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Special Focus: Customs and Trade

Winter 2015 • volume XXXII, no. 3


international law quarterly

winter 2015 • volume XXXII, no. 3

In this issue: Message From the Chair............................................................ 5 From the Editor......................................................................... 5 U.S. Foreign Policy Toward Cuba: Charting a New Course, Albeit Slowly ........................................................................ 6 Customs Law Enforcement: A Double-Barrel Strategy.............. 8 The Black Market Peso Exchange and the Small Exporter ...... 10 U.S. Customs In-Transit Seizures: Authority and Extraterritoriality ............................................................... 12 H-1B Cap Conundrum: Alternatives for U.S. Employers and Foreign Professionals ......................................................... 14 C-TPAT 2.0, aka the Trusted Trader Program .......................... 16 NAFTA Symposium 1977R - Investment and Business Track.............................. 18 1978R - Administrative, Litigation & Arbitration Track....... 19 World Roundup....................................................................... 20 Section Scene..................................................................... 22-27

On the Cover

A cargo container is removed from a ship at the Red Hook, N.Y., port of entry into the United States. Photo credit: www.cbp.gov

This publication is prepared and published by The Florida Bar. Statements or opinions or comments appearing herein are those of the editors and contributors and not of The Florida Bar or the International Law Section. Articles may be reprinted with permission of the editor and the author(s) of the requested article(s). Contact: Yara Lorenzo at yara.lorenzo@hoganlovells.com

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International Law Section Leadership

Peter Quinter Chair

C. Ryan Reetz Immediate Past Chair

Eduardo Palmer Chair-Elect

Alvin F. Lindsay Secretary

Arnoldo B. Lacayo Treasurer

Mark R. Weiner CLE Chair

Angela Froelich Program Administrator

International Law Quarterly Yara Lorenzo Sandy P. Jones Omar K. Ibrahem Peter Quinter Susan Trainor Colleen Bellia Elizabeth Ortega

Editor-in-Chief Managing Editor Articles Editor Special Issue Editor Copy Editor Layout Media Contact ECO Strategic Communications eco @ecostrtats.com


international law quarterly

winter 2015 • volume XXXII, no. 3

6 Features

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6 • U.S. Foreign Policy Toward Cuba: Charting a New Course, Albeit Slowly

12 • U.S. Customs In-Transit Seizures: Authority and Extraterritoriality

On 17 December 2014, President Barack Obama boldly announced a new U.S. foreign policy toward Cuba. What has really changed with this announcement? The answer, for now, is nothing. The U.S. Department of the Treasury’s Office of Foreign Assets Control, the Department of Homeland Security’s U.S. Customs and Border Protection and the U.S. Department of Commerce have not changed anything regarding the requirement to obtain and comply fully with the terms of any import, export, travel, carrier or remittance of special licenses.

U.S. Customs and Border Protection (CBP) often seizes goods bearing allegedly counterfeit marks that were shipped from a foreign country through the United States with a third country as the final destination. By definition, goods in-transit are not intended for entry into U.S. commerce; therefore, there is no potential confusion by U.S. consumers or potential damage(s) to a U.S. trademark owner’s goodwill within the territorial United States. Why then can CBP seize counterfeit goods when in-transit? The answer must lie with the statutory interpretations of the terms import, imported or importation.

8 • Customs Law Enforcement: A Double-Barrel Strategy

14 • H-1B Cap Conundrum: Alternatives for U.S. Employers and Foreign Professionals

The United States government loses millions of dollars every year as a result of customs fraud. It is no wonder then that U.S. Customs and Border Protection (CBP) views customs law enforcement as serious business. This article focuses on two civil statutes that should keep all importers in line. CBP prosecutes most infractions under its administrative penalty statute. The government also relies on private whistleblowers. The recent pursuit of importers under the federal False Claims Act suggests that an era of privatization of customs law enforcement is upon us.

On 7 April 2014, just six days after the United States Citizenship and Immigration Services (USCIS) began accepting new H-1B petitions for employment of foreign professionals for fiscal year 2015, USCIS announced that it had reached the statutory cap. USCIS rejected approximately 51% of the petitions and returned the filing fees for all cap-subject petitions not selected. Fair or not, this is our current immigration system. This article explores several alternatives to the H-1B professional visa for U.S. employers seeking to employ foreign professionals.

10 • The Black Market Peso Exchange and the Small Exporter

16 • C-TPAT 2.0, aka the Trusted Trader Program

The United States government, through the Department of Commerce, has been encouraging small businesses to get involved in exporting as a way to grow their businesses and create jobs in a time of lackluster domestic demand. The Obama administration has encouraged this involvement in exporting United States products through the National Export Initiative of the International Trade Administration. Yet, for the small business, getting paid for export sales includes trade-based money-laundering risks that the small business owner is often ill prepared to detect or prevent.

On 16 June 2014, U.S. Customs and Border Protection (CBP) published a Federal Register Notice titled “Announcement of Trusted Trader Program Test,” commencing with an eighteenmonth pilot program. The Trusted Trader Program is unifying the Customs-Trade Partnership Against Terrorism and the Importer SelfAssessment voluntary programs into a new Trusted Trader Program. CBP is collaborating with both the U.S. Consumer Product Safety Commission and the U.S. Food and Drug Administration to create the Trusted Trader Program. The results of the pilot will determine whether or not the Trusted Trader Program will go forward.

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international law quarterly

winter 2015 • volume XXXII, no. 3

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international law quarterly

winter 2015 • volume XXXII, no. 3

Message From the Chair

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he ILS has been very active during the first quarter of 2015.

Florida Bar’s 2015 annual convention in Boca Raton in June and the sections’ joint retreat over Labor Day weekend.

On 18 February 2015, we held our first Cuba Committee event at DLA Piper. It was entitled “Cuba— Legal and Business Perspectives.” In attendance were the president and president-elect of The Florida P. QUINTER Bar (TFB). Speakers included the former president of Spain and a representative from the White House. The ILS is leading a delegation to Havana, Cuba, the last week of May 2015, to plan a U.S.-Cuba legal conference for The Florida Bar to take place in Havana in October or November 2015.

On 27 February 2015, the ILS held its annual International Litigation, Arbitration and Business Transactions (ILAT) Conference. It was well attended by attorneys from all over Florida and even outside the United States. An attendee of note was new Florida Bar and ILS member Jose Manuel Godinez-Samperio, a Mexican national whose parents illegally entered the United States with him when he was a child. Godinez-Samperio graduated from Florida schools, passed The Florida Bar exam, litigated the issue of his admission to The Florida Bar up through the Florida Supreme Court and finally had legislation passed in the Florida Legislature granting him (and others in his situation) the legal ability to become a Florida Bar member.

We held an ILS Executive Council meeting on 26 February 2015. During this meeting I was pleased to report that the ILS has a record number of members, has achieved a high level of sponsorship, is enjoying another great year of producing international law board certified candidates, has solid revenues and continues to present successful seminars and conferences. We are joint planning with the Business Law Section for some events, including The

On 28 February 2015, the ILS coordinated another successful Vis Pre-Moot at JAMS in Miami, Florida. Several Florida law schools and students participated. You will find photos of each of these events in the Section Scene, beginning on page 22. Peter Quinter, Chair GrayRobinson, P.A.

From the Editor . . .

T

his past weekend, The Florida Bar International Law Section held its annual International Litigation, Arbitration & Transaction (ILAT) Conference. As I met conference participants throughout the day, I was struck by how many of them were from other parts of Y. LORENZO the state or from out of the country. Though this is something I have always known, this year’s ILAT Conference reaffirmed for me that the ILS is not just a space for members and practitioners of international law to meet and catch up; it truly is a resource for foreign lawyers and potential clients to find the solutions they need to navigate the increasingly complex and connected world we live in.

Given the recent announcements concerning the normalization of relations between Cuba and the United States, one of the marquis topics discussed at ILAT this year was customs and trade, which also happens to be this issue’s special focus. The compilation of articles concerning customs and trade was made possible thanks to the support of ILS Chair Peter Quinter, who served as the special issues editor. Whether or not one is aware of it, trade has always been part of the economic fabric of this state. That position is sure to take on new meaning in the coming months as relations with Cuba are redefined. It is as good a time as ever to be an international lawyer. Enjoy this issue! Yara Lorenzo, Editor-in-Chief yara.lorenzo@hoganlovells.com

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international law quarterly

winter 2015 • volume XXXII, no. 3

U.S. Foreign Policy Toward Cuba: Charting a New Course, Albeit Slowly By Peter A. Quinter, Miami

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n 17 December 2014, President Barack Obama boldly announced a new U.S. foreign policy toward Cuba. As background, a document issued by the White House entitled “FACT SHEET: Charting a New Course on Cuba” stated, in part: It is clear that decades of U.S. isolation of Cuba have failed to accomplish our enduring objective of promoting the emergence of a democratic, prosperous, and stable Cuba . . . . Though this policy has been rooted in the best of intentions, it has had little effect—today, as in 1961, Cuba is governed by the Castros and the Communist party.

a traveler is licensed by OFAC to engage in Cuba travelrelated transactions, and to such products acquired in third countries by any U.S. traveler, including purchases at duty free shops.

President Obama’s proposal is to allow licensed U.S. travelers to Cuba to import up to US$400 worth of goods from Cuba, of which no more than US$100 can consist of tobacco products and alcohol combined.

President Obama also announced that the Treasury and Commerce departments will issue regulations that will authorize the export What has really changed of “certain building with this announcement? materials for private The answer, for now, is residential construction, nothing. The federal law goods for use by enforcement agencies private sector Cuban responsible for enforcing entrepreneurs and the U.S. trade and agricultural equipment travel embargo with for small farmers.” As Cuba under the Trading stated in a press release With the Enemy Act by the Cuban American and the implementing Bar Association’s Cuban Assets Control (CABA) “Statement on Regulations at 31 CFR the Change in U.S.-Cuba Part 515 have not yet Policy and Release of “Puros1” by Daniel Frey made any changes. The Licensed under CC BY-SA 3.0 via Wikimedia Commons Prisoners,” the policy U.S. Department of the changes announced by President Obama appear to Treasury’s Office of Foreign Assets Control (OFAC), the “minimally impact commercial relations between the Department of Homeland Security’s U.S. Customs and United States and Cuba.” I agree with CABA, but this Border Protection (CBP) and the U.S. Department of new policy is a positive beginning toward what may in a Commerce have not changed anything regarding the few years be normal diplomatic relations between two requirement to obtain and comply fully with the terms countries with a long history and separated by only 90 of any import, export, travel, carrier or remittance of miles of ocean. special licenses. Some in the United States Congress are vehemently Let’s take one of Cuba’s most famous exports as an opposed to any dialogue with the Castro government in example—cigars. CBP’s “Cuban Cigar Update” states: Cuba. They can rest assured that President Obama has There is now an across the board ban on the importation only limited authority to change the trade, travel and into the United States of Cuban-origin and other Cubangeneral commercial relationship with Cuba. He needs origin tobacco products . . . . This prohibition extends to the U.S. Congress to pass a law to allow most of those such products acquired in Cuba, irrespective of whether

