Click here to visit www.crowell.com International Trade Bulletin
Vol. I: Issue 15 | October 4, 2006  |  www.crowell.com


ANTITRUST IN THE SPOTLIGHT: EU Fines for Anti-Competitive Behaviour

The European Union has adopted new guidelines which change the way that fines for anti-competitive conduct are calculated. In common with many other countries – including the United States – the European Union regularly imposes financial penalties on companies that are found to contravene the EU's anti-trust laws. The European Union has now reformulated the way it calculates these fines in order to maximize fines for the bigger players and to increase the level of fines imposed for long-standing anti-competitive practices.

The European Commission has adopted new guidelines on the method of setting fines for infringements of Articles 81 and 82. The new guidelines represent a substantial change in the Commission's fine setting procedure. Whereas under the former system the amount of the fine depended mainly on the classification of an infringement as “minor”, “serious” or “very serious”, under the new guidelines, fines will be based on a percentage of the yearly sales of the covered products, which will be calculated individually for each company participating in the infringement.

In particular small companies - which in the past have constantly complained that the former guidelines led to disproportional and discriminatory fines - will certainly benefit from this new approach. At the same time, the new guidelines will lead to substantially increased fines for infringements of a longer duration. Whereas under the former guidelines, the fine was increased by 10% for every year of the infringements, the new guidelines foresee an increase of 100% for every year.

The Commission's new formula of combining the value of sales to which the infringement relates and the duration of the infringement is likely to provide a more appropriate reflection of the economic importance of the infringement as well as the relative weight of each participant.

Finally, the new guidelines foresee a significant increase in the level of fines for repeat offenders. This means that corporations and enterprises that have been caught more than once engaging in anti-competitive practices can expect larger penalties.

For more information or assistance on this subject, please contact Volker Soyez in our Brussels office at vsoyez@crowell.com.

ANTITRUST IN THE SPOTLIGHT: E-Discovery Amendments to FRCP Become Effective December 1, 2006

Having been approved by the United States Supreme Court, the proposed amendments to the Federal Rules of Civil Procedure concerning the discovery of electronically stored information will take effect on December 1, 2006. The amendments are designed to acknowledge the differences between electronically stored information and traditional paper files, including the vastly greater volume of electronic material, differences in the way that electronic files are created, stored, collected and archived, and the particular challenges parties face when trying to identify, preserve, and produce potentially relevant electronic material.

These significant amendments to the Federal Rules include provisions:

  • Requiring E-Discovery issues to be examined at the outset of a lawsuit (Rules 16 & 26(f));
  • Requiring the mandatory disclosure of categories and locations of electronically stored information (Rule 26(a)(1)(B));
  • Imposing a “reasonably accessible” standard to determine if a party must produce electronically stored information (Rule 26(b)(2)(B));
  • Introducing a “clawback” provision relating to inadvertently produced privileged information (Rule 26(b)(5)(B));
  • Establishing a standard for the production of electronic files ( i.e., “ordinarily maintained” or “reasonably usable”) if a production format is not specified by the requesting party (Rule 34); and
  • Creating a “safe harbor” provision for electronic information that is lost due to the routine operation of IT systems as long as reasonable steps were taken to preserve the information after knowing it was discoverable (Rule 37).

Even before the amendments become effective, we have found that courts increasingly have been following these general principles. We expect much debate and litigation regarding the interpretation of these rules, as parties continue to struggle with the litigation challenges created by electronic discovery.

For more information, please contact Jeane Thomas in our Washington, DC office at jthomas@crowell.com.


EUROPE IN THE SPOTLIGHT: Enlargement to the EU-27

The European Commission confirms that Bulgaria and Romania may enter the European Union as of 1 January 2007. As future members of the European Union, Bulgaria and Romania will be required to apply the EU common external tariffs for goods imported from third countries. Temporary restrictions are, however, being anticipated.

The European Commission has issued its final monitoring report on the readiness of Bulgaria and Romania to enter the European Union. In the report, the Commission endorses the two countries' accession on the 1st of January 2007, as originally planned. According to the Commission, the two countries have undergone an extraordinary reform process and their accession will not compromise the functioning of the EU. However, since there are still areas where progress is needed, the Commission is recommending that certain internal EU mechanisms such as safeguard measures, transitional measures, financial corrections on EU funds and cooperation and verification mechanisms for the judiciary and the fight against corruption and organized crime are put in place until up to three years after accession.

