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February 27 2013 Issue

Wednesday, February 27, 2013
Sandler, Travis & Rosenberg Trade Report

Due Process Procedures Proposed for Suspension of Entry Filer Codes or ID/RLF Privileges

U.S. Customs and Border Protection is proposing to amend its regulations to set forth due process procedures the agency will follow before suspending or revoking assigned entry filer codes or discontinuing immediate delivery privileges or remote location filing privileges. Sandler, Travis & Rosenberg attorney Arthur Purcell, who successfully argued the court case that gave rise to the proposed rule, called the proposal “a good start” but noted that it only provides basic rights that customs brokers may want CBP to expand. For more information on this topic or assistance preparing comments on CBP’s proposal, which are due no later than April 29, Mr. Purcell can be reached at (212) 549-0131 or via email.

The Administrative Procedures Act provides that, with certain exceptions, the withdrawal, suspension, revocation or annulment of a license is lawful only if, before the institution of agency proceedings, the licensee has been given (1) written notice by the agency of the facts or conduct that may warrant the action and (2) opportunity to demonstrate or achieve compliance with all lawful requirements. Since participation in CBP programs involving entry filer codes, ID and RLF requires the satisfaction of certain eligibility requirements, they are akin to licenses for purposes of the APA. In Lizarraga Customs Broker v. CBP, ST&R argued that the suspension of an entry filer code is tantamount to the suspension or revocation of the broker’s license and that the resulting removal of electronic entry filing rights destroys the broker’s ability to compete with other brokers.

CBP is now proposing to amend 19 CFR parts 142 and 143 to reflect the CIT’s 2010 decision in Lizarraga. Under this rule, when CBP proposes to suspend or revoke an entry filer code or discontinue ID or RLF privileges it would have to provide importers or brokers with written notice, including a description of the facts or conduct warranting the proposed action. The importer or broker would have 10 calendar days to appeal that decision and CBP would have to issue a written decision on any such appeal within 30 working days. The entry filer code, ID or RLF could continue to be used during the appeal period and would not be suspended, revoked or discontinued unless the appeal process concluded with a decision adverse to the importer or broker.

However, port directors could immediately suspend an entry filer code or discontinue ID or RLF privileges upon written notice to the filer in the case of willfulness or in cases in which public health, interest or safety so required. The notice would have to contain a description of the facts or conduct warranting the immediate action. Filers would have ten days to appeal any such decision and CBP would have to respond to an appeal within 15 working days. Entry filer codes would remain suspended, and ID or RLF privileges would remain discontinued, unless the appeal was resolved in favor of the filer. 

CBP Rules on Origin Determination for Downloaded Software

Private sector sources have recently made available an advisory letter issued by U.S. Customs and Border Protection in June 2012 concerning the country of origin for government procurement purposes of software that is imported via digital download and not by way of physical media such as CDs. ST&R attorney Emily Simon states that this advisory letter should be of significant interest to the software industry because it offers previously unavailable insight into CBP’s thinking on a novel country of origin determination issue concerning government procurement. Of particular note is that because the country of origin is where the software build occurs, open source software can be eligible for government procurement.

The advisory letter indicates that for one of the two types of software at issue (database management software, or DM) the required research, the development of the graphical user interface, the software build (converting source code into machine-executable code) and sometimes the burning of the software onto the servers from which it is downloaded when purchased (which together account for about 75% of the workload involved in the overall manufacturing process) occur in France. The writing of the source code and the testing and validation of the final software (about 25% of the total workload) occur in China. In some cases, the burning of the software products onto the servers occurs in the U.S.

For the second type of software at issue (application integration software, or AI) the research is performed in the U.S., Ireland, France and/or Germany and the development of the GUI is done in France or Germany. Some of the source code is written in China but most is written in France or Germany and the source code programming is saved on a computer server located in France. The software build occurs in France, testing and validation occurs in Germany, and the burning of the software onto the servers occurs in either France or the U.S.

The advisory letter cites a 1982 decision by the Court of International Trade in Data General v. U.S. that the programming of a foreign programmable read-only memory chip in the U.S. substantially transformed the PROM into a U.S. article. That decision held that the essence of the PROM was its interconnections or stored memory and that the PROM had no capacity to store and retrieve information until it was programmed in the U.S. by interconnecting the discrete components in a defined logical pattern by experienced production engineers. According to CBP, the court concluded that altering the non-functioning circuitry comprising a PROM through technological expertise in order to produce a functioning read-only memory device possessing a desired distinctive circuit pattern is no less a substantial transformation than the manual interconnection of transistors, resistors and diodes upon a circuit board creating a similar pattern.

CBP's advisory letter is significant for the software industry given its emphasis on the software build process, as opposed to the source of the open code. CBP concludes that the DM software is substantially transformed in France because the primary design and software build occurs there. Further, based on the reasoning in Data General, CBP finds that the AI software is substantially transformed in the country where the software build is performed (France or Germany). The country of origin for government procurement purposes would therefore be France for the DM software and either France or Germany for the AI software.  

