One of the primary and completely legitimate purposes of incorporating is to limit or eliminate the personal liability of corporate principals and employees. Under New York state law, corporate veil piercing principles or legal entity disregarding principles involve several factor analysis. Piercing the corporate veil requires a showing that: (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury. Morris v. New York State Dep’t of Taxation & Fin., 82 N.Y.2d 135, 141, 623 N.E.2d 1157, 1160–61 (1993). So fraud automatically pierces corporate veil, it is given. What about negligence? Well, the negligence must equate to abuse of the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party. Id. In one case, New York’s Appellate court declined to pierce corporate veil in a negligence claim finding no “fraud or wrong.” Mistrulli v. McFinnigan, Inc., 39 A.D.3d 606, 607, 834 N.Y.S.2d 271, 272 (2d Dept. 2007). This means that negligence, would not automatically serve as an entitlement to corporate veil piercing in New York state courts. Same…
Court of International Trade (CIT) decision in Zojirushi v. U.S. (CIT 2016) is a great jurisdictional monologue explaining how and when 28 U.S.C. § 1581 can be invoked when challenging Customs and Border Protection (CBP) protest. In Zojirushi, CBP did not approve nor deny protestant’s GSP claim, but instead checked the box on CBP Form 19 “rejected as non-protestable.” Protestant brought action against CBP in CIT under 28 U.S.C. § 1581(i), which is a residual jurisdictional subdivision. CIT declined jurisdiction under 28 U.S.C. § 1581(i), saying that for this type of action, jurisdiction pursuant to 28 U.S.C. § 1581(a) should be invoked, which explicitly provides for protests. (The Court of International Trade shall have exclusive jurisdiction of any civil action commenced to contest the denial of a protest, in whole or in part, under section 515 of the Tariff Act of 1930) However, the problem here was that CBP had neither denied nor approved the protest, but rather “rejected” the document. According to CIT, this problem is easily corrected through “accelerated disposition” clause under 19 U.S.C. § 1515(b). In other words, before showing up to court, protestant should request accelerated disposition. Then wait thirty (30) for “deemed” denial. And only then,…
On August 24, 2016, in Otter Products v. US, Court of Appeals for the Federal Circuit (CAFC) agreed with the Court of International Trade (CIT) decision that protective cases for smartphones that are specifically designed to fit these smartphones are not classifiable under HTSUS heading 4202. For Otter Products, LLC this decision lowered duty from 20% to 5.3%, allowing them to use HTSUS 3926.90.99 (other articles of plastic provision). Perhaps more interesting, if not important, outcome of the opinion is the analysis and well-reasoned attack on the part of both plaintiff and defendant. HTSUS 4202 heading provides for: Trunks, suitcases, vanity cases, attache cases, briefcases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; traveling bags, insulated food or beverage bags, toiletry bags, knapsacks and backpacks, handbags, shopping bags, wallets, purses, map cases, cigarette cases, tobacco pouches, tool bags, sports bags, bottle cases, jewelry boxes, powder cases, cutlery cases and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber or of paperboard, or wholly or mainly covered with such materials or with paper: Since smartphone cases are not specifically provided under heading notes,…
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In October 2015, Department of Justice published conviction and penalty information of Lumber Liquidators Inc.’ criminal activities (also available here). The fine is $13,150,000. According to February 2, 2016 Google Finance report, (holding) company’s market cap is about $354,470,000. This means that Lumber Liquidators Inc.’s criminal activities cost company 3.7 percent of its market cap (attorneys’ fees not included). According to DOJ, it is “the largest financial penalty ever under the Lacey Act.” Now that the Lacey Act criminal precedent is set to cost 3.7% of the corporate market cap, it is a good reason to revisit Lacey Act itself, especially since its has been over four years since LawCustoms published on the topic. In a nutshell, Lacey Act makes it unlawful to import, export, sell, acquire, or purchase fish, wildlife or plants that are taken, possessed, transported, or sold: 1) in violation of U.S. or Indian law, or 2) in interstate or foreign commerce involving any fish, wildlife, or plants taken possessed or sold in violation of State or foreign law. Lumber Liquidators Inc. pleaded guilty to violation of 18 U.S.C. § 542 (entry of goods by means of false statements). Lacey Act requires importer of to submit a…
Author commented on CBP’s position for digital equipment border searches back in 2008. Since then, CBP came out with amended version for digital equipment search conduct in the CBP Directive 3340-049. The directive states that searches, including those of electronic derives, can be made “without individualized suspicion.” Id. at ¶¶ 5.1.3, 5.1.4. DHS Special Agent Kevin Hamako, who may or may not have read the CBP directive, also had “an understanding that no suspicion was required to conduct a border search of any items * * * including electronic devices.” U.S. v. Kim, 7 (D.C. 2015). But, the D.C. district court decided that Agent Hamako misunderstood the “no suspicion” doctrine in the context of digital equipment border searches. DHS agent was following up a lead that allegedly implicated one businessman’s involvement with exports of controlled items without securing valid licenses around 2008-2009. In 2012, DHS agent intercepted the businessman at the airport and seized his computer, allowing the businessman to exit the United States. The seized computer was sent to the another DHS facility, where the contents of the hard drive were copied and examined. The computer was eventually returned to the businessman, but based on the examined content, DHS…
Certain individuals who work for corporations engaging in international trade, particularly imports, now have an excuse to ask for a raise. On September 16, 2014 Court of Appeals for Federal Circuit in U.S. v. Treck Leather held defendant-officer Mr. Shadadpuri personally liable for gross negligence while introducing merchandise into the commerce of United States under 19 U.S.C. § 1592(a). While requesting the raise, following arguments may be helpful: Any ‘person’ who engages in the behavior prohibited by 19 U.S.C. § 1592(a) is liable thereunder regardless of whether that ‘person’ is the importer of record or not. U.S. v. Treck Leather, pg. 11. Person includes human beings, partnerships, associations, corporations, consignees, consignors, sellers, owners, importers, agents, and other persons. U.S. v. Treck Leather, pp. 13-14. Corporate liability could not have been incurred but for direct involvement of a person. U.S. v. Treck Leather, pg. 11 (“Trek’s gross negligence . . . could not have been conceded but for the direct involvement of Mr. Shadadpuri.”). Person imports merchandise through one or more companies owned by that person. U.S. v. Treck Leather, pg. 19 (He “imported men’s suits through one or more of his companies.”). Person’s own acts are enough, no piercing of…
In the Corning Gilbert Inc. v. U.S., importer asked the Court of International Trade for an opinion about Customs and Border Protection (CBP) role in enforcing decisions of other agencies. The specific issue concerned general exclusion order issued by International Trade Commission (ITC) in the patent infringement investigation for coaxial cable connectors. Exercising ITC’s authority under 19 U.S.C. § 337(d)(2)(a), the Commission directed CBP to exclude all unlicensed “coaxial cable connectors that infringe claim 1 and/or claim 2 of U.S. Patent 6,558,194.” Id. Since the patent in question has only two claims, the ITC’s decision essentially concerned the whole patent. Now here is the interesting part: when deciding whether or not to exclude the merchandise, can CBP rely on interpretations of the ITC, or should CBP make its own inquiry? In Corning Gilbert, CBP thought that reliance on ITC’s interpretation would suffice. The Court, however, disagreed and requested CBP to exercise its own discretion: “Customs may have to go beyond the mechanical application of the ITC’s Section 337. It may have to look at evidence and analyze whether the importer, particularly a non-party such as Corning Gilbert, has established non-infringement.” Id. This holding is significant in light of CBP’s peculiar role as…
Read More CBP Can’t Hide Behind Ministerial Shield… sometimes
Imposition of antidumping duties is a popular trade tool in the modern WTO regime. When it comes to People’s Republic of China, asking the U.S. government to impose antidumping duty is even easier (due to its non-market economy status), and probably politically popular. When these duties are imposed, the tariff rate can easily overshoot 100 percent range. In case of Chinese origin pencils, for example, it would be over 114 percent. High antidupimping duties are designed to prevent “dumping” of a product on the U.S. market. Collaterally, these duties serve as the great incentive to circumvent the law, such as the antidumping duties law. This is exactly what the plaintiff has alleged in US v. Staples case. The plaintiff complained to the court about various importers, such as Staples, Target, OfficeMax, and Industries for the Blind. According to the plaintiff, these companies circumvented the law by incorrectly declaring the origin of Chinese pencils. Since the antidumping duty is tied to the origin, changing the origin of the product can change the duty. This is what the plaintiff said: Staples declared falsely on Customs entry documents that its pencils originated in Hong Kong, Malaysia, and Taiwan; Target falsely declared that its…
Customs and Border Protection (CBP) scrutiny over intellectual property rights (IPR) is on the rise. CBP reports on seizures are increasing and the agency begins incorporating IPR issues in the customs broker examination. Since the IPR area is relatively complex, one may need to keep abreast of legal jurisprudence when CBP begins IPR inquiry of imported goods. IPR primarily include three major areas: trademarks, copyrights, and patents. Another area that does not come up as often includes trade secrets. Importers of copyrighted material are now well positioned to assert “First Sale” rule if those importers are bringing “copyrighted work lawfully made abroad.” According to the U.S. Supreme Court Ruling in Kirtsaeng v. John Wiley & Sons, Inc. (2013) the purchaser of a lawful copyrighted work abroad (e.g. a book from an American publisher who lawfully sold it in Thailand) has a lawful right to bring it into the United States because “the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.” Id. citing Section 109(a) of the Copyright Act. But watch out…
Read More Importing Copyrighted Materials after Kirtsaeng Decision
Court of International Trade published opinion earlier this month, laying down the HTSUS classification principles for 3-D printing technology (or “laser sintering” / “additive manufacturing” machines, using the court’s terminology). The 46 page opinion – EOS of North America, Inc. v. US – lays rest to rumors and ambiguities of how this increasingly popular technology should be classified. Classification principles can change if the case is appealed, but Judge Stanceau did a fine job of explaining the position of the court. Members of international trade community had divergent views about the appropriate classification of the product. Some even expressed views that 3-D printers should be classified as domestic appliances (HTSUS heading 8509), reasoning that the 3-D technology is cost effective and is becoming a household item. Other, more reasonable propositions entertained classification in the machine tools category (HTSUS heading 8463) and laser welding machines (HTSUS heading 8515). The opinion, at least for now, settled this controversial question. Court concluded that 3-D printers, such as described below, designed to work with plastic materials are classified under 8477.80.00, which provides for “Machinery for working plastics … Other.” However, if the 3-D printers can work with materials such as metals, instead of or…