House Appropriations Committee Weighs in on Classification of Duty-Free Costumes - Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
The House Appropriations Committee has recently spoken to the issue of the tariff classification of duty-free costumes, in its report associated with the proposed FY 2017 Department of Homeland Security Appropriations bill.
Costumes (e.g., for Halloween, costume parties, children’s dress-up, etc.) have long been classified either within the duty-free “festive articles” provision (Heading 9505, HTS) or as dutiable apparel (for example, at the rate of 16% if of synthetic materials). Under existing practice, the determining factor is whether the item is of a flimsy nature and construction, lacking in durability, and generally recognized as not being normal articles of apparel (as opposed to the motif).
Thus, Customs has classified a flimsy clown costume within the duty-free provision yet classified a hot dog costume resembling a frankfurter in a bun as dutiable apparel because it was considered to be “well made.” Adding to the confusion is the existence of rulings on seemingly comparable items with some being classified as festive articles and others as apparel.
In its report, the House Appropriations Committee acknowledged concerns that CBP may not be applying its rules consistently in this area. Also noted was the impression among importers that CBP’s current standard of distinguishing between duty-free costumes and dutiable apparel is overly subjective and leads to disparate treatment of similar imported items. As such, the Committee urged CBP to work with private sector stakeholders to ensure that the classification approach is both fair and objective.
Given the ongoing confusion in this area and the recent attention devoted by Congress, importers of costumes (particularly those that have been entering such items as dutiable) may wish to review their product lines to identify potentially missed opportunities. We are available to assist in this area and, where appropriate, apply for CBP rulings and file protests against adverse entry liquidations.
Please contact Arthur W. Bodek for further information.
ITC Decision Bans Imports of Counterfeit Shoes
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
On June 23, 2016, the U.S. International Trade Commission (“ITC”) issued a broad Exclusion Order upholding trademark protection of the diamond-patterned outsole portion of the shoe company’s famous Chuck Taylor sneaker. The Exclusion Order has the effect of barring imports of sneakers that infringe on the Converse diamond-patterned outsole.
The decision is considered a partial victory for defendants Walmart, Sketchers and New Balance, which were accused of infringing the trademark of the midsole – which consists of a rubber band around the front of the shoe, a toe cap and stripes on the sides of the Chuck Taylor shoe. The Exclusion Order does not prevent importations of look-a-like sneakers that contain these features, as long as they do not have the diamond patterned outsole.
Converse had sought to protect its Chuck Taylor trademarks by means of civil litigation in federal court and a complaint before the ITC. The civil litigation remains pending with the U.S. District Court in Brooklyn. The recent ITC decision could possibly be relied upon by the litigants to bolster their claims in court, as it was a mixed win for both sides.
The Converse case highlights a much-overlooked tool available to trademark owners who are seeking to protect their brand. While civil litigation offers the opportunity to win monetary damages from counterfeiters, successful actions before the ITC can result in exclusion orders that bar importations of infringing merchandise.
REVISED: Holiday Port Truck Gate Schedule for July 2 through July 5, 2016 - PierPass
Terminals at the Ports of Los Angeles and Long Beach have announced their schedules for the four-day period surrounding Independence Day, Saturday July 2 through Tuesday July 5. The schedule is posted below, and a PDF of the schedule can be downloaded at http://www.pierpass.org/wp-content/uploads/2016/06/IndependenceDay_2016_8.pdf.
Please continue to monitor the websites of individual terminals for updates.
USITC Releases Report Estimating the Historical Impact of Trade Agreements - United States International Trade Commission
U.S. bilateral, regional, and multilateral agreements have evolved markedly over the last 30 years, with their provisions often becoming broader, stronger, and more transparent, according to the U.S. International Trade Commission (USITC) report, Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures, 2016 Report.
The USITC, an independent, nonpartisan factfinding federal agency, conducted the investigation pursuant to Section 105(f)(2) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (19 U.S.C. § 4204(f)(2)).
As requested, the Commission's report estimates the economic impact on the United States of all trade agreements passed under trade authorities procedures since January 1, 1984. This group of agreements encompasses the Uruguay Round Agreements, the North American Free Trade Agreement (NAFTA – Canada and Mexico), and U.S. bilateral or regional trade agreements with Australia, Bahrain, Canada, Chile, Colombia, the Dominican Republic and five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua), Israel, Jordan, Korea, Morocco, Oman, Panama, Peru, and Singapore.
