U.S. Court of Appeals Declines to Stay Temporary Restraining Order in connection with Executive Order

Immigration Ban, Temporary Restraining OrderOn Feb. 9, 2017, the U.S. Court of Appeals for the Ninth Circuit issued a ruling keeping in force the temporary restraining order (TRO) that was issued last Friday by the U.S. District Court for the Western District of Washington.  The TRO was issued in connection with the lawsuit filed by State of Washington and State of Minnesota challenging the Executive Order (EO) 13769, “Protecting the Nation From Foreign Terrorist Entry Into the United States.”  The TRO stopped the enforcement of some of the key provisions of the EO.   Two days after hearing oral arguments, the Court of Appeals issued an Order declining to stay the TRO while the Government proceeds with its appeal of the lower court’s decision.    In allowing the TRO to continue in effect, the Court  noted that the States had  standing to bring suit and that the Government was unable to establish that the TRO was “overbroad” or that persons identified in the TRO were not subject to Constitutional protections.  In addition, the Court’s order maintained the national application of the TRO.  While declining to address in detail the issue of religious discrimination, the Court noted that, in the interest of the emergent nature of the current legal proceedings, review and full consideration of these claims should be made at a later time.  Finally, the Court found that keeping the TRO was in the general public interest.  As a result of today’s decision, the TRO remains in effect, preventing the application of the key provisions of the EO.  We are sure the government will quickly announce their proposed next steps in this litigation.  GT will continue to monitor and report on these important events.

©2017 Greenberg Traurig, LLP. All rights reserved.

What to Expect under Secretary of Education Betsy DeVos

Betsy DeVos secretary of educationAfter an unusually contentious Senate confirmation process, Betsy DeVos was confirmed as U.S. Secretary of Education on February 7, 2017.

DeVos has a record of promoting charter schools and school vouchers at the K-12 level, but little is known about her priorities for higher education. Her prepared comments and responses during her Senate confirmation hearing avoided specifics, promising only to work with lawmakers toward common goals.

Her early priorities with respect to higher education likely will include:

  1. Student debt and the cost of college;
  2. Regulation of for-profit colleges; and
  3. Enforcement of Title IX of the Education Amendments of 1972.

Title IX prohibits discrimination on the basis of sex in any federally funded education program or activity. An entity in violation of Title IX may lose some or all of its Title IX funding.

Student Debt and the Cost of College

DeVos’s opening statement at the Senate confirmation hearing addressed concerns about rising amounts of student debt. “There is no magic wand to make the debt go away, but we do need to take action. It would be a mistake to shift that burden to struggling taxpayers without first addressing why tuition has gotten so high,” she said.

The Administration can be expected to propose alternatives to federally funded loan programs. On student debt, President Donald Trump had stated that he would alter the Obama Administration’s income-based repayment plan. Trump’s proposed plan would be funded by reducing federal spending.

For-Profit Colleges

The Obama Administration took significant measures to regulate for-profit colleges and the expenditure of federal monies. For example, the gainful-employment rule penalized higher education institutions that left graduates with a level of debt not commensurate with their earning potential.

Senator Elizabeth Warren pressed DeVos on her plans for combatting fraud and whether she intended to enforce the gainful-employment rule. DeVos responded, “We will certainly review that rule and see that it is actually achieving what the intentions are.”

It is expected the Administration will scale back oversight of for-profit colleges and postsecondary education generally.

Title IX

On her plans for enforcing Title IX, DeVos continued with her noncommittal responses. She said it would be “premature” for her to commit to continuing the Obama Administration’s enforcement of Title IX. DeVos stated only, “If confirmed, I look forward to understanding the past actions and the current situation.” It remains to be seen the extent to which she will withdraw or modify existing guidance. One aspect of the guidance that has received significant criticism in the past, and may be subject to change, is the designation of “preponderance of the evidence” as the standard of proof.

Jackson Lewis P.C. © 2017

Dodd-Frank Rollback Begins – Congress Overturns SEC’s Resource Extraction Issuer Payment Disclosure Rule

SEC resource extractionLast week, Congress utilized the Congressional Review Act (CRA) to pass a joint resolution that disapproves Rule 13q-1 adopted by the SEC,1which would have implemented the resource extraction issuer payment disclosure provisions of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The disapproval resolution has been sent to President Trump for his signature, which he is expected to sign.2

Under the SEC’s rule, a public company that qualified as a “resource extraction issuer” would have been required to publicly disclose in an annual report on Form SD information relating to any single “payment” or series of related “payments” made by the issuer, its subsidiaries or controlled entities of $100,000 or more during the fiscal year covered by the Form SD to a “foreign government” or the U.S. Federal government for the “commercial development of oil, natural gas, or minerals” on a “project”-by-“project” basis. Resource extraction issuers were not required to comply with the rule until their first fiscal year ending on or after September 30, 2018 and their first report on Form SD was not due until 150 days after such fiscal year end.

As a result of the disapproval resolution (assuming President Trump signs, and does not veto, the resolution), issuers that expected to be subject to the SEC’s rule can cease their compliance preparations. Under the CRA, a disapproved rule may not be reissued in substantially the same form or as a new rule that is substantially similar to the disapproved rule unless specifically authorized by a subsequently enacted law. Despite the disapproval resolution and the CRA, Dodd-Frank Section 1504’s mandate for the SEC to adopt a resource extraction disclosure rule remains intact unless and until Section 1504 is repealed. In light of the CRA’s prohibition on the reissuance of a substantially similar rule, the rule’s contested history3 and the expected reintroduction of the Financial CHOICE Act, which if enacted into law in the form introduced during the previous session of Congress would repeal Section 1504, the SEC is unlikely to commence the rulemaking process for resource extraction issuer payment disclosures for a third time.

Some public companies may still have to disclose similar payment information as required under the SEC’s rule pursuant to international resource extraction disclosure laws (for example, the EU Accounting Directive, the EU Transparency Directive and Canada’s Extractive Sector Transparency Measures Act).

1. H.J.Res.41, available at https://www.congress.gov/bill/115th-congress/house-joint-resolution/41/text.

2. The White House, Press Release, H.J. Res. 38, H.J. Res. 36, H.J. Res. 41, H.J. Res. 40, H.J. Res. 37 – Statement of Administration Policy (Feb. 1, 2017), available at https://www.whitehouse.gov/the-press-office/2017/02/01/statement-adminis….

3. For a brief discussion of the legal challenges to the rulemaking process, see our client alert dated December 17, 2015, SEC Re-Proposes Disclosure Rules for Payments by Resource Extraction Issuers.

Developer-in-Chief: How the New U.S. President May Affect the Construction Industry

construction industryEven before the start of Donald J. Trump’s presidential campaign, the Trump brand was in lights across the nation. From the original Trump Tower in New York City to the Trump International Hotel in Las Vegas, it is a name, a brand and a font recognized by nearly everyone. Long before his inauguration, the new U.S. president had made himself one of the most visible — if not the most visible — real estate developers in the world.

President Trump may be the new commander-in-chief, but he is unlikely to forget his long history in real estate. While the world prepares to learn how his policies will affect the larger economy, real estate developers and contractors are similarly focused on the impact his policies will have on the construction industry. Is the president’s (likely) pro-development stance cause for excitement in real estate circles, or is caution warranted? In the following, we explore subsets of the construction industry and the potential impacts of the new administration on these sectors and issues.

An additional note: It is no exaggeration to state that Mr. Trump’s presidency and many of his official actions, to date, have been contentious. Our goal is to provide a clear-eyed and nonpartisan review of the new President’s possible initiatives.


