Date: April 13, 2011
Time: Networking and refreshments at 6:00pm.
Program commences at 6:30pm.
Location: Law offices of Baker & McKenzie in the Grace Building,1114 Avenue of the Americas, New York, NY
(the entrance is on 42nd Street directly across from Bryant Park)
Cost: $20 for OWIT members, students, and government employees, $25 for non-members
Please join me next week for a lively presentation on food together with a beer and cheese tasting thereafter - yum!
Speaker Jessica Wurwarg will address the causes of the food “crisis” linking them to international trade through a discussion around issues such as export bans and agricultural subsidies.
Jessica, together with fellow OWIT-NY Board Member, Carolyn Avery, will then introduce us to a selection of local cheeses paired with various beers.
Jessica Wurwarg is a food policy specialist, an adjunct instructor at both NYU and the New School, and is a former World Bank staffer.
Jessica currently works full time for the City of New York, and also teaches classes about cheese and pairings with wine and beer.
This promises to be an intellectually and gastronomically stimulating evening! And, of course, I will be there – what more could you ask for?
To register please click here.
You can follow OWIT-NY on Twitter.com/OWITNY for the latest news and events in international trade.
Hope to see you there!
Questions/comments? Post below or email me at clark.deanna@gmail.com
Thursday, April 7, 2011
Tuesday, March 29, 2011
The Panama Canal - What Would International Trade be Without It?
I just returned from scuba diving in the beautiful reefs of Little Corn Island in Nicaragua. Since I was heading to Central America, I decided to stop in Panama to take a ride through the Panama Canal. It was awesome!
As I enjoy looking at large ships, seeing the multitude of vessels everywhere was fascinating to me. For a live view of the canal, click here.
SEA VICTORY VALLETTA - NYK DEMETER - MAERSK HONOUR SINGAPORE - NCC SUDAIR PANAMA - AS JUTLANDIA - these are just a few of the ships I saw while going through the canal!
Starting from the Pacific Ocean in order to cross to the Atlantic Ocean, we approached the canal and waited with many other boats for our turn to enter the canal at the Flamenco Station.
During this time, a Panama Canal Officer comes on board to both direct where to drop the anchor and to advise how long the wait will be. This is because on average, the wait can be up to 24 hours unless a reservation is made in advance for a specific date and time for entry in to the canal, which can be done up to a year and a half in advance.
Of course, a hefty premium must be paid for booking ahead of time, and in the event the ship arrives late – which is always a possibility with ocean transit - the toll is forfeited, payment to cross through the canal must be made again, and a ship must wait for its turn in the line up anyway. According to the tour guide, the average cost to transit through the canal for a commercial vessel is $120,000, with the most expensive crossing being $437,000 in 2009.
The cost of crossing the canal depends on a ship's weight and size, as well as the type of cargo it is carrying, and a captain must show the ship's manifest to a Panama Canal Officer to verify what type of cargo is on board. Dangerous cargoes, such as fertilizers or other chemicals, cost more as do cruise ships carrying people (since “people are the most valuable cargo” the tour guide explained).
For vessels who only have partial cargoes that need to cross through the canal, they have the option to dock at the port of Panama Ports Co. to unload only that portion of cargo and thereby save the cost and time of crossing.
For ships making the transit, once clearance to enter has been granted, a Panama Canal Pilot boards the vessel and takes over its control in order to navigate it safely though the canal’s locks. Every ship must have a pilot on it during the entire duration of the transit, and large vessels such as container ships or oil tankers must also hire a tug boat at a cost of $3,000 per hour. A tug boat is not optional but rather is a safety measure required by the canal operators.
The “locks” are steel gated chambers which fill with water in order to raise ships up 80 meters to a man made lake called Lake Gatun. It is roughly a 50 mile distance between the Pacific and Atlantic oceans and ships must ascend up 3 “steps” in order to get to the Lake, which is 0.5 miles wide and made from excavated land.
The first two (2) steps take you to the Miraflores Lock, with a third lock, the Pedro Miguel Lock, being the final third step before arriving at Lake Gatun. The journey requires three (3) steps up on the Pacific side, and three (3) back down on the Atlantic side.
It takes roughly 8 minutes to fill the chamber and unload it. For the average container ship, there is only 24 inches (that is, 12 in. on either side of the ship) for the vessel to fit in the chamber. To ensure that the ship remains safely in the chamber, electric “mules” (which sort of look like a modern day mini-version of a locomotive) are connected to either side of the boat for this purpose.
Ships are to use their own power to travel through the canal, so it is just a matter of maintaining a position where movement through the locks can be done without hitting the sides of the chambers, and thereby avoid causing damage to either itself or the canal locks themselves.
