Jun 2008
Airlines Plead Guilty to Price Fixing Air Cargo Rates and Agree to Pay Criminal Fines of More than $500 Million
06/30/08 10:54 PM Filed in: DOJ
| Enforcement
On June 26, 2008, the United
States Department of Justice (DOJ) announced that five major international
airlines (Air France, Cathay Pacific, KLM Royal Dutch Airlines,
Martinair, and SAS) have agreed to each plead guilty and pay
criminal fines totaling $504 million for participating in a
multi-year conspiracy to fix prices for air cargo rates. Of the
total, Air France-KLM, which now operates under common ownership by
a single holding company, has agreed to pay a $350 million criminal
fine, the second highest ever levied in a criminal antitrust
prosecution, DOJ states.
According to the charges filed on June 26, 2008, the airlines each engaged in a conspiracy to suppress and eliminate competition by fixing the cargo rates charged to customers for international air shipments. The companies have each agreed to cooperate in the DOJ's ongoing investigation.
The DOJ stated:
According to the charges filed on June 26, 2008, the airlines each engaged in a conspiracy to suppress and eliminate competition by fixing the cargo rates charged to customers for international air shipments. The companies have each agreed to cooperate in the DOJ's ongoing investigation.
The DOJ stated:
The plea agreements are subject to court approval. Along with Air France-KLM’s $350 million fine, Cathay has agreed to pay a $60 million criminal fine, Martinair has agreed to pay a $42 million criminal fine, and SAS has agreed to pay a $52 million criminal fine. If the court accepts the plea agreements, it would bring the total fines imposed in the Antitrust Division’s investigation in the air transportation industry to more than $1.27 billion, marking the highest total amount of fines ever imposed in a criminal antitrust investigation.
Applications for EU Duty Suspensions Due Mid-July
Are you importing products into
the EU and paying duties? It may be possible to have the duties
suspended on a particular product if the EU Commission approves
your application for duty suspension. The EU Commission will allow
the suspension of customs duties to companies that apply for the
relief on the basis of a valid economic argument as to why the
import of duty-suspended goods will benefit and stimulate economic
activity in the EU Community.
The EU Commission accepts duty suspension applications twice annually. The application process itself takes 12 months to complete. The current deadline for duty suspension applications is July 25, 2008 for applications that would take effect on July 1, 2009.
All current duty suspensions are listed by the EU Commission by EU Regulation. Normally, if a company succeeds in getting a duty suspension on a product, it remains on the list unless an objection is lodged at some point in the future.
Duty suspensions will not be granted where:
If you are interested in learning more about obtaining a duty suspension in the EU, please contact Global Trade Expertise or Eamonn Flood (eamonn@crannaghtrade.eu) or Carol Lynch (carol.lynch@crannaghtrade.eu) of Crannagh & Co. (www.crannaghtrade.eu).
The EU Commission accepts duty suspension applications twice annually. The application process itself takes 12 months to complete. The current deadline for duty suspension applications is July 25, 2008 for applications that would take effect on July 1, 2009.
All current duty suspensions are listed by the EU Commission by EU Regulation. Normally, if a company succeeds in getting a duty suspension on a product, it remains on the list unless an objection is lodged at some point in the future.
Duty suspensions will not be granted where:
- Identical, equivalent or substitute products are manufactured in sufficient quantities within the Community
- The goods in question are finished products intended for sale to end-consumers without further substantial processing or without forming an integral part of a bigger final product for whose functioning they are necessary
- The goods are covered by an exclusive trading agreement
- A suspension would entail a conflict with any other Community policy
- Uncollected customs duties of the goods in question is estimated to be less than ECU 20,000 per year
If you are interested in learning more about obtaining a duty suspension in the EU, please contact Global Trade Expertise or Eamonn Flood (eamonn@crannaghtrade.eu) or Carol Lynch (carol.lynch@crannaghtrade.eu) of Crannagh & Co. (www.crannaghtrade.eu).
Laptop Searches Criticized at Senate Hearing
On June 25, 2008, the Senate
Judiciary Committee (Subcommittee on the Constitution, Civil Rights
and Property Rights) held a hearing on "Laptop Searches and Other
Violations of Privacy Faced by Americans Returning from Overseas
Travel." At the hearing, advocacy groups and some legal experts
stated that it was unreasonable for federal officials to search the
laptops of U.S. citizens when returning from traveling
abroad.
