Furthermore their tax preparers and accountants are too busy keeping on top of all the new changes to the old regulations to go through this one. Learning about how a IC-DISC can benefit a company can be a daunting task. One thing is certain this provision can only save small businesses on their taxes. There is no provision to increase a tax elsewhere that you would not have had to pay. I will try to explain this in more detail.

What is an IC-DISC?

An IC-DISC is a paper corporation use to lower tax liabilities. It is a creation of the U.S. tax code that does not pay taxes. The restrictions it must follow are: 1) it must earn 95% of its revenue from exporting U.S. products; 2) it must elect to be an IC-DISC by filing form 4879 with the internal revenue service; 3) it must be a “C” corporation filed with any state; 4) must have a par value of no less that $2500 per share and 5) it must maintain separate books.

Then it can start earning revenues. The revenues it earns are deducted from the earnings of the related corporation.

How does the IC-DISC earn money?

The IC-DISC earns money by using the greater of three methods. The higher the IC-DISC earnings are the more taxes savings can be earned. The first method is the 4% of gross sales method plus 10% of the export promotion costs. Here the earnings are 4% of the gross sales price plus 10% of the cost attributed to ‘export promotion.’ Example:

Export Sale:                         $100,000.00

Export promotion costs:              $10,000.00

4 % of gross income:                 $4,000.00

10% of export promotion costs       $1,000.00

IC-DISC earnings:                      $5,000.00

The 4% method will give higher profits to exports with low margins. Alternative the next method is the 50/50 profit plus 10% of export promotion costs. Example:

Gross Sales                      $100,000.00

Cost of goods sold               $80,000.00 

Export promotion costs     $10,000.00

Total DISC Profit                $10,000.00

IC-DISC Earnings:

50/50 profit                       $5,000.00

10% of promotion cost            $1,000.00

Total DISC Profit                 $6,000.00

In this case the IC would earn more money with only a 10% profit margin. The last way is by following the Section 482 method. Example:

Gross export sales                   $100,000.00 

Arms length transaction price       $75,000.00

IC-Disc expenses                       $5,000.00

Total DISC profit                     $20,000.00

The profits the IC-DISC makes are deductible as non-taxable expenses by the related company. It depends on the method used. If its treated as a arms length transaction then the export gross receipts are taken off the income of the related party and replaces with the arms length transaction price. If, however, the income of the IC-DISC is treated as a commission then those commission are treated as an expense. In no case can the related corporation lose money on the transaction.

Then the profit can be kept in the DISC until they are either paid out in dividends or they are deemed paid out as dividends. They are deemed paid for example when ever the accumulated profits in the DISC are over $10,000,000.00 for example or they are deemed for a number of reason listed in the code.

How are the IC-DISC earnings treated by the related corporation?

The earnings of the IC-DISC are deducted from the earnings of the related corporation. When they are paid or deemed paid dividends then it can have different tax consequences depending on the corporate structure.
If the corporate structure is a closed “C” Corporation or an “S” Corporation it can be set up that the DISC will pay the individual shareholders directly and it will be taxable to those shareholders at the 15% dividend income rate. So for small exporters this is a huge tax break for exporting.

If the DISC is held by 100% by a corporate shareholder the income paid through in dividends is taxed as general income. The dividends do not qualify as most corporate dividends would as tax free status. So the benefit to a large C corporation is less but it can be used to defer income up the $10,000,000.00 mark.
Dividends deemed paid but not paid instead of paying income tax can be set to be interest charged instead. Dividends that are deemed paid will be taxed either at the dividend rate or the corporate income tax rate. But the corporation, or shareholders, can elect to pay interest on the taxes the tax. The interest rate would be the interest rate on US treasuries currently 4.5%.

For example:

Before the DISC:

Export Profits                              $20,000,000.00

Total Taxes 35%                             $7,000,000.00

After the DISC                             $20,000,000.00

Accumulated non taxed DISC income      $10,000,000.00

Deemed paid dividends                     $10,000,000.00

If dividends paid individuals            $1,500,000.00

If dividends paid to a corporation       $3,500,000.00

If elected “Interest Charge” by a Corp.   $157,500.00

While the small business gets the best break, even a large corporation can save by having taxes deferred. It is unknown how long you can keep the taxes deferred. However, if the income of the DISC on the accumulated earnings from investment or interest exceeds 5% of the total income from the year it will cease to be a DISC. So maybe that is what is keep people from keeping a horde of money at low interest rates.

What I can do to start you going?

I can help by filing to start a corporation following the rules. Filing to have the corporation elected to be an IC-DISC. Then set up procedures to have your export profits reported on the 1120 IC-DISC for instead of your 1120. Then report the disbursed the 1120 IC-DISC income to your shareholders (or shareholder) so they pay the dividend tax rate instead of either the personal income rate or the corporate income rate.
Also we can file you tax returns.

ISF

2009-11-06T11:02:00.000-06:00

So trade is booming in October and now in November. I tried that periodic updates but it was too cumbersome when its get extremely busy.

New things coming up are:

Import Security Filings. 10+2. I wonder how much this will stifle trade. Customs seems to think that a small importer is one that imports 10 times a year. As a small broker I can see so many more first time importers coming though my doors I would view ten imports a year as a huge importer. These first time and very small importers that import once every other year are so numerous that they must be entirely ignored by customs. We know they don't like dealing with them because they send them to me all the time.