There are 46 boat transits that happen every 24 hours and 52 million gallons of water are required to fill the lock’s chamber each time a vessel goes into it. Water for the chambers is supplied by Lake Gatun and this water is thereafter released into the Pacific Ocean. As Panama has roughly 60 ft. of rainfall each year, it depends on this rain to provide water into Lake Gatun.
Interested in traveling there? Check out the company I went with called Panama Marine Adventures.
For more information on the history of the Panama Canal click here.
Questions/comments? Post below or email me at clark.deanna@gmail.com
As I enjoy looking at large ships, seeing the multitude of vessels everywhere was fascinating to me. For a live view of the canal, click here.
SEA VICTORY VALLETTA - NYK DEMETER - MAERSK HONOUR SINGAPORE - NCC SUDAIR PANAMA - AS JUTLANDIA - these are just a few of the ships I saw while going through the canal!
Starting from the Pacific Ocean in order to cross to the Atlantic Ocean, we approached the canal and waited with many other boats for our turn to enter the canal at the Flamenco Station.
During this time, a Panama Canal Officer comes on board to both direct where to drop the anchor and to advise how long the wait will be. This is because on average, the wait can be up to 24 hours unless a reservation is made in advance for a specific date and time for entry in to the canal, which can be done up to a year and a half in advance.
Of course, a hefty premium must be paid for booking ahead of time, and in the event the ship arrives late – which is always a possibility with ocean transit - the toll is forfeited, payment to cross through the canal must be made again, and a ship must wait for its turn in the line up anyway. According to the tour guide, the average cost to transit through the canal for a commercial vessel is $120,000, with the most expensive crossing being $437,000 in 2009.
The cost of crossing the canal depends on a ship's weight and size, as well as the type of cargo it is carrying, and a captain must show the ship's manifest to a Panama Canal Officer to verify what type of cargo is on board. Dangerous cargoes, such as fertilizers or other chemicals, cost more as do cruise ships carrying people (since “people are the most valuable cargo” the tour guide explained).
For vessels who only have partial cargoes that need to cross through the canal, they have the option to dock at the port of Panama Ports Co. to unload only that portion of cargo and thereby save the cost and time of crossing.
For ships making the transit, once clearance to enter has been granted, a Panama Canal Pilot boards the vessel and takes over its control in order to navigate it safely though the canal’s locks. Every ship must have a pilot on it during the entire duration of the transit, and large vessels such as container ships or oil tankers must also hire a tug boat at a cost of $3,000 per hour. A tug boat is not optional but rather is a safety measure required by the canal operators.
The “locks” are steel gated chambers which fill with water in order to raise ships up 80 meters to a man made lake called Lake Gatun. It is roughly a 50 mile distance between the Pacific and Atlantic oceans and ships must ascend up 3 “steps” in order to get to the Lake, which is 0.5 miles wide and made from excavated land.
The first two (2) steps take you to the Miraflores Lock, with a third lock, the Pedro Miguel Lock, being the final third step before arriving at Lake Gatun. The journey requires three (3) steps up on the Pacific side, and three (3) back down on the Atlantic side.
It takes roughly 8 minutes to fill the chamber and unload it. For the average container ship, there is only 24 inches (that is, 12 in. on either side of the ship) for the vessel to fit in the chamber. To ensure that the ship remains safely in the chamber, electric “mules” (which sort of look like a modern day mini-version of a locomotive) are connected to either side of the boat for this purpose.
Ships are to use their own power to travel through the canal, so it is just a matter of maintaining a position where movement through the locks can be done without hitting the sides of the chambers, and thereby avoid causing damage to either itself or the canal locks themselves.
There are 46 boat transits that happen every 24 hours and 52 million gallons of water are required to fill the lock’s chamber each time a vessel goes into it. Water for the chambers is supplied by Lake Gatun and this water is thereafter released into the Pacific Ocean. As Panama has roughly 60 ft. of rainfall each year, it depends on this rain to provide water into Lake Gatun.
Interested in traveling there? Check out the company I went with called Panama Marine Adventures.
For more information on the history of the Panama Canal click here.
Questions/comments? Post below or email me at clark.deanna@gmail.com
Tuesday, March 15, 2011
New Requirements for Wine and Other Alcohol Importers and Wholesalers
I was doing some research on a wine region I particularly like called Rias Baixas which derives from both Spanish and Portuguese wine regions.
While red wine had traditionally been my preferred type of wine, the juicy white wines from this region have become my all time favorite. In so doing this research, I came across the following new regulation.
A new requirement for wine and other alcohol importers and wholesalers went into effect last month regarding the inclusion of certain corporate records when submitting an application to the government to operate as one of these entities.
