CPSC Obtains $15.45 Million Civil Penalty for Defective Dehumidifiers
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
The Consumer Product Safety Commission (“CPSC”) recently entered into a $15,450,000 settlement agreement with Gree, a manufacturer and importer of dehumidifiers produced in China.
The penalty was against three affiliated companies, located in China, Hong Kong and the United States. Gree is alleged to have imported and sold 2.5 million defective dehumidifiers for which the Company received reports of smoking, sparking, and fires resulting in significant property damage.
This is the highest civil penalty assessed by the CPSC to date and is the largest penalty that can be assessed under the Consumer Product Safety Improvement Act of 2008. In justifying the penalty amount, the CPSC cited several violations, alleging that Gree:
- knowingly failed to immediately notify the CPSC that the dehumidifiers were defective and created an unreasonable risk of serious injury or death (it appears that Gree did not notify the CPSC until approximately 9 months after they started to receive reports of the defective dehumidifiers);
- knowingly distributed and sold dehumidifiers bearing the UL safety certification mark which were not compliant with UL standards;
- knowingly made material misrepresentations to the CPSC concerning the UL certification.
This settlement underscores the shift in CPSC’s policy regarding their intention to assess significant penalties on a going-forward basis. It is also a strong reminder to manufacturers, importers, distributors and retailers of consumer products of the importance to promptly assess whether there is a reporting obligation under the Consumer Product Safety Act.
CBP Commissioner Issues Detention Order on Chemical, Fiber Products Produced by Forced Labor in China
U.S. Customs & Border Protection
WASHINGTON — U.S. Customs and Border Protection Commissioner R. Gil Kerlikowske today directed the issuance of a withhold release order against imported soda ash, calcium chloride, caustic soda, and viscose/rayon fiber manufactured or mined by Tangshan Sanyou Group and its subsidiaries in the People’s Republic of China. The order will require detention at all U.S. ports of entry of any of such merchandise manufactured by this company.
“CBP is committed to vigorously enforcing the legal prohibition on the importation of goods manufactured with forced labor,” says Commissioner Kerlikowske. “CBP will do its part to ensure that products entering the United States were not made by exploiting those forced to work against their will, and to ensure that American businesses and workers do not have to compete with businesses profiting from forced labor.”
The withhold release order is based on information obtained by CBP indicating that the Tangshan Sanyou Group and its subsidiaries utilize convict labor in the production of the merchandise.
It is illegal to import into the United States goods made, wholly or in part, with convict labor and/or forced labor (including forced child labor) and/or indentured labor under penal sanctions. CBP issues withhold release orders when information available reasonably indicates merchandise in violation of 19 U.S.C. § 1307, is, or is likely to be, imported.
US Government, Hong Kong Authorities to Share More than $20 Million Seized in Massive HSI Apparel Smuggling Probe
U.S. Immigration & Customs Enforcement
LOS ANGELES – The governments of the U.S. and the Hong Kong Special Administrative Region (HKSAR) will share $20.5 million in forfeited assets seized as part of a probe spearheaded by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) into what is believed to be the largest commercial fraud scheme ever uncovered on the West Coast.
The action, announced by ICE Tuesday, is the culmination of an investigation originally launched by the former U.S. Customs Service in 2000 into a multinational criminal organization responsible for smuggling hundreds of millions of dollars’ worth of Chinese-made wearing apparel into the U.S. through the ports of Los Angeles and Long Beach.
The ensuing probe by HSI special agents in Los Angeles and Hong Kong, working closely with U.S. Customs and Border Protection (CBP) and HKSAR’s Customs and Excise Department, revealed the smuggling scheme resulted in more than 7,000 shipping containers of apparel, worth over $600 million, being illegally imported into the United States. To avoid import duties and quotas, the organization’s operatives - based in China, Hong Kong and the U.S. - provided documents to customs brokers falsely stating the Chinese-made garments were being sold to companies in Mexico when, in fact, they were being delivered to buyers throughout the U.S. Investigators estimate the loss of customs revenues alone at more than $60 million.
“This payout has been a long time coming, but it’s a testament to the perseverance of the personnel on two continents who were involved in dismantling this scheme,” said Joseph Macias, special agent in charge for HSI Los Angeles. “Commercial smuggling is a multi-billion dollar global industry that robs governments of vital revenues and undermines our economy.”