The nation’s infrastructure was a major talking point for both candidates during the presidential campaign. There is no doubt it is aging and requires investment. So perhaps it was no surprise that Mr. Trump had something to say about infrastructure investment during his acceptance speech on the Wednesday after the general election:

“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none and we will put millions of our people to work as we rebuild it.”1

This is a statement that will likely excite many contractors. It also appears to be a strategy that will build on former President Obama’s policies. It was estimated that the controversial American Recovery and Reinvestment Act of 2009 (a.k.a. the Recovery Act or “stimulus package”) would ultimately cost $831 billion between 2009 and 2019, the bulk of it consisting of investments in infrastructure, education, health and renewable energy.2 Mr. Trump has estimated that projects launched under his direction will inject $1 trillion into infrastructure investment using federal tax credits to generate private-sector involvement.3

Republicans who often opposed Mr. Obama’s infrastructure spending may now be reluctant to support Mr. Trump in similar efforts. Private-sector involvement may be key to overcoming Republicans’ prior reticence to spend government money or increase taxes. However, if the private-sector involvement turns out to be illusory, his plans may be stymied by Congress (regardless of which party is in control).

Single-Family Homes

The Obama administration was effective in reducing risk in lending practices and protecting consumers via the Dodd–Frank Wall Street Reform and Consumer Protection Act.4 It also helped homeowners in difficult financial situations refinance their mortgages through the Home Affordable Refinance Program (HARP).5 As a result of affordable mortgage rates, employment gains and income improvement, the single-family home industry has steadily recovered from the recession.6

Despite this, homeownership — which was 63.5 percent during the third quarter of 2016 — is at its lowest level since the 1960s.7 Constraints do not appear to be on the demand side of the equation; they are on supply, where builders are faced with shortages of lots, labor and lending.

Since demand is high, this may be an area in which the new administration can affect the single-family home industry. Mr. Trump has said, “No one other than the energy industry is regulated more than the home-building industry. Twenty-five percent of the cost of a home is due to regulation. I think we should get that down to about two percent.”9 

Mr. Trump has also made clear his affinity for the residential real estate industry, noting that his father was a home builder: “A home builder taught me everything I know. There is no greater thing you can do. If you can build a home, you can build anything.”10

Taken at face value, Mr. Trump’s statements made on the campaign trail paint a positive picture. Combined with the current state of the industry, it may provide his administration with the opportunity to spur new-home construction. As of this publication, however, no clear blueprint for the industry has been put forward.


Mr. Trump believes the energy industry is the most heavily regulated industry in the nation. And his stated goals for deregulation will likely affect this industry, as well.

The Obama administration invested heavily in renewable energy.11 Mr. Trump, on the other hand, has appointed several cabinet members with strong ties to oil and gas, and he has been abundantly clear in his support for coal. Does this spell dire straits for the renewable energy industry?12

The answer to this question is, as yet, unclear. At a campaign rally in California, Mr. Trump told supporters, “I know a lot about solar — I love solar. Except there’s a problem with it. It’s got a lot of problems with it. One problem is it’s so expensive.”13 Whether he is correct in his assessment is one question. Whether he will invest in solar power to bring its deemed high price down or  scrap the tax credits the industry relies on is a separate — and still outstanding — question altogether.14  If Mr. Trump does cancel the tax credits, some analysts expect that the industry will turn to the U.S. states or even overseas for the subsidies it relies on.15

Mr. Trump’s prior claims that climate change is a hoax perpetrated by the government of China may suggest where he stands on this issue; if taken at face value, it may indicate that he is less likely to promote the renewable energy industry and more likely to defer to advisors with interests in oil and gas. However, some believe that the industry has sufficient momentum to maintain itself. Economics, instead of presidential policy, are now the driving factor behind the industry and, with companies already investing billions of dollars in renewable energy, the momentum may be too great for Mr. Trump to have a meaningful effect.16 He may not promote it, but he may not be able to stop it, either.

In the more traditional energy sectors, oil and natural gas have seen an increase in production over the past decade as a result of better fracking technology, despite efforts by the Obama administration to slow down the extraction of resources via this controversial method.17 The Trump administration is expected to open up federal land, previously identified by the Obama administration as off limits, for oil and gas production.18 If this becomes the case, the result will likely be a boon for the industry and any construction that comes with it.


Environmentalists are preparing for battle against the Trump administration. But how will the president’s perceived negative attitude towards environmental regulations affect the construction industry? Deregulation would no doubt make real estate development less expensive and, therefore, easier and more appealing. And if Mr. Trump opens up federal land for oil and gas production, against environmentalists’ wishes, construction will likely accelerate.

Construction Costs

On the campaign trail, Mr. Trump discussed some of his potential stances on foreign policy, including trade policy and immigration. With respect to trade policy, he has indicated that the United States should withdraw from the Trans-Pacific Partnership (TPP) and renegotiate — or even withdraw from — the North American Free Trade Agreement (NAFTA).19 If these new policies impede trade or place more control on imports, materials prices may increase.20 

Mr. Trump has taken a similarly hard stance on immigration, repeating his plan to erect “an impenetrable physical wall” on the border with Mexico and issuing an executive order limiting entry into the United States of people from certain countries.21 While the latter order is currently less likely to play a role in the construction industry, the former may have a significant impact. Labor is already at a premium and, in an industry that relies heavily on a foreign-born workforce, strict immigration policies may raise wages and increase the cost of construction.22

As with all of the issues listed previously, the construction industry must take a wait-and-see approach to the effects of Mr. Trump’s foreign policy stances. Legal and illegal immigration were strong, regular themes during his campaign and surprises are unlikely in this area, in particular.


It is possible that some of Mr. Trump’s policies and promises will become a boon for the construction industry. Deregulation may reduce project costs and increase the availability of funding for homebuyers and contractors alike.23 Tax cuts for the wealthy may mean that there will be more money to build projects.24 And his promises to spend large amounts of money on infrastructure could result in a flood of projects for contractors.25 

But if Mr. Trump follows through on his immigration policy, the current labor shortage will likely get worse and the costs of available labor will increase.26 Similarly, strained relationships abroad may increase the cost of materials.27

There is certainly reason for hope that Mr. Trump’s real estate experience will spur growth in the construction industry. Although he  has an opportunity to effect significant change,  we may have to wait for several years to see how his policies ultimately reshape the construction industry.

1 Donald Trump’s Presidential Acceptance Speech
2 Recovery and Reinvestment Act of 2009
3 Donald Trump Infrastructure Spending
4 Dodd-Frank Wall Street Reform and Consumer Protection Act
5 Home Affordable Refinance Program
6 Home Sales Estimates Historically Soft
7 Ibid.
8 Key Takeaways From the Latest Housing Market Reports
9 Trump Vows to Cut Burdensome Regulations in Address to Home Builders
10 Ibid.
11 Obama Has Done More for Clean Energy Than You Think
12 Renewable Energy Sector Remains Optimistic Amid Trump Policy Outlook
13 Ibid.
14 Ibid.
15 Ibid.
16 Economics Will Keep Wind And Solar Energy Thriving Under Trump
17 Trumps Energy Policy 10 Big Changes
18 Ibid.
19 Donald Trump Trade Policy
20 How Will Trump Affect the Construction Industry
21 Donald Trump Immigration Policy
22 How Will Trump Affect the Construction Industry
23 Ibid.
24 Ibid.
25 Ibid.
26 Ibid.
27 Ibid.

