Upholstery Fabric FTZ Application Filed

On January 20, 2016 the Foreign Trade Zone Board published in the Federal Register (81 FR 3100) Notification of Proposed Production Activity; Klaussner Furniture Industries, Inc.; Subzone 230D; (Upholstered Furniture); Asheboro and Candor, North Carolina.

Klaussner Furniture Industries, Inc. (KFI), operator of Subzone 230D, submitted a notification of proposed production activity to the FTZ Board for its facilities in Asheboro and Candor, North Carolina. The notification conforming to the requirements of the regulations of the FTZ Board (15 CFR 400.22) was received on January 5, 2016.

KFI currently has authority to conduct cut-and-sew activity using certain foreign micro-denier suede upholstery fabrics to produce upholstered furniture and related parts (upholstery cover sets) on a restricted basis (see Board Order 1745, 76 FR 11426, March 2, 2011). Board Order 1745 authorized the production of upholstered furniture (sofas, sleep sofas, and recliners) for a five-year period, with a scope of authority that only provides FTZ savings on a limited quantity (5.79 million square yards per year) of foreign origin, micro-denier suede upholstery fabric finished with a hot caustic soda solution process (i.e., authorized fabrics). All foreign upholstery fabrics other than micro-denier suede finished with a hot caustic soda solution process (i.e., unauthorized fabrics) used in KFI's production within Subzone 230D are subject to full customs duties.

The current request seeks to extend KFI's existing FTZ authority indefinitely (with no increase in the company's annual quantitative limit of 5.79 million square yards) and to add foreign-status leather and certain polyurethane-type fabrics to the scope of authority. KFI has also requested that the authority under Board Order 1745 be revised by modifying Condition #2 to allow KFI to admit unauthorized fabrics to Subzone 230D in privileged foreign status (19 CFR 146.41), which would preclude any change in customs classification through transformation under FTZ procedures. Pursuant to 15 CFR 400.14(b), additional FTZ authority would be limited to the specific foreign-status materials and components and specific finished products described in the submitted notification (as described below) and subsequently authorized by the FTZ Board.

Production under FTZ procedures could exempt KFI from customs duty payments on the foreign-status fabrics used in export production. On its domestic sales, KFI would be able to apply the finished upholstery cover set (i.e., furniture part) or finished furniture duty rate (free) for the authorized fabrics and the additional fabrics (indicated below). Customs duties also could possibly be deferred or reduced on foreign-status production equipment.

Authority to admit imported fabrics to Subzone 230D in non-privileged foreign status (19 CFR 146.42)--under which the fabrics' customs classification could change through transformation under FTZ procedures--would only involve micro-denier suede upholstery fabrics finished with a hot caustic soda solution process (classified within HTSUS Headings 5407, 5512, 5515, 5516, 5801, 5903, 6001, 6005, and 6006), polyurethane fabrics backed with ground leather (5903.20.2500), upholstery leather (Heading 4107), and wet coagulation process, 100 percent polyurethane coated fabrics (5903.20.2500), as detailed in the notification (duty rate ranges from free to 17.2%).

Public comment is invited from interested parties. Submissions shall be addressed to the FTZ Board's Executive Secretary at the address below. The closing period for their receipt is February 29, 2016.

Walt Disney Parks and Resorts Recalls Infant Bodysuits Due to Choking Hazard

Photos available at http://www.cpsc.gov/en/Recalls/2016/Walt-Disney-Parks-and-Resorts-Recalls-Infant-Bodysuits/

Units: About 10,000

Description: This recall involves two styles of infant one-piece bodysuits with a three snap button closure. The garments are 100 percent cotton.

The Darth Vader Infant Bodysuits were sold in five sizes: 3M, 6M, 12M, 18M and 24M. The garment has a gray body with black sleeves and trim. The artwork on the front of the bodysuit shows an infant Darth Vader holding a light saber with the text: “If you only knew the power of THE DARK SIDE.”

The Disneyland 60th Infant Bodysuits have a light blue body with royal blue sleeves and trim. The artwork on the front of the bodysuit includes Mickey Mouse, Goofy, Donald Duck and Pluto in front of the Disneyland Castle. The Disneyland 60th bodysuits were sold in four sizes: 6M, 12M, 18M and 24 M. The text on the front of the garment reads “60th Disneyland Resort, Diamond Celebration.”

Incidents/Injuries: None reported

Sold at: Walt Disney World® Resort in Lake Buena Vista, Florida, Disneyland® Resort in Anaheim, California, the Treasure Ketch Shop on the Disney Wonder® and Mickey’s Mainsail located on the Disney Magic®, Disney Dream® and Disney Fantasy® cruise ships from February 2015 through November 2015 for about $20.

Importer: Walt Disney Parks and Resorts, of Lake Buena Vista, Fla.