The safeguard measures may cover general economic matters, cross-border free movement of goods and services, competition law, energy and transport etc. as well as justice and home affairs issues such as the recognition of judgments and the European Arrest Warrant. Transitional measures will apply with regard to intra-EU export of products that do not comply with EU veterinary, phytosanitary and food rules, the free movement of workers, acquisition of land, road transport and some aspects of EU environmental and agricultural laws and standards. The possibility for financial corrections will apply with regard to the EU structural and agricultural funds. Finally, with regard to corruption and organized crime, Bulgaria and Romania will be required to report regularly on progress in addressing specific benchmarks.

The Commission's recommendations are expected to be adopted by the Council on October 20, 2006, pending outstanding national ratification of Bulgaria's and Romania's accession treaties by Belgium, Denmark, Germany and France.

For more information, please contact Robert MacLean or Margareta Djordjevic in our Brussels office at rmaclean@crowell.com or mdjordjevic@crowell.com.

EUROPE IN THE SPOTLIGHT: Compensation for U.S. Corporations Stemming from EU Enlargement

The Office of the U.S. Trade Representative (“USTR”) is requesting U.S. exporters of goods and services to notify them of any adverse commercial implications that may arise as a result of the accession of Bulgaria and Romania to the European Union. Since both Bulgaria and Romania will adopt the EU's common external tariff for goods imported from the United States, as well as a host of regulatory measures governing trade in goods and the supply of services, compensation may be requested.

The EU's fifth enlargement is being watched closely by the United States government and especially the USTR. According to WTO rules, the EU will have to notify other WTO members of its intention to modify or withdraw market access commitments it has made on goods and services in order to expand the EU to include Bulgaria and Romania. The USTR has published a request for public comment on the implications for U.S. commercial interests of the accession. Comments are sought with regard to both market access for goods and services as well as possible internal regulatory barriers to trade. Comments are due by 30 October 2006.

For more information, please contact Robert MacLean or Margareta Djordjevic in our Brussels office at rmaclean@crowell.com or mdjordjevic@crowell.com.

Divisions at the World Intellectual Property Organization May Halt Work on Global IP Reform. Discussions on two key global trade-related IP reform initiatives – a global patent law treaty and a broadcaster rights treaty to address concerns related to developments in digital technology and the Internet – have basically come to a standstill due to continuing divisions among members of the World Intellectual Property Organization (“WIPO”). As a result, any possible progress towards completing either of these agreements will likely not take place until some time later next year.

The proposed Substantive Patent Law Treaty aims to simplify and achieve greater harmonization among national and regional patent laws and practices in order to streamline procedures, lower the costs and time necessary to obtain a patent, and ensure consistency in standards for granting a patent. Sharp differences between developed and developing countries over the scope of the treaty have stalled negotiations since 2003. In 2005, the United States and several other countries called on negotiators to resolve their differences on four technical issues related to the granting of a patent: prior art, grace period, novelty, and inventive step, and to agree on these issues before moving to issues raised by developing countries. Brazil and Argentina lead the developing countries in opposing this approach, and have insisted that the negotiations cover additional issues which are of interest to them, such as the sufficiency of disclosure requirements in patent applications, the protection of genetic resources, effective mechanisms to challenge patents, and technology-transfer provisions.

The stalemate continued at WIPO's annual General Assembly which met during the week of September 25, and may lead the United States, Japan and the EU to move forward on its own patent harmonization negotiations to reduce the duplication of work performed by their respective patent offices.

The proposed Treaty on the Protection of Broadcast Organizations would grant broadcasters and cable casters separate and distinct rights from the protection of copyrights held by the creators of the programs which are broadcast. The current proposal would provide a fixed term of protection over the broadcasters' signals, permitting them to restrict the copying and redistribution of their program streams.

