LEGL 4900 Test 3

Customs Modernization and Informed Compliance Act of 1993 (Mod Act)

introduced doctrine of informed compliance, which shifted to the importer a major responsibility to comply with all customs laws and regulations

Geographical Limitations

involve restricting where the licensee can sell products made with those transferred intellectual property rights within a certain geographical location

Counterpurchase Agreement

involves sale of goods or services with the condition that the seller buy other goods produced in that country

The commercial activities exception

the most difficult of FSIA exceptions to a uS investor seeking relief for expropriation

Privatization

the national sovereign transfers a govt-owned asset to private properties

Principal Use

the ordinary use to which articles of the same class and kind as those being imported are usually put and which is greater than any other single use of the article

Fluctuation risk

the possibility that the currency of the country in which the US investor has put its money will devalue against the US dollar

Transaction Value

the price actually paid or payable for goods when sold for export to the US

Profit Margin Preservation

the price or payment to the foreign investor will be adjusted periodically to maintain the same profit margin

Buy-Back Agreement

the provider of the equipment or technology used in manufacturing will receive, as its payment, a portion of the goods manufactured by the supplier's equipment or the factory in which the equipment is installed

Export controls have roots in ______. Why?

- NATO - keep sensitive military technology out of eastern countries hands - soon became more about keeping dangerous stuff out of dangerous countries more broadly

License Exception

an authorization to export without a license

Global Supply Chain

an integrated international network of logistics, communications, finance, and trade relationships designed to take a product from inception through production and delivery to customers

Specific Processing Rules

an item originates in a country if it was subjected to specific forms of manufacturing or processing in that country

Consolidated Screening List

an online compilation of prohibited "end users"

Port of Entry

any place when customs or immigration authorities permit the entry of goods or people

Franchising

arrangement in which the licensor permits the licensee to sell certain goods under the licensor's trademark or service mark under the terms of a franchising agreement

Composite goods

articles made of different materials or components

Customs Broker

authorized agent, licensed by federal law, to act for and on behalf of importers in making entry of goods

Bhopal Gas Disaster

avoided liability in US courts

ad valorem tariff rate

based on a percentage of the value of the articles imported

Cybersquatting

the registering of a domain name with the intent to profit from the goodwill of a trademark belonging to another (sell domain at inflated price) - protects URLs of trademarked company names - WIPO arbitration

Inconvertibility Risk

the risk that the government of a country with soft currency will hinder the foreign entrepreneur from trading the foreign currency back into US dollars

Special Marking Requirements for Assembled items

if the assembly amounted to a substantial transformation, the imported item may be marked as "assembled in ___" or "assembled from components of _______"

Record-keeping requirements

importers are required to keep records of all import transactions for 5 years from the date of entry and to give Customs access to those documents on demand

Putin Proxy

instead of playing him we keep one card in our deck in case we do need to pull it later

Patent

exclusive rights over an invention

Screwdriver Plants

factories where no real substantial transformation is taking place but they try to make it seem that way to trick customs

Foreign Soverign Immunities Act (FSIA)

foreign courts are generally immune from the jurisdiction of US courts except for a few exceptions

Countertrade

franchisee makes countertrade payments to franchisor with goods instead of currency

Comity

good relations

Production Assists

goods, services, or intellectual property furnished by the importer to a foreign producer, free or at a reduced price, for use in producing merchandise for import and sale in the US

Amount of Royalties

identify a royalty level that allows both licensor and licensee to optimize their respective returns

Rule of Relative Specificity

if an article can be classified under two or more headings or subheadings, it must be classified under the one that most specifically-most narrowly-describes the article with the greatest degree of accuracy and certainty

Prior Disclosure

if an importer admits its mistake and informs Customs of a possible violation before learning that it is being investigated, the penalties are limited

Priority Claim

if at least one of the applicants named in the PCT application is a national or resident of a PCT signatory, the PCT gives the application priority claim

Traditional Theory

prohibits all takings of foreign property

Import Substitution Rights

if preferential currency exchange rights aren't available, can replace foreign imports with domestic production

Arrangement with the Soft-Currency Country

- currency exchange rights - import substitution rights

Monsanto/Beyer Crops

- "natural" pest control (takes genes from bacteria that were useful that bugs don't like & put them in crops) - Roundup Ready: farmers can spray these herbicides all over their farms & it only kills the weeds

Act of State Doctrine

- A doctrine providing that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory. - for reasons of comity

Same-condition drawback

- A drawback of duties paid on imported goods that are re-exported in the "same condition" as they were imported, provided they were not significantly altered

Trade Secret

- A formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace. - especially used in tech or pharma - countries that do not produce much IP is less likely to respect it Requirements: 1. non-public 2. proprietary 3. conveys competitive advantage

Apple, Inc v. Samsung Electronics Co., Ltd.

- Apple (US) and Samsung (ROK) in patent litigation since 2011 - In US courts & Korean courts (a worldwide constellation of litigation) Background: - In 2012, a jury awarded Apple more than 1 billion in damages for infringement against Samsung. Samsung filed a motion with the court for a reduction of the jury award & a new trial, and Apple filed a motion for supplemental damages - penalties of hundreds of millions but this is small compared to their profits

Bikram Yoga

- Bikram Cloudhury claimed to have copyright on 26 yoga postures, sued competitors - US Copyright Office said yoga postures (asanas) cannot be copyrighted, upheld by courts

Kirksaeng v. John Wiley & Sons (2013)

- Cornell student buys Thai texts, resells to US students - Wiley sued for copyright infringement - SCOTUS says that's fine - "first sale" rule. The copyright owner maintains control of the first sale only

Dutiable Value

- Customs value (transaction value) of goods entered into any country - must be reported by the importer-of-record to national customs authorities at time of entry

Who controls export controls how?

- Department of Commerce - consult with other govt departments & agencies, the intelligence community, & multilateral coordinating agencies

Lacoste v. Crocodile International

- Lacoste made a jacket for his friend, Crocodile, with a crocodile on it. So many people loved it so he made his own company, Lacoste. He is doing well - A company out of Singapore, crocodile international, argued that Lacoste had not genuinely used the trade mark & that it should be revoked DECISION: The crocodile was depicted in a similar manner in the mark & other marks. In favor of Crocodile International. "It's all about the crocodile."