Manufactured in: Guatemala

CPSC Meeting with AHFA to Discuss Flammable Fabrics Rule

This week two Consumer Product Safety Commission ("CPSC") Commissioners and staff are scheduled to meet with representatives of American Home Furnishings Alliance ("AHFA") the law offices of Kelley Drye & Warren, LLP, to discuss the merits of the petition filed by AHFA requesting CPSC to initiate a rulemaking under the Flammable Fabrics Act to adopt the performance standard and test methods prescribed in California Technical Bulletin 117-2013 on upholstered furniture flammability.

Customs Publishes Final Rule for U.S.-Australia FTA

On January 15, 2016, U.S. Customs and Border Protection published in the Federal Register (81 FR 2085) United States-Australia Free Trade Agreement; Final rule.

SUMMARY: This document adopts as a final rule, with one change, interim amendments to the U.S. Customs and Border Protection (CBP) regulations that were published in the Federal Register on February 10, 2015, as CBP Dec. 15-03, to implement the preferential tariff treatment and other customs-related provisions of the United States-Australia Free Trade Agreement.

DATES: Effective February 16, 2016.

Clients of Agathon Associates and subscribers to Agathon Associates' Trade Advisor Service can find more information relating to Australia and the free trade agreement at www.agathonassociates.com/textile-pri/australia/. You will need to enter your username and password. If you do not know your username and password email David Trumbull at david@agathonassociates.com.

Monday is Martin Luther, Jr. King Day

Monday, January 18th, U.S. government offices, and much of private business other than retail, will close in observance of Martin Luther King, Jr. Day.

When President Ronald Reagan, on November 2, 1983, signed into law the Martin Luther King, Jr. holiday he reminded his listeners that—

Martin Luther King was born in 1929 in an America where, because of the color of their skin, nearly one in ten lived lives that were separate and unequal…taught in segregated schools…could find only poor jobs, toiling for low wages…refused entry into hotels and restaurants, made to use separate facilities. In a nation that proclaimed liberty and justice for all, too many black Americans were living with neither.

If we consider the time from the arrival of the first slaves in the Virginia Colony in 1619 to the achievement of full civil rights for all African-Americans in every one of the 50 states in the 1960s, it was a very long struggle to achieve full civil equality. The modern African-American Civil Rights Movement that Dr. King was so important a leader in, on the other hand, was, for a major societal and legal change, relatively swift. It is generally considered to occupy the period from 1955 (Rosa Parks and the Montgomery Bus Boycott) to 1968 (King assassination and the Poor People's March). To those in the struggle it was long. But looking back, from 1955 to 1983, not quite 30 years, is, roughly, a generation. In one generation we advanced from a nation that tolerated legal discrimination against part of our citizenry based on the color of their skin, to a nation in which such as thing is not only forbidden, but absolutely unthinkable. It was Dr. King, more than any other single leader in the civil rights movement, who, with his insistence on non-violence, and his prophet-like call to the conscience of White American, who brought about such a marvelous and much needed change. That is why he is up there with Columbus and Washington as one of just three men who so influenced our nation that we honor them with a federal holiday.

President Reagan went on to remark that "Dr. King had awakened something strong and true, a sense that true justice must be colorblind." And Mr. Reagan pointed to both the progress made—and yet to be made—in the struggle for an America that lives up to her noble sentiment that all men are created equal, citing the passage of the Civil Rights Act of 1964 and Voting Rights Act of 1965. Reagan, as he so often did, then called on Americans to embrace and enlarge upon their better nature, and exhorted his listeners—

But most important, there was not just a change of law; there was a change of heart. The conscience of America had been touched. Across the land, people had begun to treat each other not as blacks and whites, but as fellow Americans.

Traces of bigotry still mar America. So, each year on Martin Luther King Day, let us not only recall Dr. King, but rededicate ourselves to the Commandments he believed in and sought to live every day: Thou shall love thy God with all thy heart, and thou shall love thy neighbor as thyself. And I just have to believe that all of us —- if all of us, young and old, Republicans and Democrats, do all we can to live up to those Commandments, then we will see the day when Dr. King's dream comes true.

New Address for U.S. Customs

The National Commodity Specialist Division ("NCSD"), Regulations and Rulings, in the Office of International Trade, U.S. Customs and Border Protection ("CBP"), is relocating. While the relocation process is underway, the address provided for the Director, National Commodity Specialist Division, Regulations and Rulings, in the Office of International Trade, at section 177.2(a) of title 19 of the Code of Federal Regulations (19 CFR 177.2(a)), will be inaccurate. Until the relocation process is complete, a temporary mailing location has been established and all correspondence to the NCSD should be sent to the following address: Director, National Commodity Specialist Division, Regulations and Rulings, Office of International Trade, 1100 Raymond Boulevard, Newark, New Jersey 07102. Mail received at this temporary location will be delivered to the appropriate NCSD location. Please note that e-rulings procedures will remain the same and will not be affected by the temporary change in office location.