Broadcasters argue that the new rights are needed to tackle the growing problem of unauthorized retransmission of signals facilitated by digital technology and the Internet. However, U.S. information and communications technology firms such as Intel, Verizon, Dell, TiVo, and AT&T joined a number of non-governmental organizations in denouncing the treaty, arguing that it would impose burdensome new legal requirements and additional costs for high-tech companies and consumers. Their position is that the treaty should focus primarily on addressing the problem of signal piracy rather than creating a new set of rights for broadcasters.

U.S. officials stated during the WIPO General Assembly that the draft treaty text was flawed in its current form, in part due to a lack of consensus on outstanding issues, which include the scope of the treaty, the duration of protection for broadcasts, and limitations and exceptions to the rights being proposed for broadcasters. Therefore, the U.S. currently believes it would not be appropriate to advance to a diplomatic conference to finalize the treaty without further substantive discussions. In contrast, the European Union, Japan, China, and several other countries were among those voicing their support for advancing with plans to hold a diplomatic conference next year.

Increasingly difficult negotiating environments in multi-lateral organizations such as WIPO and the WTO have led the United States and other countries to turn to other mechanisms such as FTAs to raise the level of IPR protection and/or address new issues brought about by changes in technology.

For more information, please contact Brian Peck in our California office at bpeck@crowell.com.

With news reports of Iran's continuing defiance of UN demands to cease enrichment activity, and with negotiations dragging on with no schedule or framework, Congress has moved to increase the pressure on Iran, approving legislation just before departing for the election recess. The vehicle for the legislation was the expiration of the Iran and Libya Sanctions Act (the “ILSA”) which is targeted at non-U.S. companies investing in Iran.

Earlier this year Congress was unable to agree on legislation to renew ILSA, which was then due to expire in August. A stop gap extension kept ILSA alive until September 29. (See ITB # 10). The new legislation removes Libya from the law and renames ILSA the Iran Sanctions Act of 1996, or ISA, and it is set to expire on December 31, 2011.

President Bush signed the bill into law on Saturday, September 30, 2006, and stated, “I applaud Congress for demonstrating its bipartisan commitment to confronting the Iranian regime's repressive and destabilizing activities by passing the Iran Freedom Support Act. This legislation will codify U.S. sanctions on Iran while providing my Administration with flexibility to tailor those sanctions in appropriate circumstances and impose sanctions upon entities that aid the Iranian regime's development of nuclear weapons.”

The ISA authority given to the President under this law is much the same as before, with a new provision authorizing ISA sanctions (which are apparently in addition to INPA sanctions) on entities assisting Iran in the development of chemical, biological, nuclear, weapons or “destabilizing numbers and types of advanced conventional weapons.”

In addition to the ISA provisions, IFSA codifies the current sanctions under the primary Executive Orders on Iran, requiring fifteen days advance notice before termination, except in exigent circumstances. IFSA also contains provisions authorizing support for democracy in Iran.

For questions about this issue or more information on sanctions on Iran, please contact Carrie Fletcher or Jeff Snyder in our Washington, DC office at cfletcher@crowell.com or jsnyder@crowell.com.

Japan Continues to Expand Its Free Trade Agreements (FTA) Network. Is a U.S.-Japan FTA on the Horizon? After being a relative late-comer to bilateral free trade agreements, Japan recently announced an agreement on the framework for a new FTA with Chile, as well as the commencement of a preliminary study for a free trade agreement with Australia. Japan has already concluded FTAs with Singapore, Mexico, Malaysia, the Philippines and Thailand and is in the process of negotiating FTAs with Korea and Indonesia.

Since the FTA with Mexico came into effect in 2005, bilateral trade between Japan and Mexico has increased by 40 percent over pre-FTA levels, which is prompting Japan to accelerate its FTA negotiations and which led to the basic framework with Chile. The Japan-Chile FTA will make 99.8 percent of Japanese exports to Chile tariff-free, and 90.5 percent of Chilean products to Japan tariff free over the next ten years.

With the new Prime Minister Shinzo Abe now in office and the on-going U.S.-Korea FTA negotiations taking place, talk of a possible U.S.-Japan FTA has begun to increase on both sides of the Pacific. The U.S.-Japan Business Council and other business groups have publicly called on both governments to explore an economic partnership that would go beyond an FTA, while policy-makers have internally begun discussing the need to revitalize the U.S.-Japan economic relationship that has operated primarily under the bilateral Regulatory Reform Initiative which is part of the Economic Partnership for Growth launched back in 2001.

