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THE C-AIR TIMES

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ISSUE #126 - 8/06/10

All prior Issues of The C-Air Times can be found at the end this current Issue in the Newsletter Section of our website:

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IN THIS ISSUE :

"First Sale" is Alive and Well

100% Air Cargo Screening Requirement Met, TSA Says

USDA Proposes Establishing Definitions for Terms Used in Recent Amendments to the Lacey Act

CBP Seeks HTS Change to Make Certain Festive Apparel, Etc. Duty-Free

Discontinuation of the Unknown MIDs

Clean-Trucks Bill Lands in House

PHMSA Issues Hazmat Safety Advisory on Risks of PED Use While Driving

CBP at JFK Seizes Heroin Embedded in Hangers

Bad Times Induce Faking of Even Cheap Brands

My grandfather once told me that there are two kinds of people: those who work and those who take the credit. He told me to try to be in the first group; there was less competition there.

~ Indira Gandhi

"First Sale" is Alive and Well

In the modern cross-border trade, goods are often subject to a series of sales before importation (e.g. from a foreign factory to a middleman and then to final buyer). At each level of sale, the parties in the commercial chain include a mark-up.

The “first sale” rule is a special method of appraisement designed to arrive at the transaction value of merchandise which is the subject of these multi-tiered sales.

In the United States, current law allows importers, under certain conditions, to base the valuation of product entering the United States on the “first” or earlier sale price in a series of transactions (rather than the last one). Because the “first sale” price is always lower than any subsequent resale price, the use of the first sale appraisement method results in substantial duty savings. For example, if items produced in Italy were sold to a middleman in Switzerland and the Swiss middleman sold the items to an American buyer/importer, the U.S. importer would normally pay duty based upon the price paid to the Swiss vendor. If, however, the sale qualifies under the “first sale” rule, the importer may import the product and pay duty based upon the industrial price viz. the price paid by the Swiss middleman to the Italian manufacturer. The middleman’s mark up would, therefore, be excluded from duty assessment thereby allowing the importer to achieve a duty savings. In many cases, a first sale appraisement can significantly reduce the amount of duties paid.

The U.S. has been appraising merchandise on the first sale basis since 1994 in accordance with a series of court decisions and administrative rulings but, in January of 2008, U.S. Customs and Border Protection (CBP) proposed the elimination of first sale and computation of transaction value based on the “last sale.”

Many substantial importers, trade groups and industry organizations filed comments and legal briefs in strong opposition to the proposal. This office filed a very substantial brief in opposition to the possible revocation.

In a recent letter to the transportation and importing community by Customs and Border Protection Commissioner Bersin, Mr. Bersin stated that within thirty (30) days, the CBP proposal to revoke first sale will officially and formally be withdrawn. Accordingly, the first sale rule will remain in place.

In consideration of the possible revocation of first sale rule, many importers discontinued or postponed their plans to implement first sale protocols. Importers should now revisit and revitalize their plans to implement documentation and shipping procedures which will ensure meeting CBP’s requirements for “first sale” entitlement.

100% Air Cargo Screening Requirement Met, TSA Says - Sandler Travis & Rosenberg

The Transportation Security Administration announced this week that it met the Aug. 1 deadline for screening 100% of air cargo carried on domestic passenger aircraft, as required by the 9/11 Act. TSA is also continuing its work to improve cargo security on passenger flights originating in other countries, requiring 100% of high-risk cargo to undergo security screening and having increased the requirements for overall cargo screening. A TSA press release notes that these steps are part of the agency’s continuing utilization of a multi-layered approach to air cargo security, including procedures for known and established shippers to ship cargo on domestic passenger aircraft, deploying explosive detection canine teams and conducting covert tests and no-notice inspections of cargo operations.

TSA notes that to meet the 100% screening mandate it created the Certified Cargo Screening Program, which allows certified facilities across the country to screen cargo before it reaches the airport. CCSP facilities must be approved by TSA and adhere to strict security standards, including physical access controls, personnel security and screening of prospective employees and contractors. A secure chain of custody must also be established from the screening facility to the aircraft.

TSA states that prior to the Aug. 1 deadline over 900 facilities became CCSP certified. As a result, over half of the more than nine million pounds of cargo loaded onboard passenger-carrying planes each day is prescreened, thus helping to avoid potential bottlenecks at airports.

USDA Proposes Establishing Definitions for Terms Used in Recent Amendments to the Lacey Act - USDA

WASHINGTON, Aug. 4, 2010 – The U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) is proposing to establish definitions for the terms “common cultivar” and “common food crop” as used in recent amendments to the Lacey Act, a federal law that combats trafficking in illegal wildlife, fish and plants.

The Food, Conservation and Energy Act of 2008 amended the Lacey Act by expanding its protections to a broader range of plants and plant products. The amendments exempt certain plant categories from the provisions of the Act, one of which includes common cultivars (excluding trees) and common food crops (including roots, seeds, parts or products thereof).

USDA and the U.S. Department of the Interior have been given authority under the Lacey Act to define the terms common cultivar and common food crop. The proposed rule establishes a new part in the plant-related provisions of title 7, chapter III of the Code of Federal Regulations (CFR), which will contain these definitions.

The proposed definitions are designed to ensure that exemptions to the Act do not place at risk plants of conservation concern, while exempting plants grown commercially on a large scale. They are also designed to be consistent with existing and commonly understood definitions of the terms, as well as to be consistent with the provisions of the Lacey Act, Executive Order 12866 and Regulatory Flexibility Act. More information about the Lacey Act is available on APHIS’ website at www.aphis.usda.gov/newsroom/hot_issues/lacey_act/index.shtml.

Notice of this proposal is published in Aug. 4's Federal Register.

CBP Seeks HTS Change to Make Certain Festive Apparel, Etc. Duty-Free - Broker Power Inc.

On July 1, 2010, U.S. Customs and Border Protection sent a letter to the International Trade Commission requesting that the ITC commence a Section 1205 investigation¹ regarding the possible addition of a new Chapter 98 duty-free provision for certain utilitarian festive articles.

Certain Utilitarian Festive Articles are Excluded from Chapter 95 Duty-Free Treatment

Proclamation 8097 amended the Harmonized Tariff Schedule for a number of World Customs Organization-recommended changes, effective February 3, 2007. One of the amendments added a new Note 1(v) to HTS Chapter 95, to exclude tableware, kitchenware, toilet articles, carpets, and other textile floor coverings, apparel, bed linen, table linen, toilet linen, kitchen linen and similar articles having a utilitarian function, from classification in Chapter 95 as duty-free festive articles.

CBP Seeks New Chapter 98 Provision to Make Certain Utilitarian Festive Items Duty-Free

CBP is requesting that the ITC recommend certain amendments to HTS Chapter 98, Subchapter XVII, in order to ensure substantially rate neutral, duty-free treatment to certain utilitarian articles with festive designs and/or motifs, in accordance with the judicial decisions of Michael Simon Design, Inc. v. United States².

The recommended amendments would:

Add new 9817.95.02. Replace duty-free 9817.95.05 with the following new duty-free subheading:

9817.95.02: Utilitarian articles each incorporating a symbol and/or motif that is closely associated with a festive occasion (for example, Christmas, Easter, Halloween, or Thanksgiving), the foregoing articles used or displayed principally during that festive occasion and not typically at any other time, under the terms of U.S. Note 9 to this subchapter.

Add new U.S. Note. Add the following new U.S. Note 9 to HTS Chapter 98, Subchapter XVII:

Heading 9817.95.02 applies only to tableware, kitchenware (except baking pans, cookie cutters, cookie stamps and presses³) and toilet articles of chapter 39, 69 or 70; carpets and other textile floor coverings of chapter 57; apparel and accessories of chapter 61 or 62; and made-up textile articles of chapter 63.

Consolidate 9817.95.01. Consolidate 9917.95.01’s text to read as follows:

Utilitarian articles (including but not limited to Seder plates, blessing cups, menorahs or kinaras) of a kind used in the home in the performance of specific religious or cultural ritual celebrations for religious or cultural holidays, or religious festive occasions (provided for in subheading 3924.10, 3926.90, 6307.90, 6911.10, 6912.00, 7013.22, 7013.28, 7013.41, 7013.49, 9405.20, 9405.40 or 9405.50).

CBP Says Amendments Would Ensure Such Articles Could Enter Duty-Free

CBP states that these proposed amendments, when properly implemented, would ensure that utilitarian or functional articles (except baking pans, cookie cutters, cookie stamps and presses³) with festive designs and/or motifs entered on or after February 3, 2007, are classified in accordance with HTS Chapter 95, Note 1(v), while also ensuring rate neutral, duty-free treatment for this merchandise in accordance with the decision of the courts.

¹Section 1205(a) of the Omnibus Trade and Competitiveness Act of 1988 provides that the ITC shall keep the HTS under continuous review and periodically recommend to the President such modifications in the HTS as the ITC considers necessary or appropriate to accomplish certain general objectives.

²In Michael Simon Design, Inc. v. United States, the Court of International Trade ruled that certain imports of sweaters, blouses, and shirts decorated with certain Christmas or Halloween motifs were classified as "festive articles" under HTS heading 9505 and the Court of Appeals for the Federal Circuit affirmed that decision. The United States appealed and argued that the new Note 1(v) to Chapter 95 excluded utilitarian articles. CIT rejected the U.S.’ reliance on the addition of the note, as it was inconsistent with its previous interpretation of the scope of HTS heading 9505 in earlier cases. The CAFC later affirmed the CIT’s ruling on determining whether articles are classified as festive articles under HTS heading 9505.

Discontinuation of the Unknown MIDs - USCBP (CSMS #10-000187)

CBP is discontinuing the use of the unknown Manufacturer Identification Number (MID) as data to report the manufacturer (or supplier). The discontinuation will take effect September 15, 2010; after this date, entries reporting unknown MIDs will be rejected by the Automated Broker Interface (ABI).

Clean-Trucks Bill Lands in House - The Journal of Commerce / Bill Mongelluzzo

Nadler pushes to amend federal pre-emption law

Rep. Jerrold Nadler, D-N.Y., on Thursday introduced a bill that would enhance the ability of ports to enact clean-air programs, while opening the door to unionization of harbor truck drivers.

Nadler, a member of the House Transportation and Infrastructure Committee, said his Clean Ports Act of 2010 would amend the Federal Motor Carrier Act to allow ports to enact and enforce clean-trucks programs “above the current federal requirements.”

The legislation has galvanized dozens of environmental, community, labor, transportation and shipper organizations to flood Congress with statements either in support of or against the bill.

Nadler, in a release, said the Clean Ports Act of 2010 has 57 original co-sponsors in Congress. The Coalition for Clean and Safe Ports, a national coalition of 120 environmental, public health, labor, business, consumer advocacy, faith and community organizations, issued a statement saying the legislation would help to clean the air for 87 million residents who live in or near seaport cities.

The coalition counts in its membership the Teamsters union, which is attempting to organize thousands of harbor truck drivers nationwide. Most of the drivers that shuttle containers to and from ports are independent contractors that, by law, cannot be unionized.

If the legislation passes, ports such as Los Angeles would be allowed to include in their clean-port programs a mandate that harbor trucking companies hire drivers as direct employees, thus making it possible for unions to organize the drivers.

In fact, the Los Angeles clean-trucks plan is the subject of litigation filed by the American Trucking Associations, which is challenging the program’s employee-driver mandate. The U.S. District Court in Los Angeles is expected to rule soon on the clean-truck plan, possibly in the coming month.