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international law quarterly

winter 2015 • volume XXXII, no. 3

U.S. Foreign Policy Toward Cuba, continued

Hotel nacional habana Licensed under CC BY 2.5 via Wikimedia Commons

changes to occur. What President Obama does have sole authority to do is to remove Cuba from the list of countries that have been designated “State Sponsors of International Terrorism” according to the Arms Export Control Act and the Foreign Assistance Act. Cuba has had that designation since 1 March 1982. President Obama has instructed Secretary of State John Kerry to launch a review and to provide a report within six months. I expect the report to be favorable to Cuba and to give President Obama the justification to remove Cuba from the state sponsors of terrorism list, thereby allowing for aid, loans and grants to be made available to U.S. persons and to the people of Cuba. For those who actually read the “FACT SHEET” or listened to President Obama’s speech about his new policy toward Cuba, the expected change in Cuba’s designation as a state sponsor of terrorism should come as no surprise. It is an extension of earlier efforts by the president and continues the general loosening of the restrictions between the two countries that was pursued by former U.S. presidents. It is not a drastic change, and it will be implemented over many years, not weeks. For example, travel to Cuba is still limited. Unrestricted travel to Cuba is not even anticipated right now. All persons subject to the jurisdiction of the United States are subject to U.S. laws and OFAC regulations. OFAC specifically licenses organizations

that sponsor and organize certain educational exchange programs to promote contact with the Cuban people (popularly known as People to People Groups), provided that all requirements of 31 CFR 515.565(b) (2) are satisfied. As stated in the application guidelines, OFAC only licenses People to People Groups that certify that all participants will have a full-time schedule of educational exchange activities that will result in meaningful interaction between the travelers and individuals in Cuba. These activities are certainly not described as “tourist activities” under the Trade Sanctions Reform and Export Enhancements Act of 2000. I hope that as normal diplomatic relations develop, there will be more interaction between the people of the United States and of Cuba and that the benefits of free trade and travel will once again occur. Until then, and it will be a while, I will enjoy my Dominican cigar while reading colorful tourist brochures from my Canadian friends who are traveling freely to Cuba for the winter. Peter Quinter is chair of the Customs and International Trade Law Group at GrayRobinson, P.A. Based in Miami, Florida, Mr. Quinter represents clients from all over the United States and the world on import, export, customs and international traderelated matters primarily involving P. QUINTER U.S. Customs and Border Protection and the U.S. Department of Homeland Security. He is recognized as an expert by The Florida Bar as he is board certified in international law. Mr. Quinter has been recognized by many publications for his representation of clients and for his reputation as one of the best customs lawyers in the United States. He has been listed in Chambers USA legal directory for the past several years. Mr. Quinter ran the Boston Marathon on 20 April 2015, completing a significant item on his bucket list. ILQ

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international law quarterly

winter 2015 • volume XXXII, no. 3

Customs Law Enforcement: A Double-Barrel Strategy By Josh Levy, Coral Gables

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chemes by unscrupulous importers to evade U.S. customs laws are limited only by the imagination. Importers falsify entry documents to pay lower customs duties. Merchandise is intentionally undervalued or misclassified for this purpose. An importer can conceal an article’s true country of origin for any number of reasons: to qualify goods for free trade agreements, to avoid antidumping duties, to evade quotas or to bypass intellectual property restrictions. Merchandise is transshipped through friendly countries to circumvent U.S. trade www.threelines.com.hk via www.photobucket.com sanctions. Products are engineered disguising their true purpose to receive a better tariff and then retrofitted near the port of entry after clearing customs. The government loses millions of dollars every year as a result of customs fraud. It is no wonder then that U.S. Customs and Border Protection (CBP) views customs law enforcement as serious business. CBP invokes an arsenal of statutes to enforce regulations. The malefactors in the examples above would no doubt face criminal liability, but this article focuses on two civil statutes that should keep all importers in line. CBP prosecutes most infractions under its administrative penalty statute. The government also relies on private whistleblowers. The recent pursuit of importers under the federal False Claims Act suggests that an era of privatization of customs law enforcement is upon us.

Section 1592 CBP’s frontline weapon is the administrative penalty

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statute 19 U.S.C. § 1592. Originally enacted in 1930, Section 1592 authorizes CBP to impose monetary penalties when import documentation is false or incomplete or when parties engage in false acts. There are three elements to establish a violation of the statute: (1) a false statement, omission or act; (2) that is material; and (3) is due to fraud, gross negligence or negligence. Section 1592 targets a wider class of actors than those committing fraud. Every importer is expected to use reasonable care when declaring merchandise’s tariff classification, valuation and country of origin. This permits CBP to determine whether goods are admissible and the correct rate of duty. Although the importer is held principally responsible for this information, CBP can seek penalties against any party aiding the importer, including customs brokers, suppliers and consignees. Enforcement of Section 1592 results in payment of millions of dollars in penalties and lost revenue each year. In cases involving fraud, penalties are imposed up to 100% of the domestic value of the merchandise. Penalties are lower for gross negligence, the lesser of 40% of the domestic value or four times lost duties. For negligence, the penalties are the lesser of 20% of the domestic value or two times lost duties. Penalties for negligence can still add up to crushing amounts. This is especially true for small businesses. Corporate officers are personally liable for penalties in fraud cases. The U.S. Court of Appeals for the Federal


international law quarterly

winter 2015 • volume XXXII, no. 3

Customs Law Enforcement, continued

Circuit, the court of last resort for penalty cases, recently held that officers are also personally liable for their company’s errors or omissions during the entry process. Fortunately, importers have the opportunity to mitigate penalties. The prior disclosure process encourages importers to come clean with the possibility of reducing penalties and interest on lost duties. CBP is usually generous in reducing penalties based on the importer’s www.raaziq.com via www.photobucket.com inability to pay, its history of importers awake at night. Originally passed in 1863 to compliance and a long list of mitigating factors. CBP’s charity only travels so far, though. An importer prosecute war profiteers, the federal False Claims Act refusing to pay the mitigated amount can expect the (FCA) allows the government or a private party to allege government to bring a collection action in the Court of that an importer knowingly underpaid customs duties. International Trade for the full amount of the penalty. The government can either file its own lawsuit or

False Claims Act

intervene and take control of the whistleblower’s suit.

Section 1592 isn’t the only statute that should keep

... continued on page 33

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international law quarterly

winter 2015 • volume XXXII, no. 3

The Black Market Peso Exchange and the Small Exporter By Robert J. Becerra, Miami Introduction

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he United States government, through the Department of Commerce, has been encouraging small businesses to get involved in exporting as a way to grow their businesses and create jobs in a time of lackluster domestic demand. The Obama administration has encouraged this involvement in exporting United States products through the National Export Initiative of the International Trade Administration.1 Yet, for the small business, getting paid for export sales includes tradebased money-laundering risks that the small business owner is often ill prepared to detect or prevent.

exporter into its bank account via wire transfer from a major international bank. Sometimes these wire transfers are received from the bank account of a third party to the underlying transaction, i.e., a person or a company other than the small exporter’s customer in the foreign country.

Trade-Based Money Laundering and the Black Market Peso Exchange

Trade-based money laundering has been defined as the process of disguising the proceeds of crime and moving value through the use of international trade transactions. More simply put, it uses the international movement of funds as payments The Small Exporter for goods and services For the purposes of this to hide and transport article, a small business illicit dollars. The engaged in export Colombian Black Market usually employs fewer Peso Exchange (BMPE) than ten employees; is is the most common often family run; and is form of trade-based engaged in brokering and money laundering. distributing internationally The BMPE is a complex www.freedigitalphotos.net; photo by David Castillo Dominici high-value merchandise method of trade-based such as electronics, money laundering. It was originally used to circumvent medical devices and cellular telephones. Very often, restrictive policies on currency exchange in Colombia. this small exporter does not warehouse or stock its products for export, but instead orders merchandise directly from manufacturers or domestic distributors. The merchandise is then shipped directly to logistics providers, such as freight forwarders, ocean transportation intermediaries or air carriers. Those logistics providers execute the actual transportation of the goods resulting in their export to the foreign customer. The small exporter often receives payments in advance of shipping the merchandise in order to minimize transaction costs and to mitigate credit risk. These payments are usually received by the small

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Legitimate businesses in countries like Colombia need U.S. dollars to conduct international business. To circumvent restrictive policies and restrictions, businesses have used peso brokers that deal in the black or parallel currency market. Colombian drug traffickers, having a surplus of U.S. dollars, have taken advantage of this system to receive pesos in Colombia in exchange for drug dollars in the United States. Similar systems exist in other Latin American countries, such as Venezuela, Argentina, Brazil and Paraguay, as well as in Dubai in the Middle East.2 Through a system like the BMPE, a peso


international law quarterly

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The Black Market Peso Exchange, continued

broker brings together willing sellers of large amounts of U.S. dollars with companies that have a large demand for U.S. dollars to purchase United States exports. In the past, illicit funds would be deposited into the BMPE and other alternative value systems by structured deposits in the form of cash, money orders or similar financial instruments. Presently, money launderers employ more sophisticated methods, such as utilizing those who have multiple bank accounts at divergent financial institutions, along with bulk cash smuggling. These smuggled dollars are deposited into foreign banking institutions in Latin American countries and then wired back into the United States to pay for the export of goods and services.3 The typical trade-based money-laundering transaction involving the BMPE usually follows this scenario: 1. Drug traffickers sell drugs in the United States for U.S. dollars.

2. The drug trafficking organization arranges to sell these U.S. dollars to a “peso broker” at a discount over official exchange rates in exchange for currency of the organization’s home country, for example, Colombia or Mexico. The peso broker pays the organization for the U.S. dollars in pesos from the broker’s bank account located in the home country. 3. The peso broker structures deposits of the U.S. dollars into the broker’s affiliated U.S. bank accounts, known as funnel accounts, in order to evade reporting requirements of the U.S. Bank Secrecy Act. 4. The peso broker locates importers in the broker’s home country that import goods from the United States and need U.S. dollars to pay their United States suppliers. 5. The peso broker arranges to pay the United States supplier on behalf of the importer in U.S. dollars from the broker’s bank account in the United States. ... continued on page 34

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international law quarterly

winter 2015 • volume XXXII, no. 3

U.S. Customs In-Transit Seizures: Authority and Extraterritoriality By Shanshan Liang, Tallahassee

U.

S. Customs and Border Protection (CBP) often seizes goods bearing allegedly counterfeit marks that were shipped from a foreign country through the United States with a third country as the final destination. The seizure notice always cites 19 U.S.C. § 1526(e).1 Generally speaking, U.S. trademark laws are intended only for U.S. consumers and U.S. trademark owners.2 By definition, goods in-transit are not intended for entry into U.S. commerce; therefore, there is no potential confusion by U.S. consumers or potential damage(s) to a U.S. trademark owner’s goodwill within the territorial United States. Why then can CBP seize counterfeit goods when in-transit? The answer must lie with the statutory interpretations of the terms import, imported or importation, precursors to Section 1526’s jurisdiction. Neither the Tariff Act nor the Lanham Act expressly defines import or importation. In order to render an accurate interpretation, courts should inquire as to the legislative intent because the first purpose of

www.freedigitalphotos.net; image by Idea go

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www.freedigitalphotos.net; photo by renjith krishnan

statutory construction is to ascertain the intent of the legislature.3 As discussed above, the prohibition against the importation of infringing goods in the Lanham Act only pertains to goods that are intended for subsequent distribution into U.S. commerce. Importation should be interpreted, therefore, as bringing goods into the United States for subsequent distribution into U.S. commerce. Under that logic, CBP does not have authority under 19 U.S.C. § 1526 to seize in-transit goods, counterfeit or not. Litigation on this issue is limited, mainly because litigating against CBP is lengthy and costly. Many foreign importers end up abandoning their goods rather than choosing to litigate against the agency. The only available decision to date is a 1987 Southern District of Florida case where the court held that CBP had authority to seize goods in-transit.4 In that case, watches bearing counterfeit marks were shipped from Hong Kong and transited Florida in route to Paraguay. One of the arguments offered by the defendants in the action was that the infringing goods were neither “imported” nor “entered” into the United States and, therefore, were not subject to the trademark laws of the United States. The court rejected the defendants’ argument and held that the counterfeit goods were imported because they had been brought within the territory of the United States and the goods were admitted for entry for the purpose of applying the trademark laws.


international law quarterly

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U.S. Customs In-Transit Seizures, continued

Subsequently, Congress amended 18 U.S.C. § 2320 to provide criminal sanctions against trafficking in counterfeit goods. 18 U.S.C. § 2320(i) explicitly prohibits transshipment of counterfeit goods.5 Arguably, even if CBP initially lacks authority to seize counterfeit goods under 19 U.S.C. § 1526(e), it nevertheless has the authority to seize counterfeit goods under 18 U.S.C. § 2320 because transshipment will be deemed as a violation of 15 U.S.C. § 1124 and 19 U.S.C. § 1526 provides authority of seizure for violation of 15 U.S.C. § 1124. But still, the element of importation in 19 U.S.C. § 1526(e) is missing.

to Treasury Ruling T.D. 37376 cited by Am. Customs Brokerage Co., merchandise is not imported if it comes into the United States temporarily, but it will be treated as imported if it is brought into the United States permanently. Whether the merchandise is brought into the United States permanently is ultimately a question of intent. Such intention must be determined on the basis of circumstances. Id. at 254. Accordingly, genuine in-transit goods that are transported under bond should not be considered as imported permanently into the United States.