The Commission used a variety of approaches to analyze the impacts of these agreements. The Commission traced the evolution of key provisions over the last 30 years, developed economic models that estimate the magnitude of the agreements’ impacts, assessed how individual provisions have impacted specific industries through a series of case studies, and summarized the empirical literature estimating the effects of trade agreements.
The quantitative estimates from the models represent changes relative to the levels of economic outcomes that would have existed absent the agreements. The estimates offer wide coverage, across many trade agreements and different types of economic outcomes, but they are not comprehensive. They do not capture all of the economic benefits of the agreements, or all of the economic costs, due to limits on available data and analytic techniques.
Following are highlights from the report.
- The Commission estimated that in 2012, the agreements increased total U.S. exports by 3.6 percent, total U.S. imports by 2.3 percent, real GDP by 0.2 percent, total employment by 0.1 percent, and real wages by 0.3 percent.
- In 2012, U.S. bilateral and regional trade agreements expanded bilateral trade flows with partner countries by 26.3 percent on average across the traded goods and services sectors.
- Model results also showed that the bilateral and regional trade agreements had a positive effect, on average, on U.S. bilateral merchandise trade balances with partner countries, increasing trade surpluses or reducing trade deficits by $87.5 billion in total in 2015.
- Increases in patent protection since the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) entered into force increased U.S. international receipts for the use of intellectual property by 12.6 percent in 2010.
- The agreements had a mixed effect on foreign direct investment, in some cases increasing and in other cases decreasing inbound and outbound investment flows.
- The bilateral and regional trade agreements resulted in tariff savings of up to $13.4 billion in 2014, with a significant part of these savings benefiting U.S. consumers.
- In addition, some of the agreements increased the variety of products imported by the United States.
- Finally, the report finds that industry-specific agreements had a larger impact than agreements that cover many sectors, and presents estimates of such effects: ◦The Information Technology Agreement increased annual U.S. exports of the information technology products covered by the agreement by 56.7 percent in 2010.
- The Uruguay Round and NAFTA tariff reductions increased annual U.S. steel imports by 14.7 percent in 2000.
- The increase in apparel imports that coincided with the Agreement on Textiles and Clothing accounted for most of the reduction in U.S. employment in the apparel industry between 1998 and 2014. Read More
Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures, 2016 Report (Investigation No. 332-555, USITC Publication 4614, June 2016) is available on the USITC's Internet site at https://www.usitc.gov/publications/332/pub4614.pdf.
USITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.
Timber theft Leads to 10 Months in Prison for Kentucky Man
Fish & Wildlife Service
When people think of wildlife crime, piles of confiscated ivory, poaching and black market sales come to mind. What many people don’t realize, is that destruction of protected species goes far beyond international icons like elephants and rhinos. Some trees can be iconic too and need special protection.
Just like wildlife poaching, there are unethical people, motivated by greed, who seek to profit without regard to population levels or ecosystem health. Just like hunting and fishing, timber harvest is a legal enterprise that is managed through sound science, habitat assessments and review by state and federal foresters. When people illegally take wildlife, or alter ecosystems, we all lose out. This is why a recent investigation and court case in Indiana is groundbreaking.
Together, with our counterparts in the Indiana Department of Natural Resources and the U.S. Attorney's Office for the Northern District of Indiana, we put one career violator behind bars for illegally harvesting a stand of black walnut trees. Cheyenne Allen, of Salyersville, Kentucky is facing 10 months in prison for an illegal timber scheme where he stole timber from someone else's private land.
In Indiana, timber can only be harvested by the landowner or by a licensed timber buyer who has purchased the timber. In 2011, Allen saw an opportunity near Logansport, Indiana to take advantage of an unsuspecting landowner and defraud him of almost $85,000 in high-quality timber. Allen's timber buyer's license was previously revoked by Indiana Department of Natural Resources in October 2009, because of repeated timber theft and other violations across multiple counties of northern Indiana.
Deceptively posing as the new owner of nearly 20-acres of land, Allen organized a crew to harvest the timber and marketed the logs to saw mills - all without actually being the landowner. Harvested logs were sold to companies in Indiana and Kentucky. Products from these trees eventually made it as far as Germany, Indonesia, Malaysia, Spain, Portugal, Austria and other international forest product buyers.
"This case is a prime example of how important it is to collaborate with our state conservation partners to stop career violators," said Edward Grace, Deputy Assistant Director for Law Enforcement with the U.S. Fish and Wildlife Service.
"It sends a serious message that we will not tolerate the profiteering of America's natural resource legacy," continued Grace.
