INTERNATIONAL TRADE AND CUSTOMS LAW NEWSLETTER PREPARED FOR THE CLIENTS AND FRIENDS OF THE FIRM, FOR VIEWING ON THE WORLD WIDE WEB.

Volume XIV, Number 3
July, 1999

ANTIDUMPING:
IMPORTERS ENTITLED
TO NOTICE OF DUTIES,
CAFC SAYS

Importers are entitled by law to meaningful advance notice of possible antidumping duty assessments, according to an important new ruling from the U.S. Court of Appeals for the Federal Circuit (CAFC). In Transcom, Inc. v. United States, No. 98-1401 (June 17, 1999), the CAFC ruled that the U.S. Commerce Department could not apply its so-called "non-market economy (NME) presumption" to notice requirements in an antidumping investigation.

In Transcom, Commerce initiated an annual review of an antidumping duty order involving Chinese bearings. The investigation notice named certain exporters whose shipments would be covered by the review. When one of the named exporters did not prove that it was independent from Chinese state control, Commerce published a high "all others" antidumping rate, which, it indicated, would apply to bearings shipped by all Chinese exporters who did not prove their entitlement to separate rates - including exporters who were not named in the notice of investigation. Commerce argued that this practice was authorized by the agency's "NME presumption", which holds that all manufacturers in a state-controlled-economy country like China are presumed to be part of a single state enterprise, unless they prove their independence from state control.

Transcom, an importer who had purchased bearings from Chinese exporters not named in the Notice of Investigation, challenged the application of the "all others" antidumping rate to its shipments, arguing that it had not received legally sufficient notice that the review might affect its entries. The company noted that Commerce gave no indication that unnamed exporters might be covered by the review until publication of the review's preliminary results -- when the administrative record was closed, and it was too late for any exporter to come forward with information proving its freedom from state control. Rather, Transcom argued, in the absence of a review specifically covering its entries, the company was entitled by law to have the entries liquidate at the antidumping duty rate asserted at the time of entry. The U.S. Court of International Trade sided with the government, on the basis of the "NME presumption".

The CAFC reversed, holding that Transcom had not been given legally adequate notice that its interests might be affected by the outcome of Commerce's administrative review. It held that while the NME presumption could be used to set antidumping rates for exporters who are properly included in the scope of a Commerce review, the presumption could not be the basis for giving interested parties notice regarding the review's scope. The Court declined to reach the plaintiff's argument that the lack of notice deprived it of due process in violation of the Fifth Amendment to the Constitution. The CAFC also indicated that it would not go so far as to suggest that importers must be given entry-by-entry notice that their interests may be affected by a Commerce antidumping review.

TRANSCOM
DECISION COULD
HAVE BROADER
IMPACT

As a result of the Transcom decision, importers whose shipments were included in antidumping review proceedings on the basis of the "NME presumption" may have a basis to challenge those assessments. Furthermore, in more recent reviews involving goods from NME countries, Commerce has included language in its investigation notices suggesting that unnamed exporters might "potentially" be covered by the investigation's results, or that they are "conditionally" covered. Further litigation will likely be necessary to determine whether this form of notice comports with statutory and Fifth Amendment due process requirements.

Copies of the Transcom decision are available from our offices[GTR #99-301].

CONTAMINATION
FEAR HALTS SOME
FOOD IMPORTS

Fears that some European Union food products may be contaminated with polychlorinated biphenyls (PCBs) or dioxin have prompted the Food and Drug Administration (FDA) to order the automatic detention of a wide range of European Union food products imported into the U.S. Affected products may not be released for domestic consumption unless the importer furnishes laboratory tests showing that the products offered for importation are free from the contaminants. The scare was prompted by the discovery that a contaminated fat product was introduced into animal feed made by a Belgian firm. The contaminated feed, in turn, may have been used to feed meat and dairy animals. The automatic detention applies to a wide range of meat and dairy products imported from Belgium, France and the Netherlands, and an additional list of products imported from most other EU member states. Importers may not simply submit a certification that their imported products are not contaminated; specific laboratory test data must be submitted.

Copies of FDA Import Alert 99-24, which establishes the detention, are available from our offices [GTR #99-302].

CITA CHANGES
VISA POLICY
FOR "UNDELIVERABLE"
GOODS

The Committee for the Implementation of Textile Agreements (CITA) has issued a new directive providing that quota-class textile and apparel products, exported from the U.S. to a foreign country, and determined to be "undeliverable", may be re- imported into the U.S. without being subject to textile quota or visa requirements.

