Two recent litigations, one in the Court of International Trade, address the legitimacy of importing genuine goods without the permission of the US trademark owner, commonly referred to as gray market goods. Both involve imported batteries.

Trademark owners have two forms of relief from gray market goods.

The first form of relief authorizes CBP to exclude merchandise bearing a registered U.S. trademark when it is imported without consent of the U.S. trademark owner, provided that (i) the trademark owner has recorded its trademark with CBP, and (ii) the owner of the trademark is a U.S. company and the foreign goods were not manufactured abroad by a party under common ownership or control with it. In this case, goods may be excluded without making a claim or being required to show physical and/or material differences between the goods that the U.S. trademark owner has authorized to be sold in the U.S. and their gray market counterparts.

The second form of relief, referred to as the "Lever Rule", excludes from entry any merchandise bearing a registered U.S. trademark when such merchandise is imported without the consent of the U.S. trademark owner, provided that: (i) the trademark owner has recorded its trademark with CBP, and (ii) the trademark owner demonstrates that the imported goods are physically and materially different than the authorized goods sold in the U.S.

The first of the two cases was brought in the Federal District Court in Chicago. That litigation asserts that the importation of batteries that, according to the plaintiff trademark owner, are different from the batteries it sells in the United States. The imported batteries are different from those sold in the US largely in terms of their packaging, warrantees and similar consumer-related elements rather than the physical nature of the batteries.

The CIT litigation challenges CBP's decision to grant Lever treatment to the batteries. Generally, the plaintiff in the CIT litigation argues that CBP should not have granted Lever treatment to the batteries without an opportunity for public comment. Further, the complaint alleges that the trademark owner sells batteries in the United States that do not exhibit the warranties, safety information and consumer warnings that it claims distinguish batteries untended for domestic consumption from the imported batteries.
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In International Fidelity Insurance Co. v. United States, Slip Op. 17-64, (May 30, 2017), the United States Court of International Trade held that Customs and Border Protection ("CBP") acted reasonably when it extended liquidation twice while determining whether imported from Mexico qualified for duty-free treatment under NAFTA. Plaintiff argued that the decision to extend liquidation was an abuse of discretion. The CIT disagreed.
CBP has pretty much unfettered discretional authority to extend liquidation. The CIT recognized the existence of a "narrow limitation" of that authority. The court will not invoke the limitation unless the extensions are necessary because of substantial gaps in or near inactivity on the government's part. Here, the court characterized the government's activity as "continual, if not consistent", enough to avoid the limitation.

A new Oregon law prohibits the sale in that state of products made with any "covered animal species". The law has some exceptions, none of which apply to commercial footwear. The law, which is the result of a ballot initiative, goes into effect July 1, 2017.
The measure defines "covered animal species" as any species of elephant, rhinoceros, whale, tiger, lion, leopard, cheetah, jaguar, pangolin, sea turtle, ray and, with the exception of spiny dogfish, shark.
As you may be aware, a limited number of Harmonized Tariff Schedule ("HTS") subheadings do not have corresponding free trade agreement  ("FTA") tariff change rules. This is because the tariff change rules were negotiated while an earlier version of the HTS was in place.

A schedule of the up-to-date/out-of-date status of the rules for each FTA can be found here.
Until the rules are updated, the certificate of origin should indicate both the current HTS subheading and the previously corresponding subheading.
The following is a brief summary of recent classification rulings.

The initial ruling, NY N284223 (April 11, 2017)
, deals with women's, open toe/open heel, below-the-ankle, platform wedge sandals with outer soles of rubber/plastics. The leather uppers are attached in four places on either side of the platform/wedge bottoms by riveted, magnetized, metal pegs. The wedge bottoms consist of plastic that is wrapped with a thin layer of cork, stacked leather, or wood. Each has a wrapped, cushioned insole and holes with metal inserts that correspond to the pegs of the uppers. All of the uppers are removable and interchangeable with the wedge bottoms. The uppers will be imported with corresponding bottoms. Some leather uppers will be imported separately. All of the uppers are valued over $2.50 per pair.

When imported together, the combination of uppers and corresponding bottoms will be classified as complete footwear in subheading 6403. 99. 90 (10%). Although not stated, this classification applies only when there is an equal number of uppers and corresponding bottoms in a shipment.

When imported separately, the uppers are classified in subheading 6406.10.10 (Free).

NY N284486 (April 13, 2017) classified a woman's "flip-flop" in subheading 6405.20.30 (7.5%). The shoe has a Y-shaped upper consisting of a 55/45 cotton/polyester fabric. The outer sole is textile with widely spaced rubber/plastic traction dots. Based upon the classification determined by CBP, it is apparent that textile was the majority material in the contact with the ground.
The International Trade Commission ("ITC") has announced that it intends to re-open its on-line MTB portal to allow members of the public to submit additional, limited public comments on certain petitions for duty suspensions and tariff reductions. The re-opening will commence June 12, 2017 at 8:45 a.m. for a period of ten days, and will close June 21, 2017 at 5:15 p.m. 82 Federal Register 24142 (May 25, 2017).

The re-opening is for the limited purpose of allowing additional comments on Category VI petitions (i.e., petitions that the ITC does not recommend for inclusion in a MTB). The ITC's recommendation will appear in the preliminary report to Congress expected to be issued June 9, 2017. The comments permitted are limited to those that address the decision to place a petition in Category VI.

The Customs Report is a newsletter of customs legal, administrative and other developments affecting importers of footwear prepared by McGuireWoods, LLP, 1345 Avenue of the Americas, New York, New York 10105, (212) 548-7020, as a service for FDRA members and other interested parties. Matters reported on or summarized herein may not be construed as legal advice on specific situations.

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