Foreign Trade Zones (FTZs)

- Legally defined sites (warehouses and manufacturing facilities) operated pursuant to legislation and under government license, that are legally "outside" the customs territory of the country they are in - imported goods can be brought, assembled, repackaged, and exported here without being subjected to tariffs until they released into the stream of commerce - encourage companies to build warehouses in FTZ - licensed, regulated, and bonded

Transgenic Life

- Monsanto/Bayer Crops - GloFish - Aqua-advantage salmon

Multilateral Sanctions

- Sanctions imposed by more than one country - usually more effective than sanctions that don't have universal support

Operation Mega Flex

- Sep 2020 - Customs: look at all this stuff we caught coming in from China that shouldn't be - election about to happen, not an accident that they released it - now Biden is about to stop things from leaving the country

Huawei CFO indictment

- The CFO of a major Chinese telecommunications company was accused by US of violating sanctions on Iran - She bought a bunch of computer equipment which got shipped to S. Korea, then sent to Iran, the US believed they were developing nuclear weapons - The US does not have jurisdiction over China so they waited until she got to her home in Vancouver - began process of extradition to send her to the US for trial - had to show dual criminality - what they are doing is against the law in both countries - not a crime in Canada to send stuff to Iran, so they got her for bank fraud

Electronic Export Information (EEI)

- a U.S. electronic form completed by the exporter; it contains basic information about the shipment, including the shipper, products, values, buyer, and country of destination. - required for shipments with an export license or shipments valued over $2500

Contract Manufacturing

- a business arrangement in which the production of goods is contracted or "outsourced" by one firm to a manufacturing firm, often overseas - often how production assists happen

Utility Patent

- a patent that protects the functionality of the invention - has a broad range of potential applications

Patriot Act (2001)

- act passed in response to the terrorist attacks of Sept. 11, 2001, granting broad police authority to the federal, state, and local governments to interdict, prosecute, and convict suspected terrorists - strengthened seizure powers

United States v. Mousavi (9th Cir 2010)

- addresses the issue of the D's willful intent, or willfulness, in his violation of IEEPA. FACTS: - Mousavi immigrated to the US from Iran in 1999 and had two businesses - During an audit, the IRS discovered that he had an unreported income of $45,000 from a Kuwaiti company to help him develop his business in Iran, including a development of a pipeline from Iran to Kuwait - Mousavi had no license from OFAC to conduct business with Iran - He was convicted for violating a US embargo of Iran under IEEPA & the Iranian Transaction Regulations - He argued that he did not willfully intend to violate a specific law or regulation DECISION: In order to sustain a conviction for the willful violation of IEEPA and the Iranian sanctions, the govt need not prove that the D knowingly violated a specific provision of the law, but that the D acted with knowledge that his conduct was unlawful.

Entry Process

- administrative process supervised by national customs and authority - informally referred to as "clearing customs" - purpose: to determine whether any import prohibitions/restrictions apply to the goods, whether the goods are subject to any regulations, & whether any tariffs/import duties

Automated Commercial Environment

- an online system of US Customs and Border Protection, in collaboration with the US Census Bureau - where information about the shipment is sent to various federal agencies

Boycott

- an organized refusal of one or more nations, often backed by economic sanctions, to trade with one or more other nations - often used for political reasons

Short Supply Controls

- apply to certain foodstuffs, medicines, basic metals, or natural resources - historically used for military technology - US law permits the use of these to protect the US economy from excessive foreign demand for scarce materials - France, Germany, and Czech Republic put controls on PPE

Nissan Motor Mfg. Corp., U.S.A. v. United States (US Court of Appeals 1989)

- arose out of Nissan's importation of equipment into an automotive manufacturing subzone in TN Facts: - Nissan imported production machinery for use in the subzone - the machinery was to be assembled and tested in the zone, and if it proved unsatisfactory it would be replaced, redesigned, or scrapped - Customs ruled that production equipment was not "merchandise" and was therefore dutiable - Duties were assessed & Nissan protested DECISION: Machinery entered into a FTZ for use in the manufacture & assembly of automobiles is not merchandise under the act and may not be entered duty free

Criminal Fraud

- beyond a reasonable doubt - 2-20 years imprisonment

Henrietta Lacks

- cancerous cells removed during treatment at Johns Hopkins - used to create an immortal cell line for medical research - 11,000 patents filed - Lacks has never been informed or compensated

What is the main thing customs is trying to do?

- collect money/taxes/tariffs

Dual-use items

- commercial items that may also have military or "proliferation" uses (relating to the proliferation of nuclear, chemical, or biological weapons) - ex: semiconductors, night vision, oil drilling equipment, etc

Inversions

- companies move headquarters out of US to some low tax jurisdiction & decide that they're not going to pay taxes on anything

Special Designated Nationals & Blocked Persons - recent changes

- companies trading Venezuelan oil - Banks working with Iran - Russian election hackers - Bitcoin addresses associated with NK hackers - Huawei not listed (yet) - Turkish officials recently"delisted"

CFIUS (Committee on Foreign Investment in the United States)

- created an amendment to the 1950 defense production act - can review & block any transaction with foreigner that impacts national security - China is current focus

Carl Zeiss, Inc. v. US (Fed Cir 1999)

- discusses the rule of *relative specificity* and is one of the most frequently cited cases in this area of law Background: - Zeiss imported microscopes, stands, and accessories, including a camera, all specifically tailored for neurosurgical use - Customs classified it as "stereoscopic compound microscope with a means for photographing the image." - Ziess disagreed, arguing that the article should be classified as "instruments and appliances used in medical & surgical sciences." - Ziess brought this action in the CIT. The court held for the govt & Zeiss appealed - DECISION: Affirmed for the government. Customs properly classified it as a "compound optical microscope." Items are to be construed according to their common & commercial meaning. The good meets the common dictionary meaning of compound microscope, but since it is also classifiable as a "medical appliance," the court must then decide into which category the article fits. The heading for compound microscope is narrower, more specific, and describes the article with more accuracy and certainty.