Trump Directs Reexamination of the Fiduciary Rule Changes

DOL Fiduciary RulePresident Donald Trump issued a memorandum late last week directing the Department of Labor to reexamine the anticipated changes to the fiduciary rule applying to most retirement plans and individual retirement arrangements. The changes are set to go into effect on April 10, 2017; however, the memorandum directs the Department of Labor to conduct a full review to determine whether to rescind or revise the rule. Initial reports indicated that implementation of the rule was being delayed, but the memorandum ultimately issued by the President did not include a delay. The Department of Labor released a statement following the issuance of the memorandum indicating it would consider its legal options to delay implementation. It is not clear how quickly the Department of Labor may reach a conclusion on a delay of implementation.

The anticipated changes expand the definition of fiduciary under the Employee Retirement Income Security Act of 1974 (“ERISA”) and subject more financial advisors to fiduciary standards under ERISA. The new fiduciary rule is aimed at eliminating a potential conflict of interest by subjecting retirement plan advisors to fiduciary standards under ERISA if the advisor receives variable compensation tied to the investments the advisor recommends to the plan. Advisors could avoid harsh penalties under the rule by providing specific disclosure and agreeing to abide by a “best interest” standard of conduct. We are aware that some advisors were preparing to implement significant business model changes to comply with the anticipated rule changes.

What this means for employers –

  • Employers/benefits committees should evaluate whether they will require advisors to comply with the requirements of the rule despite the memorandum.

  • Employers/benefits committees should reach out to their advisors/consultants and confirm whether they intend to proceed with implementing changes to comply with the rule.

  • Employers/benefits committees should continue to monitor developments in this area from a fiduciary risk perspective.

Copyright Holland & Hart LLP 1995-2017.

U.S. Customs and New Trump Administration: Your Top Ten Questions Answered

CBP Department of Homeland Security CustomsDuring the campaign, U.S. Customs & Border Protection (CBP) was mostly mentioned by President Trump in the context of illegal immigration. Controlling the flow of people, however, is only one of the jobs of CBP, which is part of the Department of Homeland Security. CBP also regulates what goods come into the United States, while ensuring that the goods pay the appropriate tariff (basically, a form of tax paid as a percentage of the value of the goods entered). As both the gatekeeper to the United States as well as the second-largest source of U.S. government revenue, the agency is a key regulator for many importers.

Many of President Trump’s campaign proposals, while not explicitly directed at CBP, would either impact how it operates or would require implementation by the agency. Further, CBP continues to juggle its dual roles as gatekeeper to the United States with its long-standing role as a revenue collection agency. CBP also is tasked under new legislation with implementing the largest change in its method of operation in two decades, including a move from the port-centric model that has governed its operations to a more industry-focused model centered on Centers of Excellence and Expertise. Adapting to a new political agenda will require agency action when CBP already has its regulatory hands full.

To help navigate this uncertain future, this client alert presents the “Top Ten” questions that every company that imports goods into the United States should be thinking about. This client alert is part of a series of “Top Ten” articles on the future of key international trade and regulatory issues expected to change under the Trump administration. Previously issued client alerts discuss the future of NAFTA1 and international trade litigation (including antidumping and countervailing duty actions) under the Trump administration,2 as well as the top ten questions regarding the future of the CFIUS review process. Future client alerts will deal comprehensively with all international trade and regulatory areas where significant change could occur under the new administration.

The Top Ten CBP Questions Answered (or, Will the Customs Change With the Times?)

1. “So what are the roles played by Customs?”

As the primary gatekeeper into the United States, Customs has a great many roles, including:

  • Regulating who enters the United States

  • Interdicting the flow of illegal goods into the United States

  • Collecting tariffs

  • Regulating exports

  • Collecting statistical data regarding imports

  • Enforcing directives of other agencies that impact the transit of goods into and out of the United States

For U.S. importers, CBP regulates each product entering the United States. Ever since passage of the Customs Modernization Act in 1993, CBP has operated on the twin principles of “informed compliance” and “shared responsibility,” thereby placing primary responsibility on the importer of record to make entries correctly, but as informed by Customs outreach and educational efforts. Failure to import goods properly can result in seized entries, lost import privileges, and civil and criminal penalties.

2. “What has President Trump promised?”

Although President Trump did not focus on CBP explicitly, many of his international trade and immigration proposals run straight through CBP. These proposals include:

  • Changes to U.S. immigration laws and an increased focus on border security (CBP controls entry of persons into the United States).

  • The revision or elimination of NAFTA (the terms under which NAFTA-country imports enter the United States are administered by CBP).

  • Any crackdown on imports from Mexico and China in their roles as two of the three largest trading partners of the United States (tariff collection and how/whether entry occurs are controlled by CBP).

  • The implementation of the expected increase in antidumping, countervailing duty, and safeguard actions in the new administration (although other agencies determine the duty levels, collection is managed by CBP).

Addressing President Trump’s frequent criticism of China as stealing U.S. intellectual property to advance its manufacturing interests would also require substantial efforts by CBP to block infringing goods from entry into the United States. Thus, the election of President Trump likely will have a major impact on how the gatekeeper to the territorial United States operates, impacting every company that imports goods.

3. “Isn’t Customs law pretty static? Have there been any recent changes to Customs law?”

Congress enacted the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) (signed into law on February 24, 2016), which represents the largest change in Customs rules since the Customs Mod Act in 1993.3 Among other changes, TFTEA improves intellectual property rights protection rules and establishes a new Intellectual Property Rights Coordination Center to consolidate oversight of IP-related Customs issues and to coordinate IP investigations to identify producers, smugglers, or distributors of infringing merchandise; expands substitution drawback of duties, while increasing the time periods for claiming drawback; and mandates increased cooperation among agencies and consultation with Congress on the progress made by the agency in implementing the law and improving CBP transparency, accountability, and coordination in enforcement efforts. CBP has published interim final regulations implementing a new structure that contains Centers of Excellence and Expertise, which moves certain responsibilities from port directors to a more industry-specific structure as a means of harmonizing treatment of imports at different ports.4

TFTEA also includes the Enforce Act and Protect Act within Title IV, Section 421 of the TFTEA. The Enforce Act and Protect Act establishes a formal process for CBP to investigate allegations of evasion of anti-dumping and countervailing duty (AD/CVD) orders. As developed in detail below, these provisions offer an opportunity for U.S. companies to combat evasion of AD/CVD orders, while creating risks of investigation and penalties for importers of record.

4. “What is the likely trend in penalties under the new administration? Is this another area where fines are expected to increase?”

As will be discussed in Foley’s forthcoming client alert regarding anticipated white collar developments in the new administration, penalties have sharply risen for many regulatory regimes. This is also true with regard to CBP penalties, which (while primarily civil) have more than doubled over the last three years (approaching $1 billion annually). It is our expectation that this increase will continue.

Further, the DOJ increasingly has brought actions seeking criminal penalties for Customs matters. The DOJ has done so both by using statutory provisions related to Customs matters (entering goods into the United States via fraud, gross negligence or negligence,5 entry of goods that are falsely classified,6 and entry of goods by means of false statements)7 and through non-Customs provisions as well (the use of federal provisions regarding the obstruction of justice,8 the federal conspiracy statute,9 money laundering,10 smuggling,11 and aiding and abetting).12 Further, as explored in detail below, the U.S. government increasingly has been relying on the False Claims Act (FCA) to address shortfalls in duty collections.13 The use of these non-Customs provisions is notable for supporting higher criminal penalties. For example, while each count of falsely classifying goods under 18 U.S.C. § 541 is punishable by up to two years in prison, violations of the smuggling provisions in 18 U.S.C. § 545, obstructions of justice pursuant to 18 U.S.C. § 1519, and money laundering pursuant to 18 U.S.C. § 1956 can be punished by up to twenty years in prison.