I think importing for them will soon be over if every shipment comes with a $1,000 fine because their suppliers failled to fillout and send in the ISF paperwork.

Anti dumping cases:

On the rise we are waiting to see what will happen with the China Countervailing cases.

When will Zeroing be finished? No time soon. There needs to be an appeal to CAFC at some point.

I finally have a free weekend so hopefully I'll be able to review the recent cases and maybe write about more new issues in trade.

Trade in review

2009-10-01T20:55:00.000-05:00

WTO:
Lamy speech: G20 must walk the talk on Doha.

DSB
Panel set for Certain measures affecting imports of poultry from China.
Chairman: Mr Ole Lundby
Members: Mr Felipe Lopeandía
Mr Mohammad Saeed

Notice of appeal by China of measures affecting trading rights and distribution services for certain publications and audio visual entertainment products.

US Court of International Trade
National Fisheries Institute v. United States Customs and Border Protection.

GPX International Tire Company v. United States, Bridgestone Tire Corp.
This is an extremely important ruling in China antidumping and countervailing

Background: An antidumping margin is calculated based on the difference between the home market price and the export sales prices. Where is the price is sold less than the home market tot eh export market it is assessed a dumping margin collected by customs.
Countervailing does not deal with the home market price but only the amount of subsidy given by the exporting country's government.
Because the U.S. started trading with "Non-market economies" (NMEs), Congress added to the antidumping statute a method for calculatings dumping margins for nations that are deemed "NMEs." The reason being that in NMEs there was no reliable home market price. The relationship between the government and the businesses involved in exporter were too intertwined. Congress did write into the statute that the antidumping NME method would preclude countervailing.
Up until 2007 Commerce choose to use antidumping method for NME exclusively as the trade remedy for NMEs and did not add countervailing duties to the ADD. The Federal Court of Appeals upheld Commerce's decision as a permissible interpretation of the statute.
After 2007, however, they began apply both AD for NME and Countervailing duties (CVD).
The first time this was applied to was for coated paper. That case was dropped by the International Trade Commission for lack of injury.
This case Chef Judge Restani ruled that apply both CDC and ADD for NME would result in a high likely hood of double charging. Therefore this interpretation would be unreasonable. Commerce can apply both ADD for NME and CDV but they have to show that it is done fairly and without double charging.
The other issue was that Commerce set a dead line for calculate what countervailing subsidies would be counted. Subsidies give before China entered the WTO would not be counted toward the CVD while subsidies after would be included. Plaintiffs and defendants in this case agreed they did not want to include the prior subsidies but defendant intervenors argued that they should be. Here she ruled it was arbitrary and unsupported by substantial evidence to set such a dead line.
So it was remanded back for Commerce to set policies in place to insure that there would be no double counting of CVD and ADD margins. Also remanded that if Commerce decides it want to continue to apply CDV the cut off date for the subsidies would not be acceptable.

I wonder now what sort policies could be in place to even lower the chance of not double counting. You have one method prescribed by statute, NME method, where you basically construct a new price based on foreign surrogates and where possible actual international market place prices, and CVD where you just count up all the inputs received from the government.

The difference between the surrogate price and the price sold will include all of the subsides because it it measuring from a hypothetical outside point. So if you take out a double counting you would have to adjust it so the result would be the same.

I think commerce is stuck trying to figure out how to get aqure pegs in round holes on this one. It will be interesting to see what they come up with.

Gilda Industries v. United States.
Court denied class action status for those companies effected by the EU-beef hormone retaliatory tariffs. Seems to me the place to fight these tariffs would be a lobbying effort in the EU to change their beef importation policy.

Kahrs International, Inc., v. United States.
Seven count case:

Customs did not follow the proper comment and notice when revoking its prior rulings as required by the statute.
Customs did not follow the proper comment and notice when revoking a prior established uniform practice. This was the most interesting part of the case. The argument was that by allowing Kahrs to import flooring for many years, even inspecting the flooring several times, customs tactily gave there approval to that classification. So then that to change their mind after so many years and shipments that customs had infact revoked a ruling that required a request for comment for them to change the classification on Kahrs flooring products. Here the court reasoned just because customs lets you import something doesn't equate to a ruling on the product. Rulings need to be in writing to have affect. I think it confirmed what I have been telling customers all along that just because you've been importing something and customs hasn't said anything doesn't mean you are home free. Of course even rulings can be revoked and they can claim after the ruling that you didn't provide them with all pertinate information.
Challenges the classification: These items were properly classified as parquet panels 4412. The court went to the dictionary and looked up "parquet" and concluded to be a parquet panel it required geometric patterns. Which would you think it the more descriptive though for wooden floor tiles parquet panels or plywood? The court did not go into the Carborundum factors.
Challenges the classification: These items then should be edge glued lumber under 4418.90.2000.
Can't find the fifth cause of action?
Challenges the classification: Or maybe these should be classified as Builders Joinery 4418.90.4500.
Declaratory judgment sought that Kahrs exercised reasonable care. Kahrs motioned for a declaratory judgment that in classify its goods. The court ruled it lacked jurisdiction because the penalty phase had not reach ripeness through the adminstrative remedies. I think maybe since the Declaratory Relief Act was ment to curtail continuous litigation maybe it would be good to revise the way the court treats standing under the Administrative Procedure Act at some point.

Kahrs International, Inc., v. United States.
Evidentiary motions on the above case.

