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Related Party Royalties Held to be Non-Dutiable - Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP

In Trimil SA vs United States, Slip Op 19-161, the U.S. Court of International Trade (CIT) ruled that payments made by the importer to parties related to the sellers of the imported merchandise for advertising fees and trademark royalties (collectively “fees”) were not part of dutiable value. The holding in this case is significant for a number of reasons including the fact that the advertising service provider and the trademark owner were related to the sellers of the imported merchandise. This is the first CIT decision to address the dutiability of  royalties paid by an importer to a party that was also related to the seller of the goods.

In the transactions at issue, the importer, trademark owner, and seller, were all related.  Duties were paid under the Transaction Value basis of appraisement based upon the prices paid by the importer to the seller of the goods plus certain design assists provided by another related company. The dutiable value of the goods purchased from the related sellers was increased to include royalty payments made by the importer for the use of the Armani trademark plus advertising fees paid to companies related to the sellers of the merchandise. No duties were paid on the fees when the goods were purchased from unrelated sellers. This distinction relating to the dutiability of the fees based upon whether the payments were made to related or unrelated sellers was based on a number of Customs rulings going back to 1985 which held that trademark royalties paid to parties related to the sellers of the goods would be dutiable, whereas the same fees paid to parties unrelated to the sellers would be non-dutiable. 

The fees paid to the advertising service provider and the trademark owner were calculated as a percentage of the sales prices of the goods sold in the U.S. by Trimil. Although the agreements included language which permitted the licensor to approve the vendors selected by Trimil to produce the garments, the service agreements did not dictate where the goods had to be purchased or which companies had to produce the garments. The purchase orders issued by Trimil to the sellers of the merchandise did not reference the trademark royalties or advertising fee arrangements.  

Importers who have been paying duty on royalty payments to parties that are related to the sellers of the merchandise should review  those arrangements in light of the Trimil decision to determine whether there is an opportunity to treat those payments as non-dutiable and obtain duty refunds for payments made in connection with entries for which the liquidations have not become final.

Our office is available to answer questions regarding the dutiability of trademark royalties and similar payments




Federal Register Notices:




CBP and Trade Partners are Taking Action to Secure eCommerce Supply Chains - U.S. Customs & Border Protection

WASHINGTON – U.S. Customs and Border Protection (CBP) is announcing the selection of nine entities for the Section 321 Data Pilot.

The Section 321 Data Pilot is a voluntary collaboration with online marketplaces, carriers, technology firms and logistics providers to secure e-commerce supply chains and protect American consumers. In December, CBP expanded the scope of the pilot by accepting data for shipments arriving by ocean and international mail, and extended the pilot through August 2021.

“The Section 321 Data Pilot is a significant step toward executing CBP’s overall e-commerce strategy,” said CBP Acting Commissioner Mark Morgan. “CBP has worked closely with the trade community to identify appropriate information that will advance the trade enforcement mission of CBP, and our partner government agencies, while preserving the facilitation of low-value shipments which American consumers rely upon.”

The pilot’s participants comprise a wide range of e-commerce supply chain actors including Amazon, eBay, Zulily, FedEx, DHL and UPS, as well as technology firm PreClear and logistics providers XB Fulfillment and BoxC Logistics. Although the Section 321 Data Pilot is currently limited to nine participants, CBP plans to expand access to all interested and qualified participants in early 2020.

Section 321 and the Growth of e-Commerce

The pilot will allow CBP to test whether the transmission of additional advance data, beyond the data elements currently required for shipments arriving by air, ocean, truck, or rail, will enable CBP to perform more effective and efficient targeted screening with respect to Section 321 shipments.  

Section 321(a)(2)(C) of the Tariff Act of 1930, as amended, authorizes CBP to provide an administrative exemption to admit free of duty and tax shipments of merchandise imported by one person on one day that have an aggregate fair retail value in the country of shipment of not more than $800 (bona-fide gifts and certain personal and household goods are subject to different requirements in order to qualify for separate administrative exemptions).