In April, the U.S. Court of Appeals for the Ninth Circuit ruled that U.S. Customs and Border Protection (CBP) could conduct searches of electronic devices such as laptops without reasonable suspicion. Specifically, the court ruled that border control agents who found child porn on a traveler's laptop didn't violate the man's right to be free from unreasonable searches. Judge Diarmuid O'Scannlain wrote, "We are satisfied that reasonable suspicion is not needed for customs officials to search a laptop or other personal electronic storage devices at the border." In 2005, the U.S. Court of Appeals for the Fourth Circuit upheld computer searches by border guard when a man drove from Canada to the U.S. with child porn on his computer.
As reported by the New York Times:
In April, the U.S. Court of Appeals for the Ninth Circuit ruled that U.S. Customs and Border Protection (CBP) could conduct searches of electronic devices such as laptops without reasonable suspicion. Specifically, the court ruled that border control agents who found child porn on a traveler's laptop didn't violate the man's right to be free from unreasonable searches. Judge Diarmuid O'Scannlain wrote, "We are satisfied that reasonable suspicion is not needed for customs officials to search a laptop or other personal electronic storage devices at the border." In 2005, the U.S. Court of Appeals for the Fourth Circuit upheld computer searches by border guard when a man drove from Canada to the U.S. with child porn on his computer.
As reported by the New York Times:
“If you asked most Americans whether the government has the right to look through their luggage for contraband when they are returning from an overseas trip, they would tell you ‘yes, the government has that right,’ ” Senator Russ Feingold, Democrat of Wisconsin, said Wednesday at the hearing of a Senate Judiciary subcommittee.
“But,” Mr. Feingold continued, “if you asked them whether the government has a right to open their laptops, read their documents and e-mails, look at their photographs and examine the Web sites they have visited, all without any suspicion of wrongdoing, I think those same Americans would say that the government absolutely has no right to do that.”
First Sale Valuation to Remain Permissible Through At Least 2010 & "10+2" Rule May Be Finalized by End of Summer
On June 24, 2008, U.S. Customs and
Border Protection (CBP) Commissioner Ralph Basham testified before
the Senate Finance Committee regarding CBP's trade functions and
enforcement actions. (Basham's written testimony can be
found here.) Of great interest to the trade
community was Basham's remarks regarding first sale
valuation.
Specifically, Basham stated that in January of this year, CBP published in the Federal Register a Notice of Proposed Interpretation seeking public comment of the phrase "sold for exportation to the United States" for purposes of applying the transaction value method of valuation in a series of sales scenario. Under the proposed interpretation, transaction value would be based on the price paid by the buyer in the U.S. to the foreign manufacturer, which is a departure from the current application of the valuation statute, which allows importers to use the price paid by an intermediary to the foreign manufacturer as the basis for transaction value. Basham noted that the proposed re-interpretation of the valuation statute that would disallow "first sale" valuation has been "controversial."
Basham noted that the recently passed Farm Bill (Food, Conservation and Energy Act of 2008 (Pub. L. No. 110-246)) requires CBP to collect valuation information from importers and included a sense of Congress that CBP should not publish a final interpretative rule on this issue before January 1, 2011. He then stated that, "CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with Congress and the private sector, or without the explicit approval of the Secretary of Treasury." With respect to first sale, Basham stated:
Other items of interest include the status of the proposed "10+2" rule or Importer Security Filing, which requires importers to provide CBP with 10 data elements plus 2 data elements from carriers electronically at least 24 hours prior to vessel loading at foreign ports of origin. The proposed ten data elements are:
The two additional elements required from carriers are: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the United States; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).
It has been reported that in response to questioning by the committee, Basham stated that CBP hopes to submit the rule to the Office of Management and Budget (OMB) by the end of the week and have it ready for publication by the end of the summer.
Specifically, Basham stated that in January of this year, CBP published in the Federal Register a Notice of Proposed Interpretation seeking public comment of the phrase "sold for exportation to the United States" for purposes of applying the transaction value method of valuation in a series of sales scenario. Under the proposed interpretation, transaction value would be based on the price paid by the buyer in the U.S. to the foreign manufacturer, which is a departure from the current application of the valuation statute, which allows importers to use the price paid by an intermediary to the foreign manufacturer as the basis for transaction value. Basham noted that the proposed re-interpretation of the valuation statute that would disallow "first sale" valuation has been "controversial."