There are many benefits that could be gained through the launch of a U.S.-Japan FTA. Firstly, as in the case with Korea, the United States and Japan are strategic allies with common goals in the Asia-Pacific region and around the world. An FTA between the two countries would serve to further cement already close ties and could, if launched in the near-term, help newly elected Prime Minister Abe get off on a good foot with President Bush. Secondly, the launch of a comprehensive trade pact with Japan would certainly catch the attention of WTO members and could serve as an impetus to jump-start the stalled WTO Doha negotiations. Finally, economic analyses have pointed to Japanese companies as the major losers from a U.S.-Korea FTA as Japanese products would likely be displaced in both the U.S. and Korean markets. When the U.S.-Korea FTA is completed, Japanese businesses are sure to become greater supporters of an FTA between the United States and Japan.

Agricultural liberalization, particularly Japan's reluctance to open its rice market, has been the key impediment to the launch of a U.S.-Japan FTA to date. However, it is clear that Japan is watching progress, particularly in this sector, in the U.S.-Korea FTA to see if there is an agreement reached on sensitive products that could be adopted in a U.S.- Japan agreement. Further, some key opinion leaders in and outside of Japan have extolled the Japanese Government to follow the Korean lead in providing government assistance to farmers. On October 2, the Korean Government announced that it will allocate a record $2.56 billion in support for rice farmers aimed at helping to sustain their earning levels as the Korean rice market is liberalized. It is unclear whether the Abe Government will take a fresh look at this issue. However, in the interim, trial balloons for other types of agreements to help pave the way for a more comprehensive FTA or economic partnership agreement are beginning to be raised. For example, one idea that has been discussed is an intellectual property rights agreement under which the United States and Japan would seek to coordinate anti-piracy and counterfeiting efforts. Another could be in the area of customs that would both streamline customs procedures to reduce costs for shippers and ensure more security.

Given the current stalemate in the WTO Doha Round negotiations and the increasingly aggressive FTA agendas of China, Korea and other countries in Asia, the internal discussions on how to revitalize the U.S.-Japan economic relationship are certain to continue over the coming months, particularly in advance of Prime Minister Abe's first visit to Washington sometime during the first half of 2007. Crowell & Moring and its trade and investment consulting affiliate C&M International, will continue to monitor and periodically report on any developments.

For more information, please contact either C&M International's Amy Jackson in Washington, DC at amyjackson@crowell.com or, Brian Peck in Crowell & Moring's California office at bpeck@crowell.com.

Reversal of India's Coke and Pepsi Ban Raises Investment Questions. Earlier last week, the High Court of Kerala, the supreme judiciary authority in India's southwest state of Kerala, quashed the state government's directive calling for the complete ban on the sale and production of Coke and Pepsi.

In August, the Center for Science and Environment (“CSE”), a private research group based in New Delhi, publicly alleged that it had conducted tests revealing that the level of pesticides found in the soft drinks sold in India made them unsafe for human consumption. After the release of this data, seven of India's states instituted bans on the sale of Coke and Pepsi products, forbidding their distribution at state-run schools, colleges, hospitals and government offices. The state of Kerala instituted a complete ban on the companies' soft drinks and asked that they close their plants operating in the state. Shortly after these bans had been imposed, the Indian Health Minister made public statements that the data published by CSE was flawed. According to his statements, a government-appointed committee determined that the sampling methods used by the research group were not scientifically and statistically valid.

Coke and Pepsi challenged the outright ban in Kerala in the state's High Court, alleging that their products meet high quality standards. They argued that only the central government in India has the competence to ban food products and that Kerala's actions were outside the scope of its permitted authority. The High Court ruled in Coke and Pepsi's favor, stating that, under the Prevention of Food Adulteration Act, only the central government has the authority to prohibit the manufacture and sale of food. The Court further stated that the ban on the products was “harsh and unjust,” particularly in light of the fact that the soft drink companies were not given any opportunity to challenge the ban before it was instituted. In response to the Court's decision, the state of Kerala has said that it will appeal the decision to India's Supreme Court. At issue will be the conflict between the federal law regarding food safety and the right of states to make decisions regarding the health of their inhabitants.