Federal Register Notices:

International Trade Administration

Ball Bearings and Parts Thereof from France Antidumping
Barbed Wire and Barbless Fencing Wire From Argentina, Final Results of Sunset Review and Revocation of Order
Certain Activated Carbon from the People's Republic of China Antidumping administrative review
Certain Activated Carbon from the People's Republic of China Rescission
Certain Frozen Fish Fillets from the Socialist Republic of Vietnam Time Extension, New shipper review
Certain Kitchen Appliance Shelving and Racks from the People’s Republic of China: Countervailing, Anti Dumping.
Certain Pasta from Italy, Countervailing
Certain Pasta from TurkeyCountervailing
Certain Polyester Staple Fiber from the Republic of Korea Antidumping
Certain Steel Nails from the People's Republic of China, New shipper review
Chlorinated Isocyanurates from Spain, Final Results of Antidumping Duty Administrative Review
Cut-to-Length Carbon-Quality Steel Plate from the Republic of Korea, Antidumping
Frozen Warmwater Shrimp from the Socialist Republic of Vietnam, New Shipper Review, Antidumping, Administrative review.
Frozen Warmwater Shrimp from Thailand, Antidumping
Glycine from the People's Republic of China Antidumping Administrative review
Narrow Woven Ribbons With Woven Selvedge From the People’s Republic of China. Countervailing.
Ni–Resist Piston Inserts from Argentina, Countervailing
Ni–Resist Piston Inserts from the Republic of Korea Countervailing
Pure Magnesium from the People's Republic of China . Time Extension; New Shipper Review
Purified Carboxymethylcellulose from the Netherlands, Antidumping
Oil Country Tubular Goods from the People’s Republic of China, Countervailing
Pressure Sensitive Plastic Tape from Italy: Antidumping changed circumstances review
Quarterly Update to Annual Listing of Foreign Government Subsidies on Articles of Cheese Subject to an InQuota Rate of Duty
Stainless Steel Bar from India, Administrative review Antidumping
Stainless Steel Plate in Coils from Belgium Time Extension
Welded Carbon Steel Standard Pipe and Tube from Turkey, Countervailing
Wooden Bedroom Furniture from the People's Republic of China Antidumping
Export Trade Certificate of Review
Scope Rulings

International Trade Commission

Certain High-Brightness Light-Emitting Diodes and Products Containing Same: Investigation
Certain Liquid Crystal Display Modules, Products Containing Same, and Methods Using the SameInvestigation
Certain Probe Card Assemblies, Components, and Certain Tested Dram and Flash Memory Devices, etc Investigation
Certain Sodium and Potassium Phosphate Salts from China. Countervailing and Antidumping
Certain Video Displays, Components, and Products Containing Same, Investigation.
Ni–Resist Piston Inserts from Argentina and Korea, Countervailing
Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from China Investigation

Presidential Proclamations:
Chinese safeguard measures for tires.

Additional duties of:
35% September 26th 2009 to 2010
30% September 26th 2010 to 2011
25% September 26th 2011 to 2012
Expiring September 25 2012.

Covered:

new pneumatic tires for the kind used on motor cars,light trucks vans and SUVs.

Not covered:

pneumatic racing tires
new pneumatic tires for large trucks and buses
new pneumatic tires for agricultural or forestry vehicles and machines and construction or industrial handling vehicles or machines
new pneumatic tires used for aircraft, bicycles, motorcycles, trailers, all terrain vehicles lawn mowers and golf carts.
used pneumatic tires retread and recycled tires
non-pneumatic tires

To determine whether the tire will be a light truck tire or a large truck tire will be based on the load rate: All LT or P tires will be considered covered. All tires with a load range standard load, light load or extra load will be covered. All tires with a load range of "A" to "E" will be covered and those tires with a load range of "G" and higher will not be covered. But a load range of "F" will require more documentation into its final use.

Transportation Security Administration:

Air Cargo Screening.

Customs and Border Protection

Customs and Border Protection Bulletin

Dates and agenda for WCO meeting
There were no prposed ruling revocations over the past three weeks.

Review of the past two weeks.

2009-09-13T18:58:00.005-05:00

WTO DSB:

U.S. Court of International Trade

Bond Street, Ltd. v. United States
Canadian Wheat Board v. United States
ENI Tech. Inc. v. United States
May Food Mfg. v. United States
NSK Corp. v. United States

Federal Register Notices:

Federal Maritime Administration:

Agreements filed
Ocean Transportation Intermediary License: Applications

Foreign Asset Control Office:

Sudanese Sanctions Regulations

Industry and Security Bureau:

Potential Market Impact of Proposed Stockpile Disposals (Fiscal Year 2011)
Clarification Regarding License Requirements for Transfers (in-country) to Persons Listed on the Entity List
Revisions to Gift Parcel and Baggage Restrictions, Creation of License Exception, etc: Cuba
Andrew Ward Freyer Action Affecting Export Privileges
Bertrand Lalsingh: Action Affecting Export Privileges

International Trade Administration:

Consolidated Decision on Applications for Duty-Free Entry of Electron Microscopes: University of Oklahoma, et al.
Ball Bearings and Parts from France, Germany, Italy, Japan, and the United Kingdom: Antidumping. Final Results of Antidumping Duty Administrative Reviews and Revocation of an Order in Part.
Carbazole Violet Pigment 23 From India: Antidumping
Certain Cased Pencils from the People's Republic of China: Antidumping
Certain Frozen Fish Fillets from the Socialist Republic of Vietnam: Antidumping
Certain Steel Concrete Reinforcing Bars from Turkey Antidumping
Certain Worsted Wool Fabrics to Persons Who Cut and Sew Men's and Boys' Worsted Wool Suits, etc Solicitation of Applications for Allocation of Tariff Rate Quotas
Certain Worsted Wool Fabrics to Persons Who Weave Such Fabrics in the United States: Solicitation of Applications for Allocation of Tariff Rate Quotas
Circular Welded Carbon Steel Pipes and Tubes from Thailand Antidumping. New shipper review
Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Antidumping, Countervailing.
Floor-Standing, Metal-Top Ironing Tables and Certain Parts Thereof from the People's Republic of China: Antidumping
Frozen Warmwater Shrimp from the People's Republic of China: Antidumping
Frozen Warmwater Shrimp from the Socialist Republic of Vietnam, Antidumping Extension of Time Limit for the Final Results of the Third Administrative Review.
Honey from Argentina: Antidumping
Hot-Rolled Carbon Steel Products from India: Antidumping
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan: Antdumping
Polyethylene Retail Carrier Bags from the Socialist Republic of Vietnam: Countervailing
Wooden Bedroom Furniture from the People's Republic of China: Antidumping Partial Rescission of Antidumping Duty Administrative Review.

International Trade Commission:

Certain Bulk Welding Wire Containers and Components Thereof and Welding Wire: Investigation.
Digital Televisions: Investigation
Flash Memory and Products Containing Same: Investigation
Kitchen Appliance Shelving and Racks From China: Investigation
Narrow Woven Ribbons with Woven Selvedge from China and Taiwan: Investigation.

Presidential Proclamations:

North American Free Trade Agreement; Rules of Origin, Adjustment

State Department:

Culturally Significant Objects Imported for Exhibition Determinations:
American Stories: Paintings of Everyday Life, 1765–1915
Drawings by Rembrandt and His Pupils; Telling the Difference
Gifts from the Ancestors; Ancient Ivories of Bering Strait
Heroes: Mortals and Myths in Ancient Greece
Luc Tuymans
Mrs. Delany and Her Circle
Paul Gauguin; Paris, 1889
Playing with Pictures; the Art of Victorian Photocollage
Sacred Spain; Art and Belief in the Spanish World
Terezin Declaration Provisions Relating to the Restitution of Nazi-Confiscated Art

Trade Representative of the United States:

China's Compliance with WTO Commitments: Hearings

U.S Customs and Border Protection

Approved Guagers: Chemical and Petrochemical Inspections LP,SGS North America Inc Camin Cargo Control Inc. Saybolt LP SGS North America Inc., Tampa FL

Customs Bulletin:

skipped a week

2009-09-09T16:25:00.002-05:00

It has been a slow week with the vacation day on Monday. But I know rulings and decisions are piling up. I will publish my review of the past two weeks next Sunday.

Trade Review for the week ending August 30th

2009-08-28T12:03:00.007-05:00

Calculation of antidumping costs decided this week. Resulting in the permissibility of unfairness.

WTO:

US Court of International Trade:

Solvay Solexis SPA and Solvay Solexis. Inc., vs. TheUnited States
Depreciating of goodwill after a merger attributed to one division rather than the company as a whole increased the cost based and antidumping duties for importer Solvay. The court ruled the Commerce used a permissible interpretation of accounting standards. But no investigation appears to be done on whether the costs of the merger should have been applied, whether there was a greater nexus between the division and the merger to the company as a whole.

National Fisheries Institute Inc., Et Al. vs. United States Customs and Border Protection.
Customs exceeded its authority in setting bonding requirements well beyond the likely antidumping amount for importers of shrimp. But who could blame them as they had just recently been sued for not setting the bonding amounts high enough. Fortunately did not hold customs liable for setting the bond requirements too low in the previous case.

Puerto Rico Towing and Barge Company vs. The Untied States.
Puerto Rico is considered a US port when considering whether ship repairs will be dutiable.

Federal Register Notices:

Export-Import Bank:

Advisory Committee of Export–Import Bank of the United States: Meeting.

International Trade Administration:

Administrative announcements:
Agency Information Collection Activities; Proposals, Submissions, and Approvals
Scope rulings
Application(s) for Duty-Free Entry of Scientific Instruments: 1 and 2
Applications for the International Buyer Program (Calendar Year 2011)
Trade Remedies:
Circular Welded Non-Alloy Steel Pipe from the Republic of Korea. Antidumping: Wheatland tube withdrew its request for review of Kumkang. The antidumping rate will be set at the cash deposit rate if no other importer intervenes within the time period.
Hot-Rolled Carbon Steel Products from India: Countervailing: Extension of time for preliminary results of administrative review Now due December 31st 2009.
Glycine from the Peoples Republic of China. Antidumping: Rescission of administrative review.
Magnesia Carbon Bricks from the People's Republic of China and Mexico. Antidumping, Countervailing. Initiation of investigation. Yet another new ADD.CVD case is born.
Oil Country Tubular Goods from the People's Republic of China: Antidumping, postponement of preliminary determinations. New due date November 4th.
Wooden Bedroom Furniture from the People's Republic of China: Antidumping. Initiation of new shipper reviews.

