Tuesday, October 26, 2021 from 12:00 – 1:00 pm EDT (9:00 – 10:00 am PDT)

Combine the COVID-19 pandemic with the already exponential rise in e-commerce, and what do you get? Innovation? Sure. Imitation? Absolutely. With it harder than ever to touch and experience products before purchase during the pandemic, 2021 is poised to be the “Year of the Knockoff.”

Following on Crowell & Moring’s 2021: Year of the Knockoff webinar earlier this year, join us for a panel discussion with members of the fashion industry to discuss specific trends in counterfeit products, concerns all members of the industry may be facing, and strategies for countering them at the U.S. International Trade Commission and beyond.

Moderator:

  • Preetha Chakrabarti, Technology & Brand Protection Counsel, Crowell & Moring

Speakers:

  • Josh Pond, Patent & ITC Litigation Partner, Crowell & Moring
  • Howard Michael, Technology and Brand Protection Co-Chair, Crowell & Moring

Christina Mitropoulos, Director, Brand Protection & Manufacturing Initiatives from the American Apparel & Footwear Association (AAFA)

Register here.

In ruling NY N321700 (October 1, 2021), Customs and Border Protection (CBP) discussed the tariff classification of five different riflescopes from China. The first scope – identified as the GLX 2x Prism – is an optical scope designed to be affixed to the top of a firearm. The item contains a variety of glass, crystal, and plastic prisms within a cylindrical housing. On one end is a lens and on the other end is a reticle incorporating a targeting symbol and diopter to allow the user to manually focus the image. It also contains a battery powered light source that illuminates the reticle for shooting in low light situations. This scope can magnify an image to 2x and is not adjustable to the end user. The second, third, fourth, and fifth scopes are identified as the SLx 2.5x Prism, SLx 3x Prism, SLx 3x MicroPrism, and SLx 5x Prism, respectively. The four scopes contain all the same features as the first scope mentioned above; however, the second scope can magnify an image to 2.5x, the third and fourth scopes can magnify to 3x, and the fifth scope can magnify to 5x.

When considering the classification of the item, CBP noted that, when in use, the optical scopes are designed to be attached to the sight rail of a variety of different rifles. Light enters one end of the scope and is then magnified through telescopic means by the incorporated prisms and crystals at the set level. For its determination CBP concluded that the applicable subheading for the GLX 2x Prism, SLx 2.5x Prism, SLx 3x Prism, SLx 3x MicroPrism, and SLx 5x Prism is 9013.10.1000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Liquid crystal devices, not constituting articles provided for more specifically in other headings; lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere in this chapter;…: Telescopic sights for rifles: Not designed for use with infrared light.”  The general rate of duty is 14.9% ad valorem.

Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheading 9013.10.1000, HTSUS, unless specifically excluded, are subject to an additional 7.5% ad valorem duty rate. As such, the chapter subheading 9903.88.15 must be reported in addition to subheading 9013.10.1000, HTSUS.

Wednesday, October 27, 2021 from 10:00 – 11:00 am EST

China’s advance pricing arrangement (“APA”) has been a valid tax planning tool for multinational companies. In fact, the China’s State Taxation Administration has developed a productive working relationship with the IRS’s Advance Pricing and Mutual Agreement (“APMA”) program.

This webinar introduces how companies with operations in both the U.S. and China can incorporate APAs into its tax planning to reduce transfer pricing risks in China.

Speakers

  • David Blair, Partner, Washington, D.C.
  • Jackson Pai, Counsel, Los Angeles
  • Irina Pisareva, Partner, New York
  • Ye Zhou, Director, Shanghai

Register Now

After a predictable lull in corporate enforcement actions during the recent transition between administrations, and following a near quarter-century low in such actions under the previous administration, the Department of Justice (“DOJ”) announced this week that a “surge” of corporate enforcement is coming. Recent comments from DOJ officials indicate that, in addition to a significant increase in enforcement actions, updated policies and enhanced resources tailored to advance the administration’s priorities are near at hand.

Click here to continue reading the full version of this alert.

 

This is an update from our October 4, 2021 post on this topic.

On October 4, 2021, United States Trade Representative (USTR) Katherine Tai delivered a speech at the Center for Strategic and International Studies (CSIS) detailing the Biden Administration’s new strategy for managing U.S.-China trade relations. Tai announced that the USTR will restart a targeted tariff exclusion process for Section 301 duties. Today (October 6) the USTR published a request for comments regarding possible reinstatement of certain exclusions to the Section 301 tariffs visible here. The exclusion process covers 549 products for which the prior Administration granted exclusion extensions, most of which expired on December 31, 2020.  See here for the list of covered products   The USTR is seeking public comments on whether or not to further extend the exclusion from 301 tariffs on these products.  The comment period opens October 12 and closes December 1 and 11:59 PM EST and can be accessed here.

