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Substantial Transformation Not Necessary to Qualify as US Good for Procurement, CAFC Says
February 11, 2020 |Penalties and Courts

A good manufactured in the U.S. with foreign components does not have to be substantially transformed to qualify as a U.S. good for government procurement purposes, the U.S. Court of Appeals for the Federal Circuit said in a Feb. 10 decision. Acetris had appealed the Department of Veterans Affairs decision to disqualify from eligibility for a procurement contract Acetris’s pharmaceuticals manufactured in the U.S. from an Indian active pharmaceutical ingredient. The VA relied on a CBP ruling issued in April 2018 that found the country of origin was India because the drugs did not undergo a substantial transformation (see 1804030065). India is not a party to the World Trade Organization’s Government Procurement Agreement. The Federal Circuit, affirming a ruling from the Court of Federal Claims, found the VA does not have to defer to CBP rulings, and that the term “U.S.-made end product” in the Foreign Acquisition Regulations does not only encompass products wholly manufactured or substantially transformed in the United States. “Instead, such products may be -- as Acetris’ products are -- 'manufactured’ in the United States from foreign-made components,” CAFC said.

Topics:Court of International Trade, CBP CROSS Rulings, World Trade Organization (WTO)
Expect More Customs Penalty, Whistleblower Cases in 2020, Law Firm Says
January 22, 2020 |Penalties and Courts

The Justice Department is adding new lawyers to its international trade office, indicating that there could be an uptick in Section 592 penalty cases against importers, according to Crowell & Moring’s 2020 Litigation Forecast. The hiring comes amid increased scrutiny on valuation and country of origin issues as Section 301 tariffs incentivize importers to find ways to reduce duty liability. “This likely means that CBP has already determined that a significant amount of penalty cases are not going to be resolved administratively and will proceed to litigation,” said David Stepp, a customs lawyer with the law firm.

Topics:Customs duty
CAFC Upholds Limits on Retroactive Suspension of Liquidation After Scope Rulings
January 14, 2020 |Penalties and Courts

The U.S. Court of Appeals for the Federal Circuit on Jan. 13 upheld a lower court decision that found Commerce cannot suspend liquidation retroactively prior to the beginning of a scope inquiry, even when no formal scope inquiry is conducted. The agency had in 2013 found washers imported by United Steel and Fasteners were subject to, and had always been covered by, the antidumping duty order on helical spring lock washers from China. It directed CBP to suspend liquidation for unliquidated entries all the way back to 1993, when the AD duty order was originally issued (see 13071529). CIT sustained the scope ruling, but said Commerce’s regulations prevent it from ordering retroactive suspension of liquidation prior to the date of a scope inquiry’s initiation, unless CBP had already suspended liquidation (see 1701120034). CAFC agreed, noting that Commerce itself, when issued the relevant regulations, said importers have the right to rely on CBP liquidation decisions until Commerce rules otherwise.

Topics:Customs duty, Court of International Trade, CBP CROSS Rulings
Whistleblower Gets $170,000 in Customs Duty Evasion Case
January 8, 2020 |Penalties and Courts

Xing Wei received $170,000 for her role as a whistleblower in a customs duty evasion case settled between the Justice Department and a garment wholesaler in 2017 (see 1710030048), Wei's lawyer Timothy McInnis said in a news release. Notations, the wholesaler, admitted to failing to prevent the obvious customs fraud committed by importer, Yingshun Garments (see 1609280038), as part of the settlement. McInnis said the settlement is significant for two reasons. “First, the government pursued duties fraud claims against a US-based 'downstream' commercial purchaser and re-seller, not just the foreign manufacturer and importers,” he said. “And, second, the whistleblower received an award for opening the door to the investigation and later helping uncover Notations' role even though her qui tam complaint did not name Notations specifically.” Asked why it took so long after the 2017 settlement for Wei to receive her portion, McInnis said by email that “there is no specific reason for the delay” and that some things “just take time.”