In ruling NY N320523 (August 3, 2021), Customs and Border Protection (CBP) discussed the tariff classification of two hanging kits from China. The first hanging kit, identified as the “Home Lightweight Décor Hanging Kit/Starter Décor Kit,” consists of 43 items. This includes 28 picture hangers made of steel, 6 small poster strips which are rubber tabs with adhesives on both sides, 8 pieces of Velcro, and 1 plastic box that serves as the kit’s package. The picture hangers vary in holding capacity, being described as 10-pound, 30-pound, and 50-pound holding power nail and hook combinations. The second product is identified as the “Lightweight Hangers,” consisting of 51 items. This item includes 6 décor pins made of steel and polystyrene, 6 picture clips made of steel and polystyrene, 20 push pins made of steel and polystyrene, 2 hooks made of steel and suction cups made of silicon rubber, 16 screw hooks made of nickel-plated steel, and 1 polyproline box to hold and package the kit. Both kits are sold and marked as lightweight hanger kits for the purpose of hanging pictures, posters, and other lightweight house décor items.

CBP turned to the General Rules of Interpretation (GRIs) in order to classify the hanging kits under the Harmonized Tariff Schedule of the United States (HTSUS). GRI 1 could not be used as a basis for classification because there is no single heading in the tariff schedules that could cover all the components of the hanging kits. Alternatively, GRI 3(b) states that “mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale shall be classified as if they consisted of the material or component which gives them their essential character.” Because the kits consist of different components and no essential character for the composite good can be determined, CBP referred to GRI 3(c) – which states that “classification will be determined by the heading which occurs last in numerical order among those headings which equally merit consideration.”

For the first kit, CBP found that all 43 items perform a similar function and thus merit equal consideration. For that reason, under the application of GRI 3(c), the first kit is classified according to its steel component and would be classified under subheading 7326.90.8688, HTSUS, which provides for “other articles of iron or steel, other, other…other.” The rate of duty is 2.9% ad valorem. For the second kit, CBP found that the 51 items all performed a similar function and that, under the application of GRI 3(c), the item would be classified according to its metal component. CBP determined that the second kit would be classified under 8302.50.0000, HTSUS, which provides for “Hat racks, hat pegs, brackets and similar fixtures and parts thereof, of base metal.” The rate of duty is free.

Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheading 7326.90.8688 and 8302.50.0000, HTSUS, unless specifically excluded, are subject to an additional 25% ad valorem duty rate. As such, the chapter subheading 9903.88.03 must be reported in addition to subheading 7326.90.8688 and 8302.50.0000, HTSUS.

In a string of recent cases following the Supreme Court’s 2019 decision in Food Marketing Institute v. Argus Leader Media, multiple courts have held that a party submitting information to the government need not demonstrate it obtained an assurance of confidentiality from the government in order for the agency to justify withholding that information in response to an information request made under the Freedom of Information Act (FOIA).  (Crowell & Moring previously wrote about the new test instituted by Argus Leader here.)

FOIA Exemption 4 allows agencies to withhold documents otherwise responsive to a FOIA request if the documents contain “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.”  As discussed in our previous post analyzing the Argus Leader decision, the Supreme Court had left open the question of whether the submitting party must have received some assurance from the government that the information would be kept confidential.  Recently, in The Washington Post v. U.S. Small Business Administration, the District of Columbia District Court followed the lead of other post-Argus Leader decisions in “declin[ing] to ‘read the word confidential to impose a blanket requirement that the government provide an assurance of privacy in every case in which it asserts Exemption 4.”  This ruling follows the court’s observation in Renewable Fuels Assoc. v. U.S. Environmental Protection Agency that “no court has yet held that ‘privately held information lose[s] its confidential character for purposes of Exemption 4 if it’s communicated to the government without’ privacy assurances.”  These decisions signal that no “assurance of confidentiality” requirement currently exists.

   

Washington – August 6, 2021: Himamauli Das, senior advisor at Crowell & Moring International, LLC, has been named acting director of the Financial Crimes Enforcement Network, the anti-money-laundering unit of the U.S. Treasury Department. Das assumes the role at a time when FinCEN is moving to implement provisions of the Anti-Money Laundering Act of 2020, which became law in January of 2021 and makes the most sweeping changes to U.S. anti-money laundering laws since the USA PATRIOT Act of 2001.