The factors the USTR will consider in deciding whether or not to extend exclusions are similar to those considered in the prior Administration, including:

  1. whether the particular product is available in the United States or other countries;
  2. how changes in the global supply chain since September 2018 or any other relevant industry developments have impacted product availability;
  3. the efforts the importers or U.S. purchases have undertaken since September 2018 to source the product from the U.S. or other countries; and
  4. domestic capacity for production in the United States.

The USTR is also considering additional criteria for granting exclusions, such as whether or not reinstating the exclusion will impact or result in severe economic harm to the commenter or to other U.S. interests, such as small businesses, employment, manufacturing, or critical supply chains. It remains to be seen if other criteria, possibly relevant to broader administration goals such as promoting efforts to advance climate change, might also be considered.

If the USTR reinstates exclusions, then such exclusions would be reinstated retroactively. Importers may seek 301 duty refunds on all subject entries that are not “liquidated” by U.S. Customs and Border Protection (CBP) at the time the importer makes a claim for a refund with CBP.  CBP typically liquidates an entry 314 days after entry, so the sooner importers file for and receive an exclusion extension the greater the potential duty refunds.

It is not clear if the USTR will open up a broader exclusion processes, but in her speech at the CSIS, Ambassador Tai stated that “we will keep open the potential for additional exclusion processes, as warranted.”  While Ambassador Tai focused her remarks on President Biden’s vision for a worker-centered trade policy for the U.S.-China trade relationship, the policy details from her speech indicated that the Biden Administration will continue utilizing key elements from the Trump Administration’s toolkit.  Ambassador Tai stated that the U.S. will continue to seek enforcement of the existing Phase One trade deal from January 2020. She made little indication that the Section 301 tariffs targeting the vast majority of Chinese imports will be removed imminently.  Crowell calculates that for List 1 USTR granted 33.8% of all exclusion requests while for the larger List 3 the number dipped to 4.9% granted. Ambassador Tai also stressed that the United States is not seeking to further inflame ties with China.

Now is a critical time for constructive dialogue between industry and government. Implementing a broader, more transparent, reasoned and fair exclusion process will help meet these goals, and reduce the harm caused by the 301 tariffs.  If the USTR implements a new exclusion processes, they should heed the critique of the prior USTR-administered process by the U.S. Government Accountability Office (GAO) readable here. It will be vital that the USTR consider the lessons learned from previous exclusion processes, and enact a framework that is objective, predictable and considers the reality of domestic manufacturing’s reliance on global supply chains.

Ambassador Tai’s full speech on US-China trade can be read here.

For video of her speech as well as the Q&A that followed, the Center for Strategic and International Studies has made available this link.

In ruling NY N321380 (September 24, 2021), Customs and Border Protection (CBP) discussed the tariff classification of hamper bags from China. The four products, described as tote bags, are designed and sized to provide storage, protection, portability, and organization for personal items – such as clothing – during travel. The outer surface of each article is constructed of a textile material that is 80% polyester and 20% cotton. The outer surface is also not coated with plastic sheeting. The four bags are identical in construction, size, and materials, with the only difference between all four being the decorative design. Each bag features two handles and measures approximately 15.9” in length, 10” in width, and 20.9” in height.

When considering the classification of the item, CBP determined that the applicable subheading for the fours tote bags is 4202.92.3131, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “travel, sports, and similar bags, with outer surface of textile material, other, other, of man-made fibers.” The rate of duty is 17.6% ad valorem. Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheading 4202.92.3131, HTSUS, unless specifically excluded, are subject to an additional 25% ad valorem duty rate. As such, the chapter subheading 9903.88.15 must be reported in addition to subheading 4202.92.3131, HTSUS.

 

On October 4, 2021, United States Trade Representative (“USTR”) Katherine Tai delivered a speech at the Center for Strategic and International Studies (CSIS) highlighting the Biden Administration’s new strategy for navigating U.S.-China trade relations. Ambassador Tai focused her remarks on President Biden’s vision for a worker-centered trade policy in the U.S.-China trade dynamic, however the policy details from the speech signal a continuance of key elements of the status-quo left behind by the Trump Administration – specifically the use of tariffs on a wide range of U.S. imports from China.

USTR will continue to seek enforcement of the Trump Administration’s Phase One deal from January 2020 and shows little indication that the Section 301 tariffs targeting the vast-majority of Chinese imports will be removed. Despite maintaining the tariffs of up to 25 percent on approximately $360 million in US imports, Ambassador Tai announced that USTR will restart a targeted tariff exclusion process for Section 301 duties.  While encouraging, this suggests only limited relief for some portion of U.S. businesses and consumers who have been hit with the existing tariffs.

In her speech, Ambassador Tai took aim at China’s economic system by saying that, “Beijing has doubled down on its state-centered economic system” and it “is increasingly clear that China’s plans do not include meaningful reforms to address the concerns that have been shared by the United States and many other countries.”   She directly tied China’s economic growth to the “expense of workers and economic opportunity here in the U.S.” and highlighted the injury to the U.S. steel injury which has seen employment drop “40 percent since 2000.” Other industries highlighted in the remarks included the extensive Chinese-state subsidies into photovoltaic solar cells and semiconductors as well as the unequal market access for U.S. agriculture.