Going back to the meaning of importation, courts have consistently held that under the tariff law, importation means the bringing of goods within the jurisdictional limits of the United States with intent to unlade. Am. Customs Brokerage Co., Inc. v. U. S., Cust. Ct. 245, 253-54 (Cust. Ct. 1974) (internal citations omitted). According

Further, there is a longstanding principle of presumption against extraterritoriality—a presumption that U.S. law does not have extraterritorial effect over a foreign person or foreign conduct unless Congress has affirmative intention, which is clearly “expressed to give a statute ... continued on page 39

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international law quarterly

winter 2015 • volume XXXII, no. 3

H-1B Cap Conundrum: Alternatives for U.S. Employers and Foreign Professionals By Larry S. Rifkin, Miami

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completed at least one academic year of studies may n 1 April 2014, the United States Citizenship and apply for OPT. An alien can obtain an additional seventeen Immigration Services (USCIS) began accepting new months (twenty-nine months in total) if his or her current H-1B petitions for employment of foreign professionals in fiscal year 2015, which began 1 October 2014. The OPT is based on having received a bachelor’s, a master’s H-1B visa—one of the principal temporary work visas or a doctoral degree in one of the STEM fields (science, for foreign nationals with a bachelor’s degree or higher technology, education, mathematics) (list of degrees or equivalent—is subject to an annual limit of 85,000, published on the SEVP website) and his or her employer is which includes 20,000 quota numbers reserved for enrolled in the E-Verify program and agrees to report the holders of U.S. master’s degrees. On 7 April 2014, USCIS student’s departure within forty-eight hours.3 announced it had received a sufficient number of H-1B This STEM extension of F-1/OPT was created in response petitions to reach the statutory cap for fiscal year (FY) to the H-1B cap issue to allow the foreign student to 2015. In fact, it received approximately 172,500 H-1B remain in the United States petitions for the allotted in authorized status while spots, the highest number giving the alien another of H-1B cap petitions opportunity to apply for ever filed.1 USCIS then an H-1B visa the following conducted a computerfederal fiscal year. generated lottery that Intra-company randomly selected the filed Transferees petitions to be adjudicated. This year, USCIS rejected One option available for approximately 51% of the those H-1B applicants petitions and returned the unsuccessful in the filing fees for all cap-subject lottery is the L-1 visa, petitions not selected.2 Fair a temporary, nonLicensed under CC A-S A 4.0 via Wikimedia Commons; photo by Craig L. Hodges or not, this is our current immigrant visa that immigration system. So, if you’re one of the unlucky allows qualified overseas companies to relocate foreign thousands not selected in the lottery for this fiscal qualified employees to its U.S. parent, branch, affiliate year, what options do you or your employer have to or subsidiary. The requirements for the U.S. petitioning free yourself from this cap-induced limbo? This article employer are: (1) it must have a qualifying relationship explores several alternatives to the H-1B professional with a foreign company, such as parent company, branch visa for U.S. employers seeking to employ foreign office, subsidiary or affiliate of the foreign company; and professionals. (2) it must be, or will be, doing business (engaging in

Students Under the Optional Practical Training (OPT) program, international students (F-1) who graduate from colleges and universities in the United States are able to remain in the country and receive training through work experience for up to twelve months. In addition, a student who has

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international trade is not required) as an employer in the United States and in at least one other country directly or through a parent, branch, affiliate or subsidiary for the duration of the alien’s stay in the United States as an intra-company transferee.4 The L-1A non-immigrant classification enables a U.S.


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H-1B Cap Conundrum, continued

employer to transfer an executive or a manager from one of its affiliated foreign offices to one of its offices in the United States. This classification also enables a foreign company that does not yet have an affiliated U.S. office to send an executive or a manager to the United States with the purpose of establishing a new office. The L-1B category is designed for intra-company transfers of employees with specialized knowledge. Specialized knowledge means either special knowledge possessed by an individual of the petitioning organization’s product, service, research, equipment, techniques, management or other interests and its application in international markets, or an advanced level of knowledge or expertise in the organization’s processes and procedures.5 The employee’s requirement for both classifications is that the alien employee must have worked abroad for the overseas company in an executive/manager or specialized position for a continuous period of one year within the three years immediately preceding his or her admission to the United States.6

Unlike the H-1B visa, the L-1 classification is not subject to any cap limitation. The transferring employee may also be accompanied or followed by his or her spouse and unmarried children who are under twenty-one years of age. Spouses of the L-1 alien, classified in the L-2 category, are eligible to apply for employment authorization to work in the United States. An individual petition shall be valid for the period of established need for the beneficiary’s services, not to exceed three years, except where the beneficiary is coming to the United States to open or to be employed in a new office.7 If the beneficiary is coming to the United States to open or to be employed in a new office, the petition may be approved for a period not to exceed one year.8 Aliens of Extraordinary Ability If the alien employee shut out of the H-1B lottery is especially accomplished in the sciences, education, business or athletic field, the O-1A category for individuals of extraordinary ability may also be an ... continued on page 42

Aballí­Milne Kalil, P.A. is a Miami legal boutique, now in its twenty-second year, which focuses its practice on international commercial litigation, international business transactions, tax and estate planning, and domestic real estate transactions. The firm’s attorneys are fluent in a number of languages including English, Spanish, Portuguese and French, and have connections with a strong network of capable lawyers across the United States, Europe, Latin America and the Far East. www.aballi.com

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C-TPAT 2.0, aka the Trusted Trader Program By Jennifer Diaz, Fort Lauderdale

O

n 16 June 2014, U.S. Customs and Border Protection (CBP) published a Federal Register Notice1 titled “Announcement of Trusted Trader Program Test,” commencing with an eighteen-month pilot program. The Trusted Trader Program is unifying the Customs-Trade Partnership Against Terrorism (C-TPAT) and the Importer Self-Assessment (ISA) voluntary programs into a new Trusted Trader Program. The results of the pilot will determine whether or not the Trusted Trader Program will go forward. CBP is collaborating with both the U.S. Consumer Product Safety Commission (CPSC) and the U.S. Food and Drug Administration (FDA) to create the Trusted Trader Program. The three government agencies will collaborate, share information, streamline the application and validation process and increase the efficiencies in the existing trade programs.

C-TPAT Won’t Disappear, But ISA Will The Trusted Trader Program will provide additional benefits not currently available to C-TPAT and www.archives.gov ISA members. Companies will still have the option to apply for C-TPAT and opt out of the Trusted Trader Program, but the ISA program will be extinct. The new program aims to streamline the process through which importers can establish to CBP that they strive to secure their supply chains and strengthen their internal controls for compliance with the existing laws and regulations administered or enforced by CBP.

Phases of the Trusted Trader Program The new Trusted Trader Program is planned to be implemented in three phases. Phase I will combine C-TPAT and ISA applications, review, validations and vetting. Phases II and III will be released once the test

16

phase is finalized and CBP confirms it will proceed with the program.

Authorized Economic Operator Programs As envisioned, the program would align with Authorized Economic Operator (AEO) programs implemented by countries around the world. These AEO programs focus on a combined trade and security compliance model.

C-TPAT and ISA Overview The C-TPAT focuses on companies securing their supply chains from concealment of terrorist weapons. C-TPAT helps to achieve CBP’s goals of improving security while facilitating the flow of global trade by: (1) improving security of a significant percentage of shipments to the United States; (2) providing benefits and incentives to private sector companies that meet or exceed C-TPAT supply chain security criteria and best practices; and (3) concentrating CBP’s inspectional resources and capabilities on higher risk shipments. C-TPAT members enjoy certain incentives based on their tier status within a three-tier structure. Tier I incentives are afforded to those importer partners that have been certified; Tier II to those that have been certified and validated; and Tier III to those that have exceeded the program’s requirements and exhibit best practices. ISA, also a voluntary program, provides incentives to companies that can demonstrate strong internal controls to comply with laws and regulations administered or enforced by CBP. ISA is based on the premise that companies with strong internal controls achieve the highest level


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Trusted Trader Program, continued

of compliance with customs laws and regulations. To participate in ISA, companies must be C-TPAT participants.

Trusted Trader Incentives

Centers of Excellence and Expertise tests.2 In addition, Trusted Trader Program test participants will benefit from:

Companies participating in the Trusted Trader Program test will receive incentives currently provided to C-TPAT importers and those currently provided under the ISA program. Under the C-TPAT program, these include reduced examination rates, access to the Free and Secure Trade (FAST) lanes, exemptions from stratified exams for importer partners, front-of-the-line treatment and penalty mitigation.

1. Reduced FDA targeting/examination risk score;

Benefits under the ISA program include access to summary trade data, including analysis support from CBP; consultation, guidance and training by CBP for compliance, risk assessments, internal controls, CBP audit trails, etc.; removal from Regulatory Audit’s audit pool established for Focused Assessment (FA); expedited cargo release; and priority consideration for applications to participate in the

Trusted Trader Program test participants that also participate in the Reconciliation Prototype (78 FR 27984) will be allowed to flag and unflag entries for reconciliation retroactively after the entry summary is filed up to sixty days prior to the date for which liquidation of the underlying entry summary has been ... continued on page 45

2. Possible penalty offsets; 3. Reduction in the number of Foreign Trade Zone (FTZ) on-site inspections; 4. Exemption for drawback claimants from on-site visits from drawback specialists; and 5. Exemption from random Non-Intrusive Inspections (NIIs).3

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international law quarterly

winter 2015 • volume XXXII, no. 3

The Florida Bar and the International Law Section present

NAFTA Symposium – Investment & Business Track COURSE CLASSIFICATION: INTERMEDIATE

Friday, June 26, 2015, 2:00 p.m.- 6:30 p.m. Course 1977R

2:00 p.m. – 2:40 p.m.

Staff Contact: Angie Froelich (afroelich@flabar.org)

Customs & Trade Law Highlights – USA, Canada & Mexico Peter Quinter, USA Felicia Nowels, USA Greg Kanargelidis, Canada Margarita Muiña, Mexico

2:40 p.m. – 3:20 p.m.

Establishing and Managing an International Enterprise ─ USA, Canada & Mexico Moderator: Francisco Corrales Panelists: Joseph B. McFarland, USA John Klopfenstein, Canada José Luis Gutiérrez-Azpe, Mexico

3:20 p.m. – 3:30 p.m.

Break

3:30 p.m. – 4:10 p.m.

Tax Structuring of U.S. Business & Investment Structures for Canadians & Mexicans Lucius Smejda, USA Professor André Lareau, Canada Margarita Muiña, Mexico

18

4:10 p.m. – 4:50 p.m.

Using Trusts in International Planning ─ Focus: USA, Canada & Mexico Jacques Ethier, Canada Professor William Newton III, USA Professor Michael W. Gordon, Mexico

4:50 p.m. – 5:10 p.m.

Break


international law quarterly

winter 2015 • volume XXXII, no. 3

The Florida Bar and the International Law Section present

NAFTA Symposium – Administrative, Litigation & Arbitration Track COURSE CLASSIFICATION: INTERMEDIATE

Friday, June 26, 2015, 2:00 p.m.- 6:30 p.m. Course 1978R

2:00 p.m. – 2:50 p.m.

Staff Contact: Angie Froelich (afroelich@flabar.org)

Things to Know if a Deal Goes Wrong in Latin America ─ Lessons on Choosing the Right Battlefield, Managing Risks and Ethical Considerations Moderator: Panelists:

2:50 p.m. – 3:40 p.m.

Eduardo de La Peňa Carlos Loperena, Mexico Henry Rodríguez, Central America Andres Moreno, Bolivia César Coronel, Ecuador

Current Immigration Rules and Practices in USA, Canada and Mexico Moderator: Panelists:

Zel Saccani Larry Rifkin, USA Denis L’Anglais, Canada Enrique Arellano Rincón, Mexico

3:40 p.m. – 3:55 p.m.

Break

3:55 p.m. – 4:45 p.m.

Execution of A Foreign Judgment in Canada, Florida and Mexico: Practical, Financial and Legal Aspects and Ethical Considerations Francesca Russo, USA Omar Guerrero Rodríguez, Mexico Marie-Ève Paré, Canada

4:45 p.m. – 5:35 p.m.

