Sunday, March 22, 2015

Ruling of the Week 2015.10: Getting an iHandle on iLuggage

Heading 4202 of the Harmonized Tariff Schedule of the United States sees lots of legal action for two reasons. First, the duty rates are very high; some as high as 20%. Second, U.S. Customs and Border Protection seems to find that many items go in these high-duty provisions.

For context, Heading 4202 covers:

Trunks, suitcases, vanity cases, attache cases, briefcases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; traveling bags, insulated food or beverage bags, toiletry bags, knapsacks and backpacks, handbags, shopping bags, wallets, purses, map cases, cigarette cases, tobacco pouches, tool bags, sports bags, bottle cases, jewelry boxes, powder cases, cutlery cases and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber or of paperboard, or wholly or mainly covered with such materials or with paper . . . .

There are two distinct parts to this heading. The first part, before the semicolon, does not depend on material. The second part only includes items that are of leather, plastic sheeting, textiles, etc. Both sections list many examples of containers and end with the expression "and similar containers." That is where things get interesting and problematic.

I am talking about this because it is endlessly fascinating, because I have litigated this issue, and because of HQ H163995 (May 19, 2014), which involves the classification of iPod covers or possibly neoprene covers for laptop computers. There is, at least to my mind, some ambiguity as to the merchandise. I am going to assume it is iPod covers.

Customs classified them in Heading 4202 and Target, the importer, protested. According to Customs, the proper classification is as articles of plastic in Chapter 39. The problem for Target is that Note 2(m) to Chapter 39 states that "This chapter does not cover . . . trunks, suitcases, handbags or similar containers of heading 4202." If the laptop covers are similar to trunks, suitcases, and handbags of Heading 4202, they cannot be classified in Chapter 39.

Because the laptop covers at issue are not leather, plastic sheeting, textiles, vulcanized fiber, or paperboard, if they belong in 4202, it will be in the first section as containers "similar to" trunks, suitcases, vanity cases, etc.
Ticking off the necessary elements, Customs first made the unsurprising but necessary conclusion that the iPod covers are containers. This was based on dictionary definitions stating that a container is something that can hold together, hold, or contain an article.

The bigger issue was whether the iPod covers are "similar to" the containers listed in the first part of Heading 4202. To do this, Customs properly invoked the cannon of statutory construction "ejusdem generis," which is Latin for "same kind." Under this rule, the general phrase "and similar containers" is interpreted as limited to containers that share the same  essential characteristics or purposes with the listed articles. The courts have previously held that the essential characteristics and purposes of the items listed in Heading 4202 are that they "store, organize, protect, and carry" the items contained therein.

The meaning of "store" and "organize" were worked out in a case called Firstrax. That case is worth reviewing if only because it is one of mine. It involved fabric pet crates. The Court of International Trade found that a single item, including a living pet, cannot be organized. Organizing is the act of putting multiple items in some kind of useful order.  A pet is also not stored, because storage is the act of putting something away for later use.

In this case, the iPod covers hold one device. Consequently, they do not provide organization. Furthermore, the covers include opening to allow the user to operate the controls on the iPods. Since the iPod is not being put away for later use, the covers do not "store" the iPods. Two down.

Target acknowledged that the covers protect the iPods from scratches and from impact in the event they are dropped. Target also seems to have acknowledged that the grippy material facilitates securely carrying the iPods. That means that the covers serve to protect and facilitate carrying.

That was enough for Customs and Border Protection to find that the iPod covers are properly classifiable in Heading 4202 and, therefore, excluded from Chapter 39.

I have some concerns about this decision. First, how exactly do the exemplars in the first part of Heading 4202 facilitate carrying the items in the container? With the exception of spectacle cases, they all have a handle. I think this is important in that it helps define how we should interpret what it means to facilitate carrying something. All of these cases take something that is unwieldy (clothing and personal effects) or delicate (a musical instrument or binoculars) and make carrying the item or items practical by the addition of a handle to something that does not otherwise have a handle. That is not the case with respect to an iPod case, which makes the iPod no easier to carry. The grippiness of the case is, at best, incidental, since the user still has to carry the iPod in much the same way it would be carried without the case.