“All attempts to circumvent U.S. importation revenues are taken very seriously,” said Anne Maricich, acting director of CBP’s Office of Field Operations in Los Angeles. “By collaborating and pooling resources transnationally with law enforcement partners in a massive undertaking such as this, our borders extend to further stop culprits and recover substantial monetary losses.”
Besides the interdiction of more than 200 shipping containers of clothing, the probe also resulted in the seizure of a 100,000 square foot warehouse in the City of Commerce, as well other business and residential locations in Los Angeles and Laredo, Texas. Additionally, investigators seized or obtained restraining orders against two dozen bank accounts in the U.S. and Hong Kong.
To date, five persons, including the owner of a Los Angeles-area trucking company, have been federally charged in connection with the case. Armando Salcedo, 53, owner of Friends Global Logistics trucking company, pleaded guilty in 2008 to making false customs declarations and smuggling. In addition to receiving an 18-month prison term, Salcedo forfeited nearly $5 million in personal property and other assets to the federal government, including his Downey residence and the City of Commerce warehouse. The remaining four defendants remain at large and are considered fugitives.
Baltimore CBP Finds Destructive Pest in Cumin Shipment
U.S. Customs Border & Protection
BALTIMORE – U.S. Customs and Border Protection (CBP) Office of Field Operations (OFO) agriculture specialists at the Port of Baltimore discovered Monday that a shipment of cumin seed from India was infested with Khapra Beetle larvae. CBP agriculture specialists did not discover any live larvae but collected a specimen of the dead larvae and sealed the container.
The specimen was forwarded to a U.S. Department of Agriculture (USDA) entomologist who confirmed it as Trogoderma granarium, commonly known as Khapra Beetle. The importer has been issued an Emergency Action Notice requiring the 55,000-pound shipment of cumin seed to be re-exported.
The Khapra Beetle is considered one of the world’s most destructive insect pests of grains, cereals and stored foods, and it remains the only insect in which CBP takes regulatory action against even while in a dead state.
“Khapra Beetle is one of the most invasive insects CBP agriculture specialists encounter,” said Dianna Bowman, CBP Area Port Director for Baltimore. “And we take our mission to intercept these destructive pests and protect America’s agricultural industry very seriously.”
The Khapra Beetle is labeled a ‘dirty feeder’ because it damages more grain than it consumes, and because it contaminates grain with body parts and hairs. These contaminants may cause gastrointestinal irritation in adults and especially sickens infants. Khapra Beetles can also tolerate insecticides and fumigants, and can survive for long periods of time without food.
According to the USDA Animal and Plant Health Inspection Service (APHIS), previous infestations of Khapra Beetle have resulted in massive, long term-control and eradication efforts at great cost to the American taxpayer.
California implemented extensive eradication measures following a Khapra Beetle infestation discovered there in 1953. The effort was deemed successful, but at a cost of approximately $11 million. Calculated in today’s dollars, that would be about $90 million.
CBP Agriculture Specialists have extensive training and experience in the biological sciences and agricultural inspection. On a typical day nationally, they inspect over 1 million people as well as air and sea cargo imported to the United States and intercept 4,657 prohibited meat, plant materials or animal products, including 464 agriculture pests and diseases.
FTC Charges Volkswagen Deceived Consumers with Its “Clean Diesel” Campaign
Federal Trade Commission
Seeks Compensation for Those Who Bought or Leased Affected VW and Audi Vehicles over Seven-Year Period
The Federal Trade Commission has charged that Volkswagen Group of America, Inc. deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which Volkswagen fitted with illegal emission defeat devices designed to mask high emissions during government tests. The FTC is seeking a court order requiring Volkswagen to compensate American consumers who bought or leased an affected vehicle between late 2008 and late 2015, as well as an injunction to prevent Volkswagen from engaging in this type of conduct again.
In a complaint filed in federal court, the FTC alleges that during this seven-year period Volkswagen deceived consumers by selling or leasing more than 550,000 diesel cars based on false claims that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value. The cars sold for an average price of approximately $28,000.
“For years Volkswagen’s ads touted the company’s ‘Clean Diesel’ cars even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests,” said FTC Chairwoman Edith Ramirez. “Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”
According to the FTC’s complaint, Volkswagen promoted its supposedly “clean” cars through a high-profile marketing campaign that included Super Bowl ads, online social media campaigns, and print advertising, often targeting “environmentally-conscious” consumers.