International Trade Commission

Pressure Sensitive Plastic Tape from Italy: Antidumping
Certain MLC Flash Memory Devices and Products Containing Same: Investigation.
Certain Non-Shellfish Derived Glucosamine and Products Containing the Same: Investigation.
Articulated Coordinate Measuring Arm: Investigation
Certain Flash Memory Controllers, Drives, Memory Cards, and Media Players and Products Containing Same: Investigation

Federal Maritime Administration

New Applicants for FMC Licenses.

State Department

Statutory Debarment Under Arms Export Control Act and International Traffic in Arms Regulations: Bureau of Political–Military Affairs
Issuance of a Presidential Permit for the Proposed Enbridge Energy Alberta Clipper Pipeline Project

Trade Representative, Office of.

Andean Trade Preference Act (ATPA); 2009 Annual Review

Customs Bulletin

Pellicles: Propose ruling revocation
Expansion of global entry pilot project.
Information Collection Activities.

Week in Review Ending August 22nd

2009-08-17T16:20:00.007-05:00

WTO

Appellate Body issues compliance report on US-Japan “zeroing” dispute. Upholds panalfindings that the US is still not in compliance with regards to obligation on antidumping.

US Court of International Trade

Zhejiang Native Produce & Animal By-Prods. Imp. & Exp. Corp. v. United States: Challenge to the 5th administrative review of Honey from China. The commerce department erred in not allowing Zhejang a specific company review rather than a country wide rate.

Federal Register Notices

Foreign Asset Control Office

Designation of Entities (Pursuant to Executive Order 13382) The new list can be found at the agencies web site
Change in address for ANTARES SHIPPING COMPANY NV (f.k.a. IRISL Benelux NV), Noorderlaan 139, B-2030, Antwerp, Belgium; V.A.T. Number BE480224531 (Belgium) [NPWMD]

International Trade Administration.

Trade Remedies:
Carbazole Violet Pigment 23 from India: Countervailing: Preliminary results deadline for the administrative review for the period of calendar 2007 pushed back from 245 days to 365 days. They are now due December 31st 2009 from September 2 2009.
Certain Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: Antidumping Final results of changed circumstances review. Determined that Ternium is the same as Hylsa for dumping deposit rates. Ternium will get Hysla's 10.38% cash deposit rate.
Frozen Warmwater Shrimp from Vietnam: Antidumping: Final results of changed circumstance review for several entities.
Honey from the People’s Republic of China: Antidumping 7th administrative review. The department extends the deadline for preliminary results two months to November 2 from September 2 2009 becuase it needs more time to evaluate the data from surrogate countries.
Light-Walled Rectangular Pipe and Tube from Mexico: Antidumping Final results of changed circumstances review. Determined that Ternium is the same as Hylsa for dumping deposit rates. Ternium will get Hysla's 3.76% cash deposit rate.
Petroleum Wax Candles from the People's Republic of China: Antidumping Request for comments on the scope of the antidumping order. Change could include candles there were not previous in the scope. This could be a big change for importers of candles. Comments due Date September 16th 2009.
Polyester Staple Fiber from Taiwan: Antidumping Administrative review. Petitioner withdrew it's request for review of Nan Ya Plastics Corporation. Antidumping. Rescision of administrative review of Saehan and its successor Woogjon.
Polyethylene Retail Carrier Bags from Indonesia, Taiwan, and the Socialist Republic of Vietnam: Antidumping Preliminary determination date postmponement. Peitioners requested a 42 day postponement for Tiawan and a 50 day postponement for Indonesia and Vietnam.
Wooden Bedroom Furniture. Antidumping: Final results of yearly administrative review. POR Jan 1st 2007 to December 31st 2007. Most new shippers reviewed received 29% dumping rates new PRC wide rate shot up to 219% for the period most companies were not reviewed got to keep their 7% rates from the cash deposit. Some CIT action still to shake out with this case. See last weeks CIT rulings.
Other Related:
Energy Efficiency Trade Mission to India, November 16th to 20th

International Trade Commission

Certain Textile Articles Containing Acrylic and Modacrylic Fibers: Effect of Modifications of NAFTA Rules of Origin for Goods of Canada Institution of investigation. Request for comments from interested parties due date October 2nd 2009.
Certain Textile Articles Containing Rayon and Other Manmade Fibers; Institution of investigation. Request for comments from interested parties due date October 2nd 2009.
Woven Electric Blankets From China: Antidumping: Prelimary finding of injury.
Certain Ink Cartridges and Components: Termination of enforcement procedings: Multi-million dollar civil penalties handed down.

Economic Development Administration

List of firms petitioning for Trade Adjustment Assistance

Customs Bulletin:

Container Transport: Lloyds Register America Inc. Has authority to certify containers for international transport under customs seal. American Bureau of Shipping, International Cargo Gear Bureau, and National Cargo Bureau, Inc. have authorty to certify containers and road vehicles.
Quarterly interst rate for under payments 4%, over payments by non-corporations 4%, over payments by corporations 3%.
Proposed Revocation Rulings: MP3 player cases with speakers. from 8518 to 4202
Revocation of rulings for DNA Sequencing machienry from 9027 to 8479.
Modification on ruling letters for satilite radio tuners.

Week in Review ending August the 15th

2009-08-11T18:26:00.015-05:00

WTO DSB:

Panel Report on US vs. China: US prevails that China's distribution of CD's and DVD thought government chanels are not consistent with WTO obligations.