The inclusion of spectacle cases does not change that analysis. Glasses are hard to carry safely without a case. They bend and scratch easily. The case makes it easier to carry glasses in a meaningful way (even without a handle).

So, it seems to me that the "carry" part of the "store, organize, protect and carry" test must mean that the item would not be easily carried but for the case. The iPod cases doe not seem to satisfy that requirement.

Is it enough if all the cover does is protect the contents? Personally, I think not. This is the second question. Customs, following some court cases, says that any one of the four criteria is sufficient to classify something in Heading 4202. I don't agree. Trunks, suitcases, vanity cases, etc. do all four of those things. I think what we have here is a semantic argument that has lost sight of the original ejusdem generis analysis. Nothing in the first part of Heading 4202 is exclusively protective without also helping to transport the articles inside. It seems to me that you need at least those two items together to be ejusdem generis with trunks, suitcases, spectacle cases, etc.

Lastly, I wonder whether it is correct to say that an iPod cover contains the iPod when it has opening to allow access to the controls. The cover certainly envelopes the iPod, but the iPod is exposed to the elements in a way that is not true for musical instrument cases, for example. When I was in high school carrying a bass clarinet from home to school, I could not play the instrument while it was in the case. That strikes me as very significant.

This issue will surely be before the Court of International Trade at some point. It looks to me to create the opportunity to further clarify what "carry" and "protect" mean in the context of Heading 4202. More important, it looks like a good opportunity to reverse course and recognize that protection alone is not enough to be ejusdem generis with the exemplars of Heading 4202.

Saturday, March 14, 2015

Ruling of the Week 2015.9: Do Court Decisions Matter?

We sometimes take it for granted that when the Court of International Trade or Court of Appeals for the Federal Circuit makes a determination on the tariff classification of some item, the decision matters beyond the specifics of the case. That, however, is not an obvious proposition or necessarily true. It is rare that the Court of International Trade will have two or more opportunities to decide the classification of exactly the same product, though it does happen. So, the direct impact of court decisions can be limited.

Also, the Court of International is unique among federal courts in that the principal of res judicata does not apply in tariff classification litigation. As a result, an importer can lose a classification claim on its first entry and try again on its second, third, and fourth entries. Although the Court does apply the principal of stare decisis, under which it seeks uniformity in its decisions, one judge of the CIT cannot bind the decision of another judge.

At the administrative level, things are a little different. When Customs and Border Protection issues rulings, it often cites decisions from the Court of International Trade and from the Federal Circuit in support of its conclusion. This is often true with respect to the major guiding principles of customs law but is also sometimes true on specific questions of law.

That is the case with HQ H178917 (Sept. 15, 2014), in which Customs ruled on the classification of certain lighting fixtures designed specifically for use in dental applications. Customs had initially ruled that the merchandise was classified as lamps and lighting fittings of Heading 9405. In this ruling, following the court decision in Trumpf Medical Systems, Inc. v. United States, Customs has decided to revoke the earlier ruling and classify the merchandise in Heading 9018 as instruments and appliances used in medical, surgical, dental or veterinary sciences . . . ."

In the original ruling, Customs noted that dental chairs are classifiable as furniture of Heading 9402. Complete dental consoles, which include chairs and lighting, are classifiable in Heading 9018 as dental instruments and appliances. Customs concluded that lamps, which are not explicitly included as either furniture nor as dental equipment, should be classified in Heading 9405 because it is a specific provision for them.

Following the decision in Trumpf, Customs reconsidered this approach. Trumpf involved overhead lights for surgical theaters. The court looked at the characteristics of the lights and found them to mee the broad definition of the term "instrument or appliance" in the context of Heading 9018. The specific characteristics the court considered included:

  • High illumination/brightness
  • Color rendition of tissue
  • Light field diameter
  • Shadow reduction
  • Limited heat/Irradiance
  • Depth of Illumination

Applying this analysis to the dental lamps, CBP found the same characteristics present. Further, there is evidence that the lamps are only used in dental applications. Consequently, CBP revoked the earlier ruling, followed the analysis in Trumpf, and changed the classification of the lamps.

