Customs Lab Testing: End of the Story or Just the Beginning?

Transcription

1 Customs Lab Testing: End of the Story or Just the Beginning? Presented by Arthur W. Bodek September 9,

2 What is the Significance of Customs Lab Results? Are Customs lab test results per se binding or are they subject challenge? 2

3 Importance of Physical Properties of Imported Merchandise Tariff Classification Scope of Antidumping Cases Free Trade Agreements Country of Origin Others 3

4 Tariff Classification Many tariff provisions based on composition of the commodity. E.g., of metal, of plastics, of textile, of leather, etc. Many tariff provisions have specific composition requirements. E.g., Containing 70% or more by weight of silk 4

5 Tariff Classification Determinations as to chief weight of commodities of multiple materials (e.g., 50% / 50% items). 50% cotton / 50% polyester sweatshirts tested out as 52.9% polyester / 47.1% cotton. HQ of June 30, Materials that may appear or perform similarly. Ramie, cotton 5

6 Scope of Antidumping Cases Antidumping Cases often defined based on very specific physical properties: Greige Polyester Cotton Print Cloth from People's Republic of China (A ) Honey from People's Republic Of China (A ) Petroleum Wax Candles from People's Republic of China (A ) Polyethylene Retail Carrier Bags from People's Republic Of China (A ) Steel Nails from People's Republic Of China (A ) 6

7 Free Trade Agreements FTAs having short supply provisions Very detailed list of short supply items Tariff Shift-based eligibility rules that turn on the correct tariff classification. Country of Origin (see below) 7

8 Country of Origin Garlic Customs lab erred in its conclusion that garlic was of Chinese (rather than Mexican) origin utilizing a limited set of reference samples. HQ of May 18, Opposite result under more favorable testing conditions (HQ of March 2, 2006). 8

9 Country of Origin Honey Customs lab determination that honey originated in China was not overcome by the importer. HQ of December 5,

10 Status of CBP Lab Report Determinations Customs decisions enjoy a measure of presumed correctness. Subject to certain exceptions, in a civil action commenced in the Court of International Trade under section 515, 516, or 516A of the Tariff Act of 1930, the decision of the Secretary of the Treasury, the administering authority, or the International Trade Commission is presumed to be correct. The burden of proving otherwise shall rest upon the party challenging such decision. 28 U.S.C. 2639(a)(1). 10

11 Status of CBP Lab Report Determinations Furthermore, it is well settled that the methods of weighing, measuring, and testing merchandise used by customs officers and the results obtained are presumed to be correct. Aluminum Company of America v. United States, 60 C.C.P.A. 148, 151, 477 F.2d 1396, 1398 (1973) (Alcoa). Absent a conclusive showing that the testing method used by the CBP laboratory is in error, or that the Customs laboratory results are erroneous, there is a presumption that the results are correct. See Exxon Corp. v. United States, 462 F. Supp. 378, 81 Cust. Ct. 87, C.D (1978). If a prima facie case is made out, the presumption is destroyed, and the Government has the burden of going forward with the evidence. Alcoa, 477 F.2d at 1399; American Sporting Goods, 27 C.I.T [Excerpted from HQ H of March 30, 2014] 11

12 Status of CBP Lab Report Determinations Furthermore, in HQ , dated July 21, 1994, CBP held that where there is a conflict between results obtained by a Customs laboratory and those obtained by private or independent laboratories, Customs will, in the absence of evidence that the testing procedure or methodology used by the Customs laboratory was flawed, accept the Customs laboratory report. See HQ See also HQ , dated July 22, [Excerpted from HQ H of March 30, 2014] 12

13 Status of CBP Lab Report Determinations How has the Customs presumption of correctness played out as a practical matter? Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). Libas, Ltd. v. United States, 193 F.3d 1361, 1366 (Fed. Cir. 1999). United States v. Qiao Chu Wei Tang Lo, No. 3:11-cr-286(S3) (M.D. Fla. Nov. 7, 2012). Zani v. United States, 25 C.I.T. 966 (Ct. Int'l Trade 2001). Dal-Tile Corp. v. United States, 28 C.I.T. 358 (Ct. Int'l Trade 2004), aff d 424 F.3d 1286, (Fed. Cir. 2005). HQ H (April 1, 2014) 13

14 Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) Supreme Court case dealing with evidentiary issues not a Customs case. Admissibility of scientific evidence involves an assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue. 14

15 Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993) Daubert factors: 1. whether a theory or technique has been tested; 2. whether it has been subjected to peer review and publication; 3. the theory or technique's known or potential rate of error; and 4. whether it is generally or widely accepted, 15

16 Libas, Ltd. v. United States, 193 F.3d 1361, 1366 (Fed. Cir. 1999) Issue was whether fabric was power-loomed rather than as hand-loomed and therefore subject to a higher duty rate. 16