Over the course of his career, Das has served in high-level government positions in in the administrations of George W. Bush, Barack Obama and Donald Trump. Most recently, he was counselor to the agency’s general counsel. He also previously served at the Treasury as assistant general counsel for international affairs and acting deputy assistant secretary for trade and investment. In addition, Das served as senior director for international trade and investment at the National Security Council, where he oversaw efforts to impose sanctions.

At C&M International, Das has advised clients on international economic policy and foreign relations, which includes trade, foreign investment, national security, export controls and sanctions, financial regulation, export promotion, climate change, sustainability and other matters.  Das also serves as senior managing director of K2 Integrity, a risk, compliance, investigations, and monitoring firm.

“We are delighted for Him as he takes on this new role protecting the financial system and ensuring robust anti-money laundering policies and procedures remain strong in the face of ongoing challenges,” said Robert Holleyman, president and CEO of Crowell & Moring International and a partner in Crowell & Moring’s International Trade, and Privacy and Cyberecurity groups. “Having had the pleasure of working with Him not only currently at C&M International, but also during his time at the White House and Treasury while I was Deputy U.S. Trade Representative, I can say with certainty that the nation and his new colleagues are fortunate to have such an outstanding public servant at the helm of FinCEN.”

“I am honored to be the new acting director of FinCEN as it carries out its important mission to maintain and protect the financial system of the United States,” Das said. “I am grateful for the support and the opportunity to work together with colleagues at C&M International over recent years.”

About Crowell & Moring LLP

Crowell & Moring LLP is an international law firm with offices in the United States, Europe, MENA, and Asia that represents clients in litigation and arbitration, regulatory and policy, and transactional and corporate matters. The firm is internationally recognized for its representation of Fortune 500 companies in high-stakes litigation and government-facing matters, as well as its ongoing commitment to pro bono service and diversity, equity, and inclusion.

About Crowell & Moring International LLC

Crowell & Moring International LLC is a global government relations, public affairs, and public policy consulting firm that helps clients shape the international regulatory landscape to support innovation, sustainable growth, and commercial competitiveness in global markets. CMI’s team of public policy experts, former trade negotiators and government officials, economists, and researchers work with clients to resolve commercial and trade challenges, clear political hurdles, and engage in the policymaking processes that affect their business goals.

Contact:

Andrew Loeb
Senior Coordinator, PR
+1 202.624.2792
Email: aloeb@crowell.com

In ruling NY N320579 (July 27, 2021), Customs and Border Protection (CBP) discussed the tariff classification of an outdoor wooden swing from India. The seat of the swing is 18” in width, 9” in depth, and 2” in thickness. It is made of Meranti wood and has no armrest, backrest, or footrest. The seat is meant to be suspended from a tree or a rafter using a 50” polyester rope with tassels, a pair of 2.25” iron S hooks, and a pair of 2.5” iron O-ring mounting hardware. The tassels from the polyester rope are 12” in length and extend from each corner of the seat base. The swing is meant to provide outdoor seating for a single individual and has a weight capacity of 264 lbs.

In its determination, CBP used the Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”). It found that because the swing set is designed to be hung, it fell within the construct of Chapter 94, Note 2(b) – which states that “articles (other than parts) referred to in headings 9401 to 9403 are to be classified are to be classified in those headings only if they are designed for placing on the floor or ground. The following are, however, to be classified in the above-mentioned headings even if they are designed to be hung, to be fixed to the wall or to stand one on the other: (b) Seats and beds.” CBP also considered the Meranti swing seat to be a composite good made up of three different components—metal from the mounting hardware, polyester textile from the rope with the tassels, and wood from the seat. Of these three components, CBP found that the wood component was “the indispensable attribute that strongly marks or serves to distinguish the structure, core or condition of the article,” and that the essential character of the seat is imparted by the wood. Thus, CBP determined that the applicable subheading for the Meranti wood swing seat was 9401.69.6031, (HTSUS), which provides for “Seats, whether or not convertible into beds, and parts thereof:  Other Seats, with wooden frames:  Other:  Other:  Chairs:  Other:  Other.” The rate of duty is free.

On July 26, 2021, U.S. Customs and Border Protection (CBP) modified its July 1998 Withhold Release Order (WRO) that originally prevented the importation of carpet and hand-knotted wool products from seven Nepalese companies. Specifically, CBP modified the WRO so that carpet and hand-knotted wool products from Annapurna Carpet Industries Pvt. Ltd. (Annapurna Carpet) would be admissible at all U.S. ports of entry. This decision came after a thorough investigation by CBP into Annapurna Carpet indicated that the company had addressed all eleven indicators of forced labor and “remediated concerns about the use of forced labor in its production process.”