Is this a good result? I don't think so. Customs' initial ruling noted that Additional U.S. Rule of Interpretation 1(c) requires that a provision for parts and accessories does not prevail over a specific provision for the item. In this case, the lamp is arguably part of a dental chair. But, it is a lamp, provided for specifically in Heading 9405. Further, the Explanatory Notes to 9018 state that the heading excludes certain items of dental equipment when separately presented. Among the excluded items is "diffused lighting" and "shadowless lamp." If 9018 excludes these items, CBP was right the first time.

It seems that that Trumpf decision was very much influenced by the limited use for these lamps. That may not have been consistent with an application of the legal text and the General Rules of Interpretation.  This seems like a good example, along with the rulings following GRK Canada, of how the analysis in a CIT or CAFC decision trickles down to the people at Customs and Border Protection in a way that may not result in clarity.

Friday, March 06, 2015

Ladies and Gentlemen: Pitcairn Island Honey

Because I have some of the best and well-traveled readers (and their relatives) in the compliance business, I have received a picture of a Pitcairn Island country of origin label. An anonymous reader had this jar of honey in a cabinet.


So, compliance pros, what do you think of the marking? Does "Pitcairn Island, South Pacific Ocean" satisfy the U.S. Customs and Border Protection requirement for country of origin marking?

Let me know what you think in the comments.

Wednesday, March 04, 2015

Ruling of the Week 2015.8: Old Jersey and Pitcairn Island

For today's ROTW, I set out looking for a ruling dealing with some far off and preferably warm location. Turns out that, with the exception of coastwise transit issues, there are no Customs and Border Protection rulings involving Pitcairn Island or any of several Pacific Ocean microstates including Tuvalu, Niue, and Kiribati.

Pitcairn Island

What I did find is an interesting question about the country of origin marking for products of the Bailiwick of Jersey Island, Channel Islands. The ruling is HQ 561938 (Mar. 18, 2002). For those of you who may not know, Jersey is an island off the coast of Normandy, France. It is an independent international actor and not part of the U.K. although the U.K. is responsible for its defense and external relations. Also, the Queen is the Head of State in her capacity as "the Crown in Right of Jersey." It is, according to the U.S. Department of State, a "Crown Dependency" along with the Isle of Man and the Bailiwick of Guernsey.

So, what we know is that it is geographically and politically close to the U.K. It is politically distinct from the U.K.; but, it is not fully independent. That raises a question of how goods that originate in Jersey are to be marked when imported into the U.S.



Here, without additional comment, is the answer according to U.S. Customs and Border Protection:

For country of origin marking purposes, colonies, possessions, or protectorates outside the boundaries of the mother country are considered separate entities. Section 134.45(d), Customs Regulations (19 CFR 134.45(d)), states that the name of the colony, possession of protectorate shall usually be considered acceptable marking. However, when the name is not sufficiently well known to insure that the ultimate purchasers will be fully informed of the country of origin, or where the name appearing alone may cause confusion, deception, or mistake, clarifying words may be required. In such cases, the Commissioner of Customs shall specify the additional wording to be used in conjunction with the name of the colony, possession, or protectorate.
With regard to the Bailiwick of Jersey, Channel Islands, Customs has issued Treasury Decision (T.D.) 68-292(2), dated November 22, 1968, which states that, "[s]ince the States of Jersey, Channel Islands, attached to the Crown of England, are not a part of the United Kingdom or Great Britain, the marking "Made in Jersey, British Isles" constitutes acceptable country of origin marking." Similarly, T.D. 73-106, dated April 13, 1973, held that the marking, "Made in Guernsey, British Isles" was acceptable country of marking for goods produced on the island of Guernsey, Channel Islands. The phrases, "Manufactured in Jersey, British Isles," "Product of Jersey, British Isles," "Made in the British Isles" or "Made in the United Kingdom" would also be acceptable for purposes of 19 U.S.C. 1304.
I feel that the remaining descendants of the HMS Bounty should seek a CBP ruling on something, just for the heck of it. Apparently, they sell honey, soap, and honey soap. If you happen to see this, would represent you on a country of origin question just for the fun of it.