For example, Volkswagen promotional materials repeatedly claimed that its “Clean Diesel” vehicles have low emissions, including that they reduce nitrogen oxides (NOx) emissions by 90 percent and have fewer such emissions than gasoline cars. In fact, the FTC’s complaint states that they emit up to 4,000 percent more than the legal limit of NOx — a dangerous pollutant that contributes to environmental harms and respiratory ailments.
The complaint alleges that Volkswagen also claimed that “Clean Diesel” vehicles met “stringent emission requirements,” were “50-state compliant,” and would maintain a high resale value. Yet, according to the FTC’s complaint, these claims were also false because without the illegally installed software, the “Clean Diesel” vehicles would not have passed federal emissions standards and the hidden defeat devices will significantly reduce the vehicles’ resale value.
The FTC also charged that Volkswagen provided the means and instrumentalities for others to deceive consumers, and that installing the emissions defeat devices was an unfair practice.
The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, and Touareg SUVs, as well as TDI Audi models. The suggested sale prices for the affected vehicles ranged from approximately $22,000 for the least-expensive Volkswagen model with a 2.0-liter engine to approximately $125,000 for the most-expensive Audi model with 3.0-liter engine.
The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Northern District of California, San Francisco Division.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
CBP Announces All Trade Centers Fully Operational, Serve To Further U.S. Trade Goals
U.S. Customs & Border Protection
U.S. Customs and Border Protection (CBP) announced today all 10 of its Centers of Excellence and Expertise (Centers) are operating at full capacity. The full operation of all 10 Centers is the culmination of considerable work within CBP and with trade stakeholders to streamline operations and modernize the way CBP does business.
“The Centers transform the way CBP interacts with trade stakeholders while meeting the needs of economic growth and facilitating supply chain security,” said CBP Commissioner R. Gil Kerlikowske. “As one of the agency’s major modernizing efforts to streamline trade operations, the Centers increase uniformity at our ports and enhance CBP’s industry expertise to better enforce the nation’s trade laws.”
The announcement aligns with the agency’s effort to strengthen America’s economic competitiveness by facilitating lawful trade as described in the Trade Facilitation and Trade Enforcement Act of 2015, signed by President Barack Obama on February 24.
The Centers provide centralized points of contact for specific industries.
CBP’s 10 Centers of Excellence and Expertise are:
- Apparel, Footwear & Textiles – San Francisco
- Electronics – Los Angeles
- Machinery – Laredo
- Natural Gas & Minerals – Houston
- Base Metals – Chicago
- Consumer Products & Mass Merchandising – Atlanta
- Industrial & Manufacturing Materials – Buffalo
- Automotive & Aerospace – Detroit
- Agriculture & Prepared Products – Miami
- Pharmaceuticals, Health & Chemicals – New York
Polyethylene Terephthalate (Pet) Resin from Canada, China, India, And Oman Injures U.S. Industry, Says USITC
United States International Trade Commission
The United States International Trade Commission (USITC) today determined that a U.S. industry is materially injured by reason of imports of polyethylene terephthalate (PET) resin from Canada, China, India, and Oman that the U.S. Department of Commerce has determined are sold in the United States at less than fair value and subsidized by the governments of China and India.
The Commission also made negative findings with respect to critical circumstances with regard to imports of this product from India. As a result, goods that entered the United States from India in the 90 days prior to August 15, 2015, will not be subject to retroactive countervailing duties, and goods that entered the United States from India in the 90 days prior to October 15, 2015, will not be subject to retroactive antidumping duties (dates are the dates of the Department of Commerce’s affirmative preliminary determinations).
All six Commissioners made affirmative material injury determinations and negative critical circumstances findings.
As a result of the USITC’s affirmative determinations, Commerce will issue countervailing duty orders on imports of this product from China and India and antidumping duty orders on imports of this product from Canada, China, India, and Oman.
The Commission’s public report Polyethylene Terephthalate (PET) Resin from Canada, China, India, and Oman (Investigation Nos. 701-TA-531-532 and 731-TA-1270-1273 (Final), USITC Publication 4604, April 2016) will contain the views of the Commission and information developed during the investigations.
The report will be available by May 19, 2016; when available, it may be accessed on the USITC website at:
http://pubapps.usitc.gov/applications/publogs/qry_publication_loglist.asp.