The modification marks the second time CBP has modified this WRO. The first time CBP modified the WRO was in October 1998 when it allowed for the importation of carpet and hand-knotted wool products from the following three of the seven companies originally included in the WRO:

  • Norsang Carpet Industries Pvt., Ltd.,
  • Everest Carpet
  • K.K. Carpet Industries.

At that time CBP found that the three companies had fully addressed concerns regarding the use of forced labor in their supply chains. Notably, the following three companies are still impacted by the WRO:

  • Kumar Carpet Pvt.
  • Singhe Carpet Pvt.
  • Valley Carpet

WROs are issued by the U.S. government when information reasonably but not conclusively indicates goods were made in whole or in part using Forced Labor. Merchandise detained under a WRO order must be exported immediately or a substantial submission made that provides specific information showing that the goods were not made with forced labor. To obtain a release of any shipment that has been subjected to a WRO, a certificate of origin along with this detailed statement regarding the merchandise’s production and supply chain origin must be submitted to CBP. CBP makes a determination on a case-by-case basis.

The Press Release is available here.

For more information on actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

CBP Issues Withhold Release Order (WRO) on Certain Silica-Based Products from Xinjiang, PRC | International Trade Law (cmtradelaw.com)

Customs and Border Patrol (CBP) Issues Withhold Release Order (WRO) Against Chinese Fishing Vessels | International Trade Law (cmtradelaw.com)

On July 23, 2021, the U.S. Trade Representative issued a formal determination deciding not to take action against Vietnam in response to their currency practices under Section 301. The investigation, which was initiated in October of 2020 to examine Vietnam’s acts, policies, and practices related to the valuation of their currency, effectively concluded following the announcement of a currency agreement between the U.S. and Vietnam on July 19, 2021. While the investigation found evidence that Vietnam engaged in activities that warranted action under Section 301, “the determination finds that the Treasury-State Bank of Vietnam (SBV) agreement provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this time.  USTR, in coordination with Treasury, will monitor Vietnam’s implementation going forward.”

Investigation findings, as outlined by USTR:

  1. Vietnam’s acts, policies, and practices with respect to currency valuation, including excessive foreign exchange market interventions and other related actions, taken in their totality and as discussed in further detail in the Report, are unreasonable in light of U.S. and international norms that exchange rate policy should not be undertaken to gain an unfair competitive advantage in international trade, should not artificially enhance a country’s exports and restrict its imports in ways that do not reflect the underlying competitiveness, should not prevent exchange rates from reflecting underlying economic and financial conditions, and should not prevent balance of payments adjustment.
  2. Vietnam’s acts, policies, and practices that contribute to undervaluation of its currency through excessive foreign exchange market interventions and other related actions burden or restrict U.S. commerce; and, accordingly,
  3. The acts, policies, and practices under investigation are actionable under Section 301(b) of the Trade Act

The report is available here.

The Federal Register Notice is available here

Action, as outlined by the formal determination:

  • Citing the July 19, 2021, Treasury-SVB currency agreement, the determination notes that, where an agreement or measures provide a satisfactory resolution of the matter subject to investigation, USTR may determine under Section 304 that no action is appropriate.

Next Steps, as outlined by the formal determination:

  • Acknowledging that Section 304 allows USTR to defer 301 actions in favor of an alternative agreement or measures, the determination notes that, Section 306 of the Trade Act, requires USTR to monitor the agreement or measures, and may take action at a future time upon a finding that the implementation has not been satisfactory.

The full determination can be found here.

USTR’s press release can be found here.

For more information on the Vietnam and currency issues please reach out to our team and see previous posts below.

Vietnam Archives | International Trade Law (cmtradelaw.com)

In ruling NY N320422 (July 21, 2021), Customs and Border Protection (CBP) discussed the tariff classification and country of origin for marking purposes of the “Yahtzee Frenzee” game. The game consists of 20 dice, 80 playing cards, 1 round tracker card, 1 token, and game instructions. In the six-round game, each player has a set of five dice. Three cards are laid out in each round and the players must roll their dice to match the dice to the values depicted on the cards until all the cards for that round are claimed. The first player to match their dice with a card must call it out and collect their designated card. Different cards can have different values and multipliers, and in rounds 4 and 6 players have the opportunity to roll for another player’s cards. The winner of the game is the player who has the most points by the end of the 6 rounds.

