Print PDF

April 18 2012 issue

Wednesday, April 18, 2012
Sandler, Travis & Rosenberg Trade Report

Imports of “Gray Market” Goods Subject of Copyright Case Taken Up by Supreme Court

The Supreme Court will hear this fall a case whose outcome could have major implications for imports of so-called “gray market” goods, a $63 billion a year industry that offers consumers lower prices and is relied on by a number of major retailers. The court’s decision is expected to finally resolve the question of whether the so-called “first sale doctrine” in U.S. copyright law, which provides that manufacturers lose the right to control the sale of copyrighted goods once they have been sold, applies to goods originally made overseas and then imported into the U.S. The Supreme Court ruled in 1998 that this doctrine does apply to goods reimported after having been produced in the U.S. and then exported.

Sandler, Travis & Rosenberg attorney Ken Wolf explains that this case arose after a Thai national in the U.S. to pursue a doctorate degree had friends and family ship textbooks to him that he subsequently resold on the Internet. However, those books had been produced overseas by a U.S. publishing company using a wholly-owned foreign subsidiary and were intended solely for sale to non-U.S. markets. The Second Circuit Court of Appeals ruled last fall that in this case the first sale doctrine (17 USC § 109(a)) does not provide a valid exception from the ban on unauthorized imports of copyrighted materials (17 USC § 602(a)(1)) because it specifically applies to goods “lawfully made under this title” and the books at issue do not meet that description because they were manufactured overseas where the U.S. law does not apply. The Supreme Court previously considered this issue in 2010 (wti/wti.asp?pub=0&story=36032&date=&company=) but due to a 4-4 split that case was non-precedential, thus giving rise to the need for a more definitive decision.

Business groups are urging the Supreme Court to overturn the appeals court’s ruling, warning that it could have negative consequences. For one, it could limit the ability of discount retailers to obtain lower-cost goods and result in higher prices for U.S. consumers. In addition, some U.S. manufacturers could move their operations overseas in order to secure copyright protections that would enable them to exercise more control over the distribution and price of their goods in the U.S.

For more information on this case and how it could affect your business, please contact Ken Wolf.

Treasury Delays Currency Report as China Widens Trading Band for Yuan

As has become its habit, the Treasury Department announced April 13 that it will delay publication of its semiannual report to Congress on international economic and exchange rate policies of major trading partners. Treasury said the delay will allow it to assess progress on related issues at several upcoming international meetings, including the G-20 finance ministers and central bank governors meeting April 19-20, the spring meetings of the International Monetary Fund and World Bank April 20-21, and the upcoming U.S.-China Strategic and Economic Dialogue, which is expected to be held by the end of May.

Treasury remains under pressure from some quarters to use this report to name China and possibly other countries as currency manipulators. Critics allege that China’s currency remains substantially undervalued and that Beijing is deliberately keeping it that way to drive down the price of Chinese exports, which play an important role in the country’s economic growth. While Obama administration officials have continued to raise the issue with their Chinese counterparts in a variety of venues in recent months, the White House does not appear to support the punitive legislation that passed the Senate last fall and has refused to formally name China a currency manipulator, a designation that would likely have major political significance and could serve to further heighten bilateral trade tensions.

Treasury’s last exchange rate report (wti/wti.asp?pub=0&story=38901&date=&company=) cited several factors in support of its determination not to name China a currency manipulator, including that the yuan had appreciated against the dollar by nearly 12% over the past 18 months and almost 40% since 2005. In a move that could further improve that performance, China announced that as of April 17 it is allowing the value of the yuan to vary as much as 1% (up from 0.5%) from a reference rate set by the government each day.

Dual-Use Goods Export Restrictions Extended to Three Persons

The Bureau of Industry and Security has issued a final rule that, effective April 18, adds two persons in Canada and one person in Jordan to the Entity List. BIS is taking this step because these persons are knowingly and willfully engaging in the transshipment of U.S.-origin equipment subject to the Export Administration Regulations for use in Syria and Iran without the required export licenses.