AD/CV Notices: Silicon, Furniture, Shrimp, Xanthan Gum, Silicomanganese

Agency: International Trade Administration.
Commodity: Silicon metal.
Country: China.
Nature of Notice: Preliminary results of administrative review of antidumping duty order for the period June 1, 2011, through May 31, 2012.
Details: Shanghai Jinneng International Trade Co. Ltd. did not have reviewable transactions during the period of review.

Agency: International Trade Administration.
Commodity: Wooden bedroom furniture.
Country: China.
Nature of Notice: Initiation of new shipper review of antidumping duty order for the period Jan. 1 through Dec. 31, 2012.
Details: Review covers Dongguan Chengcheng Furniture Co. Ltd. The ITA will instruct U.S. Customs and Border Protection to allow, at the option of the importer, the posting until the completion of this review of a bond or security in lieu of a cash deposit for entries of subject merchandise both produced and exported by Dongguan.

Agency: International Trade Administration.
Commodity: Frozen warmwater shrimp.
Country: China, Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam.
Nature of Notice: Postponement until May 28 of preliminary countervailing duty determinations.

Agency: International Trade Commission.
Commodity: Xanthan gum.
Country: Austria and China.
Nature of Notice: Scheduling of final phase of AD injury investigations.
Details: Staff report will be placed on the non-public record May 7 and a public version will be issued thereafter. A hearing will be held May 23 and requests to appear at this hearing are due by May 15. Pre-hearing briefs are due by May 14 and post-hearing briefs are due by May 30. Final comments are due by June 17.

Agency: International Trade Commission.
Commodity: Silicomanganese.
Country: India, Kazakhstan and Venezuela.
Nature of Notice: Scheduling of full sunset reviews of antidumping duty orders.
Details: Staff report will be placed on the non-public record June 20 and a public version will be issued thereafter. A hearing will be held July 18 and requests to appear at the hearing are due by July 1. Pre-hearing briefs are due by July 1 and post-hearing briefs are due by July 29. Final comments are due by Aug. 15.

Ocean Transportation Intermediary License Revocations, Reissuances, Applicants

OTI Licenses Revoked. The Federal Maritime Commission has given notice that the following ocean transportation intermediary licenses have been revoked. A revocation may occur after a license is surrendered voluntarily by the OTI or for failure to maintain a valid bond.

- license #1695F: Union Shipping Company, Miami, Fla.
- license #001945F: The I.C.E. Co. Inc., Grapevine, Texas
- license #2868F: Jarvis International Freight Inc., Houston, Texas
- license #017269N: Fastmark Corporation, Medley, Fla.
- license #017835N: Multi Link Container Line LLC, Valley Stream, N.Y.
- license #018732F: Transways Logistics International Inc., Jamaica, N.Y.
- license #020829N: Yishun Logistics (USA) Inc., Jamaica, N.Y.
- license #021023NF: Inma Export Corp., Miami, Fla.
- license #022332NF: FS Goodship LLC., Elk Grove Village, Ill.
- license #022922N: Valueway Global Logistics Inc., Flushing, N.Y.
- license #023744N: StarWin Logistics Inc., Jamaica, N.Y.
- license #023835NF: Purely Global Inc., Miami, Fla.

OTI Licenses Reissued. The Federal Maritime Commission has given notice that the following ocean transportation intermediary licenses have been reissued.

- license #017697N: IREH Logistic Services Inc., Long Beach, Calif.
- license #017719NF: Sunjin Shipping (U.S.A.) Inc., Jamaica, N.Y.
- license #018732N: Transways Logistics International Inc., Jamaica, N.Y.
- license #022246N: Pelham Services Inc., Miami, Fla.

OTI License Applicants. The Federal Maritime Commission has provided notice that the following applicants have filed applications for licenses as non-vessel-operating common carrier and/or ocean freight forwarder ocean transportation intermediaries. Persons knowing of any reason why any of these applicants should not receive a license are requested to contact the FMC.

- AC Alliance USA LLC, Wood Dale, Ill.
- Aduana International Freight Forwarding Services Inc., Harmon, Guam
- AFC LS LLC, Kennesaw, Ga.
- Air Sea Land Shipping & Moving Inc., New York, N.Y.
- Armada AVS Corp., Carson, Calif.
- Auto Export Shipping Inc. d/b/a A.E.S. Inc., Elizabeth, N.J.
- Bright Star Logistics Inc., Los Angeles, Calif.
- Darya Globeship LLC, Lake Mary, Fla.
- Delmar International (N.Y.) Inc. d/b/a Delmar International d/b/a Delmar International, Rosedale, N.Y.
- Dongbu Express U.S.A. Inc., Torrance, Calif.
- Efreightsolutions LLC, Irving, Texas
- Emarat Shipping Inc., Anaheim, Calif.
- Enter to USA LLC, Miami, Fla.
- HLI Logistics LLC, Hillside, N.J.
- Knight (USA) LLC, Eastampton, N.J.
- Milogix Inc., La Mirada, Calif.
- Newtrans Worldwide Inc., Elk Grove Village, Ill.
- Norman G. Jensen Inc. d/b/a Jensen Marine Services, Minneapolis, Minn.
- Ocean Star International Inc. d/b/a O.S.I. d/b/a International Van Lines, Coral Springs, Fla.
- Piton Logistics Inc., Fort Lauderdale, Fla.
- Polmar Cargo Inc., Doral, Fla.
- Ri-Time Group Inc., City of Industry, Calif.
- Royal Shipping Inc., Dearborn Heights, Mich.
- Tapco International Inc., Riviera Beach, Fla.
- Trans Atlantic Shipping LLC, Sorrento, Fla.
- Weida Freight System Inc., Inglewood, Calif. 