Irrespective of the type of legal entity formed, i.e., corporation, partnership, etc., the submission of the following records is now mandatory:
1. Source of Funds Documentation
2. Trade Name Registration (if required by State or local government)
Also obligatory is the submission of additional organizational records, the requirements for which, vary depending on the entity’s type as follows:
Corporations:
* Articles of Incorporation and Certificate of Incorporation/Formation
* By-Laws
* Certificate to Operate in a Foreign State (if organized in a different state)
Partnerships:
* Partnership Agreement
Limited Liability Corporations (LLCs)
* Operating Agreement
* Articles of Incorporation and Certificate of Incorporation/Formation
While these rules went into effect on February 14, 2011, the federal agency, the Alcohol and Tobacco Tax and Trade Bureau (TTB) who enforces these rules, has granted a grace period through April 15, 2011 in order to allow businesses an opportunity to adapt to the new requirements.
For those who have submitted applications without the above documentation, TTB will grant the submission of such records through April 15, 2011. After this time, applications without these documents will be considered "incomplete."
To give a little background on TTB, it is the federal agency responsible for the labeling, advertising, and marketing of alcoholic beverages. TTB is also mandated to enforce the laws and write the regulations on the collection of alcohol, tobacco, firearms and ammunition excise taxes.
For more information on TTB regulatory compliance specific to wine click here and for those specific to importing or exporting wine click here.
For some nice images and to learn more about visiting this area, click here. (This is not an endorsement, though it is a nice website!) - Have I mentioned the Iberian peninsula is my favorite part of the world to spend time in?
Questions/comments? Post below or email me at clark.deanna@gmail.com
While red wine had traditionally been my preferred type of wine, the juicy white wines from this region have become my all time favorite. In so doing this research, I came across the following new regulation.
A new requirement for wine and other alcohol importers and wholesalers went into effect last month regarding the inclusion of certain corporate records when submitting an application to the government to operate as one of these entities.
Irrespective of the type of legal entity formed, i.e., corporation, partnership, etc., the submission of the following records is now mandatory:
1. Source of Funds Documentation
2. Trade Name Registration (if required by State or local government)
Also obligatory is the submission of additional organizational records, the requirements for which, vary depending on the entity’s type as follows:
Corporations:
* Articles of Incorporation and Certificate of Incorporation/Formation
* By-Laws
* Certificate to Operate in a Foreign State (if organized in a different state)
Partnerships:
* Partnership Agreement
Limited Liability Corporations (LLCs)
* Operating Agreement
* Articles of Incorporation and Certificate of Incorporation/Formation
While these rules went into effect on February 14, 2011, the federal agency, the Alcohol and Tobacco Tax and Trade Bureau (TTB) who enforces these rules, has granted a grace period through April 15, 2011 in order to allow businesses an opportunity to adapt to the new requirements.
For those who have submitted applications without the above documentation, TTB will grant the submission of such records through April 15, 2011. After this time, applications without these documents will be considered "incomplete."
To give a little background on TTB, it is the federal agency responsible for the labeling, advertising, and marketing of alcoholic beverages. TTB is also mandated to enforce the laws and write the regulations on the collection of alcohol, tobacco, firearms and ammunition excise taxes.
For more information on TTB regulatory compliance specific to wine click here and for those specific to importing or exporting wine click here.
For some nice images and to learn more about visiting this area, click here. (This is not an endorsement, though it is a nice website!) - Have I mentioned the Iberian peninsula is my favorite part of the world to spend time in?
Questions/comments? Post below or email me at clark.deanna@gmail.com
Sunday, March 6, 2011
Importing Gray Market Goods – The Omega v. Costco Case
"Critical Implications of Costco v. Omega on the Gray Goods and the First Sale Doctrine" CLE Program is now available at lawline.com here
Lawline.com now has available a continuing legal education (CLE) course that I served as faculty on regarding a case that dealt with an importation of “gray market goods.” Specifically, it had to do with the Supreme Court’s December 2010 affirmance of the case heard in the 9th Circuit Court of Appeals entitled, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 962 (9th Cir. 2008). (For more information on gray market goods, see my Dec. 20, 2010 post)
To give a little background, Omega, a popular high end watch company, is the owner of a “Globe” watch design that is registered with the US Copyright Office. It also has its trademark registered with the US Patent and Trademark Office.
Omega had a production of watches manufactured overseas that bore the Omega trademark and the copyprighted Globe design.
Costco thereafter purchased the foreign manufactured Omega watches bearing the copyright and trademark, and imported them into the United States for sale in its US stores at a price of $1,299, which was significantly less than Omega's US retail sales price of $1,995.