Automobile Accidents Involving Non-Residents and Insurance Law – Florida, Canada and Mexico Moderator: Panelists:

Rachel Journeault Fernando Camarena Cardona, Mexico Marie Blanchet, Canada

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international law quarterly

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WORLD ROUNDUP ASEAN, INDONESIA Patrick M. Talbot patrick.talbot@uph.edu

ASEAN provides training for member states. ASEAN (the Association of Southeast Asian Nations) has been busy sponsoring a number of symposia and programs to strengthen political and economic growth of the ten ASEAN Member States (AMS). Included in those efforts was a training program in January 2015 to deal with vertical integration and anti-competitive practices. Vertical integration involves the chain of distribution of goods from manufacturers to distributors and retailers, with a concern about anti-competitive vertical restraints. The January training highlighted issues concerning AMS as well as the United States. In addition, ASEAN has formulated an Agreement on Transboundary Haze Pollution, aimed at curbing this kind of pollution, which is common in the region. Indonesia recently ratified this agreement. Several AMS have also received training in intellectual property rights, such as a seminar in December 2014, moving toward implementation of the Madrid Protocol. This protocol is an important WIPO (World Intellectual Property Organization) treaty aimed specifically at international trademark protection. In January, ASEAN hosted a symposium on protection of religious freedom and rights of conscience in the region, amidst growing concerns of curtailment of these freedoms caused by radical and extreme religious elements in society. The symposium followed a study entitled “Keeping the Faith: A Study of Freedom of Thought, Conscience, and Religion ASEAN,” sponsored by the Human Rights Resource Center (Indonesia) and the Norwegian Embassy. Several ambassadors, foreign ministers, academics (including this author) and think tanks participated in this important symposium.

ASEAN builds international cooperation. ASEAN continues to develop international cooperation and ties with a number of nations, including its acceptance of residential ambassadors from states such as India, Finland, Jordan, Sweden and the U.K.

President Jokowi of Indonesia faces crises during first 100 days. In President Joko “Jokowi” Widodo’s first 100 days in

20

office, a couple of highly publicized political crises have emerged. The first involves the executions of convicted foreign drug dealers in Indonesia, and the second concerns a controversial pick for national police chief. Eight members of the so-called “Bali Nine” (named after their arrest in Bali on heroin charges) were executed on 28 April. The only woman, Filipina Mary Jane Velosa, was granted a temporary reprieve. Drug trafficking is a capital offense in Indonesia (as it is in Singapore and Vietnam). The individuals who were executed came from countries such as Australia, Brazil and the Netherlands. The Universitas Pelita Harapan (UPH), where this author teaches, held a seminar in January entitled “Execution of the Death Penalty in Indonesia,” featuring a justice of Indonesia’s Supreme Court and a former chief justice of Indonesia’s Constitutional Court. The second situation is President Jokowi’s controversial pick of Commander General Budi Gunawan as the new national police chief. Shortly after the appointment in early January, General Gunawan was named a suspect in a political corruption case and is under investigation by Indonesia’s Corruption Eradication Commission (KPK). General Gunawan has waged his own campaign against the KPK, filing legal action in the South Jakarta District Court alleging KPK’s own corruption and claiming the investigation against him is groundless and politically motivated. Although Parliament previously approved General Gunawan’s appointment, final approval rests with the president and is pending the outcome of the investigation.

Air Asia plane crash is under investigation. On 28 December 2014, Indonesia and some neighboring states (Singapore, China and others) experienced a heartbreaking holiday tragedy when Air Asia flight QZ 8501 crashed into the Java Sea, killing all 162 persons on board. Extreme weather is considered to be a factor in the crash. The plane was en route from Surabaya, Indonesia, to Singapore. The airplane’s black box has been located and indicates that a French copilot may have been at the helm at the time of the accident. The investigation is ongoing and is expected to last about seven months.

Jokowi administration cracks down on illegal fishing. In a show of international strength, the Indonesian Ministry of Maritime Affairs and Fisheries (headed by Ms. Susi Pudjiastuti) has sunk several illegal foreign


international law quarterly

winter 2015 • volume XXXII, no. 3

World Roundup, continued commercial fishing vessels operating in Indonesian waters. Thousands of vessels have been involved in this practice. They come from neighboring states such as Thailand, Vietnam and Malaysia (each a member of ASEAN), as well as China. The Jokowi administration is cracking down on illegal fishing after years of Indonesia ignoring the issue.

CHINA AND HONG KONG Maria Catalina Carmona maria.carmona@hoganlovells.com

Are the 2015 CIETAC rules a cure for split ends? The new Arbitration Rules of the China International Economic and Trade Arbitration Commission (CIETAC) entered into effect on 1 January 2015. CIETAC, founded in 1956, is China’s main arbitral institution. It is, however, not the only one. CIETAC, which is based in Beijing, set up sub-commissions in Shanghai (also known as CIETAC Shanghai) and Shenzhen (also known as CIETAC South China) to serve

South China’s booming dispute settlement market, as well as sub-commissions in Chongqing and Tianjin. Up until 2012, CIETAC and its various sub-commissions operated as part of a single organization, applying the CIETAC Rules of Arbitration and its different amendments. In 2012, CIETAC amended its rules for the eighth time, to allow for interim measures in certain circumstances and consolidation of parallel proceedings, among others. The 2012 rules were supposed to bring CIETAC’s practice in line with other international arbitral institutions, but they did much more than that. In fact, the 2012 rules granted CIETAC’s Beijing office more power over the regional branches, which was not well received by CIETAC Shanghai and CIETAC South China. After fierce opposition, CIETAC Shanghai and CIETAC South China declared their independence and produced what is now referred to as “the Split.” After the Split, CIETAC revoked its authorization to the Shanghai and Shenzhen’s sub-commissions to administer arbitrations. In October 2012, CIETAC South China answered by changing its name to the South ... continued on page 28

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international law quarterly

winter 2015 • volume XXXII, no. 3

SECTION SCENE International Law Section Seminar

Cuba 2014: What the U.S. Legal and Business Communities Need to Know 20-21 November 2014 Orlando, Florida

Carlos Loumiet, shareholder at Broad & Cassel

A full house at Cuba 2014

Alfredo Duran, attorney

Milton Vescovacci, shareholder at Gray Robinson Antonio Zamora, of counsel at LEX International

Johammes Werner, publisher of Cuba Standard

Peter Quinter and Antonio Zamora

22

Milton Vescovacci, shareholder at Gray Robinson, and Peter Quinter

Dinner at the conference


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Section Scene, continued

The Florida Bar International Law Section

International Litigation, Arbitration & Transactions (ILAT) Conference 27 February 2015 Miami, Florida

Yine Rodriguez and Peter Quinter

Judge Gerald Cope and Alvin F. Lindsay

Fernando Langa and Penelope Perez-Kelly

Arnold Lacayo and Annette Escobar Giacomo Bossa, Daniel Visoiu and Clarissa Rodriguez

Zachary Schrader

Judge Joseph Farina, Judge Chris McAliley, Trent Walton and Sandra Friedrich

Clarissa Rodriguez

Alvin F. Lindsay, Laura Reich, Daniel Vielleville, Elizabeth Eljuri and Scott Burr

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international law quarterly

winter 2015 • volume XXXII, no. 3

Section Scene, continued International Litigation, Arbitration & Transactions (ILAT) Conference,

Jose Manuel Godinez Samperio, James Meyer, Judge Rosemary Barkett, Peter Quinter and Robert Becerra

continued

The ILAT schedule of sessions

Colleagues gather for an informal discussion between sessions

Peter Quinter and Penelope Perez-Kelly

Alvin F. Lindsay and Judge Gerald Cope with a conference attendee

Giselle Leonardo and Peter Quinter

24

John Rooney


international law quarterly

winter 2015 • volume XXXII, no. 3

Section Scene, continued International Litigation, Arbitration & Transactions (ILAT) Conference,

Tania Cruz and Ryan Reetz

Judge Rosemary Barkett, Jose Manuel Godinez Samperio and Peter Quinter

continued

Angel Valverde, Jacqueline Villalba and Richard Lorenzo

Carlos Somoza, LaTonia Tinker and Arturo Aballi

Rebekah Poston, Marcos Jimenez, Eduardo Palmer and Matthew Menchel

Jacqueline Becerra, Richard Montes De Oca, Marcello Hallake and Marianna Conti Craveiro

25


international law quarterly

winter 2015 • volume XXXII, no. 3

Section Scene, continued

The Florida Bar International Law Section Vis Pre-Moot 28 February 2015 JAMS, Miami, Florida

First Place Team – Levin College of Law, University of Florida, with Philip W. “Whit” Engle of the Chartered Institute of Arbitrators

Second Place Team – University of Georgia School of Law with ILS Vis Committee Chair Sharié Hudson

26


international law quarterly

winter 2015 • volume XXXII, no. 3

Section Scene, continued The Florida Bar International Law Section Vis Pre-Moot, continued

Third Place Team – Florida International University College of Law with ILS Vis Committee Chair Sharié Hudson and Judith Ann Freedberg of the Miami International Arbitration Society

Best Oralist – Dimitros Peteves of the Levin College of Law, University of Florida, with Judith Ann Freedberg of the Miami International Arbitration Society and Eduardo Palmer.

Second Place Oralist – Andrew DiComo of the Levin College of Law, University of Florida, with Judith Ann Freedberg of the Miami International Arbitration Society and Eduardo Palmer

27


international law quarterly

winter 2015 • volume XXXII, no. 3

World Roundup, from page 21 China International Economic and Trade Arbitration Commission (SCIETAC) or the Shenzhen Court of International Arbitration (SCIA). CIETAC Shanghai followed shortly thereafter, changing its name to Shanghai International Arbitration Center (SIAC). To add to the confusion, CIETAC opened new branches in Shanghai and Shenzhen to operate, unopposed, under its 2012 Rules of Arbitration. The Split let to a period of uncertainty, especially concerning arbitral clauses that had picked CIETAC Shanghai or CIETAC South China as the administering entity. While SIAC and SCIETAC had the favor of their local governments, and thus awards in arbitrations under their administration were enforceable locally, enforcing said awards in other regions of China became increasingly problematic. CIETAC’s 2015 Arbitration Rules aim at solving (or at least reducing) this uncertainty. Specifically, Article 2(6) of the 2015 Rules of Arbitration clarifies that “where the sub-commission/arbitration center agreed upon by the parties does not exist or its authorization has been terminated, or where the agreement is ambiguous, the [CIETAC Beijing] Arbitration

Court shall accept the arbitration application and administer the case. In the event of any dispute, a decision shall be made by CIETAC.” Aside from this, the 2015 rules also introduce provisions that parties to international arbitrations have come to expect. For example, the new rules provide for emergency arbitrator proceedings (although these proceedings will mainly apply in Hong Kong—where CIETAC established another sub-commission after the Split—because Chinese arbitration law does not provide for emergency arbitration proceedings), enhanced consolidation procedures and single arbitration for disputes under multiple contracts. CIETAC is expected to keep its status as China’s main arbitration institution. Whether this expectation becomes a reality will depend greatly on how Chinese courts react to the new arbitration rules. CIETAC Rules of Arbitration are not binding on Chinese courts, so the question as to how courts will interpret ambiguous arbitration clauses, or clauses providing for CIETAC Shanghai or CIETAC South China, remains open.

No institution becomes a leader without a good reason. Cooperation Agreement with arbitral institutions from different countries Pioneer arbitration center in Brazil and Latin America ISO – 9001 certificate since 2004 Over US$ 8 billion in dispute International Services Multilingual Staff B 50% of Brazilian market share and 82% of Share of Mind

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www.ccbc.org.br centroarbitragem@ccbc.org.br +55 (11) 4058 0400 São Paulo - SP - Brasil


international law quarterly

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World Roundup, continued EUROPEAN UNION Santiago Cueto sc@cuetolawgroup.com

New jurisdiction rules in European Union come into force. On 10 January 2015, new jurisdictional rules governing litigation in the courts of all twenty-eight member states of the European Union (EU) took effect. The changes were made to the EU’s Judgments Regulation, which is the key European instrument on jurisdiction and enforcement issues in civil and commercial matters. The new rules supersede national laws and are particularly relevant to individuals and entities based outside the EU, but engaged in commerce within it. Under the new jurisdictional regime, the default rule is that defendants should be sued in the courts of their domicile. The new regime also allows for parties to an agreement to elect to resolve their disputes in the court of a member state. Unless the parties indicate otherwise, their choice will be respected and treated as an exclusive jurisdiction.