Prior to the enactment of the Trade Facilitation and Trade Enforcement Act (TFTEA), the Section 321 exemption applied only to shipments valued at less than $200. Section 901 of TFTEA amended Section 321(a)(2)(C) of the Tariff Act of 1930 to raise the de minimis value cap from $200 to $800. This has greatly increased the number of shipments qualifying for the Section 321 exemption.

Combined with the exponential growth of the online shopping market in the United States over the past five years, CBP has seen a significant increase in small, low-value packages. In fact, today CBP processes more than 600 million express consignment and international mail shipments a year – approximately 1.8 million a day. The unprecedented growth in volume of these low-value shipments requires creative solutions to interdict illicit and dangerous products to enter the United States, including illicit narcotics, unregulated prescription drugs, brand counterfeits, and unsafe food and beauty products.

Improving Trade Enforcement and Facilitation through the Section 321 Data Pilot

All nine participants must transmit certain required data elements to CBP for the Section 321 Data Pilot. Moreover, CBP has given participants the flexibility to transmit optional data elements as they are able to test the viability of sharing additional information. This information will help CBP ascertain data which are key indicators of compliance with U.S. trade laws and consumer safety. With these additional details, CBP will be able to focus more resources on high-risk shipments while expediting the clearance of legitimate shipments. 




U.S. Department of Commerce Issues Affirmative Preliminary Antidumping Duty Determination on Collated Steel Staples from China - U.S. Department of Commerce

Today (1/3/20), the U.S. Department of Commerce announced its affirmative preliminary determination in the antidumping duty (AD) investigation of imports of collated steel staples from China, finding that exporters from this country are dumping collated steel staples in the United States at a margin of 301.64 percent.

As a result of today’s decision, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of collated steel staples from China based on the preliminary rate noted above.

In 2018, imports of collated steel staples from China were valued at an estimated $88.8 million.

The petitioner is Kyocera Senco Industrial Tools, Inc. (Cincinnati, OH).

The strict enforcement of U.S. trade law is a primary focus of the Trump Administration. Since the beginning of the current Administration, Commerce has initiated 187 new antidumping and countervailing duty investigations – a 188 percent increase from the comparable period in the previous administration.

Antidumping and countervailing duty laws provide American businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of the unfair pricing of imports into the United States. Commerce currently maintains 511 antidumping and countervailing duty orders which provide relief to American companies and industries impacted by unfair trade.

Commerce is scheduled to announce the final determination on or about May 19, 2020.

If Commerce’s final determination is affirmative, the U.S. International Trade Commission (ITC) will be scheduled to make its final injury determination on or about July 2, 2020. If Commerce makes an affirmative final determination of dumping, and the ITC makes an affirmative final injury determination, Commerce will issue an AD order. If Commerce makes a negative final determination of dumping, or the ITC makes a negative final determination of injury, the investigation will be terminated and no order will be issued.

Click HERE for a fact sheet on today’s decision.

The U.S. Department of Commerce’s Enforcement and Compliance unit within the International Trade Administration is responsible for vigorously enforcing U.S. trade law and does so through an impartial, transparent process that abides by international rules and is based on factual evidence provided on the record.

Foreign companies that price their products in the U.S. market below the cost of production or below prices in their home markets are subject to antidumping duties. Companies that receive unfair subsidies from their governments, such as grants, loans, equity infusions, tax breaks, or production inputs, are subject to countervailing duties aimed at directly countering those subsidies. 




Philadelphia CBP Agriculture K9 Detects Prohibited Animal Products from Albania - U.S. Customs & Border Protection

PHILADELPHIA – A Customs and Border Protection (CBP) agriculture detector dog led to the seizure of nearly 14 pounds of prohibited food products at Philadelphia International Airport December 19.