What decides what "substantially all" means for the Buy American act?

- executive orders - Eisenhower: 50% USA content & assembled in USA - Trump: 95% for iron/steel, 55% for others

Liquidation

- final computation and assessment of the applicable duty on entered goods by Customs - closes the book & makes entry complete - customs has 314 days to make final determination - importers have 180 days to challenge

Informal Consortia or Parallel Exchanges

- foreign investors form consortia to trade local soft currency - investors spread risk over a larger group with the hoping of reducing the vagaries of local bureaucracy

General Rules of Interpretation (GRI)

- found at beginning of tariff schedule, first step to determining tariff classification - requires specialized training and experience

Benefits of sanctions

- gets them to stop, possible regime change - leads to pressure from citizens of that country - don't want to go to war - showing support & accountability - deterrent (stops other small countries from doing something)

Buy American Act

- govt agencies that want to buy stuff for government procurement (military) - allowed to give preferences for people who have buy American standards

Paris Convention

- guarantees that in each signatory country, foreign trademark and patent applications from other signatory countries will receive the same treatment and priority as those from other domestic applicants - also gives a patent holder in any signatory country a right of priority

Aqua-advantage salmon

- has 3 genetic parents (2 types of salmon and an eel) - fast growth

Drawbacks of sanctions

- hurts domestic economy - may push country into arms of our adversaries - lose face if it fails - may hurt innocent citizens - commits you - difficult to enforce

Gross Negligence

- if there is clear and convincing evidence that the act or omission was done with actual knowledge or reckless disregard for the relevant facts and with disregard for the importer's obligations under the law - twice that of negligent violations

Otter Products, LLC. v. US (CIT 2015)

- illustrates problem of classifying an item that most of us know, but is not specifically described in the schedule Background: - Otter Products imported protective cases. - Customs classified the article as a "briefcase or similar container" at a 20% duty - Otterbox argued the items should be classified as "another article of plastic" at 5.3% - Otterbox protested, paid the duties, and filed with the CIT. The court agreed with Otterbox and the govt appealed DECISION: Judgement is affirmed for Otter Products. The cases cannot be classified as "briefcase or similar container" because they are not listed by name, and bc they are not "similar containers" to the other items listed therein but have different characteristics and purposes. - Importance: figure out essential function/character

Counterfeit goods

- imitation goods that are sold illegally - US businesses lose over $250 billion per year - piracy is a big business

Bureau for Industry and Security (BIS)

- implementation of additional export controls

Active investment

- investor has ownership as a branch or subsidiary - the investor can become a foreign citizen of the other country

Inconvertibility/ Nontransfer Insurance Policy

- investors can purchase to insure against hard blockages, which occur when govt passes a law that prevents conversion or transfer - type of political risk insurance

Gray market goods

- items manufactured outside a country and then imported without the consent of the trademark holder - legal to sell but intended for different geographical region - companies often make cheaper products for developing markets

Export Controls

- laws and regulations that govern the control and licensing of certain goods & technology exported from the US or released or transferred to anyone who is not a US citizen or permanent resident, whether that person is within or outside the US - focus on what the product is and where it is going - administered by commerce dept

Anti-boycott Laws

- legal responses by governments that make it unlawful for their citizens or companies to participate in a boycott

Rules of Origin

- legal rules used to determine the country of origin of imported products - found in trade agreements, national statutes, & regulations of customs authorities

Harmonized Tariff Schedule of the US (HTSUS)

- maintained by International Trade Commission - divides products into several thousand tariff classifications

Making materially false statements to customs

- material: if it refers to identity, quality, value, source, or country of origin of the merchandise, or if it affects the rate of duty charged or the item's right to be entered into the US - penalty depends on whether the offense resulted from negligence, gross negligence, or fraud

Substitution Drawback

- may be received by a US firm that imports goods and then exports other goods of the "same kind and quality" - deal with *fungible goods* or agricultural commodities (ex: wheat is the same)

Current debate: Should 3-d printing and milling software be controlled? What did Defense Distributed do?

- modular rifle, where you can switch out different parts, where none of the pieces are regarded as weapons besides the lower receiver - Defense Distributed: started selling 80% lowers & small aluminum mills where you can insert lower, download software, & turn 80% lower into a lower receiver - can create a gun in your house that is not registered (ghost gun) - their argument with the 1st amendment has been successful - this is now under EAR but ppl are challenging those rules

Entry Summary Form

- most important form - includes the item, value, and COO

What can export controls be replaced by?

- multinational treaties - allows individual countries to establish export controls as exceptions to free trade - promote cooperation for nonproliferation of weapons

Negligent Violation

- one in which the importer fails to use reasonable care, skill, and competence to ensure that all customs documents and statements are materially correct and all laws are complied with - 2x duty lost or full value - financial penalty designed to be big enough to deter you

Export Management and Compliance Program

- one of the best ways to internally ensure compliance for a company - controls and policies for exports

Export Administration Regulations (EAR) Who is it controlled by?

- originally under the authority of the Export Administration Act of 1979 - dual use items - controlled by commerce dept

Intellectual Property Rights (IPRs)

- patents, copyrights, and trademarks extended to individuals and organizations to protect their ownership of products or other creative works generated through their original ideas - increasingly becoming an extremely important asset of any large corporation

Currency Risk

- potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate two types: - fluctuation risk - inconvertibility risk

Transfer Pricing

- prices charged in sales between an organization's units - multinational corps often do this with their subsidiaries - ex: only pay $1 for motorcycle & only get taxed on market price

International Emergency Economic Powers Act

- provides the current grant of authority to the president to regulate economic and financial transactions and to place restrictions on importing or exporting during a peacetime international emergency

Drawback

- refund of duties already paid on imported goods when the goods (or other goods manufactured from the original goods) are reexported or destroyed - allow the exporter to purchase materials from low cost foreign suppliers without having to pay prohibitively high duties

Manufacturing Drawback

- refund of duties and taxes paid on merchandise that is imported, subjected to manufacture of production, and then exported within 5 years - you use imports & send exports out - most common drawback in the US designed to encourage US manufacturers to export

Made in the USA

- regulated by Federal Trade Commission - mandatory for textiles and NAFTA auto % and assembly disclosure - otherwise voluntary - "all or virtually all standard"

Sanction

- regulation that prohibits certain relationships with specified foreign countries, foreign entities, or named foreign individuals bc of threats to national security - can include a partial or total ban on trade and financial transactions, the seizure of property, freezing bank accounts, a ban on travel, etc.