Next, on to Cueta and Mellila, little bits of Spain stuck in Morocco.

Wednesday, February 25, 2015

The Rolls Royce of Protests

What makes for a valid protest is one of those ever green questions that generates litigation before the U.S. Court of International Trade. The most recent entry in the parade of cases on this topic is Ovan International Ltd. v. United States.

The background here is simple. Carriage House Motor Cars came into ownership in the U.S. of a 1958 Royce Silver Cloud. As will happen when one owns a classic car, Carriage House planned to sell it at auction in the UK. The car did not sell and was returned to Carriage House in the U.S. with Ovan acting as the customs broker and the Importer of Record.

At the time of entry, Ovan claimed the entry should be duty free under HTSUS item 9801.00.25. Customs issued a Notice of Action stating its intent to liquidate the vehicle as a dutiable passenger car at 2.5% There was some back and forth between counsel for Ovan and Carriage House on the one hand and Customs on the other hand. On February 22, 2013, Customs liquidated the entry as dutiable and Ovan, the IOR, paid the duties. Forty six days later, counsel e-mailed an affidavit attempting to satisfy Customs that the vehicle qualified for duty-free entry. Subsequently, 189 days after liquidation, plaintiffs' counsel filed a formal protest on CBP Form 19. The protest was filed in the name of Carriage House, the owner of the Rolls Royce. Customs denied the protest as untimely.

In case you are wondering, Ovan paid $23,641 in duties, meaning the value of the car was about $945,000. Ovan was the importer of record. It is very likely that the agreement between Ovan and Carriage House makes Carriage House responsible for reimbursing Ovan, which is why Carriage House filed the protest.

Standing is the legal requirement that a plaintiff have an appropriate interest in the subject matter of a case to bring that case to court. Without a standing requirement, I could go ahead and sue Bruno Mars for impersonating the Police (the band, not the law enforcement agency). The Police can (and should) do that, not me.

Standing in the U.S. Court of International Trade is controlled by 28 USC 2631(a), which says that:
A civil action contesting the denial of a protest, in whole or in part, under section 515 of the Tariff Act of 1930 may be commenced in the Court of International Trade by the person who filed the protest pursuant to section 514 of such Act, or by a surety on the transaction which is the subject of the protest.
That is a problem for Ovan, which is not the party that filed the protest and not the surety. End of story. Ovan lacks standing and is not an appropriate plaintiff. The Court dismissed Ovan from the case. But, the case continued with Carriage House as the remaining plaintiff. First lesson, as a general matter, a protest should be filed by the IOR. After all, the IOR pays the duties and is seeking the refund.

That leads to the second issue, did Carriage House file a valid protest? If not, there is nothing for the CIT to review.

As to the formal protest, there is no real debate that it was late. A protest must be filed within 180 days of the date of liquidation. This protest was filed nine days too late.

But, did the affidavit count as a protest? It was filed within the acceptable time and the law is clear that a protest need not be on Form 19. Carriage House argued that the affidavit was sufficient to satisfy the requirement for a timely protest.


Historically, the courts have said that protests are to be liberally construed in favor of the protesting party. As a result, informal or unofficial documents have been found to be valid protests so long as they are sufficiently detailed to alert Customs to the challenged decision. On the other hand, there are minimum requirements that must be satisfied. Most important for this case are the requirements set out in the customs regulations at 19 CFR 174.13(a). The Court of International Trade relied on an 1999 Federal Circuit decision called Koike Aronson, Inc. v. United States for this proposition. That pre-dates this blog, so I have no post on Koike.

