Caring for Your Clothes and the Care Labeling Rule

I just returned from southern Italy where I’ve had the pleasure of being in since the end of July. Not surprisingly, when I was not touring around Naples on my trusted vintage Vespa with my favorite tour guide, enjoying the mineral baths of Ischia, or swimming under the stars in Sorrento, I was out shopping.

In true (International Trade attorney) form, I found myself examining the apparel labels for its country of origin - typically stamped “MADE IN ITALY” and not, “CHINA” like I often see here in the US – and for information on how to care for the garment.

Technically known as the “care label,” it is the tag on your clothes which you will recognize as having care symbols that instruct how a consumer textile product ought to be cared for, e.g., indicating a desired water temperature or, that it should be dry cleaned only.

Oversight of this label here in the US is provided by the Federal Trade Commission (FTC) in accordance with its “Rule on Care Labeling of Textile Wearing Apparel and Certain Piece Goods as Amended.”

Oddly enough, it just so happens that the agency is seeking comments on the benefits of the Rule to consumers purchasing products covered by it.

The solicitation of comments include:

- What benefits has the Rule provided to, or what significant costs has the Rule imposed on, consumers? Provide any evidence supporting your position.

- What impact has the Rule had on the flow of truthful information to consumers and on the flow of deceptive information to consumers?

- What benefits, if any, has the Rule provided to, or what significant costs, including costs of compliance, has the Rule imposed on businesses, particularly small businesses?

- Provide any evidence concerning whether any of the Rule’s provisions are no longer necessary. Explain why these provisions are unnecessary.

- Should the FTC modify the Rule to address the use of professional wetcleaning? If so, why and how? If not, why not?

The FTC is asking these questions and others as part of a systematic review of its rules and now you have an opportunity to impact its decision making.

Interested in submitting a comment? You may do so online by writing ‘‘Care Labeling Rule, 16 CFR Part 423, Project No. R511915’’ on your comment, and filing your comment online here. Follow the instructions on the web-based form.

Prefer to send it on paper? Mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H–113 (Annex A), 600 Pennsylvania Avenue, NW., Washington, DC 20580.

To read the full text of the solicitation of comments click here.

Questions/comments? Post below or email me at clark.deanna@gmail.com

New CPSIA Lead Content Limits Announced

Effective Date: August 14, 2011

Starting next month, importers, manufacturers, retailers and distributors of children’s products will be required to certify that their products conform to the Consumer Product Safety Improvement Act’s (CPSIA) requirement that children’s products contain no more than 100 ppm of total lead content.

Testing must be undertaken by a third party test lab which is certified by the Consumer Product Safety Commission, and lists of approved testing companies is available on its website here.

Both the testing of, and compliance with, these federal guidelines with respect to inaccessible internal parts of children’s products and certain component parts of children’s electronic devices are not mandated under this new rule.

This requirement is not to be confused however, with the levels set for lead paint or other surface coatings placed on children’s products. That limit of a total lead level of .009% remains the same as it has been the case since August 14, 2009.

Through the CPSIA, Congress seeks to reduce the exposure to lead on children 12 years of age and under, as lead is a heavy metal that is especially toxic to children. It has been associated with causing brain damage, hearing impairment, lowered learning levels, and at high levels can be fatal.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Determining the Value on an Importation Between Related Parties – Was There a Bonafide Sale?

US Customs collects duties on all imports that enter the U.S. As a general rule, Customs presumes that the price paid by the importer, which is typically the invoice total, is the appropriate basis for determining the import’s “transaction value” which in everyday language, essentially means, the amount upon which the duty to be paid will be calculated.

Customs generally presumes that a transaction between unrelated parties is conducted at “arm’s length.” This means that the price offered by a seller of goods is a “fair” price and not one offered under more favorable terms, i.e., a lower price, which would cause the amount of duty paid on an importation to be less than what would otherwise be under a “fair” price.

Questions arise however, in the case of related party transactions, as from US Customs point of view, it would not be unusual to give a related company what it would consider a preferred, i.e., cheaper price on goods.

There are 2 ways Customs determines if a bonafide sale took place –

(a) the sales transaction was conducted at arm’s length, or

(b) transaction details show that there were no non-market influences that affected the legitimacy of the sales price.

As the term “sale” has not been defined by Customs, it has relied upon the definition as articulated in J.L. Wood v. United States, 62 CCPA 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974) which defines it as the transfer of property taken from one party to another for consideration.

In general, for all sales whether between related or unrelated parties, Customs will look at a number of factors in its determination of a legitimate sales price, in addition to looking at the circumstances of a transaction as a whole. Specifically, Customs looks to the documents related to the sales transaction, including the shipping terms, in order to determine the following factors:

a. Whether the potential buyer has assumed the risk of loss

b. Whether the potential buyer acquired title to the imported merchandise

c. Whether the alleged buyer paid for the goods

d. Whether such payments are linked to specific importations of merchandise

e. Whether the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller.