The Clean and Sustainable Transportation Coalition, a transportation and shipper organization, on Thursday wrote a letter to James Oberstar, chairman of the transportation committee, urging him not to co-sponsor Nadler’s bill. The industry group said Nadler “inaccurately states that the ports do not have the ability to enforce clean-truck programs.” Clean-trucks plans in Los Angeles and neighboring Long Beach already have resulted in the introduction of almost 7,000 new, low-emission trucks in the harbor fleet.

Meanwhile, Nadler and the Coalition for Clean and Safe Ports note that a number of city administrations, including the mayors of Los Angeles; New York; Newark, N.J.; Oakland; and Seattle, strongly support the Clean Ports Act.

PHMSA Issues Hazmat Safety Advisory on Risks of PED Use While Driving - Broker Power Inc.

The Pipeline and Hazardous Materials Safety Administration is issuing a safety advisory notice to remind offerors and carriers of hazardous materials of the risks associated with the use of personal electronic devices (PEDs) by individuals operating motor vehicles that contain hazardous materials.

Source Document

CBP at JFK Seizes Heroin Embedded in Hangers - USCBP

Jamaica, N.Y. – U.S. Customs and Border Protection Officers at John F. Kennedy International Airport Monday, with the aid of a detector dog, were able to prevent heroin from being smuggled into the country in hollowed wooden clothes hangers.

The shipment arrived from Ghaziabad, India and was destined for Detroit. Detector dog “Ramchez” alerted to the shipment as possibly containing narcotics. The shipment was manifested as “garment samples personal.”

Upon examining the contents, several wooden hangers were found. The hangers were probed and found to contain a white powdery substance. The substance tested positive for heroin. A total of more than three pounds of heroin was seized with a street value of almost $56,000.

Immigration and Customs Enforcement in Detroit is pursuing an investigation on the consignee of this shipment.

“CBP’s frontline officers and canine teams at JFK Airport continue to conduct great enforcement operations. This seizure is an example of their assiduousness,” stated Robert E. Perez, director, New York field operations. “I commend our officers for their work in securing our nation’s borders.”

Bad Times Induce Faking of Even Cheap Brands - USC/ Financial Cronicle / Stephanie Clifford

In the bad US economy, even counterfeiters are trading down.

After years of knocking off products like $2,800 Louis Vuitton handbags, criminals in the United States are discovering there is money to be made in faking the more ordinary — like $295 Kooba bags and $140 Ugg boots. In California, the authorities recently seized a shipment of counterfeit Angel Soft toilet paper.

The shift in the counterfeiting industry, which costs US businesses an estimated $200 billion a year, plays to recession-weary customers looking for downmarket deals, the authorities say. And it has been fuelled in part by factories sitting idle in China. Almost 80 per cent of the seized counterfeit goods in the United States last year were produced in China, where the downturn in legitimate exports during the recession left many factories looking for goods — in some cases, any goods — to produce.

“If there is demand, there will be supply,” said John Spink, associate director of the anti-counterfeiting and product protection programme at Michigan State University. In China, he said, “It’s all of a sudden them saying, ‘We have low capacity. What can we make?”’

The answer is increasingly knockoffs of lesser-known brands, which are easy to sell on the internet, can be priced higher than obvious fakes, and avoid the aggressive programmes by the big luxury brands to protect their labels, retail companies and customs enforcement officials say.

The results: faux Samantha Thavasa bags for $113 and Ed Hardy hoodie sweatshirts for $82.50. And, bizarrely, imitations that are more expensive than the real ones: In 2007, Anya Hindmarch sold canvas totes that said “I’m Not a Plastic Bag” for $15. Now fakes are available on the Web for $99.

“If it’s making money over here in the US, it’s going to be reverse-engineered or made overseas,” said Jonathan Erece, a trade enforcement coordinator for US Customs and Border Protection in Long Beach, California. “It’s like a cat-and-mouse game.”