Costco did so however, without the authorization of Omega, which according to Omega, was in violation of the Copyright Act’s prohibition on unauthorized importations.
In its defense, Costco raised what is known under Copyright law (and not Customs law) as the “First Sale Doctrine.” This doctrine places a limitation on the exclusive rights of a copyright owner (19 USC §109a) which in this case is Omega.
Ultimately, the 9th Circuit Court of Appeals position was that using this defense was permissible only where the disputed copies of a copyrighted work were either made or previously sold in the US with the authority of the copyright owner. That is, Costco could not use it as a defense in this instance.
The Supreme Court agreed.
For an in-depth discussion on some possible implications of this decision on imports, check out our program on lawline.com by clicking here.
Questions/comments? Email me at clark.deanna@gmail.com or post below.
Lawline.com now has available a continuing legal education (CLE) course that I served as faculty on regarding a case that dealt with an importation of “gray market goods.” Specifically, it had to do with the Supreme Court’s December 2010 affirmance of the case heard in the 9th Circuit Court of Appeals entitled, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 962 (9th Cir. 2008). (For more information on gray market goods, see my Dec. 20, 2010 post)
To give a little background, Omega, a popular high end watch company, is the owner of a “Globe” watch design that is registered with the US Copyright Office. It also has its trademark registered with the US Patent and Trademark Office.
Omega had a production of watches manufactured overseas that bore the Omega trademark and the copyprighted Globe design.
Costco thereafter purchased the foreign manufactured Omega watches bearing the copyright and trademark, and imported them into the United States for sale in its US stores at a price of $1,299, which was significantly less than Omega's US retail sales price of $1,995.
Costco did so however, without the authorization of Omega, which according to Omega, was in violation of the Copyright Act’s prohibition on unauthorized importations.
In its defense, Costco raised what is known under Copyright law (and not Customs law) as the “First Sale Doctrine.” This doctrine places a limitation on the exclusive rights of a copyright owner (19 USC §109a) which in this case is Omega.
Ultimately, the 9th Circuit Court of Appeals position was that using this defense was permissible only where the disputed copies of a copyrighted work were either made or previously sold in the US with the authority of the copyright owner. That is, Costco could not use it as a defense in this instance.
The Supreme Court agreed.
For an in-depth discussion on some possible implications of this decision on imports, check out our program on lawline.com by clicking here.
Questions/comments? Email me at clark.deanna@gmail.com or post below.
Friday, February 25, 2011
The Complexity of Fabric Classification
I picked up an Emilio Pucci scarf recently and have been enjoying learning about all of the different ways of wearing it. Its size is approximately 3 ft x 3 ft and while I bought it to wear as a cover up on the beach, I’ve been discovering its many variations as a shawl and scarf.
While wearing it the other day in my office, I found myself researching fabric issues and I couldn’t help but think about how appropriate it was given that I was wearing a large (and gorgeous) piece of cloth!
The issue I was looking into had nothing to do with the material of my new accessory but rather that of bonded fabrics and the identification of where nuances arose as between the general rule on bonded fabrics and “pile” fabrics. I was also trying to determine if there were any differences when the fabric was knit versus crocheted.
Finding this answer required an analysis of the Textile Section Notes of the tariff (Harmonized Tariff Schedule of the United States, “HTSUS”) and in particular, Chapters 59, 60 and 61. Let me explain how the tariff is organized.
The tariff is arranged by Section which generally categorizes similar merchandise. It has titles such as “Vegetable Products,” (Section II), “Plastics and Articles Thereof, Rubber and Articles Thereof” (Section VII), and “Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking Sticks, Seatsticks, Whips, Riding-Crops and Parts Thereof; Prepared Feathers and Articles Made Therewith; Artificial Flowers; Articles of Human Hair” (Section XII).
At the beginning of each Section are “Notes” unique to all of those Chapters within the Section. Similarly, in the first part of each Chapter are Notes specific to the tariff provisions within that Chapter, along with Additional U.S. Notes that are unique to imports coming into the United States.
The methodology for the classification of goods under the HTSUS is governed by what are known as the General Rules of Interpretation (GRI). The first GRI provides that classification determinations are made in accordance with the terms of the headings of the tariff schedule and any relevant Section or Chapter Notes.
Coming back to bonded fabrics, Note 2 to HTSUS Chapter 59 (entitled, “Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use”) provides a general rule for bonded fabrics, stating that where a knitted or crocheted fabric is coated, impregnated, laminated or covered, then it would be classified in HTSUS Chapter 59.