For these three persons, this rule specifies a license requirement for all items subject to the EAR and establishes a license application review policy of a presumption of denial. The license requirement applies to any transaction in which items are to be exported, reexported or transferred (in-country) to such persons or in which such persons act as purchaser, intermediate consignee, ultimate consignee or end-user. In addition, no license exceptions are available for exports, reexports or transfers (in-country) to these persons.

However, shipments of items removed from eligibility for a license exception or export or reexport without a license (NLR) as a result of this rule that were en route aboard a carrier to a port of export or reexport on April 18 pursuant to actual orders for export or reexport to a foreign destination may proceed to that destination under the previous eligibility.

Click here for BIS notice

Unaffiliated NVOCCs May be Allowed to Jointly Offer Service Arrangements to Shippers

The Federal Maritime Commission is soliciting input through June 18 on ways to improve its regulations that exempt non-vessel-operating common carriers who enter into service arrangements from certain tariff filing requirements. Under those regulations an NVOCC service arrangement is a written contract, other than a bill of lading or receipt, between one or more NSA shippers and an individual NVOCC or two or more affiliated NVOCCs in which the shipper makes a commitment to provide a certain minimum quantity or portion of its cargo or freight revenue over a fixed time period and the NVOCC commits to a certain rate or rate schedule and a defined service level. An NSA shipper is a cargo owner, the person for whose account the ocean transportation is provided, the person to whom delivery is to be made, a shippers’ association or an NVOCC.

The FMC notes that when these regulations were promulgated in 2004 they did not allow two or more unaffiliated NVOCCs to jointly offer NSAs, due in part to litigation concerning whether such a situation would violate the antitrust laws. Once a federal court ruled that it would not the FMC launched a proceeding to consider expanding the exemption in this way, but no further action was taken. Earlier this month the FMC terminated that proceeding in light of its determination to conduct a full review of the NSA regulations as part of a broader retrospective review of whether certain regulations should be modified, streamlined, expanded or repealed to make them more effective or less burdensome.

Accordingly, the FMC is inviting comments and information from all members of the interested public (whether in the U.S. or elsewhere), including ocean common carriers, ocean transportation intermediaries, exporters and beneficial cargo owners, on ways to improve or change the NSA regulations. The FMC specifically requests input on (1) extending the exemption to allow two or more unaffiliated NVOCCs to jointly offer NSAs and (2) how to make the rules less burdensome and more effective in achieving the objectives of the Shipping Act.

AD Notice: Frozen Shrimp from Vietnam

Agency: ITA.
Commodity: Frozen warmwater shrimp.
Country: Vietnam.
Nature of Notice: Final results of changed circumstances review of AD duty order.
Details: C. P. Vietnam Corporation is the successor-in-interest to C. P. Vietnam Livestock Corporation for purposes of the AD cash deposit rate and will receive the same AD duty treatment.

OFAC Changing Numbering System for Export Licenses

The Office of Foreign Assets Control announced this week a change in the numbering system used by its Licensing Division that is being reflected in new licenses, denial letters and other correspondence issued after March 26, 2012. The new numbering begins with alphabetical characters designating the sanctions program (e.g., CU, IA or SU) followed by the calendar year, a unique six-digit number and a final number denoting original or amendment. For example, a new license issued pursuant to the Cuban Assets Control Regulations would bear a number styled as license no. CU-2012-XXXXXX-1 while a license issued pursuant to the Iranian Transactions Regulations would appear as license no. IA-2012-XXXXXX-1.

OFAC states that for the time being the old licensing case numbering system will not disappear completely. An amended version of a license originally issued prior to March 26, 2012, will continue to follow the original system; i.e., alphabetical characters for the sanctions program followed by the existing license number and an alphabetical character.

Foreign Regulatory Changes Could Affect Exports of Foods, Mining Equipment, Fuel Measuring Instruments, Hazardous Substances

According to the National Institute of Standards and Technology, the World Trade Organization has been notified of regulatory changes that may affect exports of specific products to the following countries. For information on how these restrictions may affect your business, contact ST&R.