Deemed Export

- release or transfer of any item subject to control, including technology or software to a foreign person in the US - may require licensing

Wassenaar Agreement

- replacement for COCOM (NATO) in 1996 - voluntary arrangement on *Export Controls for Conventional Arms and "Dual-Use Goods" and Technologies* - coordinate national export control strategies and to develop lists of items & technologies that should be controlled - includes weapons, dual-use goods, cybersecurity, and hacking software

Fundamental Research

- research in science, engineering, or mathematics, the results of which ordinarily are published and shared broadly within the research community, and for which the researchers have not accepted restrictions for proprietary or national security reasons - not within the scope of the EAR

Field of Use Limitations

- restrict the applications for which the licensee may employ the IPR - ex: licensor of laser technology only allows them to use it for medical purposes

Customs enforcement

- right to inspect, audit, 5-year record keeping

Forms of FDI

- start foreign business (ex: subsidiary) - acquire a foreign firm - joint ventures (create a new entity together with a host country or by acquiring a portion of existing local entity) - invest in corporate stock, LLCs, joint ventures

Expropriation

- taking of an isolated item of property - potential investors fear potential for government takings - Foreign Sovereign Immunities Act means foreign govts often immune from suit in US courts - gets assurance through Bilateral Investment treaties, becoming a common part of FTAs - often provide investor-state arbitration

Harmonized Commodity Description and Coding System

- tariff schedule of virtually all nations - standardizes the nomenclature used to identify, describe, and classify goods - tariff rates can be different

Country of Origin

- that country from which an imported good is said to have originated according to the specific legal rules called the rules of origin - usually last place of "substantial transformation"

Formal Entry

- the administrative process required to import goods into the customs territory of a country - most big commercial shipments

Rates of Duty

- the amount of tax to be assessed Rate 1: - a. General (tariff rate applicable to imports from countries with whom the US has normal trade relations -- MFN, PNTR) - b. Special: (tariff rate applicable to imports under one or more tariff preference programs -- FTA, trade preference program) Rate 2: countries that don't have PNTR, sanctions list

Foreign Availability

- the controlled item, or one of comparable quality, is "available-in-fact" from non-US sources in sufficient quantities so that any attempt to control for national security purposes would be ineffective

Tariff-Shift Rule

- the country of origin is the last country in which all "inputs" (raw materials, component parts, etc.) in the finished product underwent a defined change in tariff classification. - more objective & certain than other rules - alternative to substantial transformation - Europe uses this - objective

US Non-Preferential Rules of Origin

- the country of origin of an article imported into the US is the country where the article was *"wholly obtained"* - AKA where an article was wholly & completely produced or manufactured entirely from raw materials originating in that country - if an article is NOT wholly the growth, product, or manufacture of one country, then the country of origin is where the article last underwent *substantial transformation* for a new & different article of commerce

United States v. Mandel (1990 9th Cir of Appeals)

- the court had to consider whether the defendants should be given access to the records and info that the Secretary of Commerce used in deciding to place the subject items on the control list Facts: - D were charged with illegally exporting high technology equipment w/o a license - they shipped anyway - During discovery, they requested to see the records relied on by the Secretary of Commerce in deciding whether to place the subject items on the control list, and they wanted to know the factual basis for each item - the govt argued that the records were not material bc they cannot challenge the Secretary's decision to place an item on the control list - The secretary's decision was a political question not reviewable in courts DECISION: The information and factual basis relied on by the Secretary of Commerce in deciding to place an item on the control list are not subject to discovery by the D's & are not material to the defense. The secretary's decision to place an item on the list is a political question; courts will not inquire into the national security or foreign policy reasons for controls

Better Homes Plastic Corp v. United States (CIT 1996)

- the court has to determine whether a shower curtain set was classified under the heading for "curtains" or under the heading for "tableware, kitchenware, other household articles and toilet articles, of plastics." Background: - P (Better Home) imported shower curtain sets consisting of an outer textile curtain, an inner plastic liner, and plastic hooks. - The liner prevented water from escaping & was color coordinated, but the curtain was decorative & permitted the color of the plastic liner to show while in use - Customs classified it as "curtains" but Better Homes argued that it should be classified as "household and toilet article of plastic" because of the set's inner plastic liner. - DECISION: When articles are made up of component parts, or are in sets, and their parts are refereed to in two equally specific headings, then the rule of relative specificity does not apply, and *their classification must be determined by which part gives the article its essential character. In this case, the shower liner imparted the essential character to the set.*

United States v. Zhi Yong Guo (9th Cir 2011)

- the defendant attempted to argue that the export regulations were so complex & unclear that compliance was impossible Facts: - Guo was caught shipping and smuggling listed camera equipment to China - He was charged with knowingly and willfully conspiring to export, and attempting to export controlled items without a license. - Guo claimed that compliance was impossible because the regulations were too vague & too complex DECISION: The Export Administration Regulations are neither vague nor so complex that compliance is impossible. Conviction only requires that the D knew that a license was required for shipment and that he had failed to get one, not that he was able to understand all of the intricacies and details of the regulations or the statutes which gave them legal effect - Importance: why many companies, including UGA, have export control teams

Trade Creditors

- the entities that sell supplies or services to the venture - the venture should buy locally in local currency, conserving hard-currency resources for repatriation

Copyrights

- the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit - pirated/ bootlegged movies, video games, software

United States v. Golden Ship Trading Co. (CIT 2001)

- the importer was found negligent in misstating the country of origin of T-shirts, even though she based her information on assurances made by her supplier FACTS: - J Wu entered 3 shipments of t-shirts purchased from Hui, who claimed that he operated a factor in the Dominican. - Hui gave information necessary for the importer's broker to prepare the import documents & obtain a permit for entry - Wu declared the country of origin as the Dominican, but customs discovered that Hui had purchased the tshirts from China, then shipped to Dominican, where sleeves were attached & tags were put on - The t-shirts should have been subject to anti-dumping duties from China - The govt alleged that Wu acted without due care in determining the country of origin & sought penalties. Wu denied that she was negligent and claimed that Hui had duped her - DECISION: Wu did not exercise reasonable care because she failed to verify the information contained in the entry documents. Customs could assess a penalty that took into account the mitigating circumstances of the case

Who's responsibility is it to use reasonable care when finding the dutiable status? When should they do so? What is the first step?