Despite this general rule however, Note 1(c) to HTSUS Chapter 60 (entitled, “Knitted or crocheted fabrics”) sets forth an exception to this rule where the imported merchandise involves a knit pile fabric that is coated, impregnated, laminated or covered. Under this circumstance, these fabrics are classifiable within Chapter 60, under Heading 6001, and not under Chapter 59.
Moreover, Additional Legal U.S. Note one (1) to HTSUS Chapter 60 provides a specific definition for the term “long pile fabrics.” As defined, these are “fabrics made by inserting fibers from card silver into the loops of the ground fabric during knitting.” In everyday language, this simply means that a certain manufacturing process must have been utilized in order to qualify under this provision.
Needless to say, making classification determinations can sometimes seem like solving a puzzle as multiple Chapters and Notes need to be analyzed before any conclusions can be drawn.
Questions/comments? Post below or email me at clark.deanna@gmail.com
While wearing it the other day in my office, I found myself researching fabric issues and I couldn’t help but think about how appropriate it was given that I was wearing a large (and gorgeous) piece of cloth!
The issue I was looking into had nothing to do with the material of my new accessory but rather that of bonded fabrics and the identification of where nuances arose as between the general rule on bonded fabrics and “pile” fabrics. I was also trying to determine if there were any differences when the fabric was knit versus crocheted.
Finding this answer required an analysis of the Textile Section Notes of the tariff (Harmonized Tariff Schedule of the United States, “HTSUS”) and in particular, Chapters 59, 60 and 61. Let me explain how the tariff is organized.
The tariff is arranged by Section which generally categorizes similar merchandise. It has titles such as “Vegetable Products,” (Section II), “Plastics and Articles Thereof, Rubber and Articles Thereof” (Section VII), and “Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking Sticks, Seatsticks, Whips, Riding-Crops and Parts Thereof; Prepared Feathers and Articles Made Therewith; Artificial Flowers; Articles of Human Hair” (Section XII).
At the beginning of each Section are “Notes” unique to all of those Chapters within the Section. Similarly, in the first part of each Chapter are Notes specific to the tariff provisions within that Chapter, along with Additional U.S. Notes that are unique to imports coming into the United States.
With regards to “Textile and Textile Articles,” the tariff provisions for these types of imports are found in Section XI, Chapters 50 through 63.Making determinations on fabrics can be tricky due to reasons such as the type of combination of fibers, if such fibers had been brushed or cut during the processing thereby creating a “pile,” if fabric is adhered to another type of fabric, or if fabric has been coated or impregnated with a medium that contains varying percentages of a rubber and plastic combination.
The methodology for the classification of goods under the HTSUS is governed by what are known as the General Rules of Interpretation (GRI). The first GRI provides that classification determinations are made in accordance with the terms of the headings of the tariff schedule and any relevant Section or Chapter Notes.
Coming back to bonded fabrics, Note 2 to HTSUS Chapter 59 (entitled, “Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use”) provides a general rule for bonded fabrics, stating that where a knitted or crocheted fabric is coated, impregnated, laminated or covered, then it would be classified in HTSUS Chapter 59.
Despite this general rule however, Note 1(c) to HTSUS Chapter 60 (entitled, “Knitted or crocheted fabrics”) sets forth an exception to this rule where the imported merchandise involves a knit pile fabric that is coated, impregnated, laminated or covered. Under this circumstance, these fabrics are classifiable within Chapter 60, under Heading 6001, and not under Chapter 59.
Moreover, Additional Legal U.S. Note one (1) to HTSUS Chapter 60 provides a specific definition for the term “long pile fabrics.” As defined, these are “fabrics made by inserting fibers from card silver into the loops of the ground fabric during knitting.” In everyday language, this simply means that a certain manufacturing process must have been utilized in order to qualify under this provision.
Needless to say, making classification determinations can sometimes seem like solving a puzzle as multiple Chapters and Notes need to be analyzed before any conclusions can be drawn.
Questions/comments? Post below or email me at clark.deanna@gmail.com
Monday, February 21, 2011
The Fashion Industry and Accountability for the Basic Human Rights of Foreign Laborers
Fall 2011 New York Fashion Week which has just wrapped up here in NYC, has increasingly brought more issues to the forefront, including the currently trendy dialogue around “sustainable fashion” along with the well known - yet still undealt with - issue of eating disorders that many models struggle with.
One lesser known and far less glamorous issue has to do with foreign labor in the fashion industries. Textiles, and hence apparel, are made primarily overseas using labor that is less expensive than could be found in the United States. That obviously is no secret, however, disproportionately high working hours, wages that barely cover the rent let alone providing an adequate standard of living, hazardous working conditions, child labor and forced labor are all realities that exist in the industry as well.