Black walnut is one of six walnut tree species found in the United States and one of 15 species found worldwide. This slow-growing tree is native to the central and eastern regions of our country and can live to be more than 200 years old, with diameters as wide as three to four feet! Black walnut is the most valuable tree species in the Midwest based on price per board foot. It is in high demand internationally for specialty woodworking including flooring and furniture wood inlays.
While this is the first timber case federally prosecuted in Indiana, it isn’t an isolated occurrence. In 2013, a similar case in Iowa ended with prison time for the thief who stole more than 30 black walnut trees, some at least 140 years old. While we prevented future illegal actions by these individuals, we cannot bring back the resource that they stole. Trees of this age and quality don’t happen by accident and were managed for years by caring landowners.
"The majority of logging and timber buying in Indiana is completely legal and is carried out by good, hard-working people who are trying to make a living in a business that can be volatile in correlation with the economy,” said Forester Duane McCoy, with the Indiana Department of Natural Resources Licensed Timber Buyers Program.
“To prevent timber theft or trespass, landowners should know and mark their property lines and have a timber sale contract when selling their timber,” continued McCoy.
One way to lessen the chances of timber theft on your land is to work with land surveyors to accurately mark your property lines. Clear signage is another way to let people know they are on private property. We can all help protect the remaining stands of black walnut and other protected trees by staying vigilant against fraudulent schemes by rogues like Allen.
Volkswagen to Spend up to $14.7 Billion to Settle Allegations of Cheating Emissions Tests and Deceiving Customers on 2.0 Liter Diesel Vehicles - Federal Trade Commission
Settlements Require VW to Spend up to $10 Billion to Buyback, Terminate Leases, or Modify Affected 2.0 Liter Vehicles and Compensate Consumers, and Spend $4.7 Billion to Mitigate Pollution and Make Investments that Support Zero-Emission Vehicle Technology
In two related settlements, one with the United States and the State of California, and one with the U.S. Federal Trade Commission (FTC), German automaker Volkswagen AG and related entities have agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles sold or leased in the U.S., and spend up to $10.03 billion to compensate consumers under the program. In addition, the companies will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.
The settlements partially resolve allegations by the Environmental Protection Agency (EPA), as well as the California Attorney General’s Office and the California Air Resources Board (CARB) under the Clean Air Act, California Health and Safety Code, and California’s Unfair Competition Laws, relating to the vehicles’ use of “defeat devices” to cheat emissions tests. The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its “clean diesel” vehicles. The settlements do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles. Nor do they address any potential criminal liability.
The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.
“Today’s announcement shows the high cost of violating our consumer protection and environmental laws,” said FTC Chairwoman Edith Ramirez. “Just as importantly, consumers who were cheated by Volkswagen’s deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them.”
“By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our atmosphere,” said Deputy Attorney General Sally Q. Yates. “This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public’s trust. And while this announcement is an important step forward, let me be clear, it is by no means the last. We will continue to follow the facts wherever they go.”
“Today’s settlement restores clean air protections that Volkswagen so blatantly violated,” said EPA Administrator Gina McCarthy. “And it secures billions of dollars in investments to make our air and our auto industry even cleaner for generations of Americans to come. This agreement shows that EPA is committed to upholding standards to protect public health, enforce the law, and to find innovative ways to protect clean air.”
According to the civil complaint against Volkswagen filed by the Justice Department on behalf of EPA on January 4, 2016, Volkswagen allegedly equipped its 2.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process. During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions. This is known as a “defeat device.” Use of the defeat device results in cars that meet emissions standards in the laboratory, but emit harmful NOx at levels up to 40 times EPA-compliant levels during normal on-road driving conditions. The Clean Air Act requires manufacturers to certify to EPA that vehicles will meet federal emission standards. Vehicles with defeat devices cannot be certified.
The FTC sued Volkswagen in March, charging that the company deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which falsely claimed that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value.
The settlements use the authorities of both the EPA and the FTC as part of a coordinated plan that gets the high-polluting VW diesels off the road, makes the environment whole, and compensates consumers.
The settlements require Volkswagen to offer owners of any affected vehicle the option to have the company buy back the car and to offer lessees a lease cancellation at no cost. Volkswagen may also propose an emissions modification plan to EPA and CARB, and if approved, may also offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of a buyback. Under the U.S./California settlement, Volkswagen must achieve an overall recall rate of at least 85% of affected 2.0 liter vehicles under these programs or pay additional sums into the mitigation trust fund. The FTC order requires Volkswagen to compensate consumers who elect either of these options.