DR-CAFTA Short Supply Requests on Fleece Fabric

The Committee for the Implementation of Textile Agreements has received short supply requests alleging that the following fabrics are not available in commercial quantities in a timely manner from a supplier in the DR-CAFTA countries.

- certain piece dyed three-thread fleece fabric, classified under HTSUS 6001.21

- certain three-thread fleece fabrics with soft hand pigment, classified under HTSUS 6001.21

The petitioner is requesting that these fabrics, which will be used in the production of children’s playwear, be added to the short supply list in Annex 3.25 of DR-CAFTA in unrestricted quantities. Responses with an offer to supply these fabrics are due no later than March 7. 

Louisiana Foreign-Trade Zone Seeks to Expand

The Foreign-Trade Zones Board has received from the Port of South Louisiana, grantee of FTZ 124, a request for authority to reorganize this zone under the alternative site framework. The zone currently has a service area that includes St. Charles, St. John the Baptist, St. James, La Fourche and St. Mary parishes. The applicant is now requesting authority to expand this service area to include Tangipahoa Parish, adjacent to the Gramercy U.S. Customs and Border Protection port of entry. Comments on this request are due no later than April 29.

Foreign Regulatory Changes Could Affect Exports of Auto Parts, Appliances, Sockets

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.

Canada – Feb. 13 effective date of amended regulations on motor vehicle safety

Israel – revised mandatory standards on motor vehicle brake hose assemblies and cartridge operated hand-held tools (comments due by April 25)

Japan – revised technical regulations for electrical appliances and materials, radio equipment and drugs (comments due by April 25)

Korea – draft safety standard for automatic socket-outlet to cut-off standby power (comments due by April 25) 

Strawberries from Egypt Now Allowed Into Continental U.S.

The Department of Agriculture’s Animal and Plant Health Inspection Service has decided to begin issuing permits for the importation into the continental United States of fresh strawberry fruit from Egypt subject to the following phytosanitary measures.

- the strawberries may be imported in commercial consignments only

- each consignment must be inspected by the national plant protection organization of Egypt and accompanied by a phytosanitary certificate that includes an additional declaration stating that the consignment was inspected and found free of Chrysodeixis chalcites, Eutetrancychus orientalis and Spodoptera littoralis

- the strawberries are subject to inspection upon arrival at the U.S. port of entry 

USDA Reviewing Information Collections on Imports of Fruits, Vegetables, Fish

The Department of Agriculture’s Animal and Plant Health Inspection Service is soliciting comments through April 29 on the proposed extension of an information collection associated with the regulations that establish specific conditions for the importation of certain fruits and vegetables. These conditions involve the use of information collection activities, including the issuance of phytosanitary certificates, trapping surveys, inspections by the exporting country, labeling of boxes and recordkeeping. An additional information collection is the completion of PPQ Form 587, the Application for Permit to Import Plants or Plant Products.

APHIS has also established April 29 as the deadline for comments on the proposed extension of an information collection associated with the regulations for the importation of live fish, fertilized eggs and gametes to prevent the introduction of spring viremia of carp into the United States. In accordance with these regulations, APHIS restricts the importation of live fish, fertilized eggs and gametes of SVC-susceptible species and the importation of diagnostic specimens or research materials containing viable SVC virus. The regulations involve information collection activities including VS Form 17-129 (Application for Import or in Transit Permit (Animals, Animal Semen, Animal Embryos, Birds, Poultry or Hatching Eggs)), VS Form 16-3 (Application for Permit to Import or Transport Controlled Material or Organisms or Vectors), VS Form 17-136 (Refusal of Entry and Order to Dispose of Fish) and VS Form 17-29 (Declaration of Importation (Animals, Animal Semen, Animal Embryos, Birds, Poultry or Hatching Eggs)). Additional information collection activities include a health certificate, cleaning and disinfection certificate, and 72-hour notification to APHIS before arrival of a shipment. 

Commercial Lab and Gauger Approved

U.S. Customs and Border Protection has announced that effective Aug. 1, 2012, Camin Cargo Control Inc. of Corpus Christi, Texas, has been approved to gauge and accredited to test petroleum and petroleum products, organic chemicals and vegetable oils for customs purposes.

Amended Maritime Agreements Filed

The Federal Maritime Commission has issued notice that the following amended agreements have been filed. Interested parties may submit comments by March 11.

Caribbean Shipowners Association – The amendment would add the Cayman Islands to the geographic scope of the agreement.

EUKOR/“K” Line Space Charter Agreement – The amendment adds Korea to the geographic scope of the agreement and updates the address of Kawasaki Kisen Kaisha Ltd. 

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