CBP considered the game to be a set for tariff classification purposes and referred to General Rule of Interpretation (GRI) 3(b) to determine the essential character of the good. GRI 3(b) states that goods “shall be classified as if they consisted of the material or component which gives them their essential character.” In this case, CBP found the dice to be the component which imparts the essential character of the set. Thus, CBP determined that the applicable subheading for the “Yahtzee Frenzee” game is 9504.90.6000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Articles for arcade, table or parlor games, including pinball machines, bagatelle, billiards and special tables for casino games…parts and accessories thereof: other: chess, checkers, parchisi, backgammon, darts and other games played on boards of a special design, all the foregoing games and parts thereof (including their boards); mahjong and dominoes; any of the foregoing games in combination with each other, or with other games, packaged together as a unit in immediate containers of a type used in retail sales; poker chips and dice.” The rate of duty is free.

Additionally, CBP also determined the game’s country of origin for marking purposes. Except for the 20 dice, the game is manufactured and packaged for retail sale in Vietnam. The dice are manufactured in China and shipped to Vietnam to be packaged with the other 82 Vietnamese components, instructions, and games rule into a completed game box. Referring to 19 CFR § 134.1(b) – which states that “further work or material added to an article in another country must effect a substantial transformation in order to render such other country the ‘country of origin’ within the meaning of this part” – CBP found that the packaging of the Chinese dice with Vietnamese components in Vietnam was not sufficient to substantially transform the Chinese origin game components. As such, CBP determined that the external packaging of the game should be marked to indicate that the game contains components made in both China and Vietnam.

 

 

 

On July 19, 2021, the United States and Vietnam announced an agreement on currency practices. The announcement was made following a high-level meeting between U.S. Treasury Secretary Yellen and Vietnamese State Bank Governor Hong and in the context of rising U.S. concern over Vietnam’s foreign exchange market interventions. The agreement aims to address the currency concerns by focusing on the three primary criteria used by the Treasury Department in determining if trading partners are manipulating their exchange rates to gain an unfair competitive advantage.

Concerns, as outlined by the Treasury Department’s April 16, 2021, report to Congress:

  1. Persistent, one-sided intervention in the foreign exchange market occurs when net purchases of foreign currency are conducted repeatedly, in at least 6 out of 12 months, and these net purchases total at least 2% of an economy’s gross domestic product (GDP) over a 12-month period.
  2. A material current account surplus is one that is at least 2% of GDP over a 12-month period.
  3. A significant bilateral trade surplus with the United States is one that is at least $20 billion over a 12-month period.

Notably, Vietnam met all three criteria in the Treasury Department’s December 16, 2020, and April 16, 2021, semiannual reports to Congress.

As a result of continued U.S. pressure, including: (1) an additional Section 301 investigation launched by the U.S. Trade Representative in October of 2020; (2) a February 4, 2020, final rule allowing the Department of Commerce to consider currency undervaluation as a countervailable subsidy; and (3) the Treasury Department’s enhanced engagement process, Vietnam has agreed to address U.S. concerns.

Remedies Vietnam has agreed to, as outlined by the July 19, 2021, joint statement:

  1. Vietnam confirms that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong.
  2. The SBV is also making ongoing efforts to further modernize and make more transparent its monetary policy and exchange rate framework.
  3. In support of these efforts, the SBV will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals, while maintaining macroeconomic and financial market stability.

Reactions and Context

Treasury Department

Secretary Yellen stated the she “believed the State Bank of Vietnam’s attention to these issues over time not only will address Treasury’s concerns, but also will support the further development of Vietnam’s financial markets and enhance its macroeconomic and financial resilience.”

U.S. Trade Representative

USTR Tai stated that “In light of Treasury and the SBV having reached agreement to address the concerns regarding Vietnam’s currency policies, USTR, in coordination with Treasury, will monitor Vietnam’s implementation of its commitments and work with Vietnam to ensure that it addresses the acts, policies and practices related to the valuation of its currency that were found actionable in the Section 301 investigation.”

Commerce Department

While neither the Commerce Department nor Secretary Raimondo has issued a formal statement on the currency agreement, the development could have a material impact on Vietnamese companies subject to the Department’s Currency Rule in Countervailing Duty Investigations. The rule, which allows the Department to consider currency undervaluation as a countervailable subsidy in (CVD) investigations was first used on May 24, 2021, in an affirmative final determination in the CVD investigation of passenger vehicle and light truck tires (PVLT). Notably, the affirmative final determination took into consideration an August 2020 decision by Commerce to accept evidence related to currency undervaluation under regulations from a valuation assessment conducted by the Treasury Department.