- the importer's - the should do it in the earliest planning stages - locate the item in the tariff schedule of the country of import

Ultimate Purchaser

- the last person in the US who receives an article in the form in which it was imported - has to receive a legibly marked item to indicate the name of the country of origin - sometimes a retail customer if sold in the same state

Dutiable status What are the three factors to determine it?

- the legal status of imported goods at the time of entry for purposes of compliance with the tariff and customs laws - what tax can we charge on these goods? 1. classification (HTSUS Code) 2. customs value (what are you selling that product for?) 3. country of origin

Tariff Engineering

- the process of modifying or engineering a product prior to the importation, or importing it at an earlier stage of manufacturing, for the purpose of obtaining a lower rate of duty - USSC: an article is to be classified to its condition at the time it is imported - you can redesign products or change minor specifications, but there cannot be fraud or deception

Deemed Reexport

- the release or transfer of an item from someone who was licensed to receive it to a different foreign person - also subject to control & may require a license

Grant Back

- the return of ownership or right to use to licensor from licensee - is reasoning for licensee not adding to or making new products based on IPR

Political Risk

- the risk that profits will be affected by changes in the host country's political structure or instability - happens even in stable, developed nations

US Preferential Rules of Origin

- the rules can differ from program to program - in order to qualify for a tariff preference, an item imported into the US must be *"wholly obtained"* from a country qualifying for a trade preference - OR, if materials are from a lot of countries, then one or a combination of these apply: 1) tariff-shift rule 2) domestic/regional value content rule 3) specific processing requirements

Trading with the Enemy Act (1917)

- to restrict trade with hostile countries during times of war or during a time of emergency declared by the president - not limited to wartime use

Transportation sanctions

- travel bans - embargo on aircraft sales & leases

Heading/Subheading

- uniform across multiple countries - organized with numbers/codes so there is not a language barrier

Diversion

- unlawful transfer, transshipment, rerouting, or reexporting of controlled goods or technology from one destination to which the goods or technology were legally shipped to another destination or foreign person who has not been licensed to receive the items - you send to one country on the country chart & then they send it to a country that is not

Trade Related Aspects of Intellectual Property Rights (TRIPS)

- updates Paris and Berne Treaties - provides state - state dispute resolution - requires signatories to enact minimum substantive standards of protection and create a viable enforcement mechanism - has escape clauses for research & public welfare (can exclude from patents for morality) - regulates geographical indications (champagne)

National Security Controls

- used to prohibit the export of goods or technology that would make a significant contribution to another country's military that would be detrimental to the U.S.'s national security. - coordinated with US allies on the basis of the Wassenaar Agreement

Source of Funds

- usually where a product is sold or service is performed - important to determine tax rates and credits - more complex for IP but can be manipulated

International Traffic in Arms Regulation (ITAR) Who is it controlled by?

- weapons and military technology - controlled by state department - change from Obama administration (more controlling) to Trump

Transshipment

- when a good is from one country but acts like it is from another - hard to catch, usually caught from whistleblowing

Deferral Principal

- you don't have to pay US taxes until when you repatriate back into the firm in the US - you still have to disclose to the IRS - led to inversions

Territorial Taxes

- you only pay this country's taxes for money that you make in this country - almost every country uses this except for the US

Worldwide taxes

- you pay US taxes wherever you make the money - if you are a subsidiary, you will get double taxed, but you can get a credit on US tax rate from what they paid to other country

Fair, reasonable, and nondiscriminatory (FRAND)

-reason: Samsung was required to give a license on FRAND terms to Apple before seeking injunctive relief -can reduce risk of patent "hold-up" and perceived advantages of litigation -only applies in limited circumstances and has not curbed litigation in a meaningful way

Organization of HTSUS Example

1. Chapter: other made up textile articles (first two digits) 2. Heading: awnings and sun-blinds; tents; sails for boats; camping goods (first four digits) 3. Subheading: tents: of synthetic fibers (first six digits) 4. Tariff item: backpacking tents (first 8 digits)

Options to limit currency risks

1. Currency swaps 2. Arrangements with the soft-currency country 3. Payment and Price Adjustment Approaches 4. Structuring of Hard-Currency Obligations and Revenues 5. Countertrade 6. Counter-purchase 7. Barter 8. Buy-back 9. Informal Consortia or Parallel Exchanges 10. Inconvertibility Insurance

Process of formal entry

1. Declarations 2. Inspection 3. Pay duties 4. Released

Two-step process to classifying an article

1. Determine the meaning of specific terms in the tariff provisions (question of law) 2. See if the merchandise in question falls within the meaning of those terms (question of fact)

Key Elements of a Licensing Agreement

1. Geographical Limitations 2. Field of use 3. Output or customer restrictions 4. "Best effort" or targets 5. Turf/exclusive rights 6. Amount of royalties

Changes in Export Environment Since 2001

1. Get-tough political environment due to war on terror (gave govt far reaching powers) 2. New concerns about nuclear proliferation, spreading technology 3. China has become a global economic powerhouse 4. Russia's aggressive geopolitical & military stance

Two rules of origin

1. Non-preferential rules of origin: those applicable to imports from developed countries that receive normal tariff treatment 2. Preferential Rules of Origin: those applicable to 1) FTA/customs union countries, 2) from special tariff treatment pursuant to a trade agreement, or 3) trade preference program countries

Legal Basis for Sanctions

1. Trading with the Enemy Act (1917) 2. International Emergency Economic Powers Act 3. Patriot Act (2001)

Profiting from IP

1. can use it to make things, or license the IP to subsidiaries, clients, even competitors 2. race for patent recognition in key markets (each country has its own registration system but international law attempts harmony)

Payment and Price Adjustment Approaches

1. negotiate to receive lump-sum, hard currency payments as early as possible 2. build currency adjustment mechanisms into contractual payment terms through profit margin preservation or unitary index adjustment factors

Products not requiring marks

1. products incapable of being marked (eggs, vegetable, etc.) 2. products that cannot be marked without injury. 3. crude substances 4. articles produced more than 20 years prior to importation 5. articles imported solely for the use of importer & not for resale 6. certain products of the US that are exported & returned

What are the three broad policy reasons for controlling and licensing certain exports?