17 Libas, Ltd. v. United States, 193 F.3d 1361, 1366 (Fed. Cir. 1999) Customs sent the fabric to its lab. Through visual observation, the lab opined that the fabric was power-loomed. Its conclusion was based on such subjective factors as the apparent uniformity of the weave (as opposed to published and generally accepted test methodologies). The Court held that such subjectivity was less reliable than direct testimony from the overseas supplier. The importer s position was upheld. 17

18 United States v. Qiao Chu Wei Tang Lo, No. 3:11-cr-286(S3) (M.D. Fla. Nov. 7, 2012) Issue was whether or not imported rice syrup contained more than 50% honey by weight. 18

19 United States v. Qiao Chu Wei Tang Lo, No. 3:11-cr-286(S3) (M.D. Fla. Nov. 7, 2012) Customs lab personnel visually observed the syrup to conclude whether there was a significant amount of honey, which was treated to be more than 50%. However, the lab personnel could not actually quantify what the honey content was. The Court rejected the Customs lab testing as involving subjective observations, a condition which the Court found to be "entirely inadequate" under the Daubert standards. 19

20 Zani v. United States, 25 C.I.T. 966 (Ct. Int'l Trade 2001) At issue was whether paintings were executed entirely by hand and, thus, classifiable within Heading 9701, free of duty. 20

21 Zani v. United States, 25 C.I.T. 966 (Ct. Int'l Trade 2001) The Court faulted the Customs lab s finding that the painting was not executed entirely by hand, expressing the following concerns: 1. The integrity of the lab test was damaged by the fact that the entry numbers on the Lab Report and the entry number on the Sample Notice, did not match. 2. Customs destroyed the sampled paintings despite the fact that a protest was filed. 3. The government witness conceded that the Customs laboratory test did not meet any of the Daubert factors. 21

22 Dal-Tile Corp. v. United States, 28 C.I.T. 358 (Ct. Int'l Trade 2004), aff d 424 F.3d 1286, (Fed. Cir. 2005) At issue was whether wall tiles were classifiable as ceramic articles. Articles only considered ceramic if they did not become more dense, harder, or less porous after subjected to ASTM C-373 (which tests the absorption). 22

23 Dal-Tile Corp. v. United States, 28 C.I.T. 358 (Ct. Int'l Trade 2004), aff d 424 F.3d 1286, (Fed. Cir. 2005) Each party presented a different way to perform the prescribed test. The results of the split-tile method used by the importer were confirmed by a standard statistical analysis technique. In contrast, the government's double-soak method produced inconsistent and incoherent results and employed no controls. Importer s application of the test method was found by the court to be more reliable. 23

24 HQ H (April 1, 2014) Woolen blend overcoats were entered under DR-CAFTA short supply provision no. 93. The provision specified acceptable ranges with respect to fiber content and fabric weight as well as a very specific list of finishing processes. The Customs lab held that the measurable criteria of fiber content and fabric weight were satisfied. 24

25 HQ H (April 1, 2014) However, the Customs lab reports found that one or more of the following finishing processes were not performed: Vaporized; Sheared; Fulled; and Dyed. 25

26 HQ H (April 1, 2014) None of these terms were defined in the short supply determination. After a lack of success at the port level, the decision resulting from the lab testing was protested and forwarded to Customs HQ. Customs Headquarters overruled each of the lab determinations. 26

27 HQ H (April 1, 2014) Vaporizing Importer argued that vaporizing is essentially a steaming process to relax the fabric and provided documentary evidence that this process was performed. The CBP lab looked up a definition of vaporizing involving disperse dyes used in printing of fabrics. CBP HQ concluded that this was an error. 27

28 HQ H (April 1, 2014) Shearing Importer argued that shearing is a process to cut fibers protruding beyond a certain length, much like a lawn mower, but does not require that fibers be of uniform length. Documentary evidence of the performing of this process was submitted. The CBP lab concluded that the fabric was not sheared because the fibers were not of a uniform length. CBP HQ concluded that this was an error. 28

29 HQ H (April 1, 2014) Fulling This is a fabric compacting process that the importer argued can be performed to varying degrees. The CBP lab concluded that the fabric was not fulled because part of the weave was still visible. CBP HQ agreed with the importer that a fabric need only be partially fulled. 29

30 HQ H (April 1, 2014) Dyeing Some of the fabrics were yarn-dyed. The CBP lab concluded that the fabric must be piece-dyed to qualify. CBP HQ noted that sixty-one other short supply determinations require that a fabric be piece dyed yet the short supply determination at issue only specified dyed. As such, the lab erred in requiring piece-dyeing. 30

31 Parting Thoughts Customs lab determinations are to be regarded seriously and will be accorded a degree of deference. Nonetheless, they must be reliable. If an importer can both demonstrate the unreliability of the Customs testing and produce reliable evidence in support of its own position, a successful challenge may be possible. 31

32 Thank you! Questions? 32