US Court if International Trade Rulings:

Fujian Lianfu Forestry Co., Ltd. v. United States
Massive opinion covering many issues regard the antidumping of wooden bedroom funriture:

Commerce allowed to remand to provide explanation to why it decided not to use combination rate between exporters and producers.
The rate established for Starcorp based on "Adverse Facts Available" AFA was found to be incorrect. When establishing a AFA rate Commerce must apply a rate that is connected with the probable rate for the effected company plus a penalty amount for noncompliance and deterrent. Commerce can not just assign the highest rate available. This is proabably the most important part of the decision.
Commerce was proper in concluding Starcorp failed to cooperate to the best of its ability and was subject to AFA.
Commerce reasonably concluded values from India did not have systemic errors and India was a proper surrogate.
AFMC failed to exhaust administrative remedies regarding its challenge to four market economy inputs.
Commerce's decision not to include Jayabharatham financial statements was reasonable
Commerce's use of using actual entered values as apposed to the invoice values provided by Dara was in accordance to the regulations.
Zeroing is still the accepted practice for administrative reviews and used on entry-by-entry basis. The court rejected the argument that 1677(35) be applied uniformly to investigations and reviews. Commerce's use of zeroing both for entry-by-entry and in administrative reviews is still a permissible interpretation. (I wonder if there is not some equal protection argument that can not be made.) This is a predictable adding to the Swiss cheese that is zeroing. It is still there with lots of holes.

NMB Singapore Ltd. v. United States
Remand results of a CACF case where affirmed.

Qingdao Taifa Group Co., Ltd. v. United States

Depersia v. United States
Challenge the the customs brokers test.
Court ruled the question ambiguous but not entirely wrong.

Ad Hoc Shrimp Trade Action Comm. v. United States
Case dismissed pending consolidated case. The use of a NACA study regarding the costs of the surrogate country's, Bangladesh's, shrimp pricing after the tsunami not decided by the Court. Some question remained what relief the parties were seeking. Warning not to use cliches like "gold standard" in your briefs or the judge might embarrass you.

Peerless Clothing Int'l, Inc. v. United States
Facts: Manufacturer of suits in Canada Invoices its US subsidiary for cost to cut, cost of fabric and cost to warehouse and other administrative expenses. They did not declare the third invoice which was for eleven categories of warehousing and expenses. Customs ruled that some of the eleven categories were not dutiable but most were dutiable. Peerless then argued the six categories should be allocated on a computed value based on GAAP and the court agreed. Customs motioned to reconsider this. Arguing that transaction value should not be used.
Customs motion to reconsider was denied.

U.S. Court of Appeals for the Federal Circuit Rulings:

United States Vs. UPS Customshouse Brokerage.
Remanded for customs to consider all ten factors regarding whether the broker exercised reasonable care.
The issue on whether $75K vs. $30K fine to a broker is permissible was not decided. Maybe the judge was hoping they would settle? Because it seem like the ruling will just create a loss of judicial resources.
They will consider all ten factors, come up with the same conclusion, and they will be right back at the same place with more legal bills in a year.

Federal Register Notices

Committee for the Implementation of Textile Agreements

Foreign Agriculture Service

Assessment of Fees for Dairy Import Licenses for the 2010 Tariff-Rate Import Quota Year

International Trade Administration:

Determinations:
Consolidated Decision on Applications for Duty-Free Entry of Electron Microscopes: University of Texas at Austin, et al. , Approved duty free entry of electron microscopes.
Decision on Applications for Duty-Free Entry of Scientific Instruments: National Renewable Energy Laboratory, et al. Approved duty free entry of scientific instruments
Withdrawal of Application for Duty-Free Entry of Scientific Instruments
Trade Remedies:
Certain Hot-Rolled Carbon Steel Flat Products from the People's Republic of China: Antidumping, rescission of and preliminary results of administrative review. Final rescission
Certain Orange Juice from Brazil, Antidumping Final results of administrative review.No dumping duties for Fascher SA and only 2.17% for Sucocitrico Cutrale S.A.
Certain Pasta from Italy, Antidumping: Gluten free pasta excluded from the dumping scope.
Certain Preserved Mushrooms from the People's Republic of China, Antidumping and Countervailing: Request for yearly administrative review was withdrawn.
Certain Steel Grating from the People's Republic of China: Countervailing Postponement of preliminary results to August 22nd 2009.
Certain Cut-to-Length Carbon Steel Plate From the People's Republic of China
Carbon Steel Butt-Weld Pipe Fittings from Japan: Antidumping. Rescission of administrative review.
Glycine from the People's Republic of China Antidumping: Final Results, Cash deposit rates set at 33.67 percent for Baoding Mantong Fine Chemistry and 155.89% nation wide. HTSUS:2922.49.4020 (not dispositive)
Magnesium Metal from the Russian Federation: Final Results and Partial Rescission of Antidumping Duty Administrative Review: Antidumping Rate of 43.58% dumping margin for AVISMA, Rescission for SMW for lack of shipments, 21.01% for all other shippers.
Polyethylene Retail Carrier Bags from Thailand: Antidumping preliminary Results Yearly administrative review for period August 2007 July 2008. Master packaging hit with 122% for AFA decision. while TPBG 22.01%.
Pressure Sensitive Plastic Tape from Italy: Antidumping, Final Results of 5 year sunset review dumping margins set at 10% for Italian manufacturers.
Magnesium Metal from the Russian Federation: Antidumping Adminstrative review for two shippers SMW and AVISMA. Rescission for SMW for lack of shipments and 43.58% for AVISMA.
Wire Decking from the People's Republic of China: Countervailing Postponement of preliminary determination date to November 2nd 2009.