Even where the parties are related, Customs Regulations provide a series of scenarios in which it can be shown that the price has not been influenced by the relationship of the parties. These include:

a) If it is shown that the buyer and seller buy and sell from each another as if they are not related, this indicates that the price is not influenced by the relationship between the parties and appraisement pursuant to transaction value is valid.

b) Where the price has been settled in a manner consistent with the normal pricing practice of the industry, or with the way the seller settles prices for sales to unrelated buyers, then it is considered not to have been influenced by the relationship between the parties.

c) If it is shown that the price is adequate to ensure recovery of all costs plus a profit which is equivalent to the firm’s overall profit realized over a representative period of time in sales of merchandise of the same class or kind, this would demonstrate that the price has not been influenced.

There are further conditions as well, such as whether or not the potential buyer has assumed risk of loss for the cargo, which play a persuasive role in US Customs reasoning as to whether a bonafide sale took place.

Needless to say, the valuation of merchandise, especially when it comes to related party transactions can be tricky.

Questions/comments? Post below or email me at clark.deanna@gmail.com

Shoes and Pricing - A Factor You Probably Never Thought About

Ever wonder why a plain looking pair of shoes cost more than the fancier looking one? Is it that the “no-frills” sandal offers a more “classic” and “elegant” look than the decorative one?

Well… not necessarily… Oddly enough, depending on the classification, i.e., the tariff number, of the shoe in question, the duty rate can go from a mere six percent (6%) to that of thirty-seven point five percent (37.5%) (and this is the rate for imports from countries that we have good trade relations with - it is 66% if being imported from others – ouch!)

On a $100 pair of shoes, that is the difference in the shoe costing $106 versus $137, which as an aside, can really add up given that here in NYC, we used to have a provision on apparel that it was tax-free so long as it was under $110.

That means that a pair of shoes for $106 really did cost that much, so just escaping having to pay tax made a difference. While a $25 difference in price may not break the bank however, the shoe at $137 really translates into a total cost of nearly $149 once you add on the tax.

Simply put, importing a shoe with a lower duty rate is better for both the importer (greater chance of selling the shoe) and the consumer (cheaper price – you hope anyway!)

So why would a plain sandal cost less anyway?

This is because while the material of a shoe, i.e., of leather, versus plastic, or a rubber/plastic combination, etc., plays a role in determining its tariff classification and the rate of duty, so does the amount of this material across the surface area of the “upper” part of the shoe, which in everyday language means, the top part of the shoe, for all intents and purposes.

US Customs measures the external surface area of the upper as the surface you see covering the foot when the shoe is worn. [US Customs Treasury Decision (T.D. 93-88)]

In general, the external surface area of the upper (ESAU) for footwear classification is taken to be the constituent material having the greatest external surface area, no account being taken of accessories or reinforcements such as ankle patches, edging, ornamentation, buckles, tabs, eyelet stays or similar attachments. [Chapter 64, Note 4(a) of HTSUS]

Many factors are considered when making an ESAU determination for footwear with uppers consisting of different materials. [NY J81564, 3/26/03] For example, the type and construction of the shoe, the completeness and visibility of the materials, its plausibility, and the manner in which ornaments are attached, are among the considerations to be weighed. [NY J81564, 3/26/03]

Customs has found that in the case of footwear for which the upper consists of two or more materials, where a material clearly constitutes a significant portion of the ESAU, then it is considered more than a mere accessory or reinforcement. [HQ 085381, 11/21/89]

Customs has further found that when material in the upper is neither an accessory nor reinforcement, it is considered a part of the constituent material of the upper external area. [HQ 081646, 3/27/89]

All of these factors can lead Customs to conclude that footwear is correctly classified under the tariff number that corresponds to a high rate of duty.

Questions/comments? Post below or email me at clark.deanna@gmail.com

OWIT-NY Annual Reception with Elizabeth Daly, Director, Division for International Business for NYC Mayor's Office

Come join me tonight for an enjoyable summer evening with the New York Chapter of the Organization of Women in International Trade as we mark the end of our 2010 - 2011 year with drinks, dinner, and dessert at the popular Terrace Club conveniently located in mid-town Manhattan across from Rockefeller Center.

Date: June 22, 2011
Time: Registration: 6-6:30 pm. Dinner: 6:30-7:30. Program: 7:30 – 8:30 pm, followed by networking reception
Location: The Terrace Club 25 West 51st Street (off Fifth Avenue) New York, NY 10019
Cost: $50 for members* and $75 for non-members. Price includes one hour open wine and beer bar, a light dinner and dessert.

We are honored to announce that the evening's program will
include remarks from our very special guest, Ms. Elizabeth Daly, who holds the prestigious position of Director, International Business in Mayor Bloomberg’s administration.