The net result is both increasingly broad tools to combat willful Customs violations and higher potential penalties. Notably, the U.S. government has become willing to pursue liability for individuals as well. It is our expectation that the increasing use of criminal penalties and hefty civil penalties, including for individuals, will continue under the new administration.

5. “I heard a lot about imports from Mexico and China during the election. Are there likely to be changes at Customs with regard to these countries?”

The potential changes regarding Mexican and Chinese imports are so great that we have devoted entire client alerts to potential changes in NAFTA14 and to the likely explosion in AD/CVD and safeguard trade remedies.15 Further information regarding these topics are just a mouse click away.

In addition to these developments, we expect that CBP will also take the following changes that impact goods traded with these countries:

  • Increasing border security, including potential changes to the C-TPAT (trusted importer) program (primarily impacting Mexico, but potentially imports from other countries as well).

  • Potentially imposing some form of a border tax as a means of discouraging imports that compete with U.S. manufacturing and to take away any advantage offered to non-U.S. companies that allow the rebate of value-added taxes for exports.

  • Increasing vigilance with regard to intellectual property, such as through the enforcement of an expected increase in section 337 actions.

  • Increasing the rigor of the enforcement of intellectual property infringement, including through the measures described below.

  • Increasing the enforcement of antidumping and countervailing duty orders, as detailed below.

  • Increasing the enforcement of prohibitions on the importation of goods produced using forced (slave) labor.

  • Increasing the scrutiny given to claims that goods meet NAFTA regional content requirements and are originating goods entitled to diminished NAFTA duty rates.

6. “I believe I have been hurt by unfairly traded imports. Will CBP under the new administration have the tools to help me with these concerns?”

The ability to file antidumping, countervailing duty, safeguard, and other trade remedy actions to address imports perceived to be unfairly traded is addressed in a previously issued Foley client alert.16 These remedies, while powerful, are not the end of the story regarding how to fight unfair imports. Two other remedies, both available at CBP, also merit special discussion.

Fighting evasion of AD/CVD orders. CBP always has possessed the ability to investigate the potential evasion of antidumping and countervailing duty orders. Yet the system clearly was not working: a General Accounting Office study titled “Antidumping and Countervailing Duties: CBP Action Needed to Reduce Duty Processing Errors and Mitigate Nonpayment Risk” found that between 2001 and 2014 CBP failed to collect $2.3 billion in AD/CVD duties.17

Further, the perception has long existed that certain importers (often from China, but from other countries as well) are gaming the system by misdeclaring the country of origin of goods, transshipping the goods to hide the country of origin, misclassifying goods as non-subject merchandise when it actually fell under the scope of an order, and other tactics designed to avoid paying antidumping and countervailing duties. Further, the process of CBP’s investigation often was viewed as being opaque, giving no insight to interested parties regarding the conduct or outcome of any investigation. With CBP not being subject to any deadlines, and with its results not being subject to judicial review, companies believing they were being victimized by the circumvention of antidumping and countervailing duty orders pressed Congress for change.

The result was the enactment of the TFTEA and the issuance of regulations establishing a formal process for investigations into possible AD/CVD evasion. Interim regulations (effective as of August 22, 2016, but still subject to change in the final regulations) now allow private parties to make AD/CVD evasion allegations and participate in CBP’s investigation, which now must be completed on a set deadline. Under the new procedures, CBP can investigate:

  • Transshipping merchandise through third countries for purposes of changing the country of origin, even where the merchandise was not substantially transformed in the third country.

  • Falsely or incorrectly reporting shipping and entry documentation or engaging in false sales to underpay duties.

  • Falsely labeling or reporting the merchandise’s physical characteristics, or misclassifying it as non-subject merchandise.18

CBP must determine whether to initiate an investigation within 15 business days of receiving an allegation that entries, made within one year of the allegation, have been evading antidumping or countervailing duties. Suspension of liquidation of entries can occur within 90 days of initiation, if CBP determines there is a reasonable suspicion of evasion. The full investigation occurs over 300 days (360 for complicated cases) and includes the right of parties on both sides of the issue to provide factual information, rebut information put on the record, and submit written briefing.

Where evasion is found, CBP can take action to remedy the evasion, including by:

  • Identifying the applicable duty assessment rate or cash deposit rate.

  • Extending the period for liquidating the unliquidated entries of covered merchandise that entered before the initiation of the investigation.

  • Requiring importers of covered merchandise to post enhanced cash deposits and assess duties on the covered merchandise.

  • Taking such additional enforcement measures as CBP deems appropriate.

CBP can refer the matter to U.S. Immigration and Customs Enforcement (ICE) for possible civil or criminal investigation.

If an interested party disagrees with CBP’s determination, the party may request an internal review by the CBP commissioner, followed by a potential appeal to the U.S. Court of International Trade (CIT), which will determine whether CBP followed the proper procedures, whether its actions are consistent with the statutory and regulatory procedures, and whether its determination was arbitrary, capricious, or an abuse of discretion. CBP has stated, however, that judicial review is unavailable for any decision to not initiate an investigation — a position that eventually will be challenged in court.

While these new procedures offer enhanced protections for companies that believe they are being victimized by AD/CVD evasion, they also could prove problematic for importers, who could be accused of duty evasion. Some of the steps that importers can take to minimize the risk include:

  • Requesting that foreign suppliers act as importers of record.

  • Putting in place contractual provisions regarding the responsibility for paying any duties.

  • Carefully evaluating the classification of goods imported, not just against the presumed HTS classification, but also against the physical descriptions of potentially applicable subject merchandise covered by antidumping and countervailing duty orders.

  • Verifying that import records are accurate.

  • Keeping all appropriate import documentation, including any information relating to the physical attributes of all entries.

Importers should also promptly respond to any CBP Form 29 Notice of Action regarding an increase in duties owed, as the underpayment of duties can be quite substantial when antidumping and countervailing duty tariffs are involved.

Intellectual property protections. Another area where CBP can be used to fight unfairly traded imports is with regard to trademarks and copyrights. Many U.S. companies are unaware that it is possible to register these IP protections with CBP at a low cost, which covers a twenty-year term. Registration requires that the brand owner provide information regarding how authorized shipments generally occur, including the place of manufacture, the name and address of each foreign entity authorized or licensed to use the trademark, a brief description regarding the authorized use, and information regarding affiliates authorized to use the mark abroad.

Once registration occurs, CBP will flag shipments of counterfeit products that fall outside the expected import profile. This has the twin advantages of allowing ready entry for authorized goods while allowing CBP to hold goods that appear to be unauthorized, until such time as CBP can contact the owner of the recorded intellectual property to confirm whether the entry is authorized. Unauthorized goods are destroyed by CBP or released to the authorized owner of the intellectual property for an additional fee. Through this process the authorized owner not only can bar infringing goods, but can also gain valuable information regarding which retailers and distributors are selling counterfeit goods.

7. “What about the False Claims Act (FCA)? Is it also a tool that is likely to see increasing use in the next few years?”

Another tool that can be used to fight the underpayment of duties is the FCA. Since the passage of the 1986 amendments to the law, the FCA (codified at 31 U.S.C. §§ 3729 33) has become a vigorous tool to fight lost government revenue, as shown by the fact that in 2014 the DOJ recovered nearly $6 billion from FCA cases. Each successful prosecution of an FCA claim enables the potential collection of treble damages, plus penalties and an additional fine of up to $11,000 per false claim.

The FCA provides a mechanism whereby individuals can file lawsuits regarding claims that persons and companies have defrauded governmental programs. Since the law includes a qui tam provision that allows persons who are not affiliated with the government (relators) to bring cases on behalf of the U.S. government, and to receive a portion of any recovered damages, activity under the FCA largely is driven by private actors bringing cases, with the DOJ becoming involved thereafter.

The FCA increasingly is being used in the Customs area. The Third Circuit Court of Appeals, among other courts, has confirmed the FCA appropriately can be used for the knowing evasion of Customs duties. For example, in United States v. Toyo Ink Manufacturing, the president of a domestic producer of a violet pigment brought an FCA action against a Japanese competitor, alleging the evasion of antidumping and countervailing duties through false claims that Japan and Mexico were the countries of origin, when China and India (two countries under orders) were appropriate. Toyo settled the matter, agreeing to pay $45 million, plus interest, without admitting fault, resulting in a payment to the original relator of almost $8 million (as well as a likely commercial benefit to the U.S. business). In addition to securing favorable outcomes like this, the use of the FCA process also potentially brings Customs issues to the attention of CBP, which can assess its own penalties for the same conduct. For these reasons, the use of FCA claims for Customs violations is expected to continue to rise with the new administration, making FCA claims a regular part of Customs enforcement.

8. “What are the expected hot-button issues where Customs will be focusing its attention under the new administration?”

CBP is resource-challenged. Practitioners before CBP have horror stories of lost filings, requests for advisory opinions and protests that take years to resolve, and difficulties in achieving uniform rulings from port to port. Further, the port-by-port administration of CBP can make for great differences in the enforcement priorities, classification approach, and other issues encountered by individual importers. It is expected that the new Centers of Excellence program will take care of some of these issues, yet it will still be true that the issues of concern will vary by port.

Nonetheless, despite these uncertainties, we anticipate the following areas will see significant attention from CBP over the coming administration:

Informed compliance letters. A recent development is the issuance of “informed compliance” letters by CBP. These letters often are issued to major U.S. importers to encourage them to review their recent entries and determine if they have treated entries correctly where they acted as the importer of record. These letters often are sent to major importers who have not been audited in the past decade or that are viewed as being at a higher risk for violations.

The receipt of an informed compliance notification letter means CBP has reviewed the data of an importer of record and likely identified specific problems with its import transactions, putting the company at an increased risk of a comprehensive audit. According to CBP officials, the expectation is that companies that receive these letters will soon be the subject of a “focused assessment” or other type of CBP audit in the near future. The letters, thus, are a way of encouraging major importers to enhance their compliance and file voluntary self-disclosures in anticipation of the audit.

To provide further encouragement, CBP has indicated that companies that do not follow up with a voluntary self-disclosure can expect that any subsequently discovered violations will be subject to higher-than-normal penalties. The letters warn not only of potential monetary penalties, but also the prospect of seizure or forfeiture of imported merchandise.

While the letters do not change the operative level of care expected of all importers (who are required to exercise “reasonable care” in the execution of their Customs obligations), the letters serve as a warning shot that the company needs to get its Customs house in order and should start:

  • Preparing for a CBP audit

  • Reviewing its Customs compliance policies

  • Reviewing the care taken by its Customs brokers

  • Conducting a risk assessment, including with regard to the issues identified in the letter

  • Determining if its classifications are correct and supported by the product attributes

  • Determining whether any post-entry adjustments are needed

  • Determining whether free trade preferences are supported by FTA certificates of origin and appropriate regional content

  • Evaluating whether off-invoice items such as royalties and assists are appropriately recognized

  • Considering whether there are any other issues in the company’s import data to indicate compliance failures and penalty risks

While the assessment should start with the issues identified in the letter, the review should be comprehensive. CBP auditors have the authority to examine any areas where compliance may be lacking. If issues are found, the company should consider whether the issues are systemic. If the entries are too numerous to make a quick evaluation, statistical sampling can be used to help evaluate the scope of potential issues and the potential risk exposure. Further, the review also should cover the company’s Customs compliance program and the rigor of its compliance measures and training, as these are evaluated by CBP in an audit. Any errors should be documented and a plan put in place to strengthen the company’s compliance procedures and internal controls to prevent their recurrence.

The company also should strongly consider filing a prior disclosure. This can be accomplished using an initial marker, which merely informs CBP that an investigation of potential compliance lapses is ongoing. This locks in voluntary disclosure credit while buying time to complete a thorough investigation and to provide a subsequent full report.

Forced labor in China. In 2016, Customs issued nationwide orders instructing U.S. ports to detain certain products produced by forced labor in China. The authority for these orders is found in 19 U.S.C. § 1307 (known as section 307), which authorizes CBP to issue orders prohibiting importation of merchandise mined, produced, or manufactured, wholly or in part, by forced labor. Although section 307 has been in place for years, the TFTEA enhanced the efficacy of the provision by removing certain restrictions on when the provision could be applied, thereby removing a loophole which provided that the provision only could be applied if the “consumptive demand” for those goods in the United States exceeded domestic production. Under the revised law, any interested party (including competitors and public interest groups) may request that CBP investigate whether an import was produced using forced labor in another country. If the investigation proves the charges, then any products found to be made in whole or in part using forced labor are subject to exclusion or seizure.

CBP has been making the blockage of goods produced by forced labor a priority, as shown by CBP outreach on the program19 and frequent press releases announcing detention orders for violations.20 Given the prominent role that criticisms of China played in the campaign, we expect this focus will increase, making it imperative that companies that import from China put in place enhanced due diligence and supply chain compliance measures, as described below.

Trade security issues. Since September 11, the enhancement of border security has been a priority of CBP, not only for immigration and visits to the United States, but also with regard to the movement of goods. We expect these efforts will accelerate under the new administration, as part of the anticipated Trump administration national security initiative. This likely will mean changes in the frequency of searches of incoming cargo, potentially impacting the time of clearance, especially at busy ports. It may also mean changes in the operation of, or eligibility to use, the C-TPAT program, a voluntary program that allows certified importers, carriers, consolidators, licensed Customs brokers, and manufacturers to enjoy expedited processing and transit times at the border, reduced number of CBP examinations, and other benefits of being a trusted CBP partner.21

We also anticipate that the money being spent on the Mérida Initiative, which was designed to help Mexico increase its border security in the broad sense of disrupting Mexican criminal activity and enhancing Mexican police capabilities, will be refocused on the issue of creating enhanced inspections of goods flowing between the two countries.

Revenue collection issues. Although post 9/11 border security concerns have somewhat eclipsed what was long considered the main role of Customs — the collection of tariffs on entries — tariff collection still remains a core function of CBP. In particular, we are seeing a renewed emphasis by CBP on the issues of:

  • The classification of goods

  • The appropriate valuation of goods, especially with regard to off-invoice items (royalties and assists, and so forth)

  • The correct country of enforcement

  • The importer maintaining the appropriate support for regional content and maintaining free trade agreement certificates of origin at the time of importation

  • The declaration of the correct country of origin based upon the appropriate rules of substantial transformation or tariff shifts (e.g., for NAFTA)

  • The declaration of any payment of antidumping and countervailing duty tariffs.

Importers should review the way in which these issues are handled to ensure they are occurring in a compliant fashion.

9. “Sounds scary. What can I do to cope?”

All importers should evaluate whether they need to enhance their compliance measures in the following ways:

  • Enhance/Implement a Customs compliance program. It is surprising that even large importers often do not have compliance programs in place, or have compliances measures that are dated or are not well adapted to current import patterns. Since the existence and effectiveness of a compliance program is one of the first items tested by CBP in an audit, a pro-active review of the compliance program is the starting point for enhanced Customs compliance.

  • Conduct a classification and valuation review. Importers should regularly review the items they commonly import and confirm the accuracy of HTS classifications. These classifications should be maintained in a tariff classification database that is available to Customs brokers or any other party responsible for ensuring correct entry. Importers also should review the methodologies that are used to calculate the ad valorem value of entries, paying particular attention to transactions with affiliates and to whether the valuation includes all off-invoice items, such as royalties and assists.

  • Antidumping and countervailing duties product review. The collection of full AD/CVD tariffs and the prevention of circumvention of the hundreds of AD/CVD orders currently in effect is a priority of CBP. The TFTEA gives CBP the tools to fight antidumping and countervailing duty evasion, as discussed above. Companies that know they are importing goods subject to these orders should carefully review their entries to ensure they are occurring in good order with the payment of full duties, consistent declaration of the correct country of origin and coverage by the orders, and so forth. Importers should confirm their judgment that goods being declared as not being subject to AD/CVD orders are correctly classified. Where importers of record are importing goods that are covered by antidumping duty orders, they should confirm that they are in a position to certify that they have not entered into an agreement to receive, and have not in fact received, any reimbursement of antidumping duties. The importer should confirm that it is consistently following this requirement, as any failure to provide the required certification will lead both CBP and the Department of Commerce to presume reimbursement, thereby doubling the duties to be imposed.22

  • FTA claims. Importers should review any FTA or duty preference program instructions to determine their accuracy. Common issues to confirm are whether the regional content requirements are met, whether required certificates of origin are at hand at the time of entry, and that all required documentation to support claimed free-trade preferences is maintained for the appropriate period of time.

  • Coordinate with freight forwarders and Customs brokers. Importers should engage with their freight forwarders and Customs brokers to determine whether Customs requirements are being consistently followed and should coordinate required recordkeeping. Although it is acceptable to delegate responsibility for import responsibilities to third parties, the ultimate responsibility for the handling of entries is on the importer of record.

  • Conduct a Customs audit. Larger importers, or importers that have not been chosen for an audit in recent years, should consider performing a Customs audit. A good starting point is found in the “best practices of compliant companies” on the Customs website;23 Customs specialists can help design a tailored audit that reflects the importer’s individual risk profile, goods imported, country sourcing of goods, and other patterns of importation.

As noted above, CBP is emphasizing the combatting of goods that benefited from forced labor (adult and children alike). With enhanced section 307 giving CBP the tools to block more imports, companies should be pro-active in monitoring and auditing suppliers for lapses that could lead to costly detentions by CBP. Measures to consider implementing include the following:

  • Monitor U.S. government intelligence. The U.S. Department of Labor, in consultation with the U.S. Departments of State and Homeland Security, publishes an annual list of products believed to be produced by forced labor. Importers should monitor this list to see if the U.S. government is flagging products they commonly import.

  • Review products where the company acts as the importer of record. Importers should be aware of all products where they commonly act as the importer of record, as doing so automatically makes them the responsible parties for dealings with CBP, including with regard to the issue of CBP forced labor inquiries.

  • Conduct a supply chain audit and perform supplier due diligence. Because the forced labor provisions are designed, by definition, to bring in outside parties, it seldom is a good idea to wait for any CBP inquiry, as it often will not be possible to put together a response within a tight timeframe where third parties are involved. Waiting until receiving a notice from CBP of a potential violation risks seizures, loss of the goods, penalties, lost business, and public relations issues. Pro-active due diligence on the supply chain will allow the importer to assess the risk of a violation, determine the types of products most likely to be implicated, identify suppliers and countries of concern, allow for the creation of an audit schedule of suppliers, and generally gather information to disprove any allegation of the use of forced labor. Visits to supplier sites and gathering knowledge about the sub-suppliers that also form a part of the supply chain can also forestall problems down the road.

  • Follow up on red flags. Importers that source from countries of concern, such as China, should monitor suppliers for potential red flags that might indicate sourcing issues. Importers that discover or reasonably suspect the use of forced labor should shift to alternative sources.

  • Implement a compliance program. All importers should have a comprehensive Customs/import compliance policy; any companies that do not should implement one. The program should be reviewed to ensure it addresses supply chain management, including provisions for limiting the potential for human trafficking and forced labor in the supply chain.

  • Gather certifications. Importers should review all supplier agreements to confirm that they contain an affirmative certification that the supplier is: (1) aware of the company’s Customs/import compliance policy; (2) abides by its terms; (3) specifically is not using any form of forced labor; (4) will cooperate with any investigation of same by the importer; and (5) will be punished if these provisions are violated, including through the requirement to cover the costs of an investigation and the termination of the supply arrangement.

  • Conduct training. Importers should incorporate training regarding forced labor requirements into Customs/import training not only for persons who directly handle import transactions, but also for employees who work directly with the company’s supply chain.

  • Consider joining the Customs-Trade Partnership against Terrorism (C-TPAT) program. C-TPAT is a voluntary supply chain security program, where companies work with CBP to improve the security of private companies’ supply chains. Although the provision is aimed at terrorism, becoming part of C-TPAT helps shore up the reliability and accountability of the company’s supply chain.

  • Review government contracts. Finally, government contractors should be aware that they have a potential second source of liability, which is Executive Order 13,627. That Executive Order, implemented into the Federal Acquisition Regulation, prohibits U.S. government agencies from acquiring products produced by forced or indentured child labor, while also implementing the requirement for government contractors to certify they neither use nor source from companies that use forced labor. The penalties for violating this prohibition include termination of the government contract, debarment, and civil and criminal punishment.

Miscellaneous items. Finally, importers should look into the following housekeeping issues, which can lead to compliance lapses and, potentially, costly penalties:

  • Data collection

    • Request ITRAC data. It is a good idea periodically to request an Importer Trade Activity (ITRAC) Report from CBP for the last five years as a way of gathering a copy of all data held by Customs regarding entries for the company as an importer of record. Such information can be used for compliance purposes and, in the event of a Customs-focused assessment or voluntary self-disclosure, as a complete record of all imports where the company acted as importer of record. Since CBP is transitioning to the Automated Commercial Environment (ACE) in 2017, ITRAC data will eventually be discontinued, making it important to gather a copy of the ITRAC data while it is still available.

    • Request Census Bureau data. The Export Administration Regulations (EAR) require that exporters maintain certain information regarding exports for a period of five years after the time of exportation. To help comply with this requirement, it is a good idea to request Census Bureau data for the prior twelve months once a year.

    • Sign up for ACE. Importers that have not signed up for ACE should do so. Advantages include the elimination of paper entry summaries, decreased administrative costs, enhanced ACE report capabilities, and remote location filings for entry summaries.

  • Bond issues

    • Bond sufficiency. CBP monitors the sufficiency of continuous entry bonds to determine if the bond covers likely import activity. CBP determinations of inadequacy can result in increases in the bond amount over a short period of time (15 days). Failure to comply can result in CBP declaring the bond insufficient, thereby forcing the use of more expensive single entry bonds.

    • Listing multiple principals on the same bond. Companies should consider whether it makes sense to include multiple entities on the same bond. While doing so allows for bond savings, each entity is jointly and severally liable and responsible for paying any claim regardless of which entity is at fault. Any one of the entities can terminate the bond at any time, which can cause problems if the management of the bond is not coordinated.

  • Customs broker dealings

    • Custom broker powers of attorney. Although it is common to grant a Customs powers of attorney to Customs brokers, these grants should be monitored to ensure they are accurate and there are no unnecessary legacy authorizations in place. Reviewing ACE or ITRAC data allows for the ready identification of all Customs brokers who have made entries on behalf of an importer of record by reviewing the filer codes on the entries. Any unneeded powers of attorney should be revoked.

  • Entry clearance items

    • Update names and addresses on file with CBP. Under new procedures, CBP now maintains an importer-of-record program that seeks to more closely monitor companies that import, as a means of preventing fly-by-night importers who seek to evade duties (particularly antidumping and countervailing duties). CBP uses name and contact information from Form 5106 to communicate with importers. Importers should review the information on file with CBP to ensure the accuracy of all information and that it meets new importer tracking requirements.

    • Manifest confidential treatment. Much of the information filed as part of the entry process is available for review by companies such as PIERS, which gather it together and sell it, including to competitors. By filing a government confidentiality request and keeping it up to date, importers can take steps to keep import data confidential.

    • Confirm your reconciliation items. Companies that participate in CBP’s Reconciliation Prototype Program should ensure they (or their Customs brokers) are appropriately flagging entries, as CBP will no longer allow a blanket flag as of January 14, 2017. A monitoring program can help ensure the reconciliation process occurs appropriately, with reconciliation being used to reflect post-importation value additions and adjustments for such items as retroactive transfer price adjustments, assists, royalties, and other value elements that are unknown at the time of entry.

    • Partner Government Agencies (PGAs). There are at least sixteen partner government agencies, ranging from the Department of Agriculture to the Department of Commerce to the Environmental Protection Agency that work with CBP to effectuate specialty requirements, such as for the importation of food and medicine, and a wide range of other products.24 Importers who are impacted by these specialty requirements should ensure that they are adhering to all regulations issued by the partner agencies and effectuated as they impact cross-border transactions through CBP regulations and control.

    • Updated certificates of origin. FTAs, including NAFTA, often impose a requirement to have Certificates of Origin (COO) for anticipated duty preference claims. If these COOs are not in hand at the time of entry, then the entry is not eligible for duty preference, even if the rules of the FTA otherwise are met. Importers should work with their Customs brokers to ensure they have all required COOs on hand.

    • Steel entry requirements. In 2016, CBP instituted special procedures for the more than 100 steel products covered by antidumping and countervailing duty orders. These “live entry” procedures are designed to require the filing of electronic paperwork and upfront duties before the release of steel products subject to these orders. Importers of steel products should ensure they are correctly classifying steel entries, declaring the goods to be covered by these orders where appropriate, and that they are adhering to the “live entry” procedures.

  • Export items

    • Destination control statement (DCS). Exports require a Destination Control Statement, which appears on export documentation. The language being used should be reviewed to ensure it meets current regulatory requirements, even for EAR99 products.

    • Denied parties screening/end use/end user controls. The Office of Foreign Assets Control and the Bureau of Industry and Security restrict exports to certain persons who have been determined to have taken actions contrary to U.S. foreign policy. Exporters should confirm they maintain screening protocols that are consistently followed to prevent such dealings. Companies should also ensure that they consistently follow up on red flags indicating that goods are potentially being used/diverted for use by inappropriate end users/inappropriate end uses, such as for the support of terrorism or the proliferation of weapons of mass destruction.

    • Controlled goods. Exporters should be certain that they have not fallen into “EAR99” mode, automatically classifying all exports as EAR99 where they are, in fact, controlled under the ITAR or the EAR. Even commercial goods can become subject to the ITAR, for example, if they are modified to meet military specifications or for military use. Companies that have not undertaken a classification review in recent years should consider performing one, particularly if they are known to export goods that are controlled by the ITAR/on the U.S. Munitions List or controlled by the EAR/have an Export Control Classification Number (ECCN).

  • Trademark and trade name protections. As noted above, CBP has the ability to help bar entries that violate trademarks and trade names that are registered with the CBP. Companies that believe they are seeing infringing imports should consider taking steps to protect their intellectual property through the registration process or should consider whether seeking section 337 import protections is appropriate.

  • Training. Importers should train all compliance stakeholders annually on Customs requirements. This allows updating all relevant personnel regarding changes to CBP regulations, which often change, especially in the current environment when CBP is reflecting new statutory changes.

10. “Are there any money-saving opportunities?”

The TFTEA contains certain provisions that can aid importers. Among these are the increase of the de minimis entry threshold from $200 to $800, which increases eligibility for duty-free entries without the requirements of a formal entry; the expansion of the American Goods Returned program (HTS 9801.00.10) to certain goods that are not of U.S. origin, but were at one time in the United States; duty-free treatment for certain goods from Nepal; and enhanced duty drawback rules (available beginning in February of 2018).

Companies also should consider whether they can benefit from ways to process or import goods outside the Customs territory of the United States or otherwise without needing to pay duties, such as through the use of Free Trade Zones, the use of Customs bonded warehouses, or through use of Temporary Importation under Bond procedures. Although the exact circumstances where such measures would apply requires individual consideration, a Customs expert may be able to identify significant money-saving opportunities.

Finally, importers of record should realize that audits of imports can result in the discovery of areas of missed opportunities under free trade agreements. Chapters 89 and 99, the potential use of FTZs, TIBs, customs bonded warehouses, and other areas where there may be money-saving opportunities. An importer can perform reviews of entry data to capture opportunities of duty overpayment. If these exist, importers may be able to file requests for refunds using section 520d claims or post-summary corrections.


As shown, the landscape under the new administration is uncertain. Missteps by importers can lead to costly seizures and penalties. Fortunately, there are a great many steps that importers can take to sharply reduce their risk of a Customs audit or inquiry, or to secure a good outcome if an audit, in fact, does occur. The compliance advice outlined above is a good starting point for any importer, but a Customs specialist will be able to design a program that is tailored to the company’s individual products, import patterns, and business profile.

1 See Gregory Husisian and Robert Huey, “NAFTA and the New Trump Administration: Your Top Ten Questions Answered,” https://www.foley.com/nafta-and-the-new-trump-administration-12-01-2016/

2 See Gregory Husisian and Robert Huey, “International Trade Litigation and the New Trump Administration: Your Top Ten Questions Answered,” https://www.foley.com/international-trade-litigation-and-the-new-trump-administration-your-top-ten-questions-answered-01-06-2017/

3 See H.R. 644,114th Cong. (2016), https://www.gpo.gov/fdsys/pkg/BILLS-114hr644enr/pdf/BILLS-114hr644enr.pdf.

4 See U.S. Customs and Border Protection, Regulatory Implementation of the Centers of Excellence and Expertise, 81 Fed. Reg. 92,978 (Dec. 20, 2016). 

5 19 U.S.C. § 1592 (2011). 

6 18 U.S.C. § 541 (1994). 

7 18 U.S.C. § 542 (1996). 

8 18 U.S.C. § 1519 (2002) (“Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, … any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States … or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”). 

9 18 U.S.C. § 371 (1994). 

10 18 U.S.C. § 1956 (2016), 18 U.S.C. § 1957 (2012). 

11 18 U.S.C. § 545 (2006). 

12 18 U.S.C. § 2 (1951). 

13 31 U.S.C. §§ 3729-33 (2009-2010). 

14 See Gregory Husisian and Robert Huey, “NAFTA and the New Trump Administration: Your Top Ten Questions Answered,” https://www.foley.com/nafta-and-the-new-trump-administration-12-01-2016/

15 See Gregory Husisian and Robert Huey, “International Trade Litigation and the New Trump Administration: Your Top Ten Questions Answered,” https://www.foley.com/international-trade-litigation-and-the-new-trump-administration-your-top-ten-questions-answered-01-06-2017/.