Bahrain – draft technical regulation on packaging and labeling of molasses (comments due by June 12)

Bahrain – draft technical regulation on labeling of energy drinks (comments due by June 13)

Bahrain – draft technical regulation on packaging and labeling of high fructose corn syrup (comments due by June 13)

Colombia – draft update to safety regulations for underground mining work (comments due by July 2)

Mexico – June 1 effective date of amended official standard on yogurt

Mexico – March 30 publication of official standard on instruments for measuring and dispensing gasoline and other liquid fuels (standard will enter into force 210 days after publication)

Mexico – draft official standard on commercial information on the quality of agricultural and fisheries products (comments due by June 1)

Thailand – hazard classification and communication for hazardous substances (comments due by June 12)

Export Privilege Denial for Aircraft Exports to Iran Expanded

The Bureau of Industry and Security has modified a temporary denial order suspending the export privileges of Mahan Airways to add three entities in the United Kingdom and the United Arab Emirates as related persons that will also be subject to this TDO.

This order was initially issued in connection with the illegal export of aircraft to Iran and prohibits all affected persons from directly or indirectly participating in any way in any transaction involving any commodity, software or technology exported from the U.S. that is subject to the Export Administration Regulations. Moreover, no person may, directly or indirectly, export or reexport to or on behalf of any affected entity any item subject to the EAR or take any action that facilitates the acquisition or attempted acquisition by any such entity of the ownership, possession or control of any item that is subject to the EAR and has been or will be exported from the U.S.

Click here for BIS notice

New IPR Infringement Investigation of Food Waste Disposers

The International Trade Commission has instituted investigation 337-TA-838 to determine whether imports of certain under-sink mounted food waste disposers are violating Section 337 of the 1930 Tariff Act by reason of design patent infringement, registered trademark and common law trademark infringement, trade dress infringement, passing off and trademark dilution. Complainant Emerson Electric Co. requests that after this investigation the ITC issue an exclusion order, which would direct U.S. Customs and Border Protection to prohibit the entry of the infringing products into the U.S., and a cease and desist order, which would require the named respondent to cease actions that violate Section 337, including selling infringing imported articles out of U.S. inventory. The respondent in this investigation is located in the U.S.

New Jersey FTZ Seeks to Reorganize, Expanded Manufacturing Approved for Nebraska Zone

The Foreign-Trade Zones Board has received an application from the County of Mercer, grantee of FTZ 200, requesting authority to reorganize and expand this zone under the alternative site framework. The proposed service area under the ASF would be Mercer County, N.J., adjacent to the Philadelphia U.S. Customs and Border Protection port of entry. Because the ASF only pertains to establishing or reorganizing a general-purpose zone, the application would have no impact on FTZ 200’s authorized subzone. Comments on this application are due no later than June 18.

The FTZB has also approved a request for temporary/interim manufacturing authority to manufacture pharmaceutical products under FTZ procedures at the Novartis Consumer Health Inc. facilities sites 3 and 4 of FTZ 59 in Lincoln, Neb. This approval is effective from March 27, 2012, through March 27, 2014.

Ex-Im Bank Considers Financing Exports of Rail Equipment and Services to Russia

The Export-Import Bank of the United States has received an application to support the export of approximately $112 million in U.S. rail hardening and straightening equipment and services to Russia. This project will result in an increase in Russian rail production by 200,000 metric tons per year, and available information indicates that this production is for domestic consumption only. Interested parties may submit comments on this transaction no later than May 2.

Tuna Tariff-Rate Quota for 2012 Announced

U.S. Customs and Border Protection has announced the calendar year 2012 tariff-rate quota quantity for tuna fish in airtight containers classifiable under HTSUS 1604.14.22. This annual TRQ is based on the apparent U.S. consumption of such tuna during the preceding year. CBP has determined that 17,270,370 kilograms of tuna may be entered or withdrawn from warehouse for consumption during the period Jan. 1 through Dec. 31, 2011, at the 6% duty rate under HTSUS 1604.14.22. Excess amounts will be dutiable at a rate of 12.5% under HTSUS 1604.14.30.

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines