Adams Lee, Author at Harris Sliwoski LLP Tough Markets, Bold Lawyers Mon, 25 Mar 2024 14:14:57 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.3 https://harris-sliwoski.com/wp-content/uploads/cropped-Harris-Sliwoski-Logo-FinalIcon-White-1-32x32.png Adams Lee, Author at Harris Sliwoski LLP 32 32 New AD/CVD Petitions: 2,4-Dichlorophoxyacetic Acid (2,4-D) from China and India (AD/CVD) https://harris-sliwoski.com/chinalawblog/new-ad-cvd-petitions-24-dichlorophoxyacetic-acid-24-d-from-china-and-india-ad-cvd/ Wed, 20 Mar 2024 10:58:48 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=135343 New AD/CVD Petition: 2,4-Dichlorophenoxyacetic Acid (2,4-D) On March 14, 2024, antidumping (AD) and countervailing duty (CVD) petitions were filed against imports of 2,4-Dichlorophenoxyacetic Acid (2,4-D) from the People’s Republic of China and the Republic of India.  The petitions were filed by Corteva Agriscience LLC.  2,4-D is the active ingredient used in a wide variety of

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New AD/CVD Petition: 2,4-Dichlorophenoxyacetic Acid (2,4-D)

On March 14, 2024, antidumping (AD) and countervailing duty (CVD) petitions were filed against imports of 2,4-Dichlorophenoxyacetic Acid (2,4-D) from the People’s Republic of China and the Republic of India.  The petitions were filed by Corteva Agriscience LLC.  2,4-D is the active ingredient used in a wide variety of herbicides.

These AD/CVD investigations will be conducted by two federal agencies.  The International Trade Commission (“ITC”) will investigate whether the subject imports are a cause of injury.  The U.S. Department of Commerce (“DOC”) will investigate whether the subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies.  Both agencies have to make affirmative findings of injury or threat of injury (ITC) or of dumping or subsidies (DOC) in order for AD/CVD duties to be imposed on the subject imports.

Scope

The petition proposed the scope definition for this case as follows:

The merchandise covered by this investigation is 2,4- dichlorophenoxyacetic acid (“2,4-D”). 2,4-D has the Chemical Abstracts Service (“CAS”) registry number of 94-75-7 and the chemical formulaC8H6Cl2O3. The 2,4- D component of any derivative products of 2,4-D, including but not limited to, amine salt and ester forms of 2,4-D are covered by the scope of the order.

Salt and ester forms of 2,4-D include, but are not limited to, 2,4-D salt (CAS 2702-72-9), 2,4-D diethanolamine salt (CAS 5742-19-8), 2,4-D dimethyl amine salt (CAS 2008-39-1), 2,4-D-isopropylamine salt (CAS 5742-17-6), 2,4-D tri- isopropanolamine salt (CAS 32341-80-3), 2,4-D BEE (CAS 1929-73-3), 2,4-D 2- ethylhexylester (CAS 1928-43-4), and 2,4-D -isopropylester (CAS 94-11-1). All 2,4-D, as well as the 2,4-D component of its salt and ester forms, is covered by the scope irrespective of purity, particle size, or physical form.

The conversion of a 2,4-D salt or ester from a subject 2,4-D acid, or the formulation of nonsubject merchandise with the subject 2,4-D, its salts, and its esters in the country of manufacture or in a third country does not remove the subject 2,4-D, its salts, or its esters from the scope. For any such formulations, only the 2,4-D, 2,4-D salt, and 2,4-D ester components of the mixture is covered by the scope of the order.

2,4-D, its salts, and its esters are classified under Harmonized Tariff Schedule of the United States (HTSUS) subheading 2918.99.2010. Other merchandise subject to the current scope, including the abovementioned formulations that may be classified under 3808.93.0500 and 3808.93.1500. The HTSUS subheadings and CAS registry number are provided for convenience and customs purposes. Thewritten description of the scope of the petition is dispositive.

Alleged AD/CVD Margins

Petitioner calculated estimated dumping margins for the subject countries:

China –  143.73-388.53%

India – 62.55%

Petitioner did not provide any specific China or India subsidy margin calculations.

Named Exporters/ Producers

Petitioner included a list of companies that it believes are producers and exporters of the subject merchandise.  See attached list here

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise.  See attached list here.

Estimated Schedule of Investigations

March 14, 2024 – Petitions filed

April 3, 2024 – DOC initiates investigation

April 4, 2024 – ITC Staff Conference

April 29, 2024 – ITC preliminary determination

August 11, 2024 – DOC CVD preliminary determination (assuming extended deadline) (6/7/24 – unextended)

October 10, 2024 – DOC AD preliminary determination (assuming extended deadline)

(8/21/24 – unextended)

February 22, 2025 – DOC final determination (extended)

April 8, 2025 – ITC final determination (extended)

April 15, 2025 – DOC AD/CVD orders issued (extended)

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New AD/CVD Petitions: Melamine from Germany, India, Japan, the Netherlands, Qatar, and Trinidad and Tobago (AD/CVD) https://harris-sliwoski.com/chinalawblog/new-ad-cvd-petitions-melamine-from-germany-india-japan-the-netherlands-qatar-and-trinidad-and-tobago-ad-cvd/ Sun, 18 Feb 2024 17:39:20 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=134855 On February 14, 2024, antidumping (AD) and countervailing duty (CVD) petitions were filed against imports of Melamine from Germany, India, Japan, the Netherlands, Qatar, and Trinidad and Tobago.  The petitions were filed on behalf of Cornerstone Chemical Company. Melamine is used to produce surface coatings and laminates that are used in products like kitchen and

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On February 14, 2024, antidumping (AD) and countervailing duty (CVD) petitions were filed against imports of Melamine from Germany, India, Japan, the Netherlands, Qatar, and Trinidad and Tobago.  The petitions were filed on behalf of Cornerstone Chemical Company.

Melamine is used to produce surface coatings and laminates that are used in products like kitchen and bathroom countertops, tabletops, doors, cabinets, appliances, and furniture.

This is a dying dinosaur case, as Cornerstone is the last remaining domestic producer of melamine.  Cornerstone believes that it is besieged by unfair imports and AD/CVD orders are essential for its very survival.  But importers and purchasers of melamine probably may question why Cornerstone should be entitled to demand that the US market pay higher than market prices just because they are the last remaining US producer.

In 2015, Cornerstone successfully got an AD/CVD order imposed on imports of Melamine from China. Chinese melamine is also subject to Section 301 tariffs.  Having blocked Chinese melamine imports in 2015, Cornerstone is once again asking the government to impose AD/CVD duties now on all the replacement imports from the named countries.

In addition to the ITC investigating whether imports are a cause of injury, the U.S. Department of Commerce (“DOC”) will investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies.  Both agencies must make affirmative findings of injury or threat of injury (ITC) or of dumping or subsidies (DOC) in order for AD/CVD duties to be imposed on the subject imports.

Scope – AD/CVD orders on Melamine

The proposed scope definition of this case is the same as the existing AD/CVD orders on Melamine from China:

The merchandise subject to these investigations is melamine (Chemical Abstracts Service (CAS) registry number 108–78–01, molecular formula C3 H6 N6 ). Melamine is a crystalline powder or granule typically (but not exclusively) used to manufacture melamine formaldehyde resins. All melamine is covered by the scope of these investigations irrespective of purity, particle size, or physical form. Melamine that has been blended with other products is included within this scope when such blends include constituent parts that have been intermingled, but that have not been chemically reacted with each other to produce a different product. For such blends, only the melamine component of the mixture is covered by the scope of these orders. Melamine that is otherwise subject to these orders is not excluded when commingled with melamine from sources not subject to these investigations. Only the subject component of such commingled products is covered by the scope of these orders.

The subject merchandise is provided for in subheading 2933.61.0000 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheading and CAS registry number are provided for convenience and customs purposes, the written description of the scope is dispositive.

 

Alleged AD/CVD Margins

Petitioner calculated estimated dumping margins for the subject countries:

Japan – 103.66% to 123.81%

Germany– 5.47% to 139.66%

India – 378.01% to 619.24%

Netherlands – 33.4% to 75.18%

Qatar – 191.63% to 622.05%

Trinidad and Tobago – 230.30% to 457.76%

Petitioner did not provide any specific subsidy margin calculations.

Named Exporters/ Producers

Petitioner included a list of companies that it believes are producers and exporters of the subject merchandise.  See attached list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise.  See attached list here.

Estimated Schedule of Investigations.

February 14, 2024 – Petitions filed

March 5, 2024 – DOC initiates investigation

March 6, 2024 – ITC Staff Conference

March 30, 2024 – ITC preliminary determination

July 13, 2024 – DOC CVD preliminary determination (assuming extended deadline) (5/9/24 – unextended)

September 11, 2024 – DOC AD preliminary determination (assuming extended deadline) (7/23/24 – unextended)

January 24, 2025 – DOC final determination (extended)

March 10, 2025 – ITC final determination (extended)

March 17, 2025 – DOC AD/CVD orders issued (extended)

 

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New AD/CVD Petitions: Glass Wine Bottles from China, Mexico, Chile https://harris-sliwoski.com/chinalawblog/new-ad-cvd-petitions-glass-wine-bottles-from-china-mexico-chile/ Thu, 04 Jan 2024 11:58:47 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=134249 On December 29, 2023, antidumping (AD) and countervailing duty (CVD) petitions were filed against Glass Wine Bottles from China, Mexico, and Chile. The petitions were filed by the U.S. Glass Producers Coalition, which is comprised of Ardagh Glass Inc., and the union representing workers at the glass factories of Ardagh and two other U.S. producers

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On December 29, 2023, antidumping (AD) and countervailing duty (CVD) petitions were filed against Glass Wine Bottles from China, Mexico, and Chile. The petitions were filed by the U.S. Glass Producers Coalition, which is comprised of Ardagh Glass Inc., and the union representing workers at the glass factories of Ardagh and two other U.S. producers – Gallo Glass Company and O-I Glass, Inc.

Like many AD/CVD petitions, this new case is a sequel to a prior AD/CVD investigation. But unlike most AD/CVD sequels, the prior case in 2020 on Glass Containers from China did not result in AD/CVD duties being imposed. In that case, the U.S. International Trade Commission (“ITC”) made a negative injury determination and found that Chinese imports of glass containers were not a cause of material injury. Although the ITC found that the Chinese import volumes were significant, the ITC did not find any adverse price effects, and that the Chinese imports were not responsible for the domestic producers’ declining performance.

Having lost that case in 2020, the U.S. Glass Producers Coalition are now again asking the government to help protect them from import competition. But now they are targeting just wine bottles, instead of all glass containers in the prior investigation. By defining the scope of this investigation more narrowly than the prior investigation, the domestic producers hope that the data collected by the ITC will be different in this case and show that the domestic industry is suffering material injury (or threat of material injury) caused by the subject imports.

Mexico is the largest source of imported wine bottles. Wine bottles from China are already subject to Section 301 tariffs (25%) that have been imposed since 2018.

In addition to the ITC investigating whether imports are a cause of injury, the U.S. Department of Commerce (“DOC”) will investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies. Both agencies have to make affirmative findings of injury or threat of injury (ITC) or of dumping or subsidies (DOC) in order for AD/CVD duties to be imposed on the subject imports.

Scope

The proposed scope definition of this case is as follows:

The merchandise covered by the investigations is certain narrow neck glass bottles, with a nominal capacity of 750 milliliters (25.36 ounces), consistent with the authorized standards of fill in 27 C.F.R. §4.72; a nominal total height between 24.8 centimeters (9.75 inches) to 35.6 centimeters (14 inches); anominal base diameter between 4.6 centimeters (1.8 inches) to 11.4 centimeters (4.5 inches); and amouth with an outer diameter of between 25 millimeters (.98 inches) to 37.9 millimeters (1.5 inches); frequently referred to as a “wine bottle.” In scope merchandise may include but is not limited to the following shapes: Bordeaux (also known as “Claret”), Burgundy, Champagne, or Sparkling. In scope glass bottles generally have an approximately round base and have shapes including but not limited to, straight-sided, a tapered slope from shoulder (i.e., the sloping part of the bottle between the neck and thebody) to base, or a long neck with sloping shoulders to a wider base. The scope includes glass bottles, whether clear or colored, with or without a punt (i.e., an indentation on the underside of the bottle), and with or without design or functional enhancements (including, but not limited to, embossing, labeling, or etching). In scope merchandise may be imported with or without a closure, including a cork, stelvin (screw cap), crown cap, or wire cage and cork closure.

Excluded from the scope of the investigations are: (1) Glass containers made of borosilicate glass, meeting United States Pharmacopeia requirements for Type 1 pharmaceutical containers; (2) Glass containers produced by the “free blown” method or otherwise without the use of a mold (i.e., without “mold seams,” “joint marks,” or “parting lines”); and (3) Glass containers without a “finish” (i.e., the section of a container at the opening including the lip and ring or collar, threaded or otherwisecompatible with a type of closure, including but not limited to a cork, stelvin (screw cap), crown cap, or wire cage and cork closure).

Glass bottles subject to the investigations are specified within the Harmonized Tariff Schedule of theUnited States (HTSUS) under subheading 7010.90.5019. The HTSUS subheadings are provided forconvenience and customs purposes only. The written description of the scope of the investigations is dispositive.

Alleged AD/CVD Margins.

Petitioner calculated estimated dumping margins for the subject countries as follows:

China – 280.10% to 620.03%

Mexico – 78.55% to 102.09%

Chile – 615.68%

Petitioner did not provide any specific China subsidy margin calculations.

 

Named Exporters/ Producers

Petitioner included a list of companies it believes are producers and exporters of the subject merchandise.  See attached list here.

Named U.S. Importers

Petitioner included a list of companies it believes are U.S. importers of the subject merchandise.  See attached list here.

 

Estimated Schedule of Investigations*

December 29, 2023 – Petitions filed

January 18, 2024 – DOC initiates investigation

January 19, 2024 – ITC Staff Conference

February 12, 2024 – ITC preliminary determination

May 27, 2024 – DOC CVD preliminary determination (assuming extended deadline) (3/23/24 – unextended)

July 26, 2024 – DOC AD preliminary determination (assuming extended deadline)

(6/6/24 – unextended)

December 8, 2024 – DOC final determination (extended)

January 22, 2025 – ITC final determination (extended)

January 29, 2025 – DOC AD/CVD orders issued (extended)

* Dates are approximate. If a deadline falls on a weekend or holiday, the event will usually occur the next business day.

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New AD/CVD Petitions: Aluminum Extrusions from 15 Countries https://harris-sliwoski.com/chinalawblog/new-ad-cvd-petitions-aluminum-extrusions-from-15-countries/ Sun, 08 Oct 2023 13:55:39 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=133112 New AD/CVD Petitions: Aluminum Extrusions On October 4, 2023, antidumping (AD) and countervailing duty (CVD) petitions were filed against Aluminum Extrusions from fifteen countries, Colombia, the Dominican Republic, Ecuador, India, Indonesia, Italy, Malaysia, Mexico, the People’s Republic of China, South Korea, Taiwan, Thailand, Turkey, the United Arab Emirates, and Vietnam.  The petitions were filed by

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New AD/CVD Petitions: Aluminum Extrusions

On October 4, 2023, antidumping (AD) and countervailing duty (CVD) petitions were filed against Aluminum Extrusions from fifteen countries, Colombia, the Dominican Republic, Ecuador, India, Indonesia, Italy, Malaysia, Mexico, the People’s Republic of China, South Korea, Taiwan, Thailand, Turkey, the United Arab Emirates, and Vietnam.  The petitions were filed by the U.S. Aluminum Extruders Coalition, which is comprised of fourteen U.S. aluminum extruders, and the union representing workers at U.S. aluminum extruders.

Case Background

This case looks to be one of the biggest cases in recent years, as the imports of aluminum extrusion from the 15 listed countries in 2022 was $3.19 billion. These petitions start a sequel round of AD/CVD cases that follows the AD/CVD orders that were imposed on Aluminum Extrusions from China in 2011. The proposed scope definition of this case is broader than the scope of the prior AD/CVD orders on Aluminum Extrusions from China, and specifically includes products that had been excluded from the prior scope definition.

Aluminum Extrusion Investigations

The U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) will investigate the allegations made in the petition to determine whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies. ITC will investigate whether the subject imports are causing “material injury” or “threat of material injury” to the domestic industry. Both agencies have to make affirmative findings of injury or threat of injury (ITC) or of dumping or subsidies (DOC) for AD/CVD duties to be imposed on the subject imports.

Scope Definition of the Aluminum Extrusion 

As with the prior case on Aluminum Extrusions from China (on which I worked) the scope definition of this case will likely cause significant debate about what products are included or excluded from the coverage of this case.

The proposed scope definition of this case:

The merchandise subject to this investigation is aluminum extrusions, regardless of form, finishing or fabrication, whether assembled with other parts or unassembled, whether coated, painted, anodized or thermally improved. Aluminum extrusions are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by the Aluminum Association commencing with the numbers 1, 3 and 6 (or proprietary equivalents or other certifying body equivalents). Specifically, subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 1 contain not less than 99% aluminum by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 3 contain manganese as the major alloying element, with manganese accounting for not more than 3% of total materials by weight. Subject aluminum extrusions made from an aluminum alloy with an Aluminum Association series designation commencing with the number 6 contain magnesium and silicon as the major alloying elements, with magnesium accounting for at least 0.1% but not more than 2% of total materials by weight, and silicon accounting for at least 0.1% but not more than 3% of total materials by weight. The scope also includes merchandise made from an aluminum alloy with an Aluminum Association series designation commencing with the number 5 (or proprietary equivalents or other certifying body equivalents) that have a magnesium content accounting for up to but not more than 2% of total materials by weight.

The country of origin of the aluminum extrusion is determined by where the metal is extruded (i.e., pressed through a die).

The scope also includes a non-exhaustive list of further processed products that includes aluminum extrusions that were intended by Petitioners to be covered by this investigation. These products include vehicle roof rails, sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents  or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electrical vehicle battery trays, heat sinks, signage or advertising poles, picture frames, telescoping poles, or cleaning system components.

Excluded Aluminum Products

There are a number of exclusions from the scope of the investigation:

  • Assembled merchandise containing non-extruded aluminum components beyond fasteners that is not part or subassembly of a larger product or system and that is used as imported without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material, regardless of whether the additional parts or materials are interchangeable (e.g., windows with glass, door units with door panel and glass, motor vehicles, trailers, furniture, appliances, solar panels).
  • Aluminum extrusions made from an aluminum alloy with an Aluminum Association series designations commencing with the number 2, 5 or 7 (or other certifying body equivalents)
  • Aluminum alloy sheet or plates produced by means other than the extrusion process, such as continuous casting or rolling.
  • Unwrought aluminum
  • Collapsible tubular containers composed of alloy code 1080A and meet certain dimension limits
  • Rectangular wire, imported in bulk rolls or precut strips and produced from continuously cast rolled aluminum wire rod, which is subsequently extruded to dimension to form rectangular wire with or without rounded edges.

See the full proposed scope definition (here).

The scope definition of the prior AD/CVD orders on Aluminum Extrusions from China was vague and confusing and generated the most scope ruling requests of any case before DOC. Many of the products DOC determined were outside the scope of the prior AD/CVD orders have been specifically included within the scope of this petition.

Alleged AD/CVD Margins, By Country

Petitioner calculated estimated dumping margins for the subject countries:

China – 256.58%

Colombia – 179.53%

Ecuador – 66.46%

India – 43.41%

Indonesia – 112.21%

Italy – 37.52%

Malaysia – 53.91%

Mexico – 111.38%

S. Korea – 71.03%

Taiwan – 116.19%

Thailand – 72.20%

Turkey – 33.79%

UAE – 39.80%

Vietnam – 53.75%

Petitioner did not provide any specific subsidy margin calculations.

Named Parties

Named Exporters/ Producers

Petitioner included a list of companies it believes are producers and exporters of the subject merchandise. See attached list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise. See attached list here.

Investigation Timeline

October 4, 2023 – Petitions filed

October 24, 2023 – DOC initiates investigation

October 25, 2023 – ITC Staff Conference

November 20, 2023 – ITC preliminary determination

March 2, 2024 – DOC CVD preliminary determination (assuming extended deadline) (12/28/23 – unextended)

May 1, 2024 – DOC AD preliminary determination (assuming extended deadline) (3/12/24 – unextended)

September 13, 2024 – DOC final determination (extended)

October 28, 2024 – ITC final determination (extended)

November 4, 2024 – DOC AD/CVD orders issued (extended)

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New AD/CVD Petitions: Pea Protein from China https://harris-sliwoski.com/chinalawblog/new-ad-cvd-petitions-pea-protein-from-china/ Fri, 14 Jul 2023 14:14:11 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=131871 On July 12, 2023, PURIS Proteins filed antidumping (AD) and countervailing duty (CVD) petitions against Pea Protein from China. Pea Protein is usually sold in powder form and is a food ingredient for foods sold to individuals who are allergic to glutens (e.g., snack bars, plant-based meat products, other gluten-free foods). The U.S. Department of

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On July 12, 2023, PURIS Proteins filed antidumping (AD) and countervailing duty (CVD) petitions against Pea Protein from China. Pea Protein is usually sold in powder form and is a food ingredient for foods sold to individuals who are allergic to glutens (e.g., snack bars, plant-based meat products, other gluten-free foods).

The U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) will conduct investigations to further examine the allegations made in the petition. DOC will investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies. ITC will investigate whether the subject imports are causing “material injury” or “threat of material injury” to the domestic industry. Both agencies must make affirmative findings of injury or threat of injury (ITC) or of dumping or subsidies (DOC) for AD/CVD duties to be imposed on the subject imports.

Scope

The proposed scope definition of this case covers high protein content (“HPC”) pea protein, which is a protein derived from peas (including, but not limited to, yellow field peas and green field peas) containing more than 65 percent protein on a dry weight basis. HPC pea protein may also be identified as pea protein concentrate, pea protein isolate, hydrolyzed pea protein, pea peptides, and fermented pea protein. Pea protein, including HPC pea protein, has the Chemical Abstracts Service (“CAS”) registry number 222400-29-5.

The scope covers HPC pea protein in all physical forms, including all liquid (e.g.,solution) and solid (e.g., powder) forms, regardless of packaging.

The scope includes HPC pea protein described above that is blended, combined, or mixed with non-subject pea protein or with other products, including with protein powders, dry beverage blends, and protein fortified beverages. For any such blended, combined, or mixed products, only the HPC pea protein component is covered by the scope of these investigations. HPC pea protein that has been blended, combined, or mixed with other products is included within the scope, regardless of whether the blending, combining, or mixing occurs in third countries.

HPC pea protein otherwise within the scope is covered when blended, combined, or mixed with HPC pea protein from sources not subject to this investigation, though only the subject component of the commingled product is covered by the scope.

A blend, combination, or mixture is excluded from the scope of these investigations if its total HPC pea protein content (regardless of the source or sources) constitutes less than 5 percent of the blend, combination, or mixture on a dry weight basis.

The merchandise covered by the scope is classified under categories 3504.00.1000, 3504.00.5000, and 2106.10.0000 of the Harmonized Tariff Schedule of the United States (“HTSUS”). This merchandise may also enter the U.S. market under HTSUS category 2308.00.9890.

See the full proposed scope definition here.

Alleged AD/CVD Margins

Petitioner calculated estimated dumping margins for China at 23.86% to 291.74%.

Petitioner did not provide specific Chinese subsidy margin calculations.

Named China Exporters/ Producers

Petitioner included a list of companies it believes to be the producers and exporters of the subject merchandise. See the attached list of these producers and exporters here. Many of these Chinese exporters/producers are based in Shandong Province.

Named Importers

Petitioner included a list of companies it believes to be the U.S. importers of the subject merchandise. See the attached list of these U.S. and Canadian importers here.

Estimated Schedule of Investigations

July 12, 2023 – Petitions filed

August 1, 2023 – DOC initiates investigation

August 2, 2023 – ITC Staff Conference

August 26, 2023 – ITC preliminary determination

December 9, 2023 – DOC CVD preliminary determination, assuming an extended deadline. It will be 100/5/23 if the deadline is not extended.

February 7, 2024 – DOC AD preliminary determination (assuming extended deadline) It will be 12/19/23 if the deadline is not extended.

June 21, 2024 – DOC final determination (extended)

August 5, 2024 – ITC final determination (extended)

August 12, 2024 – DOC AD/CVD orders issued (extended)

Companies impacted by these investigations/proceedings will be bound by strict statutory deadlines and thus should begin preparing their defenses as quickly as possible. If your company is involved with this merchandise, please feel free to contact Harris Sliwoski to receive additional information as it becomes available.

Businesses subject to these investigations/proceedings will need to navigate stringent statutory deadlines, necessitating immediate commencement of defense preparation. If your company is involved with merchandise within the scope of these investigations, please feel free to reach out to our international trade team for relevant updates and assistance. We can help you in gaining an informed understanding of the pea protein situation and in formulating a proactive strategy for responding to it.

 

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Can I Import Marijuana Seeds to the U.S.? https://harris-sliwoski.com/cannalawblog/can-i-import-marijuana-seeds-to-the-u-s/ Tue, 13 Jun 2023 14:00:33 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=131339 We’ve recently received a number of inquiries about whether it is legal to import marijuana seeds into the United States. These are seeds derived from marijuana plants that have a THC content less than 0.3%, but when planted will germinate into marijuana plants that have a THC content more than 0.3%.  The seeds themselves have

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We’ve recently received a number of inquiries about whether it is legal to import marijuana seeds into the United States. These are seeds derived from marijuana plants that have a THC content less than 0.3%, but when planted will germinate into marijuana plants that have a THC content more than 0.3%.  The seeds themselves have little to no THC, regardless of whether they were extracted from or may germinate into a plant that has more than 0.3% THC.

U.S. trade law and the “reasonable care” standard

U.S. trade laws place a legal burden on the importer of record to exercise “reasonable care” to make sure that imported products are accurately declared to U.S. Customs and Border Protection (“CBP”). CBP is the federal agency responsible for ensuring that imported goods are allowed to enter only if they are in compliance with all applicable U.S. laws and regulations. CBP coordinates with a wide range of partner government agencies (e.g., FDA, EPA, DOT, ATF, CPSC, etc.) that have expertise in the laws and regulations applicable to particular products. CBP coordinates with the U.S. Drug Enforcement Administration (DEA) to implement and enforce the relevant provisions of the Controlled Substances Import and Export Act which makes it a crime to bring controlled substances into the country without a proper license.

Are marijuana seeds a “controlled substance”?

So are marijuana seeds a controlled substance? They probably shouldn’t be.

According to the Controlled Substances Act (CSA) the term “marihuana” means “all parts of the plant Cannabis sativa L.,” and specifically includes “the seeds thereof.” 21 U.S.C. § 802(16)(A). But “marihuana” does not include “hemp” which is defined as cannabis plants, “including the seeds thereof,” with a THC concentration of not more than 0.3% on a dry weight basis.  7 U.S.C. § 1639o.

On January 6, 2022, DEA issued a letter that responded to a specific query on the treatment of cannabis seeds. According to this DEA Letter, “marihuana seed that has a delta-9-tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis meets the definition of ‘hemp’ and thus is not controlled under the CSA” (emphasis added). Based on this DEA Letter’s specific reference to “marihuana seed” it appears that DEA will not consider any seeds from marijuana or hemp to be “marihuana” as long as the THC concentration of those seeds is 0.3% or less—regardless of their plant source. Thus, this DEA Letter indicates that the cannabis seeds would not be “controlled substances” and would be lawful under U.S. federal law.

However, the DEA Letter is just one official response to one specific inquiry, and may not necessarily be generally applicable to everyone.  Although it reflects one official’s interpretation of the federal laws relevant to cannabis seeds, this DEA Letter lacks the legal authority of a law or regulation that has gone through a formal rule-making process of being subject to notice and comment. But this DEA Letter may be enough federal guidance to support an importer’s best efforts to exercise reasonable care to determine if importing cannabis seeds is permissible under federal law.

The intersection of “reasonable care” and marijuana seeds import

Under U.S. trade laws, an importer is allowed to self-determine how a product should be determined as long as they exercise “reasonable care” when doing so. “Reasonable care” is not precisely defined. But it generally means when an importer conducts due diligence in considering all of the relevant facts related to the product in question, the circumstances of the importation, and the relevant laws, regulations and rulings.

An indicator of an importer exercising reasonable care is when they seek assistance from a qualified expert who can assist this evaluation. The gold standard for exercising reasonable care is when importers submit to CBP a formal ruling request for the product in question. Typically CBP ruling requests usually involve determining the appropriate tariff classification, valuation, or country of origin. CBP has issued plenty of rulings on whether products such as tobacco leaf wraps, water pipes, or grinders are drug paraphernalia. CBP has also issued tariff classification rulings on CBD oil and distillates and hemp biomass. But so far, CBP has not yet issued any rulings on whether cannabis seeds are admissible or should be considered a controlled substance. Given the interest in folks wanting to import cannabis seeds into the United States, it seems likely that CBP already has received requests to rule on the admissibility of cannabis seeds. But CBP may not yet be able or willing to make such a ruling on cannabis seeds; perhaps CBP does not want to get ahead of DEA and is waiting for DEA to provide more definitive guidance on how to treat cannabis seeds.

Anyone already importing cannabis seeds probably has done so without the formal blessing from CBP issuing a ruling that their cannabis seeds are admissible. But are those importations of cannabis seeds necessarily legal? Maybe.

CBP embargo of marijuana seed imports today

We are still hearing that CBP is looking at entries of imported cannabis seeds and taking various actions against those entries. For example, entries of imported seed have been subject to CBP examination. CBP has broad authority to examine imported merchandise. After an entry is filed, CBP has five days to determine whether to release, seize, or detain the merchandise. Merchandise not released within that five day period is considered detained. CBP is supposed issue a detention notice within five business days after a detention is made. However, in practice CBP is not always so prompt in issuing such detention notices and also sometimes does not provide any meaningful explanation for the detention. Following the issuance of the detention notice, CBP has 30 days from the date of the goods being presented for examination to decide whether to release, seize, or deny entry of the goods.

Even if CBP allows the release of imported seeds, CBP has the authority to demand that the importer redeliver the goods to CBP if CBP believes there are admissibility issues or the need to examine, inspect or appraise the goods. CBP can make a demand for redelivery within thirty days after the goods were released or after the conditional release period, whichever is later. A failure to comply with a CBP request for redelivery can result in CBP issuing a demand for liquidated damages.

Conclusion

So, although there are certainly valid reasons for importers to believe that importing cannabis seeds is legal, because CBP has not yet issued a ruling that officially acknowledges the admissibility of such cannabis seeds, importers still need to be aware that they still face some risk of CBP taking action that may affect their entries of imported seeds. An importer could assert that they have exercised reasonable care and point to consulting with outside experts and reference the CSA definitions for hemp and marijuana and the DEA Letter on seeds. But until CBP decides to make a ruling that acknowledges that cannabis seeds are admissible, any importer will have some degree of uncertainty on whether their import entries will be subject to some CBP request for additional information or be subject to examination or detention.

Ultimately, cannabis seeds probably should be legal to import. But until CBP finally issues a ruling that officially acknowledges that admissibility, importers should be prepared to deal with the real possibility that CBP could take actions against their import entries that will require them to jump through CBP’s administrative hoops.

For related posts, check out the following:

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New AD/CVD Petitions: Paper Shopping Bags from Cambodia, China, Colombia, India, Malaysia, Portugal, Taiwan, Turkey, and Vietnam https://harris-sliwoski.com/chinalawblog/new-ad-cvd-petitions-paper-shopping-bags-from-cambodia-china-colombia-india-malaysia-portugal-taiwan-turkey-and-vietnam/ Sat, 03 Jun 2023 11:58:39 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=131253 On May 31, 2023, the Coalition for Fair Trade in Shopping Bags, consisting primarily of Novolex Holdings (“Novolex”) and the union workers at the U.S. paper shopping bag manufacturing facilities, filed antidumping (AD) and countervailing duty (CVD) petitions against Paper Shopping Bags from nine countries. China is the largest exporter of the subject shopping bags,

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On May 31, 2023, the Coalition for Fair Trade in Shopping Bags, consisting primarily of Novolex Holdings (“Novolex”) and the union workers at the U.S. paper shopping bag manufacturing facilities, filed antidumping (AD) and countervailing duty (CVD) petitions against Paper Shopping Bags from nine countries. China is the largest exporter of the subject shopping bags, followed by Vietnam and India. Although the other named countries have import volumes that are quite small, it appears that some of these countries were included in these petitions because of the potential that Chinese producers might shift their production to these countries.

It was probably just a matter of time before this case was filed. The main petitioner in this case, Novolex, previously had filed multiple AD cases on imported plastic shopping bags (polyethylene retail carrier bags); first from China, Malaysia, and Thailand, followed by another round of AD petitions on plastic bags from Indonesia, Taiwan, and Vietnam. Novolex also produces paper bags and now once again seeks to use U.S. trade laws to try to protect yet another of its products from import competition.

The AD duties on plastic bags may have helped keep unfair plastic bag imports out of the U.S. market.  But these AD duties could not revive market demand for plastic bags as state laws banning plastic bags helped permanently shift consumer preference from plastic to paper bags. Now some states and cities are starting to ban or impose taxes on single-use paper shopping bags.  Although AD/CVD duties certainly will increase the cost of paper shopping bags, it is uncertain whether those duties will do anything to stop that trend towards using fewer paper shopping bags.

The U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) will conduct investigations to further examine the allegations made in the petition. DOC will investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies. ITC will investigate whether the subject imports are causing “material injury” or “threat of material injury” to the domestic industry. Both agencies have to make affirmative findings of injury or threat of injury (ITC) or of dumping or subsidies (DOC) in order for AD/CVD duties to be imposed on the subject imports.

Scope

The proposed scope definition of this case

Paper shopping bags with handles of any type, regardless of whether there is any printing, regardless of how the top edges are finished (e.g., folded, serrated, or otherwise), and regardless of whether the tops can be sealed. Subject paper shopping bags have a width of at least 4.5 inches and depth of at least 2.5 inches.

Excluded from the scope are:

  • Multiwall sacks and bags;
  • Paper sacks or bags that are of a 1/6 or 1/7 barrel size (i.e., 11.5-12.5 inches in width, 6.5-7.5inches in depth, and 13.5-17.5 inches in height) with flat paper handles;
  • Paper sacks or bags with die-cut handles, a standard basis paper weight of less than 38 pounds, and a height of less than 11.5 inches;
  • Shopping bags (i) with non-paper handles made wholly of woven ribbon or other similar woven fabric and (ii) that are finished with folded tops or for which tied knots or t-bar aglets (made of wood, metal, or plastic) are used to secure the handles to the bags; and
  • Gift bags marked for retail sale that are physically bundled into the saleable unit prior to importation such that each bundled unit is composed of no less than three individual bags and no more than 30 individual bags.

The paper shopping bags are classified under US Harmonized Tariff Schedule (HTS) subheadings 4819.30.0040 and 4819.40.0040.  The HTS subheadings are provided for convenience and customs purposes, while the written descriptions of the scope definitions are dispositive.

See the full proposed scope definition (here).

Alleged AD/CVD Margins.

Petitioner calculated estimated dumping margins for the name countries:

Cambodia: 44.29% – 221.36%

China: 133.80% – 324.24%

Colombia: 65.04%

India- 88.56%

Malaysia:  173.38%

Portugal: 26.71% – 204.54%

Taiwan: 44.76% – 50.13%

Turkey: 12.51% – 45.29%

Vietnam: 63.67% – 128.81

Petitioner did not provide any specific Chinese or Indian subsidy margin calculations.

 

Named Exporters/ Producers

Petitioner included a list of companies that it believes are producers and exporters of the subject merchandise.  See attached list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise.  See attached list here.

 

Estimated Schedule of Investigations.

May 31, 2023 – Petitions filed

June 20, 2023 – DOC initiates investigation

June 26, 2023 – ITC Staff Conference

July 17, 2023 – ITC preliminary determination

 

October 28, 2023 – DOC CVD preliminary determination (assuming extended deadline) (8/24/23 – unextended)

December 27, 2023 – DOC AD preliminary determination (assuming extended deadline)

(11/7/23 – unextended)

May 10, 2024 – DOC final determination (extended)

June 24, 2024 – ITC final determination (extended)

July 1, 2024 – DOC AD/CVD orders issued (extended)

 

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Three New AD/CVD Petitions: Steel Shelves, Steel Cylinders, Brass Rod https://harris-sliwoski.com/chinalawblog/three-new-ad-cvd-petitions-steel-shelves-steel-cylinders-brass-rod/ Mon, 08 May 2023 14:52:13 +0000 https://harris-sliwoski.com/?post_type=chinalawblog&p=130921 Last week saw a flurry of activity with three new AD/CVD petitions: (1) Boltless Steel Shelving Units from India, Malaysia, Taiwan, Thailand, and Vietnam (AD only); (2) Brass Rod from Brazil, India, Israel, Mexico, South Africa, and South Korea (AD/CVD); and (3) Non-Refillable Cylinders from India (AD/CVD) Two of these petitions are sequels of AD/CVD cases

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Last week saw a flurry of activity with three new AD/CVD petitions:

(1) Boltless Steel Shelving Units from India, Malaysia, Taiwan, Thailand, and Vietnam (AD only);

(2) Brass Rod from Brazil, India, Israel, Mexico, South Africa, and South Korea (AD/CVD); and

(3) Non-Refillable Cylinders from India (AD/CVD)

Two of these petitions are sequels of AD/CVD cases on the same product from China that happened a few years ago. AD/CVD orders were imposed on boltless steel shelving from China in October 2015. Non-refillable cylinders from China was hit with AD/CVD orders in May 2021. After these Chinese products had prohibitively high AD/CVD duties imposed, U.S. buyers still were unable or unwilling to buy from the domestic producers and instead looked to find alternative import sources. The petitioners now seek yet another round of protective duties against the increased import volumes from these new countries that replaced the Chinese supply.

The third case, brass rod, has not been subject to a previous AD/CVD investigation. But one of the petitioners in that case, Mueller Brass Co., is part of the Mueller group that is a long-time user of US trade laws. Mueller successfully got AD duties imposed on imports of seamless copper pipes and tubes, first from China and Mexico in November 2010 and Vietnam in August 2021. The beneficial impact from the AD orders on copper pipes and tubes probably influenced the decision to seek AD/CVD duties on this new case on brass rod.

The U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) will conduct investigations to further examine the allegations made in the petition. DOC will investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies. ITC will investigate whether the subject imports are causing “material injury” or “threat of material injury” to the domestic industry.

Companies in these industries – importers, distributors, purchasers–are probably already familiar from the prior cases with the disruptive impact that AD/CVD investigations can have. This new round of cases mostly involve market economy countries (except for Vietnam), which is a significant difference from the prior cases against China, which is considered a non-market economy. DOC calculates AD margins in market economy cases using the company’s actual costs. In contrast, DOC in non-market economy cases against China (and Vietnam) will not use the company’s actual costs, but instead will use a surrogate value methodology that tends to inflate the AD margins, sometimes quite significantly. If the foreign producers and exporters in these cases can successfully navigate their way through the DOC antidumping process, their AD margins will hopefully be lower than the AD margins imposed on those products from China.

As companies outside China step up their efforts to reduce or eliminate China from their supply chains, we should expect the number of AD/CVD investigations of exports from outside China to increase, based simply on the numbers.

Below are the petition summaries:

Boltless Steel Shelving Units from India, Malaysia, Taiwan, Thailand, and Vietnam

On April 25, 2023, Edsal Manufacturing Co., Inc. filed antidumping (AD) petitions against boltless steel shelving units pre-packaged for sale from India, Malaysia, Taiwan, Thailand, and Vietnam.

Scope

The proposed scope definition of this case  is the same as the scope of the AD/CVD orders on boltless steel shelving prepackaged for sale from China. The boltless steel shelving covered by this investigation may be commonly described as rivet shelving, welded frame shelving, slot and tab shelving and punched rivet (quasi-rivet) shelving as well as by other trade names.

See the full scope definition here for more specific definitions of “boltless”, “decks”, “prepackaged for sale” and “add-on kits” that are relevant to identifying what products are covered by this AD investigation.

Alleged AD/CVD Margins.

Petitioner calculated estimated dumping margins for the named countries:

India- 215.77%.

Malaysia: 41.29% – 232.94%

Taiwan: 217.66%

Thailand: 177.72% – 188.06%

Vietnam: 85.24% – 205.49%

Named Exporters/ Producers

Petitioner included a list of companies it believes are producers and exporters of the subject merchandise. See attached list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise. See attached list here.

Estimated Schedule of Investigations.

April 25, 2023 – Petitions filed

May 15, 2023 – DOC initiates investigation

May 16, 2023 – ITC Staff Conference

June 9, 2023 – ITC preliminary determination

November 21, 2023 – DOC AD preliminary determination (assuming extended deadline) (10/2/23 – unextended)

April 4, 2024 – DOC final determination (extended)

May 19, 2024 – ITC final determination (extended)

May 26, 2024 – DOC AD/CVD orders issued (extended)

 

Non-Refillable Cylinders from India

On April 27, 2023, Worthington Industries filed antidumping (AD) and countervailing duty (CVD) petitions against Non-Refillable Cylinders from India.

Scope

The proposed scope definition (see here) defines the subject merchandise as “certain seamed (welded or brazed), non-refillable steel cylinders meeting the requirements of, or produced to meet the requirements of, US Department of Transportation specification 39, Transport Canada specification 39M, or United Nations pressure receptacle standard ISO 11118 and otherwise meeting the description provided below (“non-refillable steel cylinders”).

The requested scope of this investigation differs from the prior investigation on non-refillable steel cylinders from China with regard to capacity. This proposed scope covers non-refillable steel cylinders that “range from 100-cubic inch (1.6 liter) water capacity to 1,526-cubic inch (25 liter) water capacity,” which is a modification of the prior scope covering non-refillable steel cylinders with a lower-end water capacity of 300 cubic inches. (4.9 liters).

Specifically excluded are seamless non-refillable steel cylinders.

The merchandise subject to these orders is properly classified under statistical reporting numbers 7311.00.0060 and 7311.00.0090 of the Harmonized Tariff Schedule of the United States (HTSUS). These are basket categories that contain non-subject merchandise as well. The merchandise may also enter under HTSUS statistical reporting numbers 7310.29.0030 and 7310.29.0065. Although the HTSUS statistical reporting numbers are provided for convenience and customs purposes, the written description of the merchandise is dispositive.

Alleged AD/CVD Margins.

Petitioner calculated estimated dumping margins of 11.20 – 56.52%.

Named Exporters/ Producers

Petitioner included a list of companies that it believes are producers and exporters of the subject merchandise.  See attached list of exporters here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise.  See attached list of importers here.

Estimated Schedule of Investigations.

April 27, 2023 – Petitions filed

May 17, 2023 – DOC initiates investigation

May 18, 2023 – ITC Staff Conference

June 12, 2023 – ITC preliminary determination

September 24, 2023 – DOC CVD preliminary determination (assuming extended deadline) (7/21/23 – unextended)

November 23, 2023 – DOC AD preliminary determination (assuming extended deadline) (10/4/23 – unextended)

April 6, 2024 – DOC final determination (extended and AD/CVD aligned)

May 21, 2024 – ITC final determination (extended)

May 28, 2024 – DOC AD/CVD orders issued (extended)

 

Brass Rod from Brazil, India, Israel, Mexico, South Africa, and South Korea

On April 27, 2023, the American Brass Rod Fair Trade Coalition, consisting of Mueller Brass Co., based in Port Huron, Michigan and Wieland Chase LLC, based in Montpelier, Ohio filed antidumping (AD) and countervailing duty (CVD) petitions seeking the imposition of antidumping (AD) duties on imports of brass rods from six countries, Brazil, India, Israel, Mexico, South Africa, and South Korea.  The petitions also seek the imposition of countervailing (CVD) duties on imports from India, Israel and South Korea.

Scope

The proposed scope definition defines the products covered by these petitions as brass rod, which is defined as “leaded, low-lead, and no-lead solid brass made from certain alloys”. See here for full proposed scope definition.

Alleged AD/CVD Margins.

Petitioner calculated estimated dumping margins for the name countries:

Brazil: 62.62%

India: 10.20%

Israel: 20.00%

Mexico: 63.76%

South Africa: 27.99%

South Korea: 12.75%

The petitions did not identify any specific subsidy rates for India, Israel or South Korea.

 

Named Exporters/ Producers

Petitioner included a list of companies that it believes are producers and exporters of the subject merchandise. See attached list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise. See attached list here.

 

Estimated Schedule of Investigations.

April 27, 2023 – Petitions filed

May 17, 2023 – DOC initiates investigation

May 18, 2023 – ITC Staff Conference

June 12, 2023 – ITC preliminary determination

September 24, 2023 – DOC CVD preliminary determination (assuming extended deadline) (7/21/23 – unextended)

November 23, 2023 – DOC AD preliminary determination (assuming extended deadline) (10/4/23 – unextended)

April 6, 2024 – DOC final determination (extended and AD/CVD aligned)

May 21, 2024 – ITC final determination (extended)

May 28, 2024 – DOC AD/CVD orders issued (extended)

 

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Importing “Drug Paraphernalia” after Eteros and Keirton https://harris-sliwoski.com/cannalawblog/ncbfaa-webinar-cannabis-and-international-trade-follow-up-questions-part-1/ Fri, 16 Dec 2022 15:00:33 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=128997 Many thanks for all who attended our December 1 webinar on “Cannabis and International Trade Issues 2022.” The event was hosted by the National Customs Broker and Freight Forwarders Association of America Educational Institute (NEI). We received many questions from the audience that we were not able to get to. We plan to cover some of

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Many thanks for all who attended our December 1 webinar on “Cannabis and International Trade Issues 2022.” The event was hosted by the National Customs Broker and Freight Forwarders Association of America Educational Institute (NEI).

We received many questions from the audience that we were not able to get to. We plan to cover some of those question here on the blog. Today, I’ll cover considerations around “drug paraphernalia” after the Eteros decision.

Does the panel have any thoughts on the recent Eteros and Keirton decisions at the CIT and the impact of these decisions on the import of drug paraphernalia nationally?

Several attendees raised questions on how treatment by Customs and Border Protection (CBP) of imported products deemed to be inadmissible “drug paraphernalia” would change in light of two recent decisions issued by the Court of International Trade (CIT). The CIT’s decisions (Eteros and Keirton) are significant not just because these decisions are the first time a federal court has rejected CBP’s ruling that certain products were drug paraphernalia, but also because the legal basis for the court’s rejection of CBP offers a clear path for other products to not be deemed drug paraphernalia.

The Controlled Substances Act specifically makes it unlawful to import and export drug paraphernalia. 21 U.S.C. 863(a). The federal law defines drug paraphernalia as:

any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance.

However, the federal law also carves out an exception to the import and export ban for any person “authorized by local, State, or Federal law to manufacture, possess, or distribute such items.” Most states have now passed legislation to legalize the use or sale of marijuana in some form. Some states have also specifically legalized marijuana accessories (e.g., Colorado’s Amendment 64, Washington Initiative Measure 502).

Although this exception for state “authorized” drug paraphernalia has been on the books since 1970, CBP has consistently ignored any arguments that state legalization of marijuana and marijuana accessories should be relevant to allowing importation of certain products banned as drug paraphernalia. Instead, CBP in its drug paraphernalia rulings tended to rely on a fact-based analysis in which it pointed to some evidence (e.g., website marketing, product reviews, Youtube videos) showing that the product was used to assist in the ingestion and consumption of marijuana. CBP justified its determination that the product was in fact “drug paraphernalia.” Challenging CBP’s seizures of imported “drug paraphernalia” has been pretty difficult because it was hard to rebut CBP’s factual evidence showing the product being used in the consumption of marijuana.

The CIT’s rulings in Eteros and Keirton are important because CBP has been directed by the court to recognize and respect those state laws that specifically authorize the manufacture, possession, or distribution of certain drug paraphernalia in those states. In these two cases, CBP had seized certain machinery/equipment used to trim and process harvested marijuana plants on the grounds that they were prohibited drug paraphernalia. The CIT found CBP’s seizure to be illegal because the use of such marijuana processing equipment had been specifically authorized under Washington state law. Because Washington state law had specifically authorized the use of such marijuana equipment in Washington, the federal prohibition on importing drug paraphernalia could no longer apply to such state-authorized equipment.

These CIT rulings are significant because importers now have a strong legal argument with potentially broad applications to challenge CBP’s seizures. Even if the products are in fact marijuana accessories, importation may now be allowed if there is an applicable state law that repealed a prior prohibition for such products. This could be enough of an “authorization” by the state law to block the federal prohibition on importing drug paraphernalia.

This legal reasoning of state “authorization” has potentially broad applications. Certain states’ marijuana laws could be interpreted as authorizing a broad range of marijuana accessories that may have been at risk of being deemed “drug paraphernalia.” For example, marijuana packaging (boxes, jars, labels) arguably had some risk of being considered drug paraphernalia because CBP could say it was primarily intended for use to assist the consumption of marijuana. But with states specifically authorizing sale and distribution of marijuana in state licensed dispensaries, such marijuana packaging would now seem to be the type of state “authorized” products that would be exempt from the federal drug paraphernalia import ban.

It looks like the U.S. government has chosen not to appeal the CIT’s decision in Eteros. The government still has until December 19 to file an appeal of the CIT’s decision in Keirton. But if no further appeals are filed, the next step will be to see to what extent CBP changes their policy towards drug paraphernalia seizures. And there are still plenty of questions as to what CBP will do with these CIT decisions. For example, does CBP have to separately consider the laws of each state and what do they do with any inconsistencies between state laws? What should CBP do with products imported into any states that do not have any specific state “authorization” laws for marijuana accessories?

Even if these CIT decisions do get limited by CBP down the road, these CIT decisions are still very encouraging for those in the cannabis industry who now have a better chance to potentially access a broader range of imported equipment and accessories that would facilitate the production and sale of cannabis products.

We’ll be back with more answers to questions in the coming weeks. In the meantime, for more on federal law and drug paraphernalia, please see the following posts by my co-presenter and colleague Fred Rocafort.

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Is Cannabis Inflation Proof? https://harris-sliwoski.com/cannalawblog/is-cannabis-inflation-proof/ Fri, 08 Jul 2022 14:00:45 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=117893 Inflation has been dominating the headlines lately. Prices for gasoline, food (e.g., beef, bacon, eggs), used cars and many other items have spiked over the past year. It seems like there is always breaking news of the latest shortages – baby formula, tampons, eggs, semiconductors, sriracha, lumber, bicycles, etc. Cannabis, however, has seemingly been immune

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Inflation has been dominating the headlines lately. Prices for gasoline, food (e.g., beef, bacon, eggs), used cars and many other items have spiked over the past year. It seems like there is always breaking news of the latest shortages – baby formula, tampons, eggs, semiconductors, sriracha, lumber, bicycles, etc. Cannabis, however, has seemingly been immune to inflation as prices have actually declined in many states over the past year.

Many factors are causing inflation generally, even if the phenomenon is simply described as “too much money chasing too few goods.” And although many of these factors still have an impact on the cannabis industry, the unique supply and demand conditions of the cannabis market have prevented cannabis price increases and product shortages.

Cannabis is defined by state — and not national or international — market conditions

Cannabis is still illegal at the federal level. Cannabis cannot legally cross state borders even though two contiguous states may have legalized cannabis for medical or recreational use. The cannabis market is defined by how much cannabis can be cultivated, produced and sold in each state.

In many states like California, Colorado, Oregon, and Washington, the number of cultivators is far greater than the number of licensed retailers. Despite strong demand, many states currently have an oversupply of licensed cannabis grown in-state that can only be sold in-state. When supply exceeds demands, the market prices of a product will be lowered by some companies just to remain competitive.

COVID-19 factor

With movie theaters and restaurants closed during the pandemic, many turned to cannabis to cope with social distancing stress. Although the COVID lockdowns stopped in-store sales for a while, online sales with curbside pickup and delivery options facilitated strong sales at the early stages of the pandemic.

The recent easing of COVID restrictions and rebounding consumer demand for restaurants, movies and other entertainment has caused demand for cannabis to decline. Also, with inflation driving prices for essentials like food, rent, gasoline higher, consumers have less discretionary spending money available for cannabis.

Supply chain disruptions

Inflation has been driven by delays and increased cost for shipping containers, rail freight and trucking. International events such as Russia’s invasion of Ukraine and China’s zero-COVID policies have also fueled inflation surges. But these logistical and international factors have not impacted cannabis as much as other products because cannabis supply is limited to those in state. Sure, there are higher gasoline and freight charges for intra-state transport, but it doesn’t hurt as much as higher national or international transport charges.

Cannabis cultivators had to deal with more supply chain issues as certain fertilizers became unavailable or much more expensive because of the Ukraine war. Grow lights, pots and other growing equipment were hit with increased costs from Trump tariffs on Chinese imports and delays in delivery caused by the backlog at U.S. ports. Although growers felt the brunt of these increased costs, they were not able to pass on these higher costs to processors, distributors and retailers as they risked being replaced by another growing who was willing to eat those costs and offer a lower price.

Availability of black market unlicensed cannabis

The cannabis market is unique in having a significant available supply of illegal, unlicensed cannabis. Legalization of cannabis by states should cause the illegal market for cannabis to fade to obscurity. But currently, retail prices for cannabis from licensed dispensaries are usually substantially higher than that sold on the black market.

A key difference between legal and illegal cannabis lies in taxes that some states imposed not only on transactions from retailers to consumers, but also on transactions from cultivators to retailers.  These taxes create a price differential that makes illegal cannabis an attractive option as unlicensed sellers offer product that is just as good (if not better) and lower priced than legal cannabis. The availability of high quality, lower priced illegal cannabis competes with legal cannabis, particularly with inflation pushing some consumers to pivot back to less expensive unlicensed product.

The cannabis industry is facing a cost-price squeeze. As noted above, inflation continues to increase the cost of cultivating cannabis. But given the excess supply available in most states, those costs cannot be passed through higher prices to the customers. Retailers dare not risk increasing prices to consumers for fear of losing sales to their competitors who may not raise their prices.

With cannabis demand softening as COVID restrictions ease, this cost-price squeeze likely will be felt most by cannabis cultivators, and some will not be able to survive this market phase. Inflation may not be reflected in higher cannabis prices, but inflation is most certainly having an impact on the cannabis industry, with some growers feeling the pain more than retailers.

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