Germany passes its first minimum wage law. On 1 January 2015, Germany passed its first minimum wage law. Pursuant to the law, virtually any employee in Germany—including contract employees as well as employees of employers based outside the country— will be entitled to a minimum wage of €8.50 per hour. Under the new law, the minimum wage must be paid to employees by the end of the month following the month in which the work was performed. Fines of up to €500,000 may be levied on employers that are late paying or fail to pay the full amount due to the employee. An employee who is paid less than the minimum wage will be entitled to compensation that is commensurate with his or her job role. Under normal circumstances, such compensation will be higher than the minimum wage.

New Dutch Arbitration Act seeks to modernize commercial arbitration procedures. The revised Dutch Arbitration Act entered into force earlier this year. Replacing the 1986 version of the Act, the revised Act is geared toward modernizing the Netherlands’ commercial arbitration procedures and making them more attractive to international parties. The provisions of the new Act apply to both domestic and international commercial arbitration proceedings. The revised Act modernizes some of the archaic

provisions of the old arbitration framework. These changes are intended to make Dutch arbitration more efficient, flexible and navigable. For example, the new Act creates a framework for e-arbitration, allowing procedural documents and awards to be submitted in electronic formats with electronic signatures. The new Act also makes several procedural enhancements such as allowing an arbitral tribunal to hear objections against arbitrators instead of requiring a separate Dutch court to preside over the objections. These and other changes to the Act are intended to maximize the parties’ autonomy and flexibility to tailor arbitration procedures to meet their mutual needs and interests.

France upends 109-year-old law with plan to allow Sunday shopping. France’s lower House of Parliament has approved a law that allows shops to be open on Sundays. Putting an end to France’s century-old Sunday shopping prohibition, the new law will apply to main commerce centers and some suburban shopping malls. The new rules would create “international tourist zones” where all shops can stay open every Sunday and until midnight during the week. The law is now expected to go to the Senate, the upper House of Parliament (which cannot block legislation).

MIDDLE EAST Omar K. Ibrahem omar@okilaw.com

Amid falling oil prices, Shell and Qatar scrap plan to build petrochemical plant. In 2011, Royal Dutch Shell PLC and state-owned Qatar Petroleum signed a deal to build the AlKaraana plant, a petrochemical plant. With the continued fall of oil prices, however, Shell and Qatar agreed to cancel their plans to build the plant. Shell said that in the current economic climate the plant would be “commercially unfeasible.” This is one of the first major oil-and-gas projects to be cancelled amid the decline in oil prices.

After twenty-year arbitration proceedings, Swiss arbitration panel orders Israel to pay Iran for joint pipeline project loss. In 1994, Iran’s state-owned oil company initiated arbitration proceedings relating to a 1968 agreement between Israel and Iran for the creation of a joint pipeline. The pipeline

29


international law quarterly

winter 2015 • volume XXXII, no. 3

World Roundup, continued was scuttled after the 1979 Iranian Islamic Revolution. After twenty years of legal battles, including Israel’s repeated efforts in Swiss courts to stop the arbitration, the Swiss arbitration panel ruled that Israel should pay Iran the value of a 50% stake in the pipeline project. The arbitration panel is still determining Iran’s damages.

Iraqi court dismisses $4.5 billion claim against Kuwait telecom operator Zain. In December 2007, Zain bought Iraqna from Egyptian Orascom Telecom for $1.2 billion. Shareholders in the number three mobile operator in Iraq, Korek, filed a lawsuit against Zain and Iraq’s telecom regulator. In their lawsuit, they alleged that Zain’s takeover had stopped Korek from buying Iraqna, resulting in a $4.5 billion loss to Korek. In late January 2015, an Iraqi court dismissed the claim. Korek was given thirty days to appeal the decision.

Dubai and Singapore commercial courts sign memorandum of guidance for closer judicial collaboration. The chief justice of Dubai’s International Financial Centre’s (DIFC) court and the chief justice of Singapore’s Supreme Court signed a memorandum of guidance between the two judicial systems. The memorandum provides that where a case that requires a decision on a matter of law of the other country is filed in either of the country’s courts, the first (local) court will consider directing the parties to have that question determined by the court of the other country.

SINGAPORE Santiago Cueto sc@cuetolawgroup.com

Singapore outlaws online gaming. Aimed at protecting the island nation’s young and elderly population, Singapore recently enacted the Remote Gaming Act (RGA). The RGA creates an absolute prohibition of real-money online gaming in the country, including online poker and blackjack. Violators of the RGA face tough criminal penalties—up to six months in jail or a $5,000 fine, with tougher penalties for those guilty of luring people under 21 years old. Internet service providers and banking institutions also face tough penalties if they fail to comply with a court’s blocking orders. To supplement the new law, Singapore will block access to any website that promotes, markets or otherwise facilitates gaming activities within the country’s borders.

30

New data protection law takes effect in Singapore. Singapore recently enacted the Personal Data Protection Act (PDPA) to provide additional safeguards for individuals’ privacy. The new law includes provisions for the collection and use of personal data and imposes a number of additional obligations on businesses operating in the country. In short, the regulations mandate that when personal data is collected, the reason for the data’s use must be disclosed, consent must be given for the use and the collected data can only be used for purposes “that would be considered appropriate to a reasonable person in the given circumstances.” The Act also requires businesses to designate a data protection officer to supervise, safeguard and dispose of collected personal data. In addition, the law contains provisions concerning the transfer of collected personal data from Singapore to other countries.

TAIWAN Sheau-Chyng (Sophia) Lin sophia@justuslaw.com.tw

Cabinet of Taiwan approves draft proposal on adoption of U.N. Convention Against Corruption. On 28 August 2014, the Executive Yuan (Cabinet) of Taiwan approved draft legislation formulated by the Ministry of Justice on Taiwan’s adoption of the United Nations Convention Against Corruption (UNCAC). The draft legislation has been proposed in the Legislative Yuan (Parliament) by legislators for review and ratification. The “fight against corruption and building clean government is an important indicator of a nation’s resolve to enhance global competitiveness,” former Premier Jiang Yi-huah said. Besides aligning with international norms and practices, “efforts on the aspect of execution are even more important. Ministers and executives should pay close attention to their subordinates’ probity in private and public areas,” Jiang said. The U.N. General Assembly adopted the Convention in 2003; it entered into force on 14 December 2005. It provides governments around the globe with guidelines on anticorruption laws and policies. As of 12 November 2014, there were 173 parties to the Convention. But Taiwan is not a member of the United Nations and,


international law quarterly

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World Roundup, continued therefore, cannot become a party to the Convention. As a result, Taiwan must pass the above-mentioned legislation in order to adopt the substantial effect of the Convention into its domestic laws. “Although not [a] party to the convention, the government is determined to uphold its objectives,” Jiang said. “Government agencies at all levels should formulate, amend or repeal regulations, and improve administrative measures within three years if they conflict with the Convention,” Article 6 of the draft legislation stipulates. The Ministry of Justice stated that within three years, it will review codes of ethics for companies and related regulations to strengthen the prevention of bribery and corruption in private sectors. According to the results of the 2013 “Global Corruption Barometer” published by Transparency International, the percentage of bribery cases among people receiving government services in Taiwan (36%) is higher than the global average (28%). Though 71% of Taiwanese thought the overall corruption situation had improved over the past two years, 46% thought the government’s fight against corruption is ineffective and only 16% considered it effective. Now it is hoped that the adoption of UNCAC will mark a bright start for Taiwan’s anticorruption work in 2015 and beyond.

Taiwan lifts deportation requirement for nonnationals with HIV/AIDS. Foreigners in Taiwan who are diagnosed with HIV/AIDS will no longer be subject to deportation, according to an amendment passed by the Legislative Yuan on 20 January 2015. The original HIV Infection Control and Patient Rights Protection Act allowed the government to order HIV tests on foreign residents in Taiwan and on short-term visitors staying in the country for three months or longer. Those who tested positive and were not infected by their Taiwanese spouses or during a medical process in Taiwan were required to be deported. From 1984 to 2014, 954 HIV-infected foreigners were found in Taiwan, and 906 of them were deported. In 2013, as many as seventy-one foreign workers were deported. Before the amendment passed, Deputy Health Minister Lin Tzou-yien stated that Taiwan was among twenty-eight countries that still maintained entry/exit restrictions on foreigners who have HIV/AIDS. Five years ago, UNAIDS stated that such restrictions would not help in prevention of the disease. The amendment makes Taiwan the 140th country that does not have such restrictions.

This is significant progress for Taiwan on the issue of HIV/ AIDS, but challenges remain. “De-specialization” of HIV/AIDS is the ultimate goal of Taiwan’s government, but distance remains between ideal and reality. Incidents of patients in the country being discriminated against or ostracized are common. According to the Taiwan Centers for Disease Control’s statistics, there were more than 29,000 HIVinfected persons in Taiwan in 2014, but HIV is usually under reported. It is hoped that Taiwan will keep advancing the cause of equality and human rights protection and provide a friendly environment for people who have HIV/AIDS.

UNITED STATES Peter A. Quinter peter.quinter@gray-robinson.com

United States implements, enhances trade policies and procedures. The United States has been especially active in implementing new and enhancing other international trade policies and procedures. Of special interest are: 1) The United States has expanded economic sanctions against Russian persons and companies and has placed more restrictions on “persons subject to United States jurisdiction” that are doing business with Russian persons and companies. This expansion comes in response to the Russia’s involvement in eastern Ukraine. 2) Effective 16 January 2015, the United States instituted a new policy toward Cuba involving trade, travel, communications and banking. Getting away from the failed almost sixty-year-old embargo, President Obama, through the Commerce and Treasury departments, has implemented new regulations to encourage more contact with Cubans to attempt to facilitate freedom and democracy and generally to normalize relations. 3) U.S. Customs and Border Protection (CBP) announced that it seized a record number and value of counterfeit merchandise attempting to enter the United States. Intellectual property rights protection remains a high priority for CBP. Most of the seized merchandise was from China or Hong Kong. 4) Free trade agreements between the United States and many other countries are being negotiated by the Obama administration, and Democrats and Republicans in Congress are likely to give President Obama “fast track authority” to execute these trade agreements in 2015 or 2016. ILQ

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Customs Law Enforcement, from page 9

The incentives are many for private individuals to blow the whistle on importers for missteps. The FCA contains an automatic punitive damages provision resulting in treble damages in most cases. There are civil penalties of up to US$11,000 for each false claim allegedly submitted. The whistleblower receives as much as 30% of the recovery. Victorious plaintiffs are awarded attorney’s fees and costs. As a result, there are routinely multimillion-dollar settlements in FCA customs cases. In 2013, an importer paid US$45 million to settle claims that it declared a false country of origin to avoid antidumping duties on Chinese ink toner. In 2014, the government reached a US$4.3 million settlement with an importer whose compliance manager alleged that it undervalued imported phone cases over four years. It is not uncommon for the government to join an FCA case while pursuing Section 1592 penalties based on the same allegations. In a pending case in the Middle District of Florida, the government joined a suit alleging that seventeen importers sidestepped antidumping duties on Chinese aluminum products. CBP is simultaneously prosecuting parallel administrative actions against the defendants. Some defendants settled for penalties, and the government dropped them from the FCA case. This double-barrel strategy increases the government’s leverage to force a speedy resolution and to extract larger recoveries.

Conclusion Most importers are familiar with Section 1592’s penalty process because of CBP’s well-advertised informed compliance policy. If they aren’t already on notice, then businesses should be advised that customs law violations are fertile ground for whistleblower lawsuits by the government, employees and competitors. As this powerful anti-fraud remedy is more fully utilized in the trade area, it can be expected to have a similar impact as Section 1592 has on customs law enforcement.