Following Koike, the CIT held that the protest, in whatever form, must contain all of the information required by the customs regulations to qualify as a protest. For your reference, those requirements are:

(1) The name and address of the protestant, i.e., the importer of record or consignee, and the name and address of his agent or attorney if signed by one of these;

(2) The importer number of the protestant. If the protestant is represented by an agent having power of attorney, the importer number of the agent shall also be shown;

(3) The number and date of the entry;

(4) The date of liquidation of the entry, or the date of a decision not involving a liquidation or reliquidation;

(5) A specific description of the merchandise affected by the decision as to which protest is made;

(6) The nature of, and justification for the objection set forth distinctly and specifically with respect to each category, payment, claim, decision, or refusal;

(7) The date of receipt and protest number of any protest previously filed that is the subject of a pending application for further review pursuant to subpart C of this part and that is alleged to involve the same merchandise and the same issues, if the protesting party requests disposition in accordance with the action taken on such previously filed protest;

(8) If another party has not filed a timely protest, the surety's protest shall certify that the protest is not being filed collusively to extend another authorized person's time to protest; and

(9) A declaration, to the best of the protestant's knowledge, as to whether the entry is the subject of drawback, or whether the entry has been referenced on a certificate of delivery or certificate of manufacture and delivery so as to enable a party to make such entry the subject of drawback (see §§ 181.50(b) and 191.81(b) of this chapter).


Among other things, the affidavit was not labeled as a protest and did not list the liquidation date of the entry. The Court was not swayed by evidence of a course of dealing making it clear that Carriage House was complaining about the liquidation of the one entry covering this one Rolls Royce. Given the lack of required information, the Court dismissed the case in its entirety.

This seems like a harsh result, and it is. Except that it is hard to see how either plaintiff would have won on the merits. 9801.00.25 has very specific requirements for duty-free entry. One of which is that the goods be returned to the U.S. because they do not conform to sample or specification. I have no idea what facts the plaintiffs' might have been able to present. But, it appears the car was returned to the U.S. because it did not sell at auction. We'll have to wait and see if there is a successful appeal of this decision to know whether we will learn the true facts.

One side point, reading this decision, you might come away with the notion that a valid protest must be filed via CBP's electronic systems. That is not the case. The relevant statute is 19 USC 1514(c)(1). As the Court correctly quotes, a protest may be filed in writing or via the electronic system.

Sunday, February 22, 2015

Ruling of the Week 2015.7: When is a Porsche More Than A Car?

I am late on this ruling of the week. I have been busy milking my Walking Dead posting, which got picked up by my friends at Law and the Multiverse. But, as far as I am concerned, I have another couple hours to go in this week. And, since most of you are probably busy watching the Academy Awards, I will sneak this post on to the site and give it a Hollywood connection.

This will be quick because there is not much law in this week's ruling. The ruling is NY N254307 (Jun 11, 2014). As you may know, rulings issued by the NY office of Customs and Border Protection often do not contain a lot of legal analysis. Given the short deadline and volume of requests, this makes sense.

My guess is that whoever wrote this particular ruling is a car buff. He or she certainly expended a lot of language to find that this particular 1969 Porsche 917K is classifiable not as a passenger car but as a collector's item. That was probably a good result for the importer, because the car was to be sold at auction and was expected to go for as much as $20 million.

Why? Well, a couple things. First, just look at it (although this is not the same one):




From Amanti delle Supercar

Next, the car in question was driven by Steve McQueen in the movie Le Mans.

From Cinemasterpieces
Third, and this is where I am out of my depth, the car belonged to Jo Siffert, who is apparently a legend in racing and in Porsche circles. If you read the ruling, you can easily feel the admiration the writer has for both the car and the driver. At least I think I can feel that.