Basham noted that the recently passed Farm Bill (Food, Conservation and Energy Act of 2008 (Pub. L. No. 110-246)) requires CBP to collect valuation information from importers and included a sense of Congress that CBP should not publish a final interpretative rule on this issue before January 1, 2011. He then stated that, "CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with Congress and the private sector, or without the explicit approval of the Secretary of Treasury." With respect to first sale, Basham stated:
-
The Farm Bill instructs CBP to require each importer of merchandise to declare whether the transaction value of the imported merchandise has been determined on the basis of a first or earlier sale.
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CBP is required to submit a report that includes the number of importers that declare transaction value on the basis of first sale, the tariff classification of such merchandise and the value of the merchandise, on a monthly basis to the United States International Trade Commission (USITC).
-
We have had preliminary discussions with the trade and are examining the most efficient means of collecting the required information while minimizing the impact on the trade.
-
The Farm Bill also includes a sense of Congress that CBP should not proceed with its proposed interpretative rule until January 1, 2011 and upon certain coordination and consultation with Congress, the Commercial Operations Advisory Committee, the International Trade Commission, the Secretary of Treasury, and the trade. CBP does not intend to proceed further on the proposal on first sale before January 1, 2011. Nor will we change the current interpretation with respect to first sale without consulting with the Congress and the private sector, or without the explicit approval of the Secretary of Treasury.
Other items of interest include the status of the proposed "10+2" rule or Importer Security Filing, which requires importers to provide CBP with 10 data elements plus 2 data elements from carriers electronically at least 24 hours prior to vessel loading at foreign ports of origin. The proposed ten data elements are:
- Manufacturer (or supplier) name and address
- Seller (or owner) name and address
- Buyer (or owner) name and address
- Ship-to name and address
- Container stuffing location
- Consolidator (stuffer) name and address
- Importer of Record number/foreign trade zone (FTZ) applicant identification number
- Consignee number(s)
- Country of origin
- Commodity Harmonized Tariff Schedule number
The two additional elements required from carriers are: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the United States; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).
It has been reported that in response to questioning by the committee, Basham stated that CBP hopes to submit the rule to the Office of Management and Budget (OMB) by the end of the week and have it ready for publication by the end of the summer.
USTR Initiates GSP Review for Vietnam
On June 20, 2008, the United
States Trade Representative (USTR) announced in the
Federal Register the initiation of a review to
consider designating the Socialist Republic of Vietnam as a
beneficiary developing country (BDC) for purposes of the
Generalized System of Preferences
(GSP) program and
solicits public comments on whether Vietnam meets eligibility
requirements for designation as a BDC. Comments are due by Monday,
August 4, 2008 and must be submitted in accordance with the
requirements set out in the notice.
CBP Develops New Online Trade Violation Reporting System
06/18/08 10:53 AM Filed in: CBP
| Enforcement
On June 17, 2008, U.S. Customs and
Border Protection (CBP) announced
the development of a
new online trade violation reporting system called
eAllegations
to provide concerned
members of the public a means to confidentially report suspected
trade violations to CBP. eAllegations is open for public use as of
June 17, 2008.
CBP states that eAllegations is not intended to be used for reporting security issues such as terrorism or weapons of mass destruction, but rather is intended for trade violations such as misclassification, under valuation, country of origin markings, health and safety violations, intellectual property rights violations, and/or textile or other trade violations. CBP provided the following example --
To report a possible violation, the following information must be submitted via eAllegations: the type of trade violation, description of what has occurred, the products or goods involved in the violation, and the alleged violator's name and/or company. Other information may be provided on a voluntary basis.
CBP has provided frequently asked questions (FAQ) here.
CBP states that eAllegations is not intended to be used for reporting security issues such as terrorism or weapons of mass destruction, but rather is intended for trade violations such as misclassification, under valuation, country of origin markings, health and safety violations, intellectual property rights violations, and/or textile or other trade violations. CBP provided the following example --
eAllegations will provide a means to report a possible violator who is importing substandard steel, claiming that it is of a higher grade, therefore creating a potential safety issue. Other possible violations that can be reported include a company claiming a lower than actual value on a product they are importing to pay less duty or a company who is importing textiles from one country to avoid quota restrictions.