J. LEVY

Josh Levy practices customs, international trade and insurance law at Marlow Adler Abrams Newman & Lewis in Coral Gables, Florida. He holds the LL.M. in international business and trade law from The John Marshall Law School and the J.D. from George Washington University. ILQ

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The Black Market Peso Exchange, from page 11

Upon receipt of the U.S. dollar funds, the United States supplier exports the goods to the importer’s country. 6. Finally, the importer, upon receiving the goods, sells them in the home country and pays www.freedigitalphotos.net; photo by scottchan the peso broker the arranged exchange fee in pesos, depositing them into the broker’s local bank account. This replenishes the peso broker’s account with local currency with which the broker can commence a new trade-based money-laundering transaction.4

Red Flags FINCEN, the U.S. Department of Treasury’s Financial Crimes Enforcement Network, has identified certain red flags, which it states are potentially indicative of possible trade-based money laundering through the BMPE. These red flags include, but are not limited to: 1. Payments from third parties for goods and services made by a middleman apparently unrelated to the buyer or the seller of the goods; 2. Wires between an originator and a beneficiary with no apparent business relationship; 3. A customer’s inability to produce documentation to support a transaction; 4. Significant discrepancies between the descriptions of goods on transport documents, commercial invoices or packing lists; 5. Wire transfers received as payments for goods into United States bank accounts where the importer who ordered the wire does not reside in the country from where the wire originated; and 6. Multiple deposits occurring in various locations when the account owner resides elsewhere. In addition, any of these red-flag indicators, in conjunction with shipments to duty-free zones of high-

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dollar merchandise such as electronics, auto parts, precious metals and the like could be an indication of trade-based money laundering or BMPE activity.5

Are Alternative Value Systems Illegal? The existence of an alternative/parallel currency exchange and transmission system that functions outside a country’s official banking system, such as the BMPE, is hardly unique to Colombia. Such systems for exchanging local currency for foreign currency and then transmitting that foreign currency to a designated recipient abroad are common. The government calls them informal value transfer systems or IVTS’s. These systems exist throughout the world. One of the best-known IVTS is Hawala (Middle East, Afghanistan and Pakistan), but there are others, including Fei Ch’ien (China) and the BMPE. An informal value transfer system. includes any system pursuant to which a country’s residents can exchange their currency for a second country’s currency, for transmission to a designated person in the second country. An IVTS operates outside the conventional banking system, at least in part, and it often operates through intermediaries whose “primary business activity may not be the transmission of money.”6 An IVTS, like a conventional banking system, is sometimes used by money launderers. FINCEN has consistently reported, however, that “the majority of IVTS activity is legitimate.”7 No one knows how much money is exchanged and transmitted through these systems annually, but estimates range from US$100 billion to US$300 billion worldwide.8 An IVTS provides a quick, efficient, safe and inexpensive means of exchanging and transmitting funds. IVTS’s are used by numerous legitimate businesses. “Law abiding


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The Black Market Peso Exchange, continued

ex-pat Colombian businesspeople” reportedly use Colombia’s informal/parallel market, which is an IVTS, “to hide Colombian purchases from criminals who would like to use the information in the Colombian banking system to target them and their families for extortions, theft and kidnapping.”9 The United States government expressly declined to make the use of an IVTS illegal. After outlining the benefits and the risks of IVTS’s, FINCEN concluded that “IVTS operations . . . can and do provide legitimate services to many customers who customarily prefer to use these types of financial services providers.”10 IVTS’s are not outlawed in the United States. In its 2002 report to Congress, FINCEN explained that:

involved in the BMPE, how can a small exporter prevent it from being used inadvertently to launder illegal proceeds? Let’s examine a BMPE transaction from the viewpoint of the small exporter in what otherwise would appear to be a legitimate export transaction.

Export Transaction Involving the BMPE Anytown Wireless (a fictional entity for illustrative purposes only) is a small cell phone exporter in Miami. Anytown has four employees and a small office west of Miami’s airport. Its principals are expatriates from Latin America, and they sell cell phones and accessories

Outlawing the activity also deprives the most law-abiding IVTS customers of the primary channel through which they transfer funds . . . . Traditional IVTS[’s] are very old and ingrained in the culture of many ethnic groups. They also serve legitimate needs, which makes it unrealistic and undesirable to try and eliminate them. Some countries have tried and achieved nothing but criminalization of otherwise law-abiding citizens. Indeed, this is likely to backfire and produce negative effects on Western interests.11

The Colombian informal/parallel “Xiaomi Redmi Note” by Ilya Plekhanov market, a type of IVTS, has existed Licensed under CC BY-SA 4.0 via Wikimedia Commons for many decades. It predates the to customers in the electronics industry that they have narcotics trade. Thus, U.S. dollars that Colombians cultivated over a period of years. Anytown uses freight receive for selling coffee and many other legitimate forwarders to warehouse and arrange shipments to goods in the United States have been available for Latin America. Orders from customers are usually sent purchase on the BMPE for many years. Like other IVTS’s, to Anytown via email or are taken over the phone or the Colombian parallel market is not illegal in the United 12 via Skype. Being a small exporter, Anytown Wireless States. usually does not extend credit to customers, but instead As such, although an IVTS like the BMPE may be used by demands payment in U.S. dollars prior to shipping orders drug traffickers to launder their illegal profits, the BMPE to Latin America. by itself is not an illegal value transfer system. Illegal actors Anytown Wireless has a good customer located in a use it often, as they use the U.S. banking system to further South American country that it has sold to without their goals of returning illegally earned wealth to their incident over a period of years. Latam Cellular (again home countries. Given that legal and illegal actors are

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The Black Market Peso Exchange, continued

fictional and for illustrative purposes) purchases cell phones and accessories from Anytown and retails them to customers in the local market in storefronts located in shopping malls. Although its sales in the local market are in the local currency, Latam must obtain U.S. dollars to pay Anytown before Anytown will ship the ordered merchandise. The country in which Latam Cellular is located has two currency exchange markets—one in banks that sell U.S. dollars at an official exchange rate and one in a parallel, informal market that sells U.S. dollars at lower, more attractive exchange rates, which are often published in leading newspapers. Since the cell phone market is very competitive and Latam needs to keep its costs as low as possible, it accesses the parallel informal market for U.S. dollars to pay Anytown. Latam Cellular approaches a money broker, perhaps in an office located in the same shopping mall where one of its stores is located. Latam asks to purchase a U.S. dollar denominated wire transfer for the value of the invoice it owes to Anytown Wireless to be sent directly to Anytown’s bank account in the United States. The money broker quotes a price in the local currency to Latam for this U.S. dollar wire, Latam pays it with “clean” local currency and the U.S. dollar wire is sent to Anytown’s U.S. bank account the following day. Latam tells Anytown to expect the wire so that when it is received, Anytown will immediately export the ordered merchandise to Latam. The wire received by Anytown, since it was sent by the money broker, is in the name of a third person or an entity that is unknown to Anytown Wireless and perhaps even to Latam Cellular.

In the above scenario, Anytown Wireless does not know the identity of the money broker hired by Latam Cellular or the source of the U.S. dollars ultimately wired into its account from a third-party bank account. All parties to the transaction are satisfied; Anytown receives payment, and Latam receives its merchandise. To the extent that the U.S. dollar bank account from which Anytown received its wire is funded either wholly or partially by illicit proceeds, the money launderers are satisfied as well. Anytown Wireless, the exporter that receives what may be tainted U.S. dollars, has no knowledge of any illicit nature of the source of the money, believing it to be connected to Latam Cellular, which it knows from a multi-year relationship to be a legitimate importer of cell phones in the Latin American country. Nevertheless, given anti-money-laundering programs at United States banks and the FINCEN red flags previously discussed above, Anytown Wireless’s bank files a suspicious activity report (SAR) with FINCEN because the wire transaction bears red-flag indicators. Afterward, a federal law enforcement agency, whether it be the Federal Bureau of Investigation or Immigration & Customs Enforcement, causes a seizure warrant from a federal court to be served on Anytown’s bank, seizing Anytown’s operating account that received the wire transfer, alleging Anytown’s involvement in trade-based money laundering through the BMPE. Under United States federal forfeiture laws, Anytown Wireless can challenge the seizure on the basis of it being an “innocent owner” of the funds, with no knowledge of its illicit nature, but this involves challenging the government in a federal court proceeding, which may take years and incur huge litigation costs. In the

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The Black Market Peso Exchange, continued

meantime, Anytown’s bank severs its banking relationship with the company, and the government retains possession of funds that Anytown Wireless, a small company, may need to pay accounts payable and remain in business. How can such a disaster be avoided in the first place?

Avoiding Being an Unwitting Accessory to TradeBased Money Laundering To avoid being caught in the web of trade-based money laundering through the BMPE, a small exporter must be diligent in ascertaining exactly who is paying for its exports and cannot rely only on what appears to be the legitimacy of its business relationship with its known customers. Although it is not illegal in and of itself to receive wire transfers from third parties to a transaction, when the small exporter receives a wire into its account from an unknown third party to pay for goods exported to a known customer, the question must be asked: Why? What is the business reason for receiving payments from an unknown third party unconnected to the underlying transaction, besides providing an opportunity for and enabling that third party to launder illicit funds through international trade? Is the third party actually a related entity to the foreign customer? Another supplier of the foreign customer with whom the customer has a legitimate business credit? A legitimate financing or factoring entity? A relative of the owner or other person for which there may be a business or personal reason, inconsistent with money laundering, for making third-party payments? If the foreign customer insists on making payments only through third parties that are unknown even to the foreign customer itself, FINCEN’s red flags teach that the transaction has a high probability of being part of tradebased money laundering through the BMPE. Inadequate due diligence in the records of the small exporter regarding a wire transaction with such red flags may be the proverbial kiss of death when law enforcement is evaluating whether the small exporter is an unwitting dupe or an intentional participant. A small exporter (and its principals/officers) accepting such payments without being objectively satisfied as to their legitimacy does so at its own risk of incurring civil forfeiture and potentially criminal liability for either intentional engaging in, or

being willfully blind that it is engaging in, a conspiracy to commit money laundering. For a small company, exporting can be extremely lucrative, but without adequate knowledge, training, experience and diligence regarding the acceptance of payments for such exports, exporting can also be a money-laundering disaster waiting to happen for the unwary. Obtaining advice from experienced counsel and professionals regarding IVTS and BMPE transactions may be the difference between survival and extinction for the small exporter in these turbulent international waters. Robert J. Becerra of Becerra Law, P.A., is a Florida Bar board certified specialist in international law. He concentrates his practice in the areas of civil and white collar criminal litigation in matters involving international trade, including exports, imports, cargo losses, R. BECERRA trade-based money laundering, export enforcement, customs and FDA seizures and investigations and civil forfeitures. Becerra Law, P.A., is based in Miami, Florida.

Endnotes

1 The International Trade Administration web page on the National Export Initiative, found at http://trade.gov/nei/, 22 December 2014. 2 FINCEN Advisory FIN-2010-A0001, 18 February 2010. 3 Understanding and Detecting the Black Market Peso Exchange, Evan Weitz and Claiborne Porter, United States Attorneys’ Bulletin, September 2013. 4 Where Does the Money Come From? Illegal Drugs, Due Diligence and Company Accounts, David L. Goldberg, ABA Business Law Section, Volume 12, Number 3, January/February 2003. 5 FINCEN Advisory FIN-2010-A001; FINCEN Advisory, FIN2014-A005, 28 May 2014. 6 FINCEN Advisory, Issue No. 33, March 2003. 7 FINCEN Report to Congress in Accordance with Section 359 of Patriot Act, November 2002. 8 Walter Perkel, Money Laundering and Terrorism, Informal Value Transfer Systems, 41 Am. Crim. L. Rev. 183 (Winter 2004). 9 Javier Sarmiento, CFE, CPA, Black Market Peso Exchange: An International Scheme; Fraud Magazine, July/August 2007. 10 FINCEN Advisory Issue No. 33, March 2003. 11 FINCEN Report to Congress in Accordance with Section 359 of Patriot Act, November 2002. 12 Transcript, House of Representatives Subcommittee on General Oversight and Investigations on Banking and Financial Services, Law Enforcement Efforts to Combat Money Laundering Through Black Market Peso Brokering, 22 October 1997 at 61-62 (Chairman Bachus: “And it is all illegal?” Agent James, IRS Criminal Investigations Division: “Not in our country, sir”). ILQ