1. to protect national security 2. to promote US foreign policy 3. to prevent the short supply of essential domestic materials

Private political risk insurance

2 markets - Lloyd's and private Private has less regulation but is more expensive

How did the US used to tax corporate earnings?

35%

Currency Swaps

A broad assortment of financial contracts that may be purchased from financial intermediaries to hedge against fluctuation risk - I will agree to deliver a certain number of pesos in the future for a stated number of US dollars

Unitary Index Adjustment

A contractual provision in which the investor and the government agree on payment through a commonly accepted measure of relative currency value or national inflation

Where are the three ports in GA

ATL, Savannah, Brunswick

Profit-shifting

Allocation of income and expenses between related corporations or branches of the same legal entity (e.g. by using transfer pricing) in order to reduce the overall tax liability of the group or corporation.

Export Control Classification Number (ECCN)

An alpha-numeric code, e.g., 3A001, that describes an item and indicates licensing requirements. All ECCNs are listed in the Commerce Control List (CCL)

Energy sanctions

Ban on Russian oil & gas

What country is a big problem with copyrights?

China, but they are getting somewhat better after joining WTO & TRIPS

Trademarks

Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products

Commerce Control List

Details which products can and cannot be shipped to certain countries

New Zealand - Comite Interprofessional du Vin de Champagne (CIVC) v. Wineworths Group, Ltd (1991)

Facts - An Australian company sought to sell sparkling wine in NZ. The wine was made in Australia from grapes in Australia, but was packaged in bottles that had champagne on label - CIVC sought an injunction to prevent the Australians from passing off Australian sparking wine as wine actually produced in the region of Champagne DECISION: The court enjoined the Australian defendants from using the word champagne in NZ bc they were encroaching on the reputation & good will of the P

A. Bourjois & Co. v. Katzel (USSC 1923)

Facts: - A french cosmetic company with a business in the US sold that business to a US company, A Bourjois & Co, along with their trademark for face powder. - A B re-registered their trademark and continued with the face powder business, using the same packaging - Katzel bought a Q of the same power in France & sold it in the US closely resembling the trademark. - A B sued for copyright infringement - DECISION: A B should not be granted a preliminary injunction because the trademark is only the US

*ADC Affiliate et al v. The Republic of Hungary (ICSID 2006)*

Facts: - ADC & others invested in an expansion of an airport near Budapest - in 2002, Hungary privatized the airport and caused effective termination of the claimants' long-term leases from which they sought to recover their investment - Arbitration against Hungary ensued - after the expropriation, the airport boomed - court trying to figure out whether compensation is based on the time of taking or time of award - intl law at odds with US practice but bilateral investment treaties can control with specific language

Briggs & Stratton Corp v. Baldridge (E.D. Wis 1982)

Facts: - Arab boycott on Israel. A firm could be blacklisted if traded with Israel - Briggs manufactures internal combustion engines, but they had been blacklisted bc of dealings with Israel, and received a questionnaire - Briggs answered no the questions, but did not authenticate the questionnaire bc of the new anti-boycott regulations - Court says he can be prevented from answering those questions - The company was removed from the blacklist, but Briggs was injured economically - Briggs brought an action against the officials charged with enforcing the act and regulations DECISION: The anti-boycott regulations were upheld by the court despite the difficulties of compliance or the economic consequences that may result. The district court's decision was affirmed by the US Court of Appeals

Bank of America Nat'l Trust & Savings Assn. v. United States

Facts: - Bank of A conducted business in 3 different countries & paid all 3 of their taxes. They wanted US tax credit - The IRS disallowed a # of the credits claimed DECISION: The US Court of Claims dismissed the petition for a tax credit. You have to tax net gain, whereas other countries taxed revenue. You might not want to do businesses in these countries where they have other tax systems

In re Independent Service Organizations Antitrust Litigation CSU et al v. Xerox Corporation (Fed Cir 2000)

Facts: - CSU sued Xerox, claiming that the copier manufacturer's refusal to sell patented parts & copyrighted materials violated antitrust laws DECISION: The refusal to sell or license its patented parts did not violate anti-trust laws

Compaq v. Commissioner of Internal Revenue

Facts: - Compaq set up a PCA manufacturing subsidiary in Singapore - Compaq purchased PCAs from its subsidiary at actual market price (arms length) - IRS thought that the pricing resulted in too much profit being left in Singapore DECISION: The tax court found that they satisfied their burden of proving that the prices were consistent with arms length prices

Mobile Communication Service Inc. v. WebReg, RN (WIPO 2006)

Facts: - Mobile did business under the name "Mobilcom." The domain name in question was "mobilcom.com" which was registered by WebReg - Mobile contended that the domain name consisted entirely of its trademark & WebReg lacked any rights and was using it in bad faith - Mobile noted that WebReg offered to sell the domain name for $35,000, which WebReg argued was consistent with their pattern Decision: Since 1) the URL is identical or confusingly similar, 2) WebReg does not have rights or legitimate interests, and 3) they registered and used it in bad faith, the panel orders that the domain name be transferred to Mobile.