International Trade Commission

Certain Active Comfort Footwear, Investigation. Granted motion to dismiss patent infringement based on a settlement agreement between Masai Marketing &
Trading AG of Romanshorn and RYN Korea Co., Ltd.
Certain Lighting Control Devices Including Dimmer Switches and Parts
Certain Magnesia Carbon Bricks from China and Mexico
Certain R–134a Coolant (Otherwise Known as 1,1,1,2–Tetrafluoroethane)
Certain Wireless Communications Devices and Components, Investigation: Notice of termination.
Pressure Sensitive Plastic Tape From Italy, Investigation, The Commission will proceed witht he five year sunset review and will announce the results at a later undetermined date.
Semiconductor Chips With Minimized Chip Package Size and Products Containing Same (IV) Investigation. Granted Tessera, Inc. of San Jose motion to dismiss there patent infringement complain against "numerous entities."
Shifts in U.S. Merchandise Trade 2008, Investigation: The Report is now available at the department's website.

State Department

Directorate of Defense Trade Controls; Notifications to Congress of Proposed Commercial Export Licenses

Auxiliary Power Units and Propulsion Engines to Mexico
Military Vehicle Wiring Harnesses to Mexico
Commercial communications satellite to the United Kingdom.
2.75'' Laser Guided Rocket All-Up-Round for the United Arab Emirates Armed Forces.
Proton launch of the SIRIUS-5 Commercial Communication Satellite from the Baikonur Cosmodrome in Kazakhstan
Personnel Locator System (PLS) in Mexico for end-use by the U.S. Air Force.
S-70B (SH-60J/K) Helicopters, parts and support equipment for end-use by Japan's Maritime Defense Forces
S-70A (UH-60J) Helicopters, parts and support equipment for end-use by Japan's Maritime Defense Forces
Iraqi Ministry of Defense communication systems for end-use by the Iraqi Ministry of Defense
AN/APN-217 (V) 2-3-6 Doppler Navigation System in Japan for end-use by the Ministry of Defense of Japan.
Digital Dispensing System I and VII for the Ministry of Defense of Israel for use on the F-15 Aircraft.
Phalanx Close-In Weapon System Block 1A for Australia
AN/SSQ-62, AN/SSQ-53, and AN/SSQ-36 Sonobuoys and Sonobuoy Assemblies in Canada.
AN/APG-63(V) 1 Radar System Retrofit Kits for end-use by the Ministry of Japan
Block 1B Baseline Weapon Systems. C-130J aircraft, associated support equipment, initial logistics support and initial maintenance and operational training to the Government of Qatar.

U.S. Customs Department

Expansion of Global Entry Pilot Program

U.S. Defense Department

FAR Case 2009–014, New Designated Country –– Taiwan
Prohibition on Restricted Business Operations in Sudan and Imports from Burma

U.S. Trade Representative

Implementation of the U.S.–EC Beef Hormones Memorandum of Understanding

US Customs Rulings and Bulletins:

Proposed revocation of Lawn Sweeper Bags from 3926 other plastic, 5.3%, to 8479 other machinery parts free of duty.
Revocation of Carrier for Ski and Ski Poles from 9506 Ski accessories to 8479 other machinery having individual function. Basically throw out the GRI in exchange for arcan of the EN to make a ski accessory become a dutiable machine.

Week in Review August 9th

2009-08-10T13:57:00.011-05:00

International Trade News for the week ending August 9th.

Breaking News:
NAFTA Summit: Trucking Deal on the Agenda.

US Court of International Trade Rulings:
Polly U.S.A., Inc. v. United States
Brief
Facts: Polly USA imported medical uniforms under the African Growth and Opportunity Act.
Customs request information about production processes, time lines and worker documentation.
Polly USA provided the information but customs claims they did not provide all documentation requested and that the documents failed to establish the required "traceable production timeline."

Two Issues: Whether customs had the authority to request the additional documentation or whether all that is required is a country of origin declaration and whether the country of origin was proven despite the discrepancies which may be unavoidable when doing business in Swaziland.

Ruling: An importers country of origin declaration is insufficient alone, in cases of unilateral trade preferences, to establish the country of origin. Because the AGOA is a unilateral trade preference and not a free trade agreement customs may request "whatever verification a port directer deems necessary" to establish claims of preferential treatment. Rather than the trade agreement standard that the port directer may request more information if he cannot determine the country of origin on the face of the declaration.

Ruling: Despite the difficulties in keeping good records in developing countries customs regulations requires that such records be kept and the customs may impose duties when such records are not kept. The court cites 19 CFR 10.178a (e).

Will this in effect kill the AGOA? Seems like it or it will create jobs for auditors and accountants to go over there and create record keeping systems

Bridgestone Americas, Inc. v. United States
Brief
Facts:

Federal Register Notices:

Bureau of Industry and Security

Materials Technical Advisory Committee will meet on August 13

Census Bureau

Eliminate the Social Security Number (SSN) as an identification number in the Automated Export System (AES): Customs will no longer accept personal Social Security Number for an export. Sole proprietors are asked to obtain a Federal ID number or a DUNS from the IRS to prior to exporting.