Designers or license holders who rely on foreign labor to manufacture products with their logos on it (see my previous post for an explanation about licenses, license holders and royalties) have, in my view, a duty of accountability to ensure basic human rights towards laborers all the way down the line back to the factory.
This concept of importer oversight “down the line” is not unusual within the international trade community. An example of this is US Customs C-TPAT (Customs-Trade Partnership Against Terrorism) program, which causes importers to “vet” their supply chain for security purposes all the way back to the factory in exchange for a more expeditious customs clearance. As a result of this program, changes to factories such as adequate ventilation, locks on doors and basic sanitation upgrades have been implemented due to an importer’s demands that such changes be put into place.
While industry standards grossly lack foreign labor accountability, I am pleased to report that some licensor’s do in fact, require not just those licensee’s who import products with their logos to maintain certain labor standards, but they likewise require that those importers have their manufacturers agree to these terms as well.
To give you an idea of some of these contract terms that protect laborer rights and attempt to provide an “ethical code of conduct” if you will, here are some sample clauses below:
* Child Labor: Licensee and its Suppliers will not purchase products or components thereof manufactured by persons younger than fourteen (14) years of age or younger than the age of completing compulsory education in the country of manufacture where such age is higher than fourteen (14). Licensee and its Suppliers further acknowledge and agree that they will not use any child labor in the manufacturing, packaging or distribution of Licensor merchandise. In no case shall any child younger than fourteen (14) years of age or younger than the age of completing compulsory education in the country of manufacture where such age is higher than fourteen (14) be employed in the manufacturing, packaging, sales or distribution of Licensor merchandise.
* Forced Labor: Licensee and its Suppliers will not purchase products or components thereof from suppliers that use forced labor, prison labor, indentured labor or exploited bonded labor, or permit their suppliers to do so. Licensee and its Suppliers acknowledge and agree that they will only employ persons whose presence is voluntary and that they will not utilize any forced or involuntary labor, whether prison, bonded, indentured or otherwise.
* Contract Labor: Licensee and its Suppliers shall not use workers obligated under contracts which exploit them, which deny them the basic legal rights available to people and to workers within the countries in which they work or which are inconsistent with the principles set forth in this Code of Conduct Legal and Ethical Business Practices: Licensee and its Suppliers must fully comply with all applicable local, state, federal, national and international laws, rules and regulations including, but not limited to, those relating to wages, hours, labor, health and safety, and immigration.
* Work Hours: Licensee and its Suppliers shall not require their employees to work more than the limits on regular and overtime hours allowed by the law of the country of manufacture. Except under extraordinary business circumstances, Licensee's and its Suppliers' employees shall be entitled to one (1) day off in every seven (7) - day period. Licensee and its Suppliers must inform their workers at the time of their hiring if mandatory overtime is a condition of their employment. Licensee and its Suppliers shall not compel their workers to work excessive overtime hours.
* Wages and Benefits: Licensee and its Suppliers recognize that wages are essential to meeting employees' basic needs. Licensee and its Suppliers shall pay employees at least the minimum wage required by local law regardless of whether they pay by the piece or by the hour and shall provide legally mandated benefits.
* Overtime Compensation: Licensee and its Suppliers' employees shall be compensated for overtime hours at such premium rate as is legally required in the country of manufacture or, in countries where such laws do not exist, at a rate at least equal to their regular hourly compensation rate.
* Freedom of Association: Licensee and its Suppliers shall recognize and respect the right of employees to freely associate in accordance with the laws of the countries in which they are employed.
* Nondiscrimination: Licensee and its Suppliers shall not subject any person to discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin.
* Harassment or Abuse: Licensee and its Suppliers must treat their employees with respect and dignity. No employee shall be subject to physical, sexual or psychological harassment or abuse.
Licensee and its Suppliers acknowledge and agree not to use corporal punishment or threats of violence.
* Health and Safety: Licensee and its Suppliers shall provide a safe and healthy working environment to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. Licensee and its Suppliers further acknowledge and agree that they will comply with all applicable workplace conditions, safety and environmental laws.
Clauses like these are an illustration of a movement in the right direction, however, much more can be done to prevent incidents of child labor, such as by providing the parents with livable wages.
Questions/comments? Post below or email me at clark.deanna@gmail.com
One lesser known and far less glamorous issue has to do with foreign labor in the fashion industries. Textiles, and hence apparel, are made primarily overseas using labor that is less expensive than could be found in the United States. That obviously is no secret, however, disproportionately high working hours, wages that barely cover the rent let alone providing an adequate standard of living, hazardous working conditions, child labor and forced labor are all realities that exist in the industry as well.