National Thermal Power Corp (NTPC) v. The Stinger Co. (1992)

Facts: - NTPC entered into a contract with Singer to supply equipment - A dispute arose & Singer tried to sue in London, as provided in contract, and won - Despite the contract's clear submission to ICC arbitration, the whole case should be retired in India - DECISION: The supreme court of India set aside the judgement and ordered a retrial of the entire case in India, effectively finding that if Indian law governs a contract, an international arbitration provision is void

TVBO Production Limited v. Australia Sky Net Pty Limited (Fed Ct of Australia 2009)

Facts: - TVB, based in Hong Kong, owned a Chinese language miniseries. Its subsidiary, TVBO, owned the copyright in each episode in all countries except Hong King. - TVB filed a complaint against 4 respondents, one being Australian Sky Net, that they worked together to intercept and re-broadcast the miniseries to Australia in violation of copyright regulations DECISION: The court found the defendants guilty of copyright infringement and granted TVBO its granted relief

Ukraine-related sanctions on Russia

Financial Transportation Energy

Right of Priority

For a period of one year, an application for a patent in a second member country will be treated as though it had been filed on the same date as the application made in the first member country

Tax Cuts and Jobs Act of 2017

How do we make them pay more & bring them back to the US? look at notes

Essential Character

If two or more headings or subheadings each describe only certain materials or components in composite goods, the article must be classified under the heading that describes the *material or components that give the article its essential character*

Political Risk Insurance

Insurance protecting the exporter from any political risks that arise

Substantial Transformation

Occurs when the original article loses its identity as such and is transformed into a new and different article of commerce having "a new name, character, or use" different from that of the original item - courts will look at many factors - subjective

Risk and Reward

Opportunities: - natural resources - looser regulations - cheap/ specialized labor - avoid tariffs - customer access Risks: - under the power of a foreign government - opportunity, resources, & property can be expropriated

Tied-purchase clause

Requires franchisee to buy certain goods from franchiser

Extraterritorial Jurisdiction

Should a nation be able to extend the power of its export control laws over its goods & technology once they have left its territory? - for many years the US has been trying to assert this over its goods & technology anywhere in the world - EAR: we are applicable to all items in the US and all US origin items wherever located

Language politics

Situation found in regions of a few countries where laws require that companies conduct business in a certain language

Investigations and Enforcement

The BIS may detain shipments, issue temporary denial orders to prevent illegal shipments, and monitor compliance with the conditions of individual licenses

Conscious Avoidance

The exporter purposely avoided learning the truth about an end user or destination - information that might have had a bearing on his or her license application

Trump Truman's moment during the pandemic

Trump thought the best way to get more ventilators was to threaten GM - "P" - defense production act - I will take over your company & make you make ventilators 3M: US company making masks in China - All of the sudden we need to you to make million more masks & don't sell them anywhere else

OBB Personenverkehr AG v. Sachs (USSC 2015)

USSC seemed to close the door on claims "based upon" an act in the US, where the essence of the claim -- its gravamen -- is outside the US FACTS - Sachs, a resident of CA, purchased eurail over the internet from MA based travel agent - OBB is a eurail group railway - As Sachs attempted to use her pass, Sachs fell from the platform onto the tracks. - OBB's train ran over her, causing her legs to be amputated - She sued OBB in the US Dist Ct for N. Dist of CA for five different claims - OBB claimed sovereign immunity and moved to dismiss the suit for lack of subject matter jurisdiction DECISION: - this case concerns the scope of the commercial activity exception, but the suit falls outside the commercial activity exception & is barred by sovereign immunity.

Exclusive Rights

When exploitation of a licensed IPR requires significant financial resources from a firm, they may seek exclusive rights to enhance chances of adequate return on investment; typically the licensor doesn't want to put all eggs in 1 basket though

Patent Cooperation Treaty (PCT)

a centralized utility patent application process

Soft Currency

a currency that is not easy to exchange for other currencies

Tariff Schedule

a listing of specific items, coded numerically and described by name or use

Geographical indicators

a product, particularly a wine or liquor, is marketed by reference to a geographic region

GloFish

a transgenic strain of zebrafish, contain a red fluorescent protein from sea anemones

Audit

after you've made your entry you can ask for records

Rejected Merchandise Drawback

allowed for imported merchandise that was shipped without consent, is defective, or does not conform to specifications or to samples

Madrid Protocol

allows international regulation on trademarks

Validated End-User Program

allows qualified exporters to pre-approve shipments to foreign trusted customers, business partners, and subsidiaries of American companies of certain high technology or dual use items without the need for individual export licenses

Reinsurance Treaty

an agreement among insurance companies that spreads the risk among its members

Franchise tax

can impose taxes based on the franchiser's worldwide operations even if its local operations fizzle

Passive Investment

can involve either a passive debt investment (making a loan to a foreign business) or a passive equity investment (purchasing an equity interest in the foreign business as a portfolio investment that does not allow for control of the business)

Geneva Act

central registration for design patents

The Reasonable Care Checklist

checklist to give less experienced importers a better understanding of their obligation

Informal Entry

clearing process for personal and commercial shipments valued at $2500 or less

Compound tariff rate

combination of both ad valorem and specific rates

Bad Faith

common law: intentional wrongful behavior Uniform Domain Name Dispute Resolution Policy (UDRP): includes negligence without a finding of intent

European Patent Office

common system for EU

Tax Havens

countries with a very low, or no, income tax - firms can avoid income taxes by establishing a wholly-owned, non-operating subsidiary in the country

US Countries of Origin (COO) is regulated by

customs

Berne Convention

deals with the granting of copyrights among signatory nations

INA Corp. v. Islamic Republic of Iran (1985)

demonstrates that some jurists still accept sovereign rights concepts. it is a minority view that less than full compensation could be paid in the event of any large-scale nationalization Facts: - INA International acquired 20%. of the shares of Shargh, an Iranian Insurance Co. - The investment was approved by Central Insurance of Iran by a letter to Shargh in 1977 - INA international paid 20 million rials - in 1979, claimed that all insurance enterprises were nationalized - INA sued for what it alleged to be the going value of its Shargh shares, together with interest and legal costs DECISION: the Iran-US Claims Tribunal awarded INA Corporation the amount it sought plus simple interest at 8.5% per annum from the date of nationalization