While resolution of the issue may be far off, this situation has stirred up a much larger debate within India regarding foreign investment. The decision by the High Court of Kerala attempts to balance the right of investors to feel secure in their investments in India with the rights of Indian states to protect the health and well-being of their constituents. Bans still exist in states other than Kerala, and the determination by the Indian Supreme Court may have a far-reaching impact not only on Coke and Pepsi's operations in India but also on investors attempting to decide whether their investments in India will be secure.

For more information, please contact Erin Mikita in our Washington, DC office at emikita@crowell.com.

The EU uses China's WTO Transitional Review Mechanism exercise as an opportunity to tackle barriers to trade for European industries and enterprises. At the forthcoming WTO Market Access Committee meeting in Geneva, the EU will raise a significant number of barriers to trade between the two major trading partners which the EU insists are no longer justified after China's accession to the WTO.

Conscious of the sensitivities involved in bringing WTO dispute settlement proceedings against China each time adequate progress appears not to emerge under China's Protocol of Accession, the EU is using the WTO Transitional Review Mechanism as an opportunity to highlight many of the barriers to trade that continue to pervade EU-Chinese trade in goods.

Surprisingly, Chinese export restrictions preventing EU enterprises from obtaining unobstructed access to Chinese raw materials is top of the list. The EU cites export restrictions on coke, rare earths, non-ferrous metals, steel scrap and certain chemicals (including fluorspar and phosphorous) as blocking proper access for EU enterprises to these materials. Ironically, over the last five or so years, many of these products have been subject to EU anti-dumping duties and restrictions. Times have, apparently, changed and now the EU is insisting on improved access to these raw materials and chemicals under China's commitments to the WTO upon accession.

At the same time, the EU is complaining about the growing difficulties encountered by European exporters caused by the Chinese Compulsory Certification (CCC) regulation. It appears that several sectors are affected by these provisions which are, according to the EU, trade restrictive and impose a heavy cost on Chinese importers of EU products.

The rest of the EU's concerns about trade barriers are sector-specific. A large number of Chinese measures are cited as being trade-restrictive in the following sectors: automobiles, steel, petrochemicals, chemicals, energy and fuels as well as pharmaceuticals and cosmetics. For the most part, these barriers to trade consist of administrative regulations that are imposed in such a way as to place unnecessary burdens on imports of EU products. In several sectors, the EU questions why joint venture ownership limitations continue to exist. In others, questions are asked about the continued need for local content requirements now that China has joined the WTO.

The WTO Transitional Review Mechanism for China provides a less confrontational possibility for raising these issues in contrast to formal WTO dispute-settlement proceedings. This kind of approach will no doubt play a crucial role in the forthcoming revisions to the EU's Market Access Strategy, due to be adopted in early 2007.

For more information on this issue, please contact Robert MacLean in our Brussels office at rmaclean@crowell.com.

U.S. legislation that has been declared inconsistent with WTO rules by the WTO Appellate Body does not prevent criminal charges being brought against private individuals promoting gambling over the Internet. In 2005, the WTO Appellate Body issued a decision against the prohibition maintained by the United States on the cross-border supply of gambling and betting services in a case brought before the WTO by Antigua and Barbuda. Two British businessmen have, however, been arrested in the United States in connection with Internet gambling and charged with offenses under the U.S. statute declared incompatible with WTO law.

In the WTO Appellate Body's decision, it was held inter alia that the United States did not prove that the provisions of the Wire Act were consistent with Article XIV of the General Agreement on Trade in Services, in that it was not demonstrated that the Wire Act is applied in a non-arbitrary and non-discriminatory manner to both domestic and foreign gambling services providers. Further to recommendations by the Dispute Settlement Body, the United States should normally have implemented amendments to its national gambling legislations by April 3, 2006.