The traders in midprice fakes are employing another new trick: By pricing the counterfeits close to retail prices — which they can do when the original product is not too expensive — they entice unsuspecting buyers. Any savvy shopper, for example, knows a Louis Vuitton bag selling for $100 cannot be the real thing. But when NeimanMarcus.com, an authorised retailer for Kooba bags, sells them for $295, and a small website sells them for $190, a deal-hunting consumer could think she has scored a bargain. (She has not. The $190 bag is a fake.)

“If the price points are somewhat close, some consumers get duped into believing they’re getting a real product,” said Robert Barchiesi, president of the International AntiCounterfeiting Coalition, a trade group. “They might be looking for a bargain, but a bargain to buy real goods.”

The counterfeiters are also lifting photos and text from legitimate websites, further fooling some shoppers.

“The consumer is blind as to the source of the product,” said Leah Evert- Burks, director of brand protection for Ugg Australia’s parent company, Deckers Outdoor. “Counterfeit websites go up pretty easily, and counterfeiters will copy our stock photos, the text of our website, so it will look and feel like” the company site, she said.

While all of it is illegal, the authorities do not publish statistics on what brands’ products are being counterfeited. But designers and trade experts said the downmarket trend in counterfeiting became more noticeable over the past year, as counterfeiters got more inventive.

The field is big: The total value of counterfeit goods seized by US Customs officials increased by more than 25 per cent each year from 2005 to 2008, using the government’s fiscal calendar. In fiscal 2009, as imports overall dropped by 25 per cent, the value of counterfeit products seized dropped by only 4 per cent to $260.7 million.

The official statistics capture only a piece of the problem, companies and experts say, because so many counterfeiters market directly to customers on the internet and many of those sales go undetected by the authorities.

“Online is much harder” to patrol and enforce, said Todd Kahn, general counsel for Coach, the handbag and accessories company.

That is particularly true for smaller brands, as Anna Corinna Sellinger, co-founder and creative director of the New York clothing and accessories company Foley & Corinna, learned.

A couple of years ago, she began checking out which Foley & Corinna items were selling on eBay. Her city tote, which now retails for $485, was a popular item, but on some listings “there was something off — it’s a colour I never did, or a leather I never did,” she said.

As other sites proliferated, and Corinna Sellinger noticed more and more internet fakes, she stopped looking altogether. “It’s just too frustrating,” she said. “You can try to do something, but it’s so big and so fast.”

While Corinna Sellinger basically had herself and a computer to patrol for fakes, big companies use legal teams who train customs officials on the nuances of their product, monitor the web, ask internet service providers to take down copycat sites and file lawsuits against sellers. (The brands only go after sellers; the law in the United States does not prohibit consumers from buying counterfeit products.)

Ugg Australia, the popular boot brand, developed a full enforcement programme after it realised how prevalent copies of its boots were. In 2009, 60,000 pairs of boots were confiscated by customs agents globally, Evert-Burks said. In the same year, the company took down 2,500 websites selling fake products, along with 20,000 eBay listings and 150,000 listings on other trading sites like Craigslist and iOffer. That is despite the relatively low price of real Ugg boots, which cost around $140 for a basic model.

Under similar programmes, Versace won $20 million in a recent lawsuit against counterfeiters, while Gucci, Louis Vuitton and other luxury brands have been pursuing similar cases. Coach last year announced “Operation Turnlock,” in which it would file civil lawsuits against counterfeiters, and it has sued 230 times, Kahn said. At Liz Claiborne, which owns brands like Juicy Couture and Kate Spade, the company has gone after 52 websites selling counterfeits, and removed 27,000 auction listings so far this year.

The lesson for many counterfeiters has been that they have a better chance of getting away with it if they copy smaller brands like Foley & Corinna — even though Foley & Corinna, while popular with celebrities and fashion types, is not widely recognised as a status brand and its bags can be had for as little as $126 on the brand’s own website.

"Once it's out there a lot, people won't even want the real one because then they're like, "People are going to think it's fake, " Corinna Sellinger said. "It takes the product away from the designer."

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