Industry insights

Global Trade Brief – September 2018

September 21st, 2018, Posted in Global Trade Brief

Excise Tax Refunds on distilled spirits, wine, and beer

OCR Import Operations Fact Sheet

Effective August 16, The U.S. Treasury Department and U.S. Customs and Border Protection (CBP) today jointly issued an interim final rule which provides that CBP has authority to refund the difference between the full excise taxes an importer pays at the time of entry summary filing and the new tax law’s lower effective tax rate. An importer must request and substantiate its entitlement to the reduced tax rate or tax credit appropriately. For an importer to be eligible to receive a reduced tax rate or a tax credit, the importer must be able to substantiate that the foreign producer has assigned an allotment of its reduced tax rate or tax credits to the beer, wine, or distilled spirits imported by that importer. These changes are intended to facilitate implementation of provisions of the new tax law (Pub. L. No. 115-97, enacted December 22, 2017)—that is, the provisions that are referred to as the “Craft Beverage Modernization Act.

Source:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-17710.pdf

Imports of Shrimp, Curvina, Sierra, Chano fish and fish products from Mexico

OCR Import Operations Fact Sheet

In response to United States Court of International Trade order (Slip-Op 18-92) and in cooperation with the National Marine Fisheries Service (NMFS), U.S. Customs and Border Protection (CBP), is imposing immediate import restrictions on all shrimp, curvina, sierra, and chano fish and fish products harvested by gillnets in the upper Gulf of California (UGC) waters in Mexico and listed as an endangered species under the U.S. Endangered Species Act.

To effectuate products imported into the United States under the HTS codes listed are prohibited from entry into the United States.  Further, any such products imported from Mexico as country of origin must be accompanied by the certification.

CBP also is requiring that all other fish and fish products not within the scope of the import restrictions but imported under the HTS codes listed, from Mexico as country of origin be accompanied by the certification upon arrival.

Source:

https://www.cit.uscourts.gov/SlipOpinions/Slip_op18/18-100.pdf

https://csms.cbp.gov/viewmssg.asp?Recid=23687&page=&srch_argv=18-000483&srchtype=all&btype=&sortby=&sby=

https://csms.cbp.gov/docs/23687_550050611/List_of_HTS_s.pdfCustoms

Classification of Compression Hosiery

OCR Product Classification Fact Sheet

[Sigvaris, Inc. v. United States, 2017-2237 (Fed. Cir. August 16, 2018)]

Facts:

The subject merchandise consisted of a variety of graduated compression hosiery. U.S. Customs and Border Protection (CBP) classified the merchandise as “graduated compression hosiery” under HTSUS subheading 6115.10.40 (subject to a customs duty rate of 14.6% ad valorem). The importer asserted that the classification should be HTSUS subheading 9817.00.96 (a special classification for duty-free treatment).

That subheading states: 9817 Articles specially designed or adapted for the use or benefit of the blind or other physically or mentally handicapped persons; parts and accessories (except parts and accessories of braces and artificial limb prosthetics) that are specially designed or adapted for use in the foregoing articles: 9817.00.96 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . Free

To determine the meaning of “physically . . . handicapped persons,” the Court of International Trade consulted Subchapter Note 4(a) to Chapter 98, which provides that the term “includes any person suffering from a permanent or chronic[,] physical or mental impairment which substantially limits one or more major life activities, such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, or working.”

To determine the scope and meaning of “specially designed,” the Court of International Trade consulted dictionaries to conclude that “articles specially designed for handicapped persons must be made with the specific purpose and intent to be used by or benefit handicapped persons rather than the general public.”

In its analysis, the Court of International Trade “determine[d] first whether CVD constitutes a physical handicap,”, and then “next whether [Sigvaris]’s compression hosiery is specially designed for the use of physically handicapped persons.

Analysis:

Court of International Trade found that only the more severe stage of CVD, known as Chronic Venous Insufficiency (“CVI”), constitutes a physical handicap, but that early stages of CVD do not.

The Court of International Trade then determined that the subject merchandise is not specially designed for the physically handicapped because it is designed for patients suffering from early stages of CVD and not for patients suffering from CVI.

When the matter went to The Court of Appeals said that, we must ask first, “for whose, if anyone’s, use and benefit is the article specially designed,” and then, “are those persons physically handicapped?” Here, because we find that the subject merchandise is not “specially designed” under our interpretation of the term, we conclude that the subject merchandise is not classifiable under HTSUS heading 9817 and therefore not entitled to duty-free treatment under HTSUS subheading 9817.00.96.