The new directive covers situations where quota-class goods, imported into the U.S. under cover of a textile visa, are exported to a foreign country and are found to be "undeliverable" - for example, because the customer refuses delivery, or the foreign country excludes the goods based on its own textile quota restrictions. Previously, CITA has ruled that such goods cannot re- enter the U.S. unless a new textile visa, issued by the country where the goods are manufactured, is supplied. As a practical matter, such visas are unavailable, and many goods wound up in a sort of textile quota "limbo" - eventually being either destroyed or exported to another destination.

Under CITA's new directive, such "undeliverable" goods may re- enter the U.S. without a visa, so long as they are re-entered within 45 days after exportation, and have remained in the custody of the carrier or a foreign Customs Service. In addition, the importer must furnish a certification attesting that certain legal conditions have been met. The new rule is expected to smooth operations for firms engaged in cross-border textile and apparel trade, particularly mail-order and internet retailers. Copies of the new directive are available from our offices [GTR #99-303].

CANADA COURT
NARROWS JUDICIAL
SCRUTINY
OF CITT DECISIONS

Just as the U.S. Supreme Court recently announced in Haggar Apparel Co. v. United States that U.S. courts should use a deferential standard of review when considering decisions of the U.S. Customs Service, Canada's Federal Courts have now announced a similar deferential standard for judicial review of decisions of the Canadian International Trade Tribunal (CITT).

In Schrader Automotive Inc. v. Deputy Minister of National Revenue, No. A-675-97, Canada's Federal Court of Appeal enunciated a standard of "reasonableness simpliciter" for courts to apply in evaluating decisions of the CITT, a quasi-judicial body which decides disputes relating to the Customs treatment of goods imported into Canada. The Schrader court held that judges reviewing CITT conclusions must look to see whether "any reasons support" the Tribunal's conclusions, and must "accord considerable weight to the views of [the Tribunal] about matters with respect to which they have significant expertise." Holding that tariff classification matters are legal issues of considerable technical complexity, for which great deference should be accorded the views of the Tribunal, the Court held that "considerable deference should be accorded to the Tribunal's decision and litigants who appeal tariff decisions to this Court should be aware that they have a tough hill to climb".

Copies of the Schrader decision are available from our offices [GTR #99-304].

LEATHER FOLIOS
ARE "BRIEFCASES",
CAFC RULES

Leather folios with handles are properly classified as containers "similar to" briefcases, under Harmonized Tariff Schedule subheading 4202.11, notwithstanding that they may feature a 3-ring binder, lined notepad and calendar, the Court of Appeals for the Federal Circuit recently held. In Avenues in Leather, Inc. v. United States, No. 98-1511 (May 20, 1999), the appellate court rejected the importer's contention that the folios should be considered similar to "diaries" and "notebooks", and therefore classifiable under HTS subheading 4820.10.20. Affirming a decision of the U.S. Court of International Trade, the CAFC ruled that the folios' primary functions of being used to organize, store and transport items makes them ejusdem generis (of a kind with) briefcases, notwithstanding that they may have organizational features.

Copies of the Avenues in Leather decision are available from our offices [GTR # 99-305].

CUSTOMS
AUTOMATION:
ACE FUNDS
AUTHORIZED

The battle over funding to replace Customs' aging Automated Commercial System (ACS) rages on, after importers appear to have defeated Customs' attempt to fund the system by assessing an automation fee on import transactions. The Senate Finance Committee recently authorized the spending of $242 million to design and implement the Automated Commercial Environment (ACE), which is planned as the replacement for the aging ACS. The fight continues in Congress, however, to secure the actual appropriation of funds for ACE development.

While professing that its ACS has been made "Y2K Compliant", Customs staged two simulated failures of ACS, at the Ports of Charleston, South Carolina and Savannah, Georgia, during June, to test "whether Customs is capable of continuing to process the movement of merchandise based solely on paper forms".

In other automation news, Customs has announced the extension, until at least December 31, 2000 of its National Customs Automation Program (NCAP) prototype test of the Automated Manifest System (AMS), following mixed reviews about the efficacy of the program during its initial test. There were 17 carriers who participated in the NCAP test, representing approximately 40% of U.S. container imports during the test period.

APPEALS COURT:
MASSACHUSETTS
BURMA SANCTIONS
UNCONSTITUTIONAL

A Massachusetts State law restricting firms doing business with Burma from participating in certain government contracts is unconstitutional, according to a recent decision of the U.S. Court of Appeals for the First Circuit. In National Foreign Trade Council v. Natsios, No. 98-2304, the First Circuit upheld a Federal District Court decision holding that the "Massachusetts Burma Law" violated the Foreign Commerce Clause of the U.S. Constitution, and interfered with the Federal government's exclusive power to conduct foreign policy. Although the First Circuit readily agreed that "human rights conditions in Burma are deplorable" - the reason the Massachusetts law was enacted - the three-judge panel held that the statute unconstitutionally discriminated among companies on the basis of foreign policy considerations, and interfered with the Federal government's power to "speak with one voice" on foreign policy matters. The First Circuit also held that Massachusetts had failed to advance a legitimate local justification in support of its law, and that Congress had not implicitly approved or permitted the Massachusetts law.

