In ruling NY N305275, Customs and Border Protection (CBP) determined the classification of the “Suncycle,” a pedal driven motorized personal transport vehicle equipped with a rear hitch that can tow items such as kayaks, small boats and the like. The single occupant vehicle is equipped with four wheels with either a 250 or 350 watt electric motor which is powered by solar energy. The vehicle is capable, using electric propulsion only, of travelling at a maximum of 16 mph. The Suncycle will be imported assembled.

CBP determined that the applicable subheading for the Suncycle with the 250 watt electric motor is 8711.60.0050, HTSUS, which provides for “Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side cars; side-cars: With electric motor for propulsion: Of an output not exceeding 250 W”. The rate of duty will be Free.

The applicable subheading for the Suncycle with the 350 watt electric motor is 8711.60.0090, HTSUS, which provides for “Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side cars; side-cars: With electric motor for propulsion: Other”. The rate of duty will be Free.

Products of China classified under subheading 8711.60.0050 and/or 8711.60.0090, HTSUS, unless specifically excluded, are subject to the List 2 25 percent ad valorem rate of duty. At the time of importation, 9903.88.02 must be reported, in addition to subheading 8711.60.0050 and/or 8711.60.0090, HTSUS.

According to a Federal Register Notice published on September 3, 2019, the U.S. Trade Representative (USTR) proposes to increase additional duties from 25 percent to 30 percent on the products from China currently subject to Section 301 tariff actions first taken in June, August, and September 2018, with an aggregate annual trade value of approximately $250 billion (Lists 1-3).

The USTR invites public comment on the proposed modification. There will be no hearing on this proposal. The important dates in the comment process are:

September 20, 2019: To be assured of consideration, submit written comments by September 20, 2019.

October 1, 2019: The proposed modification would be effective on October 1, 2019.

Parties can submit public comments and the public version of comments containing business confidential information (BCI) through the Federal eRulemaking Portal: http:// www.regulations.gov. The docket number is USTR–2019–0015.

A statement on the Office of the U.S. Trade Representative’s (USTR) website announced the Trump administration will add 5% to all Section 301 tariffs. List 4 duties on goods worth $300 billion will now be 15%. These tariffs are scheduled to be implemented on September 1st and December 15th.

On October 1st, the $250 million of Chinese imports currently at a 25% tariff rate will increase to 30%, following a notice and comment period. These are the goods on U.S. Lists 1-3.

Both moves are in response to Chinese retaliation to the latest (List 4) U.S. tariffs.

On August 27, 2019, the U.S. International Trade Commission (ITC) published a final rule regarding the procedures for the preparation and filing of Miscellaneous Tariff Bill (MTB) petitions and public comments. Under the MTB process, U.S. importers may petition for duty-free or reduced-duty treatment of certain imported products by submitting an MTB petition to the ITC. Typically, importers request duty relief for manufacturing raw material inputs such as chemicals, electronic goods, and proprietary parts that are not produced in the United States. However, there are no restrictions on what products and parts can be requested. In general, for an MTB petition to be successful there must not be any domestic industry opposition, and any reduction of duties resulting from the change to the duty rate for the proposed product breakout may not exceed $500,000 per annum. Importers can request an elimination or reduction of duties, depending on the annual duty savings anticipated and the $500,000 threshold.

The new rules take effect on September 26, 2019.  It is anticipated that the ITC will begin accepting MTB petitions after October 15, 2019, and petitions must be filed within 60 days of this date.  These dates will be confirmed after the ITC formally announces the commencement of the MTB petition process. Any successful petition would then need to pass Congress and be signed into law by the president before becoming effective. If signed into law, then the MTB petitions may become effective January 1, 2021, with an expiration date of December 31, 2024.

The new procedures appear more stringent than those applied during the 2016 round of MTB petitions. The petitions should include to the extent available: (1) CBP rulings issued on the product; and (2) a copy of other CBP documentation indicating where the article is classified in the HTS. Additionally, the petitions should include:

  1. an estimate of both total value and dutiable value for the product for the next five calendar years;
  2. an estimate of the share of total imports represented by the petitioner’s imports of the subject article;
  3. the names of any domestic producers of the article, if available;
  4. a certification of completeness and correctness; and
  5. an acknowledgement of the petitioner’s awareness that the information submitted is subject to ITC audit and verification.

The ITC has also indicated that there will be a clearer way to renew current MTBs. However, that information is not yet available.

In ruling NY N305154, Customs and Border Protection (CBP) determined the classification and country of origin of a Roomba® “670 Series Robotic Vacuum Cleaner.”  The item is a Wi-Fi connected vacuum robot used to clean floors. Its cleaning system allows it to loosen, lift and suction dirt, dust and hair from hard floors and carpet. The set includes the Roomba® vacuum robot, a rechargeable battery, a docking station for recharging and a power cord.

CBP determined that the applicable subheading for the item in question is 8508.11.0000, which provides for Vacuum cleaners; parts thereof: With self-contained electric motor: Of a power not exceeding 1,500 W and having a dust bag or other receptacle capacity not exceeding 20 l.  The rate of duty will be Free.

The Roomba® vacuum robot consists of approximately one thousand components, many of which are first fabricated into module subassemblies manufactured in Malaysia.  These modules will then be further fabricated into the Roomba® chassis and connected to and programmed with the Main Printed Circuit Board which contains all the required operational software, resulting in the finished Roomba®.  The manufacturing process will include the production of four separate key module subassemblies in Malaysia.  Each of these modules is a significant component of the finished Roomba®.  The modules will consist of components of several origins, with the majority being Malaysia content.  Three of the modules will be manufactured in China and shipped to Malaysia. The key modules either assembled or substantially transformed in the Malaysian factory include Main Printed Circuit Board, Wheel Modules, Cliff Harness Module and Bin Module.  These modules are fabricated into the chassis housing to create the complete Roomba® vacuum cleaner.  The chassis houses and protects all components of the Roomba® vacuum cleaner.

19 C.F.R. § 134.1(b)), defines “country of origin” as the country of manufacture, production, or growth of any article of foreign origin entering the United States.  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”.

Based on the information submitted, the materials/components and subassemblies imported into Malaysia from China where they are manufactured into different subassemblies, which are ultimately assembled into the subject Roomba®.

CBP believes that the processing performed in Malaysia with respect to Roomba®  constitutes a substantial transformation of the imported materials/components.  The manufacturing process in Malaysia transforms the Chinese originating components/materials to produce the finished product.  CBP concludes that the country of origin for the Roomba® and accessories when imported together will be Malaysia.

 

On Friday, August 23, 2019, President Trump indicated in a series of tweets that tariffs on the $250 billion of imports already in place would be raised to 30% from 25% on October 1.  President Trump also said the remaining $300 billion of imports set to go into effect on September 1 would be taxed at 15% ad valorem, rather than 10% ad valorem.

On August 23, the Customs Tariff Commission of China’s State Council announced the decision to impose approximately $75 billion in additional tariffs on the United States. Beijing’s latest retaliatory tariffs are in response to President Trump’s List 4 Trade Action of $300 billion dollars which USTR published earlier in August.

Mirroring the rollout of U.S. tariffs, the Chinese tariffs will also be installed in two batches. Starting on September 1, tariffs of 5 and 10 percent will affect 5,078 products. Tariffs of 5 and 25 percent on U.S.-made vehicles and auto parts will begin on December 15. Taking the existing duties into account, the total tariffs levied on U.S. cars will soon be as high as 50 percent. Notable U.S. products targeted by the tariffs other than autos include crude oil, soybeans, pork, chicken, wheat, sorghum, cotton and other farm products.