The Court of Appeals conclude that, to be “specially designed,” the subject merchandise must be intended for the use or benefit of a specific class of persons to an extent greater than for the use or benefit of others. This definition of “specially designed” is consistent with factors that Customs uses in discerning for whose use and benefit a product is “specially designed.” Customs considers “the physical properties of the merchandise, whether the merchandise is solely used by the handicapped, the specific design of the merchandise, the likelihood the merchandise is useful to the general public, and whether the merchandise is sold in specialty stores.”

The Court of International Trade’s findings of fact demonstrate that the subject merchandise is not specially designed for the use or benefit of any specific class of persons, and instead, is designed for use by a variety of persons.

Source:http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-2237.Opinion.8-16-2018.pdf

Mohawk Global Logistics Corp reaches settlements with BIS for their EAR Violations

OCR Export Operations Fact Sheet

OCR Global Trade Controls Fact Sheet

Violations:

  1. Mohawk caused, aided, and/or abetted a violation of the Export Administration Regulations, namely, the export of an LNP-20 Liquid Nitrogen Plant, an item subject to the Regulations, designated EAR99, and valued at $33,587. Mohawk forwarded the item for export from the United States to the All-Russian Scientific Research Institute of Experimental Physics (VNIIEF). A BIS license was at all relevant times required to export any item subject to the Regulations to VNIIEF. Mohawk prepared and filed Electronic Export Information (“EEI”) with the U.S. Government on or about that date indicating that the shipment was “NLR,” that is, “No License Required.”
  2. Mohawk caused, aided, and/or abetted a violation of the Regulations, namely, the export of Real-Time Back Reflection Laue Camera Detectors and Accessories, items subject to the Regulations, designated EAR99, and valued at $177,156, to the University of Electronic Science and Technology of China (“UESTC”) in Chengdu, People’s Republic of China, without the required BIS license. At all relevant times, UESTC was listed on the Entity List, and a BIS license was required to export any item subject to the Regulations to that entity. See 15 C.F.R. § 744.11 and Supp. No. 4 to 15 C.F.R. Part 744 (2014-2015). Mohawk provided freight forwarding services for the initial unlicensed export of these items to UESTC on or about February 12, 2014. Documents provided to Mohawk by the exporter clearly identified UESTC’s full name as it is listed on the Entity List, along with a near-exact match for the entity’s address. Mohawk proceeded with the transaction and prepared and filed EEI that falsely indicated the export was “NLR.”
  3. On the second occasion Mohawk caused, aided, and/or abetted the unlicensed export to UESTC of the same exact items, which had been returned to the U.S. manufacturer for warranty repair. Documents provided to Mohawk by the exporter again identified UESTC’s full name and a near-exact match for the entity’s address. No EEI was filed in connection with this second export of the items to UESTC.

Civil Penalty:

Mohawk is to pay the $155,000 civil penalty

Source:https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2018/1193-e2561/file

Drawback on duty paid as a result of the Section 301 trade remedy

OCR Duty Drawback Fact Sheet

CBP issued a release noting that certain goods and products imported from China and subject to additional import duties under the “Section 301” action are eligible for drawback claims. The United States in August 2018 released a list of 279 eight-digit HTSUS subheadings under the Section 301 tariff action. With additional import duties (25% ad valorem) for Chinese goods, importers must also report the 9903.88.01 special tariff number.

The additional import duties for Chinese goods covered by a 16 August 2018 list of products subjects to the Section 301 action are effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 AM EDT on 23 August 2018. In addition to reporting the Chapter 1-97 HTSUS classification of the imported merchandise, importers also are to report the 9903.88.02 special tariff number for goods subject to the additional duty assessment.

The Section 301 duties only apply to products of China, and are based on the country of origin, not country of export.

Source: https://csms.cbp.gov/csms.asp?srch_argv=18-000498&srchtype=all&opt=1

Generalized System of Preferences (GSP) Reinstated Through December 31, 2020 – Deadline for Filing GSP Retroactive Duty Refund Request – September 19, 2018

OCR Import Operations Fact Sheet

OCR Duty Drawback Fact Sheet

On Friday, March 23, 2018, the President signed into law H.R.1625 (Public Law 115-141), the “Consolidated Appropriations Act, 2018,” which reauthorized the Generalized System of Preferences (GSP) program for goods entered or withdrawn from warehouse, for consumption, from January 1, 2018 through December 31, 2020. The new law, effective April 22, 2018, also provided for the retroactive refund of all duties, without interest; to the importer of record (IOR) of GSP-eligible goods entered during the January 1, 2018 through April 21, 2018 lapse period.