Yet, last week, Betonsports' chief executive and Sportingbet's chairman were arrested at U.S. airports when they landed. One case is being handled by the U.S. Department of Justice under the United States Wire Act, while the other may be prosecuted under state laws by the state of Louisiana. Regardless of the final outcome of the WTO dispute settlements process, it seems clear that the non-conformity of the Wire Act – or of any other U.S. statute – with the GATS may not be successful before the U.S. courts as a defence against a criminal prosecution.

Around the same time, in France, executives of the Austrian stock exchange-listed company Bwin were also arrested for alleged violation of the French gambling monopoly of PMU and la Française des Jeux. EU law may, however, provide a defence for these executives since Article 49 of the EC Treaty extends the freedom of services to cross-border gambling services within the European Union.

It has been the consistent case law of the European Court that an EU Member States can restrict the cross-border provision of gambling services from the territory of another Member State only if such restriction is non-discriminatory, necessary and justified on grounds on public order, and proportional. Specifically with regard to this last condition of proportionality, the ECJ has suggested that it is up to the national courts to verify whether the imposition of criminal sanctions on companies and individuals offering cross-border gambling services are reasonable and proportionate. Furthermore, the national court also has to scrutinize whether, in reality, national gambling legislation genuinely and from the outset aims at protecting public order or whether it aims at financing the public purse, e.g. through the grant of gambling monopolies to State-owned operators. A national court finding that the criminal sanctions imposed by a given EU Member State are unjustified or disproportionate and, therefore, contrary to Article 49 of the EC Treaty, will have to refuse to apply such criminal sanctions. In this regard, it should also be noted that the European Commission has decided to officially question seven Member States (Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden) on their national statutes restricting the supply of sport betting services.

In summary, it seems that the criminal prosecution of gambling executives in the United States is unlikely to be affected at all by the recent WTO case-law on the cross-border supply of betting and gaming services. On the other hand, the criminal prosecution of gambling executives in Europe will inevitably trigger the question whether such prosecution is consistent with the principle of the freedom to provide cross-border services set out in Article 49 of the EC Treaty.

For more information on this issue please contact Christoph de Preter in our Brussels office at cdepreter@crowell.com.

The EU has reached an agreement with seventeen other World Trade Organization (“WTO”) members on binding EU commitments for trade in services. The agreement provides new opportunities for service providers in the telecommunications, financial services, engineering, computer services and professional services sectors who wish to do business in the EU.

The EU has finally concluded a three year long negotiation with seventeen other WTO members – including the United States – seeking compensation for EU modifications to its GATS commitments as a consequence of the last two EU enlargements. Austria, Finland and Sweden joined the EU in 1995, and the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia became EU members in 2004. Prior to this happening, all these countries had their own separate services commitments in the WTO.

When these countries became EU members, the lengthy process of consolidating their GATS commitments with those of the 12 former EU Member States started. Since certain commitments of the new EU Member States were incompatible with the old EU ones, or simply not acceptable to the majority of the EU Member States, the EU invoked Article XXI of the GATS, which allows WTO members to modify or withdraw their services commitments. This process is permitted provided that they negotiate compensation, in terms of new commitments in other areas, with members affected by the change.

In the negotiations, the EU withdrew certain commitments that the new Member States had made foremost in public service sectors such as the education, health and audiovisual services sectors. As compensation, the EU made additional commitments concerning telecommunication services, financial services, engineering, computer services and professional services. The compensation package is included in the new EU GATS schedule of commitments, encompassing all 25 current EU Member States.

For more information, please contact Margareta Djordjevic in our Brussels office at mdjordjevic@crowell.com.

Part 3: After Doha: Practical Approaches for Cutting the Costs of Trade 

Classification Review Update: Importers Winning Classification Cases in the CIT

In the last issue, we talked about the complexity of tariff classification of imported merchandise, as well as the dividends that periodic re-analysis of classification can pay. In the example we provided (pet costumes!), Customs selected a classification with a lower duty rate than the one the importer had chosen. The bad news is that it doesn't always work that way—when confronted with a classification puzzle, Customs frequently selects the classification with the highest duty rate. The good news, though, is that Customs isn't always right, and in recent months the U.S. Court of International Trade (aka “the CIT”) has proven it. Twice.