Volkswagen must set aside and could spend up to $10.03 billion to pay consumers in connection with the buy back, lease termination, and emissions modification compensation program. The program has different potential options and provisions for affected Volkswagen diesel owners depending on their circumstances:
Buyback option: Volkswagen must offer to buy back any affected 2.0 liter vehicle at their retail value as of September 2015 -- just prior to the public disclosure of the emissions issue. Consumers who choose the buyback option will receive between $12,500 and $44,000, depending on their car’s model, year, mileage, and trim of the car, as well as the region of the country where it was purchased. In addition, because a straight buyback will not fully compensate consumers who owe more than their car is worth due to rapid depreciation, the FTC order provides these consumers with an option to have their loans forgiven by Volkswagen. Consumers who have third party loans have the option of having Volkswagen pay off those loans, up to 130 percent of the amount a consumer would be entitled to under the buyback (e.g., if the consumer is entitled to a $20,000 buyback, VW would pay off his/her loans up to a cap of $26,000).
EPA-approved modification to vehicle emissions system: The settlements also allow Volkswagen to apply to EPA and CARB for approval of an emissions modification on the affected vehicles, and, if approved, to offer consumers the option of keeping their cars and having them modified to comply with emissions standards. Under this option in accordance with the FTC order, consumers would also receive money from Volkswagen to redress the harm caused by VW’s deceptive advertising.
Consumers who leased the affected cars will have the option of terminating their leases (with no termination fee) or having their vehicles modified if a modification becomes available. In either case, under the FTC order, these consumers also will receive additional compensation from Volkswagen for the harm caused by VW’s deceptive advertising. Consumers who sold their TDI vehicles after the VW defeat device issue became public may be eligible for partial compensation, which will be split between them and the consumers who purchased the cars from them as set forth in the FTC order.
Eligible consumers will receive notice from VW after the orders are entered by the court this fall. Consumers will be able to see if they are eligible for compensation and if so, what options are available to them, at VWCourtSettlement.com(link is external) and AudiCourtSettlement.com(link is external). They will also be able to use these websites to make claims, sign up for appointments at their local Volkswagen or Audi dealers and receive updates. Consumer payments will not be available until the settlements take effect if and when approved by the court, which may be as early as October 2016.
Emissions Reduction Program: The settlement of the company’s Clean Air Act violations also requires Volkswagen to pay $2.7 billion to fund projects across the country that will reduce emissions of NOx where the 2.0 liter vehicles were, are or will be operated. Volkswagen will place the funds into a mitigation trust over three years, which will be administered by an independent trustee. Beneficiaries, which may include states, Puerto Rico, the District of Columbia, and Indian tribes, may obtain funds for designated NOx reduction projects upon application to the Trustee. Funding for the designated projects is expected to fully mitigate the NOx these 2.0 liter vehicles have and will emit in excess of EPA and California standards.
The emissions reduction program will help reduce NOx pollution that contributes to the formation of harmful smog and soot, exposure to which is linked to a number of respiratory- and cardiovascular-related health effects as well as premature death. Children, older adults, people who are active outdoors (including outdoor workers), and people with heart or lung disease are particularly at risk for health effects related to smog or soot exposure. NO2 formed by NOx emissions can aggravate respiratory diseases, particularly asthma, and may also contribute to asthma development in children.
Zero Emissions Technology Investments: The Clean Air Act settlement also requires VW to invest $2 billion toward improving infrastructure, access and education to support and advance zero emission vehicles. The investments will be made over 10 years, with $1.2 billion directed toward a national EPA-approved investment plan and $800 million directed toward a California-specific investment plan that will be approved by CARB. As part of developing the national plan, Volkswagen will solicit and consider input from interested states, cities, Indian tribes and federal agencies. This investment is intended to address the adverse environmental impacts from consumers’ purchases of the 2.0 liter vehicles, which the governments contend were purchased under the mistaken belief that they were lower emitting vehicles.
FTC’s Injunctive Relief: The FTC settlement includes injunctive provisions to protect consumers from deceptive claims in the future. These provisions prohibit Volkswagen from making any misrepresentations that would deceive consumers about the environmental benefits or value of its vehicles or services, and the order specifically bans VW from employing any device that could be used to cheat on emissions tests.
The provisions of the U.S./California settlement are contained in a proposed consent decree filed today in the U.S. District Court for the Northern District of California, as part of the ongoing multi-district litigation, and will be subject to public comment period of 30 days, which will be announced in the Federal Register in the coming days. The provisions of the FTC settlement are contained in a proposed Stipulated Final Federal Court Order filed today in the same court.