To report a possible violation, the following information must be submitted via eAllegations: the type of trade violation, description of what has occurred, the products or goods involved in the violation, and the alleged violator's name and/or company. Other information may be provided on a voluntary basis.
CBP has provided frequently asked questions (FAQ) here.
BIS Announces Antiboycott Online Training
On June 17, 2008, the Bureau of
Industry and Security (BIS) announced the availability of a new training
presentation on antiboycott compliance on its BIS Online Training
Room.
Census Issues Mandatory AES Final Rule
On June 2, 2008, the U.S. Census
Bureau (Census) issued a final rule requiring mandatory filing of
export information through the Automated Export System (AES) or
through AESDirect
for all shipments
where a Shipper's Export Declaration (SED) is required (an
announcement of the rule can be found here). The new rule substantially
revises Census' export regulations, significantly increases
penalties, and allows for greater enforcement by Bureau of Industry
and Security (BIS) and U.S. Immigration and Customs Enforcement
(ICE). Although the effective date for this rule is July 2, 2008,
the rule will not be implemented until September 30, 2008.
Census has posted mandatory AES frequently asked questions (FAQs) here and "A Quick Guide to Title 15, Part 30 Foreign Trade Regulations" here.
The final rule was issued following a three year dispute between Census and the Department of Homeland Security (DHS) involving the sharing of confidential export information with foreign governments and the Option 4 program, which allows export data to be filed up to 10 days following vessel departure. DHS had pushed for the sharing of certain export data with foreign governments for antiterrorism purposes and Census strongly opposed this. In addition, DHS sought to end the Option 4 program because it believed it created an avenue for illegal exports, while Census disagreed. In the end, Census maintained the confidentiality of export data that existed in its previous regulations and continued the moratorium on new users for the Option 4 program with the program only allowed for current users.
Key changes made by the new regulations are as follows:
Census has posted mandatory AES frequently asked questions (FAQs) here and "A Quick Guide to Title 15, Part 30 Foreign Trade Regulations" here.
The final rule was issued following a three year dispute between Census and the Department of Homeland Security (DHS) involving the sharing of confidential export information with foreign governments and the Option 4 program, which allows export data to be filed up to 10 days following vessel departure. DHS had pushed for the sharing of certain export data with foreign governments for antiterrorism purposes and Census strongly opposed this. In addition, DHS sought to end the Option 4 program because it believed it created an avenue for illegal exports, while Census disagreed. In the end, Census maintained the confidentiality of export data that existed in its previous regulations and continued the moratorium on new users for the Option 4 program with the program only allowed for current users.
Key changes made by the new regulations are as follows:
- The Foreign Trade Statistics Regulations are renamed, "Foreign Trade Regulations" (FTR);
- All export data must be filed electronically through AES -- no paper SEDs will be accepted after September 30, 2008;
- Electronic Export Information (EEI) is the term for data filed through AES and is the equivalent to the data in the SEDs;
- Increased civil penalties of a maximum of $1,100 per day of delinquency (but, not more than $10,000 per violation) for failures to file or delinquent filings; a maximum of $10,000 per violation for false filings or misleading information in AES, in addition to other penalties; and civil forfeiture of any property involved in a violation of the FTR;
- Criminal penalties of a maximum of $10,000 per violation or five years' imprisonment or both for a knowing failure to file or a knowing filing, directly or indirectly, of false or misleading information;
- New voluntary self-disclosure are "strongly encouraged" by Census of any violation or suspected violation of the FTR. Voluntary disclosures are to be directed to Census, which will notify Customs and Border Protection (CBP), BIS' Office of Export Enforcement (OEE) and ICE.
- Specific rules on what constitutes proper proof of AES filing citations or exemptions are provided as well as how they are to be annotated on other shipping documents. For example, only the Internal Transaction Number (ITN), which confirms that the shipment information has been accepted in AES, is acceptable as proof of filing citation. The External Transaction Number (XTN) will no longer be accepted as proof of filing.
- Time frames for filing AES are provided based on the mode of transportation.