Designers or license holders who rely on foreign labor to manufacture products with their logos on it (see my previous post for an explanation about licenses, license holders and royalties) have, in my view, a duty of accountability to ensure basic human rights towards laborers all the way down the line back to the factory.
This concept of importer oversight “down the line” is not unusual within the international trade community. An example of this is US Customs C-TPAT (Customs-Trade Partnership Against Terrorism) program, which causes importers to “vet” their supply chain for security purposes all the way back to the factory in exchange for a more expeditious customs clearance. As a result of this program, changes to factories such as adequate ventilation, locks on doors and basic sanitation upgrades have been implemented due to an importer’s demands that such changes be put into place.
While industry standards grossly lack foreign labor accountability, I am pleased to report that some licensor’s do in fact, require not just those licensee’s who import products with their logos to maintain certain labor standards, but they likewise require that those importers have their manufacturers agree to these terms as well.
To give you an idea of some of these contract terms that protect laborer rights and attempt to provide an “ethical code of conduct” if you will, here are some sample clauses below:
* Child Labor: Licensee and its Suppliers will not purchase products or components thereof manufactured by persons younger than fourteen (14) years of age or younger than the age of completing compulsory education in the country of manufacture where such age is higher than fourteen (14). Licensee and its Suppliers further acknowledge and agree that they will not use any child labor in the manufacturing, packaging or distribution of Licensor merchandise. In no case shall any child younger than fourteen (14) years of age or younger than the age of completing compulsory education in the country of manufacture where such age is higher than fourteen (14) be employed in the manufacturing, packaging, sales or distribution of Licensor merchandise.
* Forced Labor: Licensee and its Suppliers will not purchase products or components thereof from suppliers that use forced labor, prison labor, indentured labor or exploited bonded labor, or permit their suppliers to do so. Licensee and its Suppliers acknowledge and agree that they will only employ persons whose presence is voluntary and that they will not utilize any forced or involuntary labor, whether prison, bonded, indentured or otherwise.
* Contract Labor: Licensee and its Suppliers shall not use workers obligated under contracts which exploit them, which deny them the basic legal rights available to people and to workers within the countries in which they work or which are inconsistent with the principles set forth in this Code of Conduct Legal and Ethical Business Practices: Licensee and its Suppliers must fully comply with all applicable local, state, federal, national and international laws, rules and regulations including, but not limited to, those relating to wages, hours, labor, health and safety, and immigration.
* Work Hours: Licensee and its Suppliers shall not require their employees to work more than the limits on regular and overtime hours allowed by the law of the country of manufacture. Except under extraordinary business circumstances, Licensee's and its Suppliers' employees shall be entitled to one (1) day off in every seven (7) - day period. Licensee and its Suppliers must inform their workers at the time of their hiring if mandatory overtime is a condition of their employment. Licensee and its Suppliers shall not compel their workers to work excessive overtime hours.
* Wages and Benefits: Licensee and its Suppliers recognize that wages are essential to meeting employees' basic needs. Licensee and its Suppliers shall pay employees at least the minimum wage required by local law regardless of whether they pay by the piece or by the hour and shall provide legally mandated benefits.
* Overtime Compensation: Licensee and its Suppliers' employees shall be compensated for overtime hours at such premium rate as is legally required in the country of manufacture or, in countries where such laws do not exist, at a rate at least equal to their regular hourly compensation rate.
* Freedom of Association: Licensee and its Suppliers shall recognize and respect the right of employees to freely associate in accordance with the laws of the countries in which they are employed.
* Nondiscrimination: Licensee and its Suppliers shall not subject any person to discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin.
* Harassment or Abuse: Licensee and its Suppliers must treat their employees with respect and dignity. No employee shall be subject to physical, sexual or psychological harassment or abuse.
Licensee and its Suppliers acknowledge and agree not to use corporal punishment or threats of violence.
* Health and Safety: Licensee and its Suppliers shall provide a safe and healthy working environment to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. Licensee and its Suppliers further acknowledge and agree that they will comply with all applicable workplace conditions, safety and environmental laws.
Clauses like these are an illustration of a movement in the right direction, however, much more can be done to prevent incidents of child labor, such as by providing the parents with livable wages.
Questions/comments? Post below or email me at clark.deanna@gmail.com
Thursday, February 10, 2011
Royalties or Royalty?
Who is royalty? In the eyes of US Customs, no one is royalty.
And, despite the upcoming marriage of Prince William and Kate Middleton for which I recently saw had no “price tag” despite England’s weakened economy, this blog post is not about royalty, but royalties. (Ah, shucks… I know)
What are royalties? Generically speaking, a royalty is a fee paid by a party (known as a “licensee”) for usage of another’s (licensor’s) right. An example of this would be a payment made by an apparel importer (the licensee) for use of the recording artist “Justin Bieber’s” image on a t-shirt it imports. For those of you who don’t know, Bieber is a young Canadian R&B pop singer who is very popular with “tweens” – at least that’s what I’ve been told!