When the relocation process is complete and a permanent address is established, CBP will publish in the Federal Register amendments to the regulations to reflect the new mailing address (see 19 CFR 177.2(a)) and announce the cessation of mail forwarding operations through the address provided in this notice.

Next Up

In October 2015, AAVN, Inc., filed a 337 compliant to the US International Trade Commission (USITC).  Within the complaint, AAVN alleges that AQ Textiles, LLC and Creative Textile Mills Pvt. Ltd, known as the respondents, are infringing on a patent owned by AAVN, called the 790 patent.  In my prior two posts, I have discussed the technology involved in the complaint and the specific allegations being made by AAVN about how the respondents are infringing the patent underlying this technology. 

In the final post of this trilogy, I want to discuss the details of how a 337 complaint is processed at the USITC.  Readers who would like an overview of the 337 law and its implementation by the USITC are referred to the link provided. 

The process for evaluating a 337 complaint within the USITC has five steps and a wild card.  The five steps are:  1) the filing of the complaint; 2) the assignment of an investigative attorney by the USITC; 3) the collection and hearing of the evidence by an administrative law judge; 4) the recommendation of action by the administrative law judge; and, 5) the approval of the recommended action by the commission that leads the USITC. 

The initial process in a 337 complaint is the filing of the complaint.  Once the 337 complaint is filed the USITC reviews the actual complaint.  In order to be approved for investigation, a 337 complaint must:  1) provide a prima facie case that an investigation is warranted; 2) demonstrate that the investigation is in the public interest (or at least will not harm the general public); and, 3) identify specific products against which the remedy will be applied.  

Once the complaint is filed and the investigation is approved, an investigating attorney and an administrative law judge are assigned to the case.  In one of the great misnomers of modern governance, the investigating attorney does not actually investigate the case.  The investigating attorney represents the government through the process.  The investigating attorney is a full participant in the case and can request discovery, make motions and file briefs on behalf of the US government throughout the process.  If this seems a little strange, that is because it is.  While, technically, the government has nothing at stake in the outcome of the case, it does have an interest in the results of investigations which can potentially be used in other legal proceedings.  The role of the investigating attorney is to insure that a complete investigative record is compiled during the judicial proceedings.  Put another way, the goal of the investigating attorney is to make sure that the investigation addresses all the relevant questions of the case – not just the questions relevant to the matters of law being addressed.  

The actual collection of evidence and investigation is done as a judicial proceeding that is managed by the administrative law judge.  The tools of the judicial proceeding includes the standard legal tools and proceedings of discovery, motions, and briefs.  Under the statute, the penalties for a respondent not participating in the judicial proceedings are steep.  In such an instance, the administrative law judge is permitted to assume that all the allegations stated in the complaint are true when making the final ruling.  Once the collection of evidence is completed the case is argued as to whether the patent in question has been infringed.  

After the arguments have been made the administrative law judge makes a ruling on the matters of law.  If the administrative law judge determines that the patent has been infringed, he or she can choose a remedy from the following options:

General Exclusion Order:  This is a general exclusion order that prohibits the importation of the infringing product without restriction. 

Restricted Exclusion Order:  The restricted exclusion order is similar to the general exclusion order except that its application is limited, or restricted, in some way.  Typically, a restricted exclusion order is limited to one or more specific companies. 

Temporary Exclusion Order:  The administrative law judge has the option to issue a temporary exclusion order to limit the importation of a product pending the completion of the 337 process.  The administrative law judge has the discretion to require a bond in lieu of a temporary exclusion order if that is more appropriate.

Cease and Desist Order:  The administrative law judge has the option to issue a cease and desist order.  I am a little fuzzy on this but I believe that this option is limited to US companies. 

Consent Order:  The case can be disposed of through the approval of a consent order between the parties. 

After the administrative law judge makes the decision, the decision is forwarded to the Commission for final approval.  If for some reason the Commission fails to act on the decision then the judge’s decision is final and has the force of law. 

Finally, we need to discuss the wild card: all exclusion orders generated by the 337 process are subject to presidential review and can be overturned by an administration.  This is not an insignificant risk.  For example, in June 2013, the USITC determined that Apple had violated the 337 act by importing technology that was infringing on a patent owned by Samsung.  Because of the impact the decision and the resulting import exclusions would have on existing Apple customers the administration disapproved the exclusion order.  The decision only impacted the USITC proceedings and had no impact on Samsung’s ability to pursue their infringement suit in Federal Court.

Jim Carson is a principal of RB Consulting, Inc and a registered patent agent.  He has over 30 years of experience across multiple industries including the biotechnology, textile, computer, telecommunications, and energy sectors.  RB Consulting, Inc specializes in providing management, prototyping, and IP services to small and start-up businesses.  He can be reached via email at jim@rbconsulting.us or by phone at (803) 792-2183.