First, in the case of Rhodia, Inc. v. United States, Slip Op. No. 06-118 (July 28, 2006), Customs had liquidated entries of certain “rare earth carbonate mixtures” as “cerium compounds” at a duty rate of 3.7%, rather than in the duty free “catch-all” category that the importer had proposed. The CIT analyzed the competing classifications and found no merit to Customs' argument. As a result, Rhodia will not have to pay any duty on the entries at issue in the case, nor will it have to pay duties on future entries of the same products.

More recently, in Degussa Corporation v. United States, Slip Op. 06-127 (August 18, 2006), the CIT again rejected Customs' position on a classification. In that case, Customs had argued that certain imported silicon carbide should be classified as an “other chemical” at a 5% duty rate. The CIT disagreed and opted for the classification asserted by the importer—“silicon dioxide,” which can be imported duty-free.

Customs may sincerely have believed that its proposed classifications were correct, or (if you take the cynical view), they may just have been trying to maximize duty revenue. Either way, the fact is that the duty differentials between its proposed classifications and those advanced by the importer were significant, and the Court's holdings represented huge savings for those importers.

We often hear importers repeat the two “golden rules” that Customs likes to repeat:
(1) “there is only one correct place in the tariff schedule for any item”; and
(2) “Customs—and only Customs—knows where that place is.” Not so. Those rules ignore the fact that the tariff schedule is law: it evolves over time, and Customs certainly doesn't have a monopoly on the correct interpretation of it. In fact, Customs often makes mistakes, as a glance at the ruling revocation notices in any issue of the Customs Bulletin shows. These court decisions show that when Customs makes a bad call in the classification area, sticking to your guns and mounting a challenge in the CIT can pay off.

* * *

Crowell & Moring's Customs lawyers are experienced in all aspects of tariff classification and CIT litigation—for more information on these or other Customs issues, please contact Barry Cohen or Alex Schaefer in Crowell & Moring's Washington, DC office at bcohen@crowell.com and aschaefer@crowell.com.

Next Week: Special Programs

October 25, 2006 – Are You Ready for E-Discovery Under The New Federal Rules? Global companies face e-discovery issues in a variety of situations, which can include not only litigation but regulatory proceedings, such as HSR second requests.

On Wednesday, October 25, 2006, Crowell & Moring will host a roundtable discussion on "Meeting the Challenges of E-Discovery and Digital Information Management," during which our expert panel will discuss best practices in litigation readiness under the new amendments to the federal rules, preservation obligations, and how to use the latest technologies to reduce costs and gain tactical advantages.  The event will be held at the Washington, DC offices of Crowell & Moring LLP located at 1001 Pennsylvania Avenue, NW. A cocktail reception will follow the roundtable.  For more information and to register, please visit www.crowell.com/events/E-Discovery-Event.html.

October 26, 2006 – Globalization's New Road Map: Best Practices and Policies for Growing and Protecting Your International Business

For more information on topic panels and our speakers or to register to attend this seminar, please visit the web site for this event at www.crowell.com/globalization/.

October 16, 2006Crowell & Moring LLP, C&M International and the American University International Business Association present

The 1st Annual International Business Conference Navigating the Risks and Opportunities of the Chinese Market

3:00 pm - 7:00 pm

Keynote Address by John Frisbie, President, U.S.-China Business Council

Doing business in China, one of the world's most dynamic countries, can be an overwhelming endeavor for many U.S.-based businesses. Positioning your company for success while simultaneously managing the significant risks that come with investing in, sourcing from, or selling to China is essential in this important market. Crowell and Moring, C&M International and the American University International Business Association invite you to join us on October 16th for two expert panel discussions on how to navigate the Chinese market (how to form joint-ventures, protect intellectual property, and market products in China, etc.) and how to understand the political and economic forces that shape U.S.-China relations and impact how U.S. businesses operate in China. Our two panel discussions will feature Fortune 500 executives, senior government officials from the Office of the United States Trade Representative and the Department of Commerce, top Crowell lawyers and distinguished academics. Following the panel discussion, a keynote address will be delivered by John Frisbie, President of the U.S.-China Business Council.

For more information on our speakers, please visit www.crowell.com/evite/IBC-invite-III.htm.

To register for the 1st Annual International Business Conference, please respond to events@crowell.com.

 

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