After detailing the woes stemming from U.S.-China trade relations, Ambassador Tai shared that a priority for the Biden Administration is for the U.S. is to invest in American workers, infrastructure, R&D, clean energy technology and incentives for companies to Buy American, among others. The USTR promised to discuss China’s performance under the Phase One Agreement and directly engage with China on its industrial policies with an objective not to inflame current trade tensions. Furthermore, the U.S. will seek to work more closely with allies to construct a fair international trade system. In contrast to using language such as “decoupling”, the single phrase from Ambassador Tai that best encapsulated the new U.S. strategy is “durable coexistence.”

A notable omission from today’s presentation was any mention of a possible new Section 301 investigation targeting Chinese industrial subsidies which had been reported by multiple news outlets in September. A new investigation with additional tariffs would be certain to add fuel to the tariff-war that began in 2018. For the time being, the Biden Administration will be sticking with the status quo of tariffs. Former USTR Robert Lighthizer has criticized the idea to restart the exclusion process as he claims companies have had more than two years to reconfigure their supply chains away from China. Proponents of the exclusions point out the burden of the tariffs on US importers and consumers, a point Ambassador Tai seemed to acknowledge in the Q&A that followed her speech

Although the headline from the speech from a business perspective is the establishment of a new tariff exclusion process, Ambassador Tai offered few details about either the scope or timing. With the exception of medical products needed to fight the pandemic, the last of the Section 301 exclusions from the first exclusion-process expired in December 2020. It remains to be seen if the exclusion process will be open to all industries and how far retroactive duty relief will stretch back in time. As the multiple rounds of exclusions continued during the Trump administration, USTR became more and more selective on which products were granted exemptions. Crowell & Moring calculates that for List 1 USTR granted 33.8% of all exclusion requests while for the larger List 3 the number dipped to 4.9% granted. In the rebooted version of the Biden Administration’s exclusion process, USTR could possibly take a more lenient approach. Ambassador Tai stated that “we will keep open the potential for additional exclusion processes, as warranted.”

To view a video of the speech and the Q&A, click here for a link to the CSIS event.

Please do not hesitate to contact Crowell & Moring if you have any questions.

In ruling NY N321330 (September 22, 2021), Customs and Border Protection (CBP) discussed the tariff classification of a snake decoration from China. The product, described as the “Disney The Nightmare Before Christmas Poseable Snake,” is a hanging home decoration intended for Halloween. The shape of the snake consists of two parts – an orange 100% polypropylene hollow molded head measuring 10 inches in length by 4 ¾ inches in width, and an orange and black striped 100% polyester knotted fabric body measuring 60 inches in length by 3 inches in width. In total the assembled snake decoration measures 70 inches in length and 4 ¾ inches in width. It also features a black 100% polyester braided cord at the top of its head for hanging the snake.

When considering the classification of the item, CBP first noted that the snake would not be recognized as a symbol closely associated with Halloween. Because there are no features on it recognized as festive motifs or symbols that would limit the item’s use for only during the Halloween season, the snake would not be described as a Halloween decoration. For its classification, CBP next turned to General Rule of Interpretation (GRI) 3(c), which provides that composite goods that cannot be classified by reference to GRI 3(a) or 3(b) are to be classified under the heading that occurs last in numerical order. In this case, the composite good consists of a textile article (heading 6307) and a polypropylene (heading 3926). As such, CBP determined that the applicable subheading for the “Disney The Nightmare Before Christmas Poseable Snake” was 6307.90.9891, HTSUS, which provides for “Other made up articles, including dress patterns:  Other:  Other:  Other:  Other:  Other.”  The rate of duty will be 7% ad valorem.

Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheading 6307.90.9891, HTSUS, unless specifically excluded, are subject to an additional 7.5% ad valorem duty rate. As such, the chapter subheading 9903.88.15 must be reported in addition to subheading 6307.90.9891, HTSUS.

On September 24, 2021, the Chinese Ministry of Foreign Affairs (“MFA”) released the Fact Sheet: U.S. Interference in Hong Kong Affairs and Support for Anti-China, Destabilizing Forces (“Fact Sheet”) which sets out a comprehensive chronological list of events detailing the United States’ interference in Hong Kong. Click here to read the official translation of the full Fact Sheet.

Click here to continue reading the full version of this alert.

On September 21, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued an updated advisory on potential sanctions risks for companies that facilitate ransomware payments in response to cyberattacks, guidance on preventative measures companies can implement to mitigate such risks, and criteria that OFAC will consider as mitigating factors in any potential enforcement action. OFAC also announced that it has added SUEX OTC, S.R.O. (“SUEX”), a Russian virtual currency exchange, to its Specially Designated Nationals and Blocked Persons List (the “SDN List”), as a result of its role in facilitating ransomware payments. This represents OFAC’s first-ever designation of a virtual currency exchange.

Click here to continue reading the full version of this alert.