Status – Phased GSP retroactive duty refund:

Phase I – CBP has completed the auto refund processing of importations entered during the lapse with special program indicator (SPI) “A” and checks are forthcoming.

Phase II – CBP will begin processing shortly the manual refunds of importations entered during the lapse with the SPI “A” that may be subject to additional review (i.e., AD/CVD, 232 remedy, reconciliation, etc.)

Phase III – Importers wishing to claim GSP preference on importations entered during the lapse period without the SPI “A” must input a Post Summary Correction (PSC) or protest (CBP will accept a protest, although not a true 19 USC § 1514)to the corresponding Port team or Center of Excellence and Expertise team requesting the GSP refund no later than September 19, 2018.

GSP refund requests may be submitted as either a PSC if the entry summary is not liquidated, or a protest if the entry summary has liquidated, in accordance with 19 CFR 174. CBP reserves the right to reject the duty refund request if the importer does not provide sufficient line-level data.

Source: https://csms.cbp.gov/csms.asp?srch_argv=18-000505&srchtype=all&opt=1

BIS Revises EAR Based on 2017 Missile Technology Control Regime Plenary Agreements

OCR Export Operations Fact Sheet

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has amended the Commerce Control List set forth in EAR Part 774 to reflect changes to the Missile Technology Control Regime (MTCR) Annex that were agreed to by MTCR member countries at the October 2017 Plenary in Dublin, Ireland, and the May 2017 Technical Experts Meeting (TEM) in Stockholm, Sweden. This final rule revises seventeen Export Control Classification Numbers (ECCNs) to implement the changes that were agreed to at the meetings and to better align the missile technology (MT) controls on the Commerce Control List (CCL) with the MTCR AnnexThe seventeen revised ECCNs are as follows:

· ECCN 1B117

· ECCN 1B118

· ECCN 1C111

· ECCN 1C118

· ECCN 2B109

· ECCN 2B120

· ECCN 2B121

· ECCN 2B122

· ECCN 6A107

· ECCN 7A105

· ECCN 7A107

· ECCN 7A116

· ECCN 9A012

· ECCN 9A101

· ECCN 9A115

· ECCN 9A515

· ECCN 9A610

International Trade Court denies drawback claims for Harbor Maintenance Tax

Flint Hills Resources, LP v. United States, Slip Op. 18-10 (CIT September 6, 2018)

OCR Duty Drawback Fact Sheet

Facts:

Plaintiffs challenged the decisions of Customs to deny plaintiffs’ administrative protests seeking drawback of (1) Harbor Maintenance Taxes (“HMT”) imposed under 26 U.S.C. § 4461, (2) Merchandise Processing Fees (“MPF”) imposed under 19 U.S.C. § 58c, and/or (3) Environmental Taxes (“ET”), imposed under 26 U.S.C. § 4411, that were paid or imposed upon the entry of their petroleum products into the United States (collectively, “taxes and fees”)

Analysis:

In December 2004, following the issuance of the Federal Circuit’s opinions in Texport and Warren, Congress amended 19 U.S.C. § 1313(j) to allow importers to receive drawback of duties, taxes, or fees imposed under federal law “upon entry or importation” (rather than only allowing drawback of those duties, taxes, or fees imposed “because of . . . importation”)

Thus, assuming an importer’s unliquidated drawback claim complied with all other drawback statutes and regulations, HMT and ET were eligible for drawback under the 2004 Trade Act.

After the amendment of the statute, the Federal Circuit addressed the new statutory provision in Aectra Refining and Marketing, Inc. v. United States, 565 F.3d 1364 (Fed. Cir. 2009) (“Aectra II”).

In reaching its decision in Aectra II, the Federal Circuit concluded that (1) the 2004 Trade Act did not suspend the time limit for completing a drawback claim for HMT, MPF, and ET (i.e., that a claimant must file a drawback claim for HMT, MPF, and ET within three years from exportation of the substitute merchandise); (2) a “complete claim” included the 19 C.F.R. § 191.51(b)’s10 requirement that a claimant “include an accurate calculation of the entire amount that it seeks to be refunded under the drawback statute,” including any HMT, MPF, and ET sought; and (3) “futility [of filing drawback claims for HMT and ET11] does not excuse the failure to file a proper claim for limitations purposes.”

Decision:

The court finds that because plaintiffs’ drawback claims did not include a calculation of the taxes and fees sought within the three-year limitation period imposed under the statute, these claims are now time-barred

Source:https://www.cit.uscourts.gov/SlipOpinions/Slip_op18/18-110.pdf