China will begin their second-phase of collecting tariff exemption applications on September 2 and will conclude the process on October 18. Firms in China that import, produce, or use relevant input material are eligible to apply for exclusions, including from the most recent trade action. Details for how to apply can be found here.

Unofficial translations for China’s $75 billion trade action can be accessed below:

List 1 – Effective September 1, 2019

List 2 – Effective December 15, 2019

On Wednesday, August 22nd, the United States and Mexico reached a draft agreement that suspends the ongoing antidumping investigation of fresh tomatoes from Mexico. The original antidumping case was filed in 1996 by Florida tomato growers, and since then suspension agreements have been in place to manage trade between the two countries and hold off the antidumping probe. In May, the Trump administration withdrew from a previous suspension agreement and placed a 17.5% tariff on Mexican tomatoes. This later increased in July when Commerce announced a 25% preliminary antidumping duty on imports of tomatoes from Mexico.

A final agreement can be signed on September 19 between the Department of Commerce and Mexican growers, as a 30-day notice period is required by statute. If this occurs, the ongoing antidumping investigation will be suspended by Commerce without issuing a final determination.

The draft agreement will establish minimum prices for certain types of tomatoes. This comes after complaints from U.S. growers over underpriced tomatoes from Mexico undercutting their produce, especially during their peak summer season. The draft agreement sets minimum prices for round and roma tomatoes at 31¢ per pound, stem-on tomatoes at 46¢, tomatoes on the vine at 50¢, specialty loose tomatoes at 49¢ and specialty packed tomatoes at 59¢. Organic tomatoes will be priced 40% higher than non-organics.

Commerce also announced new inspection requirements that will be set forth in the agreement, with these inspections eventually being conducted jointly by the USDA and CBP. Ross said the agreed-upon inspection process will be similar to the one used for imports of sugar, citrus and other Mexican agricultural products. The U.S. had concerns over imports of low-quality tomatoes that would further suppress prices. Several Mexican growers groups said in a statement that the agreement would allow for quality-control inspections on 92% of tomato exports at the U.S. border. However, Commerce said in a statement that the figure was inaccurate because it included tomatoes on the vine, which are excluded from the border inspection requirement, making the correct figure 66% of Mexican tomato imports.

Under the new deal, Commerce will also be allowed to audit up to 80 Mexican producers per quarter. The Mexican growers said importers will be entitled to reimbursement of duties that had been paid since May 7, once the deal enters into force on September 19. According to the Mexican government, there are some 1.5 million tomato growers in Mexico, and exports of the product to the United States are worth around $2 billion annually.

Late last month, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act). In doing so, it has become the latest state to impose additional data security and breach notification obligations on businesses handling private data. The breach notification amendments take effect on October 23, 2019, while the data security requirements take effect on March 21, 2020.

Expanded Breach Notification Requirements

The SHIELD Act revises various definitions and increases the scope of the state’s breach notification statute. The law expands the definition of “private information” to include:

  • Financial account information that can be used to access an individual’s financial account without a security code, access code, or password.
  • Biometric information used to authenticate or ascertain an individual’s identity.
  • A user name or e-mail address in combination with a password or security question and answer that would permit access to an online account.

The SHIELD Act also expands the definition of “breach of the security of the system” to include any unauthorized “access” to computerized data that compromises the security, confidentiality, or integrity of private information. Unauthorized “acquisition” of such data is no longer the sole trigger for breach notification obligations – a distinction that only a handful but growing number of states make.

In addition, the SHIELD Act expands the jurisdiction of the breach notification statute, making it applicable to any person or business that maintains private information of New York residents, regardless of whether that person or business conducts business in New York. There are, however, several exceptions to this jurisdictional reach. For example, the law adopts a risk-of-harm inquiry, where a business need not provide notification if “the exposure of private information was an inadvertent disclosure by persons authorized to access private information, and the person or business reasonably determines such exposure will not likely result in misuse of such information, or financial harm to the affected persons or emotional harm in the case of unknown disclosure of online credentials.” Moreover, businesses subject to certain breach notification requirements, such as the Gramm-Leach-Bliley Act (GLBA), the Health Insurance Portability and Accountability Act (HIPAA), and the New York Division of Financial Services Cybersecurity Regulation (NYDFS Cybersecurity Regulation), do not need to make additional notifications to affected New York residents, though such businesses still need to notify the New York attorney general and state regulators in accordance with the statute.

