American Petroleum Institute

International Trade & Customs Conference

March 27-29, 2011 Houston, Texas
Bill Methenitis 214-969-8585 William.Methenitis@ey.com

Administrative and Regulatory Updates

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Customs Update

Administrative and Regulatory Updates

Quarterly HMF payments and refund requests may now be filed electronically via pay.gov
CBP withdraws Notice of Proposed Interpretation of the Expression Sold for Exportation in the United States CBP withdraws Proposed Rule regarding Drawback of Internal Revenue Excise Tax Port of Las Angeles-Long Beach Drawback Center Closes

Chicago, Houston, New York and San Francisco remain

Customs Update

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Administrative and Regulatory Updates

CBP Attempts to Preclude Prior Disclosure Protection Based on CF 28/29

CBP clarifies that CF28 is generally not appropriate to commence an investigation while CF29 can be an appropriate commencement document Manufacturing and processing replaced with production New notification procedure for capacity increase New sections on public utilities and uniform treatment Conflicts of interest restrictions Penalties, fines and prior disclosures

Proposed Changes to Foreign Trade Zone Regulations

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Customs Update

Administrative and Regulatory Updates Pending Events

NAFTA Country of Origin Rules

Treasury and CBP have decided not proceed with proposal regarding uniform rules of origin for all trade They will adopt certain proposed amendments to part 102 applicable to pipe fittings and flanges among other items Current authority suggests making retroactive adjustments is incompatible with transaction value A number of companies do it anyway, taking the position that their pricing is formula based, and report changes through reconciliation HQ anticipates revoking prior rulings and liberalizing position, presumably to allow transfer pricing adjustments based on objective factors, but actual text is not yet available
Customs Update

HQ Changes Course on Transfer Pricing Adjustments

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Case Law Updates

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Customs Update

United States v. UPS

686 F. Supp. 2d 1337 (Ct. Intl Trade 2010)

CBP attempting to fine UPS under the Brokers Statute for repeated misclassifications
Federal Circuit remanded the case to CIT in 2009 because CBP failed to consider all 10 factors in the statute

CIT entered judgment for UPS holding that CBP had not established that monetary penalties were imposed in accordance with the law

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Customs Update

United States v. Tip Top Pants

2010 Ct. Intl. Trade Lexis 5

CBP alleged Tip Top made false NAFTA claims after Tip Top failed to respond to CF28 or CF29 CBP filed action in CIT to recover penalties from Tip Top and its CEO CIT rejected claim against Tip Top as a matter of law for failure to respond in writing to Tip Tops earlier petition. CBP did issue an amended penalty notice after receiving the petition, but this was insufficient to satisfy procedural due process requirements CIT dismissed claim against CEO for failure to state a claim

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Customs Update

United States v. Pressman-Gutman

721 F. Supp. 2d 1333 (Ct. Intl Trade 2010)

CBP claimed Pressman failed to redeliver merchandise and sought damages from Pressman and its surety CIT rejected claim because CBPs demand for redelivery was untimely. Demand for redelivery is to be made within 30 days after CBP receives a requested sample. CIT based their decision not only on regulations but also on established agency practice (evidenced in rulings) In this case, CBP did not forget the deadline, but instead sent an additional CF28 saying the sample was sent to the lab for analysis. Conditional release period extended 90 days pending lab analysis. CIT required Pressman to pay partial attorneys fees to surety pursuant to indemnification clause
Customs Update

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United States v. Callinish Ltd.

Slip Op. 10-124 (Ct. Intl Trade 2010)

CBP filed action related to the smuggling of evening primrose oil which was banned by FDA
Callinish failed to appear and CBP moved for default judgement in an amount equal to domestic value of merchandise, which CBP claimed to be $17,734,926.

CIT denied judgment by default because CBP failed to provide any basis in its pleadings of the domestic value of the merchandise

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Customs Update

Horizon Lines, LLC v. United States

626 F.3d 1354 (Fed. Cir. 2010)

Clarified when ship repairs are dutiable pursuant to 19 USC 1455(a)

Entry guides which direct containers into ships hold were replaced due to new design features Key factor in courts decision was that original guides were in full proper working order Whether work is a non-dutiable modification or dutiable repair is factual inquiry on a case-by-case basis
Customs Update

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Outer Circle Prods. V. United States

590 F.3d 1323 (Fed. Cir. 2010), Revd 602 F. Supp. 2d 1294 (Ct. Intl Trade 2009)

Classification dispute of soft sided bottle cases eo nomine (19.3%) or case law precedent (3.4%). CIT held that eo nomine provision in 4202 applied, distinguished facts in precedential case (SGI case). 4202 specifically states that it applies to bottle cases. CAFC reversed CIT relying on prior SGI case use of ejusdem generis (of the same kind) to determine 4202 did not contemplate containers for food and beverage such as those at issue in this case. A common aspect of the exemplars in 4202, including bottle cases, is that they do not carry food or beverages. HTS was later amended to include insulated food or beverage bags in eo nomine provision.
Customs Update

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Totes-Isotoner Corp. v. United States

594 F.3d 1346 (Fed. Cir 2010)

Totes claimed violation of the Fifth Amendment right to Equal Protection because mens gloves are subject to higher tariff rates than gloves for other persons Government challenged claim on political question doctrine, standing and failure to properly plead the claim CAFC affirmed CITs dismissal and held that Totes was required to allege sufficient facts to establish governmental purpose for discrimination and not simply a disparate impact on men who purchase mens gloves
Customs Update

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Norman G. Jenson, Inc. v. United States

Slip Op. 11-15 (Ct. Intl Trade 2011)

Broker filed 308 protests on behalf of importers in February 2007 More than 2 years after filing protests broker was unable to ascertain status after communicating with CBP and filed suit in April 2010 seeking a court order for CBP to rule on the protests CIT held that because broker had the ability to seek accelerated disposition, CIT lacked jurisdiction to order CBP to rule on the outstanding protests Essentially means CBP can sit on a protest indefinitely if accelerated disposition procedures are not utilized
Customs Update

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World Customs Organization Activity

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Customs Update

Technical Committee on Customs Valuation

(pending approval by WCO Council in June 2011)

Commentary 23.1

Provides guidance on using transfer pricing studies to support transaction value under the circumstances of sale test While not conclusive, transfer pricing studies should be considered Clarifies that indirect assists are dutiable Example: importer provides a mold to Company A, who produces a part purchased by Company B. Company B sells the finished product to the importer. The importer must include the value of the mold as an addition to value

Commentary 24.1

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Customs Update