Ms. Daly will discuss New York City’s efforts to attract and
retain international businesses. She will also provide commentary and insights on future prospects for foreign direct investment in New York City. A networking reception will immediately follow the program and Q&A.

Learn more about New York City's efforts to remain a global trading center in a collegiate environment, and connect with other international trade professionals from the Tri-state area.

For more information and to register, go to www.owitny.org or click here.

Hope to see you there!

U.S. Customs Brokers Beware – Nike May be Coming After You Next

For over a year now, Nike has been approaching licensed U.S. Customshouse brokers and requesting the broker’s assistance to provide it with information regarding a specific (or multiple shipments). In an effort to assist Nike, brokers (naively) have been handing over information, only to be later “thanked” by Nike in the form of a lawsuit whose allegations are “supported” by the very papers the broker provided it with. These lawsuits seek millions of dollars as provided for by U.S. intellectual property law, which are some (of the many) statutes under which these cases are being brought.

In an effort to crack down on imports of counterfeit merchandise, Nike has been commencing lawsuits against licensed U.S. Customs brokers across the country.

You may be asking yourself, “Why the broker and not the importer of record?” After all, not only does it not make much sense to sue an agent rather than a principal, but brokers never see or touch the cargo. I know. I get that.

Due to the increase in identity theft however, Nike claims to be without knowledge of who the actual importer of record/consignee is. It is therefore creating an allegation that the broker is in cahoots with the importer of the counterfeit merchandise, thereby creating a conspiracy if you will.

Based on this theory, it is going after the smallest and most defenseless target out there – the customs broker – in an effort to get brokers to agree to specific terms and to perform certain so- called "safe guarding" activities, which Nike believes will cut back on incidents of attempted importations of counterfeits.

Naturally, where a broker has been engaged in no (as in Z-E-R-O) wrongdoing, it will attempt to assist with any investigation as it is able to. The problem is, doing so without the advice of counsel and, certainly moving forward in a lawsuit without counsel, might only end up hurting the broker's position as inadvertent admissions will have been made on the broker’s part in an attempt to "do the right thing" and clear its reputation.

Unfortunately, due to the Court’s preference of attorneys representing litigants, representation ultimately winds up being retained and the attorney is left to deal with untimely, or unnecessary, exposure initially caused by the unrepresented litigant (i.e., the customs broker).

To find out where and against whom Nike has brought cases against, you can search publicly on the Justia Dockets & Filings website [http://dockets.justia.com] and type in Nike, Inc. in the “Party Name” box, and click “Intellectual Property” in the drop down menu called “Type.”

Given the nature of Nike’s “bait and switch” tactic, should a customs broker be contacted by Nike wherein it requests that records be provided to it, trade counsel should immediately be contacted and any response to Nike would be to "contact your attorney."

Questions/comments? Post below or email me at clark.deanna@gmail.com

Navigating the Importation Process - Tips for the New Importer

I remember one of my best friends telling me in college that she thought it would be fun to have an import business where of course, she got to do the traveling to find all of the wonderful treasures that she would sell in her shop.

I know that back then, we never could have imagined that there would be so many obscure rules, such as that articles made of wood might require a declaration from the USDA, or that beaded jewelry made of seeds from exotic forests might be subject to FDA regulations.

After all, how does an importing entrepreneur even know where to begin in terms of compliance with the law when most have little idea about the complexities of importing?

Nowadays, thanks to search engines like Google – which did not exist when we were in college (zoiks!) – getting information about importing is a much simpler endeavor. This of course, is both good and bad.

It is good in that basic importing information may be found online, but of course, not all information out there is equally correct.

The down side however, is that there is a presumption that a responsible importer would have been able to seek out information that pertained to their type of import and therefore ought to have dotted all of their proverbial “I’s” and crossed their “T’s.”

A failure to do so can lead to an accusation of negligence in the event of an importing “hiccup” or even worse, an allegation of fraudulent activity.

So where does a new importer begin?

Like people entering the country, the border is the front line of imported merchandise, and US Customs and Border Protection has jurisdiction over what is permitted to enter – and remain – in the country.

A few helpful links include the web pages on US Customs’ website (www.cbp.gov) under the “Trade” tab. Within this section is a link called "Basic Importing and Exporting" which further leads to information on US Customs import requirements as well as other federal agency requirements.

There is also a rather lengthy US Customs guide entitled “Importing into the United States – A Guide for Commercial Importers” as well as numerous “Informed Compliance” publications which offer both general importing information such as on the “Entry” of merchandise, and Tariff Classification, as well as more import specific information, such as on Eyewear, Textile and Apparel Rules of Origin, and Footwear.

More tips for new importers and exporters can be found here.

Questions/comments? Post below or email me at clark.deanna@gmail.com