Ferrostaal Metals Corp v. US (1987 CIT)

involves steel from Japan that was galvanized in New Zealand prior to its import into the US. Facts: - P attempted to enter steel products at a port, which consisted of unpainted steel sheets that originated in Japan but had been hot-dip galvanized in NZ - P identified NZ as country of origin - Customs said the country of origin was Japan & that hot-dip galvanizing was a "finishing process", not a process that results in a substantial transformation - P disagreed Opinion: - the court found that galvanizing constitutes a chemical change - the process effects changes in name, character, and use of the processed steel sheet DECISION: Japanese steel that had been galvanized in NZ prior to its importation into the US was substantially transformed so that it had become a product of NZ & thus was not subject to voluntary restraint agreements between the US & Japan

Royalty

license fee granted by the US for IP

License

limited permission to use the US firm's trademarks, copyrights, etc in making products for sale in the vicinity of the foreign company's country

Commerce Country Chart

lists each country and indicates when an export license is required. (if X under 'reason for control'). Not all countries need an export license

WTO Agreement on Rules of Origin (1995)

long-term project to achieve standardized and simplified rules of origin

Export controls are a tricky balance between ___ and ___?

national security and trade competition

Currency Exchange Rights

negotiating with government of a soft-currency to get priority rights to currency conversion

Customs Rulings Online Search System (CROSS)

online, searchable database of agency rulings from 1989 to present where importers can use the system to find rulings on articles similar to theirs

Design Patents

patents protecting the ornamental features of an article of manufacture

Modern-traditional theory

permits takings but imposes certain requirements on the nation exercising its takings power

Insurance Syndicates

pools of money provided by investors to insure specific projects

Export Credit Agencies

promote investment from their own countries

Currency Inconvertibility (Countertrade)

reciprocal arrangement between buyer & seller for the sale of goods or services intended to minimize the outflow of foreign exchange from the buyer's country

Binding Ruling

represents the official position of Customs with respect to the specific transaction for which it was issued - ex: boxers vs. women's briefs

Commercial Invoice

required for all shipments intended for sale or commercial use in the US

Domestic or Regional Value Content Test

requires that some minimum percentage of the value of materials and direct processing operations be performed in a country in order for it to have "originated" there

Prior Approval

requiring from a govt agency for IPR transfer

Specific tariff rate

specified dollar amount per piece, or unit of weight or measure

Net book value

tax-related depreciation cost of assets

Notification-Registration Schemes

technological transfer

Informed Compliance

the "softer" mechanisms designed to place the burden of voluntary compliance on importers

The Crisis over the Soviet Natural Gas Pipeline to Europe

the Reagan's administration's attempt to assert the extraterritorial jurisdiction of US export controls failed, and they were eventually rescinded

W.S. Kirkpatrick v. Environmental Tectronics Corp. (ETC) (USSC 1990)

the USSC has narrowed the impact of the doctrine by abandoning the comity rationale FACTS: - Nigeria awarded W.S. but ETC lost the bid & investigated, finding that W.S. bribed key govt officials - The US Dept of Justice confirmed ETC's findings, and W.S. officials pled guilty to violations of the Foreign Corrupt Practices Act. - ETC then brought a civil lawsuit, but W.S. moved to dismiss the lawsuit on the basis that the Act of State Doctrine prohibited the federal court from considering the matter DECISION: Permitted ETC to proceed with its lawsuit against W.S. Act of state issues only arise when a court must decide the effect of official action by a foreign sovereign

Enforced Compliance

the active investigation of customs violations and the prosecution of violators

Export

the actual shipment or transmission out of the US in any manner, or releasing or transferring technology/ software to a foreign person in the US (one who is neither a US citizen nor permanent US resident)

Barter

the direct exchange of goods and services for other goods and services

Creeping Expropriation

the effect of laws and regulations that subject the investor to discriminatory taxes, legislative controls over management of the firm, price controls, forced employment of nationals, license cancellation, and restrictions on currency convertibility

Political Risk Analysis

the enterprise retains a firm or its own personnel to analyze a host country's risk of nationalization/expropriation, as it would study any other business problem

The Statute of Limitations

the government is barred from bringing any action to collect an import duty after 5 years

Technology

the information necessary for the development, production, use, or operation of items, and in almost any form

Foreign Direct Investment (FDI)

the investor owns and actively controls the productive assets of ongoing business concerns in a foreign country

Foreign Tax Credit

the leftover taxes to pay for the US after you pay to the country where you live

Best Efforts/Targets

the licensee will be expected to pledge to use its best efforts to develop a market for the products manufactured with the IPR & must meet specific marketing targets under pain of losing its license

Diamond v. Chakrabarty (USSC 1980)

the scope of patentable subject matter continues to be a subject of dispute FACTS: - GE engineer Chakrabarty developed genetically-modified bacteria that "eat" oil - The PTO initially rejected the patent on the grounds that living things are not patentable Was the creation of a live, human-made organism patentable? DECISION: Yes. They allowed the patenting of living organisms in the US. It is like an invention & we have been patenting plants for a long time.

Reexport

the shipment or transfer of American-controlled items or technology from one foreign country to another foreign country or foreign person

Nationalization

the taking of an entire industry or a natural resource as part of a plan to restructure the nation's economic system

Civil Customs Fraud

there is clear & convincing evidence that the importer knowingly made a materially false statement or omission

Biopiracy

they extract plants and animals indigenous to the emerging nation for research, alter the plant or animal, and then obtain patents related to this research without providing the host country with compensation or affordable access to the inventions

Output or Customer Restrictions

used to limit the amount of products the licensee can produce or limit the number of customers the licensee can sell to.

Notice of Adjustment

when Customs at the port of entry determines that additional duties are owed, this is sent to the importer

Internal Emergency Economic Powers Act

where the penalties are found for violating the EARs

Financial sanctions on Russia

~ one of the greatest area of sanctions the US can impose ~ 1. Russian banks (US can't do business with them) 2. US banks off limits 3. State owned enterprises cannot use banking systems 4. certain individuals/entities who may be helping Russia aggressively cannot use 5. Individual sanctions on Russian military command, oligarchs, & Putin proxies 6. e-payment systems