In this example, either Bieber, who is presumably the exclusive license holder, or the company that has merchandising rights relating to the use of his name or “likeness,” (which in everyday language essentially means, his image) would be entitled to payment – normally a percentage of the sales price of the good – upon the sale of the t-shirt. The terms setting forth what amount will be paid varies, and can run the gamut from 2% to 16% or much more.
So what do royalties have to do with international trade?
When it comes to figuring out how much to pay in duties, “transaction value” is one method (the preferred one actually) to use for determining an amount. As provided in 19 USC 1401a(b)(1),
“The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States, plus amounts equal to -. . . Any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States . . . .”
Therefore, under certain circumstances (not all – it depends on the nature of the licensing agreement and the relationship of the buyer, seller, and license holder), royalty amounts should be added to the transaction value. To determine the dutiable status of royalties, two (2) factors should be examined:
(1) Whether the buyer was required to pay them as a condition of sale of the merchandise for exportation to the United States, and
(2) To whom and under what circumstances they were paid.
Payments made by the buyer to a third party (i.e., not the seller or a company related to the seller either usually) for the right to distribute or resell the imported merchandise will not be added to the "price actually paid or payable" for the imported merchandise if the payments are not a condition of the sale of the merchandise for exportation to the United States.
And just what is a “condition of sale?”
To figure this out, the initial questions to answer this inquiry should be:
1) Whether the imported merchandise was manufactured under patent;
2) Whether the royalty was involved in the production or sale of the imported merchandise, and;
3) Whether the importer could buy the product without paying the fee.
Given that licensing agreements are all written differently and can involve multiple related and unrelated parties using various payment structures, figuring out the dutiability of royalty payments is not necessarily a “cut and dry” issue. In fact, it can be quite complicated.
For more reading on US Customs rules regarding transaction value, check out their Value publication.
Questions/comments? Post below or email me at clark.deanna@gmail.com
And, despite the upcoming marriage of Prince William and Kate Middleton for which I recently saw had no “price tag” despite England’s weakened economy, this blog post is not about royalty, but royalties. (Ah, shucks… I know)
What are royalties? Generically speaking, a royalty is a fee paid by a party (known as a “licensee”) for usage of another’s (licensor’s) right. An example of this would be a payment made by an apparel importer (the licensee) for use of the recording artist “Justin Bieber’s” image on a t-shirt it imports. For those of you who don’t know, Bieber is a young Canadian R&B pop singer who is very popular with “tweens” – at least that’s what I’ve been told!
In this example, either Bieber, who is presumably the exclusive license holder, or the company that has merchandising rights relating to the use of his name or “likeness,” (which in everyday language essentially means, his image) would be entitled to payment – normally a percentage of the sales price of the good – upon the sale of the t-shirt. The terms setting forth what amount will be paid varies, and can run the gamut from 2% to 16% or much more.
So what do royalties have to do with international trade?
When it comes to figuring out how much to pay in duties, “transaction value” is one method (the preferred one actually) to use for determining an amount. As provided in 19 USC 1401a(b)(1),
“The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States, plus amounts equal to -. . . Any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States . . . .”
Therefore, under certain circumstances (not all – it depends on the nature of the licensing agreement and the relationship of the buyer, seller, and license holder), royalty amounts should be added to the transaction value. To determine the dutiable status of royalties, two (2) factors should be examined:
(1) Whether the buyer was required to pay them as a condition of sale of the merchandise for exportation to the United States, and
(2) To whom and under what circumstances they were paid.
Payments made by the buyer to a third party (i.e., not the seller or a company related to the seller either usually) for the right to distribute or resell the imported merchandise will not be added to the "price actually paid or payable" for the imported merchandise if the payments are not a condition of the sale of the merchandise for exportation to the United States.
And just what is a “condition of sale?”
To figure this out, the initial questions to answer this inquiry should be:
1) Whether the imported merchandise was manufactured under patent;
2) Whether the royalty was involved in the production or sale of the imported merchandise, and;
3) Whether the importer could buy the product without paying the fee.
Given that licensing agreements are all written differently and can involve multiple related and unrelated parties using various payment structures, figuring out the dutiability of royalty payments is not necessarily a “cut and dry” issue. In fact, it can be quite complicated.
For more reading on US Customs rules regarding transaction value, check out their Value publication.
Questions/comments? Post below or email me at clark.deanna@gmail.com
Subscribe to:
Posts (Atom)