Committee for the Implementation of Textile Agreements

Determination Under the African Growth and Opportunity Act

International Trade Administration

Carbazole Violet Pigment 23 from the People's Republic of China: Antidumping
Certain Tow Behind Lawn Groomers and Certain Parts Thereof from the People's Republic of China: Anti Dumping Order Countervailing Order
Certain Hot-Rolled Carbon Steel Flat Products from Thailand: Antidumping
Certain Frozen Warmwater Shrimp from Thailand: Antidumping
Certain Pasta from Italy: Antidumping
Dynamic Random Access Memory Semiconductors from the Republic of Korea:
Fresh and Chilled Atlantic Salmon from Norway: Antidumping
Narrow Woven Ribbons with Woven Selvedge from the People’s Republic of China and Taiwan Antidumping, Countervailing
Polyethylene Terephthalate Film, Sheet, and Strip from India: Antidumping
Prestressed Concrete Steel Wire Strand from the People's Republic of China; Correction
Purified Carboxymethylcellulose from Mexico: Antidumping
Stainless Steel Sheet and Strip in Coils from Japan: Antidumping
Stainless Steel Sheet and Strip in Coils from Mexico: Antidumping
Stainless Steel Sheet and Strip in Coils from Taiwan: Antidumping
Welded ASTM A–312 Stainless Steel Pipe from the Republic of Korea: Antidumping
Welded Carbon Steel Standard Pipe and Tube From Turkey: Countervailing
Advanced notice of Sunset Reviews: No reviews for September
Sunset Review for Barbwire from Argentina.
Opportunity to request a review for several cases expiring End of August

International Trade Commission

Sunset Review for Barbwire from Argentina

State Department

U.S. China Economic and Security Review Commission

Annual Report to Congress

WTO DSB News:

Cap and Trade Bill Will Affect Importers.

2009-08-03T13:11:00.003-05:00

H.R. 2454 commonly referred to as the cap and trade bill includes importers. It is unclear how this will operate because it leaves much of the formulation on the administration to develop the rules and regulations. But it makes a covered entity, any company that imports more than 25,000 tons of carbon dioxide or equivalent emission in a calender year. It then allows the administration to set up rules for that entity to begin purchasing or applying for emission rights.

One major difficulty will be how will them implement a carbon cap and trade on importers and still be compliant with article three of GATT. I do not see how it could easily work. People who should be most concerned are companies who import products whose production processes include the emission of one of the 16 greenhouse gases that have high carbon dioxide equivalents that will easily place them above the 25,000 ton ‘covered entity’ threshold.

The bill still needs to pass the Senate and will undoubtedly be changed several times before it becomes law. After that it would still have much more metamorphosing through the administrative rule making process before there would be any idea of the specifics of who it will affect. But it is more likely that it will affect importers so it is time to start watching it now.

I believe there should be a carbon tax straight out but that’s a topic for another article.

Dumping anti-circumvention Targets mix waxed candles: New requirements for "commercially availabe" made.

2009-06-17T15:57:00.004-05:00

The ITC ruled today on the fate of mixed wax candles from China. There has been an anti dumping order on petroleum wax candles from China since 1988. Recently Target and others began importing wax candles made of vegetable oil and petroleum. The goods were not part of the original scope of the anti dumping order for petroleum was candles, they were not considered back in 1988 nor are the classified the same way under the harmonized tariff schedule.

But anti dumping scopes have nothing to do with harmonized tariff schedule. While on the other hand once the scope is set by the Commerce department it can not be changed lightly. This is because the International Trade Commission determines whether a set of imported products is injuring an U.S. industry at the same time the International Trade Administration is determining whether that same set of products is being exported at less than fair market value. In order for this double headed hydro to work they need to be considering the exact same set of products. Products can not be added or subtracted or the beast will get confused and the findings will be incorrect.

However, there is an exception to allow products to be included later into the scope after the investigation and this the anti circumvention prevention section, 19 U.S.C. 1677j. This section is written to insure minor changes in manufacturing or other changes, are not used to skip on by the anti dumping order. In this case Commerce contends the "later-developed" product exception applies to these mixed wax candles.

In additional to the merchandise being developed later there are five criteria for a finding of later developed merchandise. The dispute in the case was the whether mixed waxed candles were "later developed" or not. The Commerce Department came up with two criteria to determine whether a product is "later developed:" 1) whether there were significant changes in the product and 2) whether the product was commercially unavailable at the time of the original investigation. In the first Target case the court upheld these two criteria as a reasonable interpretation of the, 19 U.S.C. 1677j, statute.

The question now boils down to whether the mixed waxed candles were commercially available during the initial investigation. If they were, then they should have independently been included in the scope of the investigation and we can consider them outside of the scope now. If they were not commercially available, then they can considered be later developed products and now can be added into the scope, twenty years later under the anti circumvention exception, as later developed products.

Now all the parties have to hop into their respective time machines and try to show that mixed wax candles were around or not around back in 1988. Not surprising each time machine finds different evidence. The parties against later developed find, a patent for mixed wax candles filed before the initiation of the investigation, vegetable wax candles were listed in the original ITC investigation as more expensive candles not to be considered, and a few catalogs with vegetable wax candles in them. The parties for the later developed theory show 2200 some catalogs from the period without any mention of vegetable wax candles, and the government concludes that it could not find anyone making mixed wax candles in the United States or elsewhere.

The tie goes to the government. If this was a tie but even if it wasn't the court rules that Commerce is correct and "commercially available" must mean that the goods were being made at the time of the original investigation not just capable of being commercially available. So this should make some businesses weary when developing new products. Even new products or products that could be around prior to anti dumping investigations might find themselves the subject to anti dumping duties.