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U.S. Customs In-Transit Seizures, from page 13

extraterritorial effect.” Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247, 255 (2010). Such presumption can be rebutted by clear congressional intent. To rebut the presumption, “general, inclusive language that, read literally, might extend a statute to conduct that causes effects abroad should not be sufficient.” William S. Dodge, Understanding the Presumption Against Extraterritoriality, 16 Berkeley J. Int’l L. at 123 (1998). All evidence in determining congressional intent, including the statute’s language, purpose and legislative history, should be considered. Id. “Administrative agencies’ interpretations of a statute should be given the same deference in this context that they are in any other.” Id. The presumption “should also be rebutted when it is clear from the subject of the statute that Congress was not primarily concerned with domestic conditions.” Id. www.wikimedia.org; photo by Daderot The U.S. Supreme Court has ruled on the issue of presumption against extraterritoriality in the field of patent law. The Court has consistently refused to read the terms import and export broadly, which may afford protections to patent holders that should have been sought in other countries. See Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972) (“Our patent system makes no claim to extraterritorial effect”; our legislation “do[es] not, and [was] not intended to, operate beyond the limits of the United States, and we correspondingly reject the claims of others to such control over our markets.” (quoting Brown, 19 How. at 195, 15 L.Ed. 595)); Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 454-55 (2007) (“The presumption that United States law governs domestically but does not rule the world applies with particular force

in patent law. The traditional understanding that our patent law ‘operate[s] only domestically and do[es] not extend to foreign activities,’ is embedded in the Patent Act itself, which provides that a patent confers exclusive rights in an invention within the United States”). What about the presumption in the Tariff Act? In a recent case, the Federal Circuit stated that the presumption against extraterritoriality does not govern the International Trade Commission’s (ITC) investigation under 19 U.S.C § 1337.6 TianRui Grp. Co. v. Int’l Trade Comm’n, 661 F.3d 1322 (Fed. Cir. 2011). In that case, the ITC found that TianRui, a Chinese company, misappropriated Amsted’s, an American company, trade secrets in producing cast steel railway wheels. The ITC issued a limited exclusion order, preventing the importation of certain TianRui products into the United States. A split panel of the Court of Appeals for the Federal Circuit affirmed. The Chinese manufacturer’s argument was that the misconduct occurred overseas and so should not be considered by the ITC investigators because Congress did not intend the statute to apply outside the territory of the United States. The court held that the presumption against extraterritoriality did not govern in this case for three reasons. First, Section 337 is expressly directed at unfair methods of competition and unfair acts “in the importation of articles” into the United States. As such, “this is surely not a statute in which Congress had only ‘domestic concerns in mind.’” Second, the commission has not applied Section 337 to sanction purely extraterritorial conduct; the foreign “unfair” activity at issue is relevant only to the extent that it results in the importation of goods into this country causing domestic injury. Third,

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U.S. Customs In-Transit Seizures, continued

the legislative history of Section 337 supports the commission’s interpretation of the statute as permitting the commission to consider conduct that occurs abroad. In sum, what constitutes importation was not at issue in TianRui—the railway wheels were imported into the United States to compete with U.S. manufacturers’ products in the U.S. market. We can glean congressional intent, however, from the discussion of legislative history of Section 337: Congress had “domestic concerns in mind.” TianRui is important for several reasons. First, the court in TianRui rejected the presumption against extraterritoriality in the interpretation of Section 337. It does not say, however, that Congress grants extraterritorial application to any unfair acts in patent law. It merely says that Congress changes the statute only to create a remedy for extraterritorial use of process patents. Id. at 1340. Second, the court seems to equate importation with bringing goods into the United States and competing with U.S. entities in U.S. commerce. Third, interestingly, Section 337 of the Tariff Act also prevents the importation of counterfeit trademarked goods.7 If the importation in 19 U.S.C. § 1337(a)(1) (A) concerns importation that causes domestic injury, the importation in 19 U.S.C. § 1337(a)(1)(C) must concern importation of counterfeit trademarked goods that have domestic effects. It appears, therefore, that transshipment of goods shall not be considered as an importation of goods because no harm is caused to U.S. trademark owners in the U.S. market. What about the presumption in the Lanham Act? Generally, courts find that the Lanham Act grants subject matter jurisdiction over extraterritorial conduct by foreign defendants only where the conduct has a substantial effect on U.S. commerce. See e.g., McBee v. Delica Co., 417 F.3d 107, 119-120 (1st Cir. 2005) (In both the antitrust and the Lanham Act areas, there is a risk that absent a certain degree of extraterritorial enforcement, violators will either take advantage of international coordination problems or hide in countries without efficacious antitrust or trademark laws, thereby avoiding legal authority); Aristocrat Technologies, Inc. v. High Impact Design & Entm’t,

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642 F. Supp. 2d 1228 (D. Nev. 2009) (“interests of, and links to, American foreign commerce were sufficiently strong in relation to those of Venezuela to justify extraterritorial application of Lanham Act”); Babbit Electronics, Inc. v. Dynascan Corp., 38 F.3d 1179 (11th Cir.1994) (holding that the Lanham Act applied to sales of cordless telephones outside the United States because the telephones were shipped through a United States free trade zone). Generally, the presumption does not apply to trademark law if the trademark violation is strongly related to the United States. But arguably, because the Lanham Act only provides exclusive right to use of trademark in U.S. commerce, the presumption is that the Lanham Act does not have extraterritorial effect. Unfortunately, the U.S. Supreme Court has not ruled precisely on this issue. Congress can intend one statute to have an extraterritorial effect while intending others not to have this effect. For example, in patent law, Congress did not intend to give U.S. patent law general extraterritorial effect but nevertheless gives special remedy for extraterritorial use of process patent by enacting Section 337 of the Tariff Act. TianRui Grp. Co., 661 F.3d at 1340. Similarly, even if Congress did not intend to give general extraterritorial effect to the Lanham Act, it can nevertheless create a special remedy for extraterritorial use of trademarks. 19 U.S.C. § 1526 and 18 U.S.C. § 2320 may be just such remedies. Certainly, as stated above, there are arguments on both sides. On one hand, there is a presumption against extraterritoriality because U.S. trademark law only grants an exclusive right in U.S. commerce. Also, precedents are more in the line of interpreting importation as “bringing goods into the United States and competing with U.S. entities in U.S. commerce.” On the other hand, because Congress enacted the Tariff Act with “domestic concerns in mind,” one can argue that the transshipment of U.S. trademark owners’ goods will injure the trademark owners’ interest. The injury would be the loss of sales of genuine goods to a foreign country, assuming that the consumers in a foreign country would buy genuine goods if counterfeits were not available. The enactment of


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U.S. Customs In-Transit Seizures, continued

18 U.S.C. § 2320(f) further shows Congress’s intent of granting authority to seize in-transit counterfeit goods.8 We would like to see how this issue is ultimately resolved by an as yet unheard U.S. Supreme Court case. Shanshan Liang was born in China and attended Tongji University to earn the B.Eng. and Fudan University for the degree in law. After graduation she came to the United States to pursue the Ph.D. She was a research assistant in the Department of Materials S. LIANG Science and Engineering at The State University of New York at Stony Brook, where she published many scientific articles in peer-reviewed conferences and journals before earning the Ph.D. in 2008. She moved to Florida with her family in 2009. She studied law at Florida State University College of Law. Both her engineering background and her international background steered her toward the practice of intellectual property and international trade with The Mooney Law Firm LLC in Tallahassee, Florida.

Endnotes

1 19 U.S.C. § 1526(e) provides that “[a]ny such merchandise bearing a counterfeit mark (within the meaning of section 1127 of

title 15) imported into the United States in violation of the provisions of section 1124 of title 15, shall be seized and, in the absence of the written consent of the trademark owner, forfeited for violations of the customs laws.” 2 See Weil Ceramics & Glass, Inc. v. Dash, 878 F.2d 659, 671 (3d Cir. 1989) (Congress only intended the trademark laws to “provide a remedy only to domestic trademark holder who is injured by the distribution of like goods, which bear facsimile marks that result in confusion to consumers or detriment to the goodwill developed by the trademark holder in the trademarked goods”). See also Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 636 (1992) (The two principles that fueled the Lanham Act are the protections of consumers and the protection of the good wills of the trademark owners). 3 Tennessee Valley Auth. v. Hill, 437 U.S. 153, 207 (1978). 4 U.S. v. Watches, Watch Parts, Calculators & Misc. Parts, 692 F. Supp. 1317 (S.D. Fla. 1988). 5 18 U.S.C. § 2320 provides that “No goods or services, the trafficking in of which is prohibited by this section, shall be transshipped through . . . the United States. Any such transshipment . . . shall be deemed a violation of [15 U.S.C. § 1124].” 6 19 U.S.C. § 1337(a)(1)(A) provides that “it shall be unlawful to import articles into the United States or the sale of such articles by unfair methods of competition or unfair acts if the threat or effect of such importation or sale is to destroy or substantially injure an industry in the United States.” 7 19 U.S.C. § 1337(a)(1)(C) provides that “it shall be unlawful to import into the United States, to sell for importation, or to sell within the United States after importation of articles that infringe a valid and enforceable United States trademark.” 8 Because 19 U.S.C. § 1526(e) authorizes CBP to seize any merchandise bearing a counterfeit mark imported into the United States in violation of 15 U.S.C. §1124 and because a transshipment is defined by Congress in 18 U.S.C. § 2320(f) to be a violation of 15 U.S.C. § 1124, one can argue that Congress has authorized CBP to seize in-transit counterfeit goods under 19 U.S.C. § 1526(e). ILQ

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option for U.S. employers. To qualify for this category, the individual alien must establish that he or she has extraordinary ability in the sciences, education, business or athletics, which has been demonstrated by sustained national or international acclaim, and is coming temporarily to the United States to continue work in the specified area of extraordinary ability.9 Extraordinary ability in the fields of science, education, business or athletics means a level of expertise indicating that the person is one of the small percentage who has risen to the very top of the field of endeavor.10 The evidentiary standard to demonstrate “extraordinary ability” is quite stringent, requiring providing evidence of: (A) Receipt of a major, internationally recognized award, such as the Nobel Prize; or (B) At least three of the following forms of documentation:

(1) Documentation of the alien’s receipt of nationally or internationally recognized prizes or awards for excellence in the field of endeavor; (2) Documentation of the alien’s membership in associations in the field for which classification is sought, which require outstanding achievements of their members, as judged by recognized national or international experts in their disciplines or fields;

Licensed under CC BY 3.0 via Wikimedia Commons; photo by Urcomunicacion

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(3) Published material in professional or major trade publications or major media about the alien, relating to the alien’s work in the field for which classification is sought, which shall include the title, date and author of such published material, and any necessary translation;

(4) Evidence of the alien’s participation on a panel, or individually, as a judge of the work of others in the same or in an allied field of specialization to that for which classification is sought; (5) Evidence of the alien’s original scientific, scholarly or business-related contributions of major significance in the field;

(6) Evidence of the alien’s authorship of scholarly articles in the field, in professional journals or other major media;

(7) Evidence that the alien has been employed in a critical or essential capacity for organizations and establishments that have a distinguished reputation; or

(8) Evidence that the alien has either commanded a high salary or will command a high salary or other remuneration for services, evidenced by contracts or other reliable evidence.11

The O-1B visa is an option for individuals with an extraordinary ability in the arts or extraordinary achievement in the motion picture or television industry. Extraordinary achievement with respect to motion picture and television productions, as commonly defined in the industry, means a very high level of accomplishment in the motion picture or television industry evidenced by a degree of skill and recognition significantly above that ordinarily encountered to the extent that the person is recognized as outstanding, notable or leading in the motion picture or television


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H-1B Cap Conundrum, continued

field.12 The evidentiary standard to demonstrate “extraordinary ability” for this visa is: (A) Evidence that the beneficiary has received, or has been nominated for, significant national or international awards or prizes in the particular field, such as an Academy, Emmy, Grammy or Director’s Guild award; or (B) Evidence of at least three of the following:

(1) Performed and will perform services as a lead or starring participant in productions or events that have a distinguished reputation as evidenced by critical reviews, advertisements, publicity releases, publications, contracts or endorsements;

Licensed under CC BY 3.0 via Wikimedia Commons; photo by SevenJazzCrusaders

(2) Achieved national or international recognition for achievements, as shown by critical reviews or other published materials by or about the beneficiary in major newspapers, trade journals, magazines or other publications;

(3) Performed and will perform in a lead, starring or critical role for organizations and establishments that have a distinguished reputation as evidenced by articles in newspapers, trade journals, publications or testimonials;

(4) A record of major commercial or critically acclaimed successes, as shown by such indicators as title, rating or standing in the field, box office receipts, motion picture or television ratings and other occupational achievements reported in trade journals, major newspapers or other publications; (5) Significant recognition for achievements from organizations, critics, government agencies or other recognized experts in the field in which the beneficiary is engaged, with the testimonials clearly indicating the author’s authority, expertise and knowledge of the beneficiary’s achievements; or (6) A high salary or other substantial remuneration for services in relation to others in the field, as shown by contracts or other reliable evidence.13

If an alien meets either of these stringent criteria for “extraordinary ability,” then the O-1A or O-1B visa may be a viable option. The classification is not subject to any cap, allows derivative status for the beneficiary’s spouse and children and is initially valid for a period not to exceed three years. The beneficiary’s dependents may not work in the United States under this classification, but they may engage in full- or part-time study on an O-3 visa.