The full Joint Statement can be found here.

USTR Tai’s statement can be found here.

For more information on the Vietnam and currency issues please reach out to our team and see previous posts below.

Vietnam Archives | International Trade Law (cmtradelaw.com)

In ruling NY N320329 (July 16, 2021), Customs and Border Protection (CBP) discussed the classification of an electric surfboard from China that is put up in a set for retail sale. The surfboard is a designed to surf in water without it needing waves or boats to pull or push it. Rather, it is propelled by a small motor mounted underneath the board on a three-foot mast and a fin that goes into the water. The entire item is made up of the surfboard, a hydrofoil (which is the mast and fin), a battery, and a motor that is controlled by a handheld remote. Additionally, the product comes with the tools and hardware to connect the mast and fin to the surfboard.

Customs defines the term “goods put up in sets for retail sale” as goods which:

  • Consist of at least two different articles which are, prima facie, classifiable in different headings;
  • Consist of products or articles put up together to meet a particular need or carry out a specific activity; and
  • Are put up in a manner suitable for sale directly to users without repacking.

To determine the essential character of the good, CBP referred to General Rule of Interpretation (GRI) 3(b), which states “in part, that goods put up in sets for retail sale shall be classified as if consisting of the component that gives them their essential character.” CBP found that in this case the surfboard imparts that essential character of the set.

CBP determined that the applicable subheading for the electric surfboard is 9506.29.0030, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Articles and equipment for general physical exercise, gymnastics, athletics, other sports…or outdoor games…; Water skis, surf boards, sailboards and other water-sport equipment; parts and accessories thereof: Other…Surf-boards.” The rate of duty is free. Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheading 9506.29.0030, 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 9506.29.0030, HTSUS.

On July 1, 2021, the Federal Trade Commission’s (FTC) finalized a new Made in USA labeling rule that becomes effective August 13, 2021. The new rule codifies the FTC’s “all or virtually all” standard for unqualified “Made in USA” claims.  The rule is intended to “crack down on marketers who make false, unqualified claims that their products are Made in the USA.” Until now, the FTC has primarily enforced Made in USA claims under its Section 5 authority, issuing hundreds of closing letters.  In recent years, the FTC has pursued penalties, for example obtaining a $1.2 million settlement in a follow-on action against a  glue manufacturer and  a consent decree resolving allegations the company falsely claimed novelty products were “Made in USA.”

The FTC conducted this rulemaking under Section 45a of the FTC Act, which authorizes the Commission to issue rules governing ‘‘Made in the U.S.A.” claims on “labels,” which the FTC defines as including advertisements disseminated electronically, including by e-mail and on websites. The new rule applies not only to product labeling, but to any “mail order catalog” or “mail order promotional material” that includes a seal, mark, tag, or stamp that labels a product as having been made in the United States. The FTC defines mail order catalogs and promotional material as “any materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased

The final Rule provides that “labels” may not contain unqualified “Made in USA” claims unless:

(1) Final assembly or processing of the product occurs in the United States;

(2) all significant processing that goes into the product occurs in the United States; and

(3) all or virtually all ingredients or components of the product are made and sourced in the United States.

The Rule does not cover qualified claims, which will remain subject to the FTC’s general authority to police deceptive and unfair claims under Section 5 of the FTC Act. The FTC has said that, even if certain components of a product cannot be sourced from the U.S., and must be imported, they still must be included in the analysis of whether a product was made in the United States.

The Rule outlines a procedure for partial or full exemption where an advertiser can sufficiently demonstrate that their Made in USA claims are not deceptive. The rule also allows the agency to seek civil penalties of up to $43,280 per violation and expands the FTC’s remedial options.

One of the FTC Commissioners, Rohit Chopra, explained that this is a restatement rule that is intended to affirm past FTC guidance and legal precedent. Apparently, the final Rule does not significantly deviate from the one proposed nor from the FTC’s 1997 Enforcement Policy on U.S. Origin Claims, and, more importantly, the Rule does not appear to impose additional requirements on advertisers.

Following the issuance of FTC’s Made in USA Rule, Agriculture Secretary Tom Vilsack released the following statement “the Federal Trade Commission took important steps to enhance its ability to enforce the Made in USA standard….USDA will complement the FTC’s efforts with our own initiative on labeling for products regulated by FSIS, an area of consumer labeling where USDA has a long tradition of protecting consumers from false and misleading labels.”