Data Security Requirements

In addition to expanding the state’s breach notification requirements, the SHIELD Act imposes additional data security obligations on businesses that own or license private information of New York residents. Such businesses are required to implement various administrative, technical, and physical safeguards designed to protect the security, confidentiality, and integrity of private information. The SHIELD Act lists various examples of such safeguards, including designating one or more employees to coordinate the security program, conducting risk assessments, training and managing employees, selecting vendors capable of maintaining appropriate safeguards and requiring such safeguards contractually, adjusting the security program based on business changes or new circumstances, and disposing private information within a reasonable amount of time after it is no longer needed for business purposes.

“Small businesses” are permitted to tailor their security programs based on their size, the nature of their activities, and the sensitivity of the personal information. The SHIELD Act defines a small business as any person or business with (a) fewer than 50 employees, (b) less than $3 million in gross annual revenue in each of the last three fiscal years, or (c) less than $5 million in year-end total assets. Here too, the SHIELD Act allows businesses to leverage their other regulatory obligations: Companies subject to, and in compliance with, other legal and regulatory regimes such as GLBA, HIPAA, and the NYDFS Cybersecurity Regulation are considered in compliance with this part of the SHIELD Act.

Penalties

There is no private right of action under the SHIELD Act. Nonetheless, covered businesses are subject to attorney general enforcement with civil penalties for knowing and reckless violations of the breach notification obligations of up to $20 per instance with a cap of $250,000. Violations of the reasonable safeguard requirements may carry penalties of up to $5,000 per violation. The SHIELD Act also lengthens the statute of limitations from two years to three years.

Conclusion and Takeaways

The SHIELD Act greatly increases the jurisdictional reach of New York’s breach notification statute, which now applies to entities that do not do business in the state, as long as they maintain private information of New York residents. It also expands various key definitions. Businesses across the country that maintain private information on New York residents will want to consider reviewing their security programs and incident response plans to determine if any changes are needed to comply with the SHIELD Act.

In ruling NY N305378, Customs and Border Protection (CBP) determined the country of origin of an all-in-one computer. The item in question is identified as the AIO Touch Screen (AIO), and is described as a touch screen computing device for use in commercial environments for point of sale machines and similar applications. The AIO consists of a motherboard, a LCD display module, various printed circuit board assemblies (PCBAs) such as a touch controller, two USB controllers, a keypad controller, an antenna, speaker, power supply, camera module and various cables and hardware.

The assembly of the AIO involves mounting the motherboard and control PCBAs into the enclosure, attaching the cabling, assembling the enclosure and wireless antenna module, and mounting the LCD module. The AIO then receives its firmware and operating system, is tested, and packaged for shipment. All of the parts that make up the AIO are all sourced from China and the assembly of the AIO is conducted in Taiwan.

The “country of origin” is defined in 19 CFR 134.1(b), in pertinent part, as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 notes that the finished machine consists of a number of discrete subassemblies that are previously manufactured in China. CBP believes the assembly operations performed in Taiwan, which consists of attaching, fastening, and taping and/or gluing, is not complex. The AIO is produced by joining these subassemblies together to form a touch screen computing device, but the Chinese subassemblies do not undergo a physical change as a result.

CBP determined that the assembly process performed in Taiwan does not result in a substantial transformation of the Chinese goods. The components themselves are not transformed in Taiwan into a new and different article of commerce with a name, character, and use distinct from the articles exported from China. Therefore, the AIO, is considered a product of China for origin and marking purposes at time of importation into the U.S.