The NFTC and business groups hailed the decision as a victory for businesses who wish to continue engaging in Federally-permitted business with Burma, without sacrificing their right to do certain types of business domestically. As of this writing, some 19 state and local governments - many of whom participated as amici curiae in the National Foreign Trade Council litigation - maintain sanction laws similar to Massachusetts'. The validity of these local trade sanctions is now seriously called into question. Copies of the National Foreign Trade Council decision are available from our offices [GTR #99-306].

"DEFECTIVE GOODS"
CLAIMS NEED STRONG
PROOF: CIT

Importers claiming an allowance in dutiable value for imported goods claimed to be defective must be able to satisfy strict standards of proof, the U.S. Court of International Trade recently held. In Fabil Manufacturing Co. v. United States, Slip Op. 99-55 (June 28, 1989) an importer of jackets sought a reduction in dutiable value pursuant to Section 158.12 of the Customs regulations in respect of imported jackets which were determined not to be colorfast. The garments had been returned to the importer by dissatisfied customers, and, the importer claimed, were subsequently donated to charity and considered a "total loss".

However, the Court found that the importer had not proven its claim. First, it noted that the importer had offered no evidence which would link the returned merchandise to the particular import entries at issue. Second, the importer had failed to establish the amount of the diminution in value resulting from the defect in the merchandise. Although the importer had furnished an affidavit attesting that the garments were declared a total loss and donated to charity, the Court noted that the importer had failed to furnish any credible evidence regarding the extent of its financial loss - for example, whether it had received a tax deduction or other consideration for the charitable deductions. Given the plaintiff's inability to prove its claims, the Court concluded that it had no choice but to grant summary judgment in favor of the government.

Copies of the Fabil Manufacturing decision are available from our offices [GTR #99-307].

CUSTOMS TECHNICAL
AMENDMENTS BILL
ENACTED

After a long delay in the Senate, the Congress has passed, and the President has signed into law, the Miscellaneous Trade and Technical Corrections Act of 1999. The bill makes a number of technical changes to the Customs laws. For example, the bill eliminates country of origin marking requirements for certain silk fabric and apparel accessories, changes duty drawback rules applicable to certain packaging materials, and provides retroactive duty refunds for a variety of products, including "13 inch" television sets having a screen measuring slightly greater than 13 inches. In addition, the law contains temporary duty suspensions for hundreds of imported articles, most of them chemicals.

Copies of the new law are available from our offices [GTR #99-308].

GSP EXPIRES
YET AGAIN

The Generalized System of Preferences (GSP), which provides conditional duty-free treatment to a wide range of goods imported from beneficiary developing countries, expired once again on June 30. Goods which would otherwise be GSP-eligible are subject to the deposit of duties at Normal Trade Relations (NTR) duty rates beginning July 1, 1999.

As in the past, Customs has indicated that entry filers using the Automated Broker Interface (ABI), who use the special program indicator "A" in making entry, will be considered as having applied for duty refunds, in the event that the GSP is reinstated, on a retroactive basis. Companies filing entries manually, or not using the indicator, will be required to file applications for duty refunds when and if GSP is renewed.

The Administration has asked the Congress to renew GSP. As of this writing, however, it is unclear when renewal legislation will be enacted.

ANTIDUMPING
FILINGS PROLIFERATE

Despite the continued healthy state of the U.S. economy, domestic manufacturers are continuing to file a rash of antidumping and countervailing duty petitions targeting imported products. Recently, petitions have been filed against a wide range of cold- rolled steel products from numerous foreign countries, various types of carbon steel pipe and tube products (some of which are also covered by a petition for "escape clause" relief), and bulk aspirin and synthetic indigo from the People's Republic of China.

Perhaps the most remarkable of the petitions recently filed are those submitted by independent Texas oil producers seeking antidumping and countervailing duties against Crude Petroleum Products from Mexico, Iraq, Venezuela and Kuwait. Because crude petroleum is a globally-priced commodity, it will be interesting to see whether the investigating agencies agree that such a product can be the subject of injurious dumping or subsidization.

For additional information regarding the items discussed in the Global Trade Report, please call Martin Neville, John Peterson, Maggie Polito, Curtis Knauss or Maria Celis at (212) 635-2730, or call George Thompson, Mike Tomenga, Larry Bogard, Jack Detzner or Julia Padierna Peralta at (202) 861-2959.