Treaty Traders or Investors If the alien is a national of a qualifying country, the nonimmigrant E-visa category, which includes treaty traders and investors who come to the United States under a treaty of commerce and navigation, is a viable option. To qualify as a treaty trader, the alien must establish that he or she will be in the United States solely to carry on trade of a substantial nature, which is international in scope, either on the alien’s behalf or as an employee of a foreign person or organization engaged in trade principally between the United States and the treaty country of which the alien is a national.14 To qualify as a treaty investor, the alien must establish that he or she has invested or is actively in the process of investing a substantial amount of capital in a bona fide enterprise in the United States, as distinct from a relatively small amount of capital in a marginal enterprise solely for the purpose of earning a living, and is seeking entry into the United States solely to develop and direct the enterprise.15

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H-1B Cap Conundrum, continued

The E-visa category is not subject to a cap and allows for derivative status for the alien’s spouse and children. Spouses of E-visa holders are eligible for employment authorization. The period of validity for E visas is subject to country reciprocity. The schedule is published on the U.S. Department of State’s website. The maximum time authorized is usually five years. An E-2 visa holder, when entering the United States, will initially be given a twoyear period of stay. Requests for extensions of stay may be granted in increments of up to two years each. The visa may be extended indefinitely, as long as the trade or investment continues.

Free Trade Visas for Nationals of Australia, Canada, Mexico, Chile and Singapore The E-3 classification applies only to nationals of Australia coming to the United States solely to perform services in a specialty occupation. The specialty occupation requires theoretical and practical application of a body of knowledge in professional fields and at least the attainment of a bachelor’s degree, or its equivalent, as a minimum for entry into the occupation in the United States. There is an annual cap of 10,500 initial E-3 applications for each fiscal year. The beneficiary’s spouse and children are eligible for derivative status, and the spouse is eligible to apply for employment authorization to work in the United States. The initial period of stay authorized is two years with no maximum number of extensions. The non-immigrant NAFTA Professional (TN) visa allows citizens of Canada and Mexico, as NAFTA professionals, to work in the United States in listed professions for U.S. or foreign employers. With some exceptions, each profession requires a baccalaureate degree as an entry-level requirement. There is no annual cap, and the beneficiary’s spouse and children are eligible for derivative status. The beneficiary’s dependents are not allowed to work but may study in the United States. The initial period of stay authorized for Canadians is three years. Mexican nationals are issued visas for periods of one year with no maximum number of extensions. The H-1B1 visa, available only to nationals of Chile and Singapore, allows qualified professionals employed in specialty occupations to live and work temporarily in

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the United States. Unfortunately, this visa is subject to an annual cap. One thousand four hundred H-1B1 visas are available for Chileans while 5,400 are set aside for Singaporean nationals. H-1B1 visas are valid for only eighteen months, as opposed to three years for H-1B visas, and may be renewed indefinitely. The period of employment in the United States must be temporary, so the foreign national must demonstrate non-immigrant intent. The beneficiary’s spouse and children are eligible for derivative status. They may not work in the United States but may study. There is no doubt that our immigration system, particularly with regard to the H-1B cap, needs congressional reform. The H-1B cap was reached this year, and for the last three years, in less than a week, leaving thousands of qualified professionals in limbo until the next fiscal year. Fortunately, until such reform passes, there are alternatives available for U.S. employers and foreign professionals. Larry S. Rifkin is managing partner of Rifkin & Fox-Isicoff, P.A., with its principal office in Miami, Florida, and branch offices in Orlando, Florida, and Lima, Peru. He is a former chair of the International Law Section and currently co-chairs the section’s DHS, Labor and State Department L. RIFKIN Liaison Committee. Mr. Rifkin was an inaugural member of The Florida Bar Immigration and Nationality Law Certification Committee.

Endnotes

1 http://www.councilforglobalimmigration.org/ NWSRM_51Percent_H1B_Petitions_Rejected_for_FY2015 2 Id. 3 8 C.F.R. §214.2(f)(10)(ii)(C). 4 8 CFR §214.2(l)(1)(ii)(G)(2). 5 8 CFR §214.2(l)(1)(ii)(G)(3). 6 8 CFR §214.2(l)(1)(ii)(A). 7 8 CFR §214.2(l)(7)(i)(A)(2). 8 8 CFR §214.2(l)(7)(i)(A)(3). 9 8 CFR §214.2(o)(1)(ii)(A)(1). 10 8 CFR §214.2(o)(3)(ii). 11 8 CFR §214.2(o)(3)(iii)(B)(1-8). 12 8 CFR §214.2(o)(3)(ii). 13 8 CFR §214.2(o)(3)(v)(B)(1-6). 14 8 CFR §214.2(e)(1)(i). 15 Id. ILQ


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Trusted Trader Program, from page 17

set. This would include retroactive flagging for the following four reconcilable issues or flag types: 1. Value; 2. Classification (only if under protest or subject to a court case); 3. Heading 9802, Harmonized Tariff Schedule of the United States (HTSUS); and

or non-resident Canadian importer that meets the requirements set forth in 19 CFR Part 141; 2. Have written policies and procedures pertaining to its import process; 3. Have a business office staffed in the United States or Canada; 4. Have an active IOR number or a CBP-assigned number;

4. Post-importation claims made pursuant to free trade agreements.4

5. Possess a valid continuous importation bond filed with CBP;

For test participants that complete the Product Safety portion of the Trusted Trader application, if CPSC and CBP jointly approve, benefits from CPSC would include:

6. Have at least two years of importing history before the date that the application for the test program is submitted;

1. Access to a product-specific CPSC point of contact who can assist in providing National Electronic Injury Surveillance System (NEISS) product codes for entry lines; 2. Access to special training concerning product safety compliance, internal controls and CPSC audit trails; 3. Opportunity to apply for external participation coverage of multiple business units (multiple Importer of Record (IOR) numbers);

7. Conduct an assessment of its supply chain based on C-TPAT’s security criteria for importers; 8. Implement and maintain security measures and supply chain security practices that meet the security criteria established in the C-TPAT Importer Security Criteria document; 9. Have a designated company officer who will be the primary cargo security officer responsible for C-TPAT;

4. Reduction in product safety tests on goods imported; and

10. Create and provide CBP with a C-TPAT security profile, which identifies how the importer meets C-TPAT’s Importer Security Criteria; and

5. Priority front-of-the-line testing by CPSC laboratories.5

11. Maintain books and records to establish compliance with the laws and regulations administered or enforced

Selection Criteria for Voluntary Participants CBP will include fewer than ten companies in the Trusted Trader Program test. Specifically, CBP intends to include at least one or more importers currently participating in C-TPAT, one or more importers not currently participating in C-TPAT and one or two participants that have imports monitored by CPSC and FDA.6 In order to participate in the Trusted Trader Program test, companies must: 1. Be an active U.S. importer

www.cbp.gov; photo by Josh Denmark

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Trusted Trader Program, continued

by CBP, including but not limited to records sufficient to ascertain the correctness of any entry and to determine the duties, taxes and fees that may be due. In addition, companies requesting consideration for the Product Safety incentives (discussed above) must also complete the Product Safety portion of the Trusted Trader application.7

New Requirements Participants of the Trusted Trader Program test will also have to meet new requirements. Participants will be required to: 1. Make relevant importation records (i.e., those records and documents listed in the appendix to 19 CFR Part 163, commonly known as the (a)(1)(A) list) available to substantiate compliance with trade laws for CBP to review; 2. Perform annual risk assessments to identify risks that could impact compliance with CBP laws and regulations; 3. Develop and execute an annual self-testing plan based on risk, and implement corrective action in response to errors and internal control weaknesses disclosed by self-testing (this includes maintaining results of testing for five years and making the test information available to CBP upon request); 4. Develop, document and implement a system of internal controls designed to provide reasonable assurance of compliance with CBP laws and regulations (includes making appropriate adjustments to internal controls and maintaining an audit trail from financial records to CBP declarations); 5. Notify the Trade Compliance Branch, Office of Field Operations, of major changes to the company’s corporate structure through reorganization, merger, acquisition, etc. Such notification must be made prior to or upon the affected date of the change by way of formal correspondence in the C-TPAT portal system; 6. Notify the CBP SCSS of any suspicious activities, anomalies and/or security breaches that affect the test participant’s supply chain; 7. Notify its SCSS and National Account Manager (NAM) prior to or immediately of any major changes that may affect the partner’s security, including a change

46

in ownership of the company or sourcing from a new country; and 8. Submit an Annual Notification Letter (ANL) and an Annual Security Profile Review to CBP. Provide CBP with the name and contact information for the company’s compliance officer.8

Centers of Excellence and Expertise CBP plans to utilize the Centers of Excellence and Expertise (CEEs) to manage trusted trader accounts. Certain key industries such as pharmaceuticals, electronics, petroleum, metals and textiles are reviewed by CBP personnel with a high level of industry-specific expertise. CEEs represent CBP’s expanded focus on trade in the 21st century by aligning with modern business practices, focusing on industry-specific issues and by providing tailored support to unique trading environments. The CEEs were established to increase uniformity of practices across ports of entry, to facilitate the timely resolution of trade compliance issues nationwide and to strengthen critical agency knowledge on key industry practices. Jennifer Diaz is a shareholder in Becker and Poliakoff. She is a board certified international attorney who is considered an expert in international law by The Florida Bar. She joins an elite group of board certified international attorneys in Florida. She leads the firm’s Customs J. DIAZ and International Trade practice assisting clients with issues relating to the import and export of merchandise to and from the United States and is the editor of the Customs and International Trade Law Blog at www.customsandinternationaltradelaw.com.

Endnotes

1 Announcement of Trusted Trader Program Test,” 79 Federal Register 34334 (26 June 2014), pp. 34334-34340. 2 “Expansion of Importer Self-Assessment Program to Include Qualified Importers of Focused Assessment Audits,” 77 Federal Register 61012 (15 October 2012), pp. 61012-61014. 3 “Announcement of Trusted Trader Program Test,” 79 Federal Register 34334 (26 June 2014), pp. 34334-34340. 4 Id. 5 Id. 6 Id. 7 Id. 8 Id. ILQ


international law quarterly

winter 2015 • volume XXXII, no. 3

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2015 Florida Bar Annual Convention

International Law Section Schedule Thursday , J une 25 12:00 noon - 1:30 p.m. International Law Section and Business Law Section Joint Luncheon - Royal Palm Ballroom V/VI 6:30 p.m. - 7:30 p.m.

International Law Section and Business Law Section Joint Reception - Grand Palm Ballroom G

Friday, June 26 9:00 a.m. - 10:00 a.m.

International Law Section 2015-2016 Committee Meetings Grand Ballroom D

10:00 a.m. - 1:00 p.m. International Law Section Executive Council Meeting & Luncheon Grand Ballroom A 2:00 p.m. - 6:30 p.m.

NAFTA Symposium Seminar - Administration, Litigation & Arbitration Track presented by the International Law Section Grand Ballroom I

2:00 p.m. - 6:30 p.m.

NAFTA Symposium Seminar - Investment & Business Track presented by the International Law Section - Grand Ballroom J

Registration/RSVP You should register for the Joint ILS/BLS luncheon (on Thursday) and the NAFTA seminars (on Friday) by using the annual convention registration form on The Florida Bar’s website. If viewing digitally, click here: Registration Form. You should RSVP for the section meetings using the form below. Name: ____________________________________________ Attorney Number: _____________ RSVP by checking the box(es) below.  ILS 2015-2016 Committee Meetings  ILS Executive Council Meeting & Luncheon

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international law quarterly

winter 2015 • volume XXXII, no. 3

The Florida Bar

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ILQ winter 2015  

International Law Quarterly, Winter 2015, volume XXXII, no. 3

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