For example, rather than just recount the facts in one of two sentences, CBP says:

To set the record straight, the 1969 Porsche, 917, chassis 917-024, had a long tail body, and was removed from its competition debut of May 11, 1969 in the 1000km Spa Francorchamps due to unstable vehicle conditions resulting from the vehicle’s long tail frame generating significant lift factors on straights using all of the road at speed. Records do indicate that racecar drivers Jo Siffert and Brain Redman managed to clock an unofficial lap time in the 917 Porsche, chassis 917-024, of 3:41.9 which would have beaten the pole of 3:42.5 set by the Lola, but they chose to use the Porsche 908LH long tail with which they won the race and set the fastest lap at 3:37.1. 
None of that is particularly relevant, nor is the detail of Siffert's career. But, it makes for good reading as these things go.

For our purposes, the important thing is Customs' conclusion that the rarity of the vehicle and its connections to Siffert and Hollywood  was sufficient reason to classify it in HTSUS item 9705.00.00 as a collector's piece. That made it duty free.


Thursday, February 19, 2015

New US NAFTA CO Form

[Updated for clarity improvements.]

Customs has updated the NAFTA CO Form 434, now with the date "11/14." The new form has some nice automated features to select dates. It is not immediately obvious, but when you click the field, you will see a drop down for a calendar. This should eliminate ambiguity as to dating formats (although I note that the printed date will be in U.S. mm/dd/yyyy format).

The other innovation is that the contact information for the Exporter, Producer, Importer and signatory all have a space for an email address. This certainly seems like reasonable information for CBP to request. But, it raises the question of whether an importer can rely on a NAFTA CO that does not include an email address and whether CBP will accept it in the event of a verification.

Yesterday, CBP issued a notice addressing that question. Below is the full text of what Customs and Border Protection had to say. Note the highlighted middle paragraph stating that forms without the email address remain valid.

CSMS #15-000108

Title: NAFTA Certificate of Origin Enhancements and Use of Expired Certifications

Date: 2/18/2015 4:53:19 PM

To: Automated Broker Interface, ACE Portal Accounts

An amended CBP Form 434, NAFTA Certificate of Origin, now available on the CBP "Forms" page
at http://www.cbp.gov/sites/default/files/documents/CBP%20Form%20434_3.pdf, provides blocks for importer / exporter / producer and signee email addresses, as well as drop-down calendars indicating "mm/dd/yy" for the input of the blanket period and signature date. These enhancements to the CBP Form 434 were made to facilitate communication and eliminate date ambiguity.

CBP will continue to accept prior versions of the CBP 434, as well as the Canadian B232 and the Mexican Certificado de Origen without the email address blocks. While a form with email blocks may assist communication, for CBP purposes, a form or format without email addresses remains valid.


CBP forms obtained from the "Forms" menu of www.cbp.gov are the most up-to-date available. CBP will continue to accept certificates of origin associated with the NAFTA (CBP Form 434), the Caribbean Basin Trade Partnership Act (CBP Form 450) and the Insular Possessions (CBP Form 3229) irrespective of any expiration date.


If you have questions, please contact the Trade Agreements Branch at FTA@dhs.gov.

Trek Leather Owner Seeking Supreme Court Reivew

Harish Shadadpuri, the principal of Trek Leather who the Court of International Trade and Federal Circuit held personally liable for corporate negligence, has asked the Supreme Court to review his case. This is one of the most interesting customs cases in a long time. Shadapuri was initially vindicated  by the Federal Circuit, which then reversed course and unanimously held he was liable as a "person" who "introduced" merchandise to the United States through negligence.

This is the last chance for Shadapuri and the last chance for the law to recognize that while corporations may be people, and people are "persons" under the customs penalty law, the corporate people and liable persons are not necessarily the same. In most other cases involving personal liability for corporate acts, the government needs to show that the corporation was nothing more than an alter ego of the person. This is called "piercing the corporate veil" and is usually done under state corporate law. The Federal Circuit interpreted the penalty statue as creating direct personal liability on anyone who introduces goods to the U.S. That is potentially anyone who provides information that Customs relies upon in making decisions regarding admissibility and liquidation. That is a lot of people.