CBP agriculture detector K9 Potter alerted to the baggage of two travelers who arrived on a flight from Albania. During a secondary examination, CBP agriculture specialists discovered 6.2 kilograms of raw unknown meat, pork hot dogs and raw ruminant tripe, 2.2 kilograms of fresh leeks, and two kilograms of fresh chestnuts. Within the chestnuts, agriculture specialists discovered two live insects, Cydia splendana (Tortricidae), a chestnut tortrix moth common to Europe, and Curculio sp. (Curculionidae), a nut weevil.

CBP seized the prohibited food products and released the travelers to continue their visit to Philadelphia. All prohibited agricultural items were destroyed.

CBP agriculture specialists observe increases in prohibited agriculture products during the holidays when foreign travelers bring traditional meals and products to celebrate with family in the United States.

“Customs and Border Protection agriculture specialists protect our nation from a variety of potential agriculture threats every day, including these raw meat products that may carry an economy-damaging animal disease,” said Casey Durst, Director of Field Operations for CBP’s Baltimore Field Office. “CBP agriculture specialists continue to exercise extraordinary vigilance in their fight to protect our nation’s agriculture and economic prosperity from invasive pests and animal diseases.”

CBP agriculture specialists perform a critical border security role in safeguarding America’s agricultural and natural resources from harmful pests and plant diseases. They have extensive training and experience in the biological sciences and agricultural inspection.

During a typical day last year, CBP agriculture specialists across the nation seized 4,552 prohibited plants, meats, animal byproducts, and soil, and intercepted 319 insect pests at U.S. ports of entry. See what else CBP achieved on a typical day during 2018,

CBP encourages foreign visitors to ‘know before you go’ by viewing general guidelines on a variety of prohibited or restricted products, or by visiting CBP’s Travel site at www.CBP.gov.




USITC Releases Shifts in U.S. Merchandise Trade 2018 - U.S. International Trade Commission

Shifts in U.S. Merchandise Trade 2018 (2018 Trade Shifts) is now available on the U.S. International Trade Commission (USITC) internet site.

The USITC, an independent, nonpartisan factfinding federal agency, produces its web-based comprehensive review of U.S. trade performance annually.

2018 Trade Shifts includes interactive features, such as graphics that allow users to view and refine, as they choose, the official government data presented. The report:

  • highlights changes in U.S. exports and imports of agricultural and manufactured goods, as well as key natural resources, providing industry and market profiles and trade data for 10 sectors; and
     
  • includes a special topic section, "Section 232 and 301 Trade Actions in 2018," which describes the trade actions taken by the United States under section 232 of the Trade Expansion Act of 1962 and sections 301-310 of the Trade Act of 1974, and the foreign responses to the U.S. actions under these authorities of the law. 

This section presents data on the shifts in 2018 U.S. trade for products covered by those two authorities, broken down by trading partners, as well as additional duties imposed in response by seven trading partners (China, Canada, Mexico, the EU, Russia, Turkey, and India).

Highlights from the 2018 Trade Shifts report include:

  • In 2018, U.S. total exports and general imports both increased, with general imports increasing at a higher rate, reaching their highest levels since 2014.
     
  • Energy-related products exhibited the largest increase in U.S. total exports, mostly due a large increase in average prices for some energy-related products. The largest increase in U.S. imports, by value, occurred in the chemicals and related products sector.
     
  • China, Canada, and Mexico continued to be the major U.S. trading partners in 2018. China continued to be the main supplier for U.S. imports of merchandise and was the third largest destination for U.S. exports, by value. The largest destinations for U.S. exports, however, were Canada and Mexico. Combined, U.S. exports to these two countries accounted for one-third of all U.S. exports of merchandise in 2018.

The U.S. merchandise trade deficit with the rest of the world grew by $83.0 billion (10 percent) to $878.7 billion in 2018, surpassing the deficit increase of 2017 and reaching the highest level and the highest yearly growth seen during the period 2014-18.

Shifts in U.S. Merchandise Trade 2018 can be accessed at
https://www.usitc.gov/research_and_analysis/trade_shifts_2018/index.html
 
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