16 Id

17 See U.S. Gov’t Accountability Off., GAO-08751, Antidumping and Countervailing Duties: CBP Action Needed to Reduce Processing Errors and Mitigate Nonpayment Risk (2016), http://www.gao.gov/assets/680/678419.pdf

18 See U.S. Customs and Boarder Protection, “Investigation of Claims of Evasion of Antidumping and Countervailing Duties,” 81 Fed. Reg. 56,477 (Aug. 22, 2016).

19 See CBP, “Forced Labor” (2017), https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations.

20 See CBP, “CBP Commissioner Issues Detention Order on Stevia Produced in China with Forced Labor,” (2016), https://www.cbp.gov/newsroom/national-media-release/cbp-commissioner-issues-detention-order-stevia-produced-china-forced; CBP, CBP Commissioner Issues Detention Order on Potassium Products Produced in China with Forced Labor (2016), https://www.cbp.gov/newsroom/national-media-release/cbp-commissioner-issues-detention-order-potassium-products-produced (2016); CBP, CBP Commissioner Issues Detention Order on Chemical, Fiber Products Produced by Forced Labor in China (2016), https://www.cbp.gov/newsroom/national-media-release/cbp-commissioner-issues-detention-order-chemical-fiber-products

21 See CBP, “C-TPAT: Customs-Trade Partnership Against Terrorism” (2016), https://www.cbp.gov/border-security/ports-entry/cargo-security/c-tpat-Customs-trade-partnership-against-terrorism

22 See CBP, “Guidance for Reimbursement Certificates,” https://www.cbp.gov/document/guidance/guidance-reimbursement-certificates.

23 See CBP, Best Practices of Compliant Companies (2013), https://www.cbp.gov/document/forms/best-practices-compliant-companies

24 See CBP, “Partner Government Agencies (PGAs) Involved with BIEC,” https://www.cbp.gov/trade/trade-community/border-interagency-executive-council-biec/partner-government-agencies-pgas-involved-biec.

Judge Gorsuch’s Opinion in Whistleblower Case Reveals the Dishonesty of his Alleged Strict Textualism

Neil Gorsuch Supreme CourtIf Judge Neil Gorsuch is confirmed, he will play a critical role in construing laws that protect worker health and safety, including laws protecting whistleblowers who suffer retaliation for opposing illegal or unsafe conduct that jeopardizes public health and safety. According to the Bureau of Labor Standards, 4836 workers were killed on the job in 2015—on average, that’s more than 93 a week, or more than 13 deaths every day. As the Occupational Safety and Health Administration (“OSHA”) is already severely understaffed and will soon be further weakened by a political appointee charged with gutting it, the last thing workers need is an activist judge who has expressed disdain for worker-protection laws. But that is exactly what we can expect from Judge Gorsuch.

In a recent dissent in TransAm Trucking, Inc. v. Administrative Review Board, 833 F.3d 1206 (10th Cir. 2016), Judge Gorsuch demonstrated that he will construe worker-protection laws as narrowly as possible and that he deems worker “health and safety” as “ephemeral and generic” statutory goals.  His opinion also reveals that his alleged values-neutral approach to statutory construction is intellectually dishonest.  The majority decision affirming the whistleblower’s win at the Department of Labor was based on the plain meaning of the statute, well-established precedent construing the statutory term at issue, and the purpose of the statute.  Judge Gorsuch’s dissent, however, was arguably activist in that it rewrites the statute.  In other words, Judge Gorsuch does not check his policy preferences or values at the courthouse door and render value-neutral decisions based on the dictionary definitions of statutory terms.  Instead, as this opinion demonstrates, his alleged strict textualism appears to be a cloak for his policy preferences, including his apparent disdain for worker protection laws.

Background of TransAm Trucking Whistleblower-Retaliation Case

Alphonse Maddin worked as a truck driver for TransAm Trucking, Inc. (“TransAm”). He was driving a tractor-trailer down an Illinois freeway on a subzero night in 2009, when he noticed that his truck was nearly out of gas. He pulled over because he could not find a fuel station, and ten minutes later, the trailer’s brakes locked up due to the frigid temperatures. Mr. Maddin was unable to resume driving the tractor-trailer and reported the truck’s unsafe condition to a TransAm dispatcher. The dispatcher told Mr. Maddin that a repairperson would be sent to fix the brakes.

Mr. Maddin dozed off briefly and awoke to find that his torso was numb and he could not feel his feet. He told the dispatcher about his physical condition and asked when the repairperson would arrive. “[H]ang in there,” the dispatcher responded.

Half an hour later, Mr. Maddin called his supervisor, Larry Cluck, and told Mr. Cluck that his feet were going numb and that he was having difficulty breathing. Mr. Cluck told Mr. Maddin not to leave the trailer and gave him two options: drag the trailer with inoperable brakes, or stay put until the repairperson arrives. Mr. Maddin knew that dragging the trailer is illegal and concluded that he might not live much longer if he were to wait for a repairperson. So, Mr. Maddin unhitched the trailer and drove off.

Fifteen minutes after Mr. Maddin left—i.e., more than three hours after he first notified TransAm that he was stranded in subzero temperatures—the repairperson arrived. Mr. Maddin drove the truck back to meet the repairperson, who then fixed the trailer’s brakes. Less than a week later, TransAm terminated Mr. Maddin’s employment for abandoning the trailer.

Mr. Maddin filed a complaint with OSHA, alleging that TransAm violated the whistleblower provisions of the Surface Transportation Assistance Act (“STAA”) by firing him. OSHA dismissed the claim, but a Department of Labor (“DOL”) administrative-law judge (“ALJ”) later ruled, after a hearing, that TransAm violated the STAA. TransAm appealed, and the DOL Administrative Review Board (“ARB”) affirmed.

Mr. Maddin’s STAA Whistleblower-Retaliation Claim

The relevant STAA provision prohibits an employer from firing an employee who “refuses to operate a vehicle because . . . the employee has a reasonable apprehension of serious injury to the employee or the public because of the vehicle’s hazardous safety or security condition.” TransAm Trucking, 833 F.3d at 1211 (alteration in original) (quoting 49 U.S.C. § 31105(a)(1)(B)(ii)). An employee’s apprehension is “reasonable” if a reasonable person in the same circumstances “would conclude that the hazardous safety or security condition establishes a real danger of accident, injury, or serious impairment to health.” Id. (quoting § 31105(a)(2)). To prevail under this provision, an employee must demonstrate that he or she “sought from the employer, and [was] unable to obtain, correction of the hazardous safety or security condition.” Id. (alteration in original) (quoting § 31105(a)(2)).

The ALJ found, and the ARB affirmed, that Mr. Maddin had engaged in protected conduct when he unhitched the trailer and “refused to operate the truck under the conditions set by Mr. [C]luck.” Id. (alteration in original). TransAm argued, on appeal, that this finding was in error because Mr. Maddin had not “refused to operate” the truck but rather in fact “operated” the truck when he drove off without the trailer.

The Tenth Circuit engaged in a Chevron analysis to determine whether to defer to the ARB’s interpretation of the STAA. Because the statute does not define “operate,” the Tenth Circuit found that Congress had not “directly spoken to the precise question at issue.” Id. (quoting Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 (1984)). Therefore, the Tenth Circuit turned to the question whether the ARB’s interpretation was “based on a permissible construction of the statute.” Id. (quoting Chevron, 467 U.S. at 843).

TransAm argued, in effect, that “operate” was synonymous with “drive.” The ARB, on the other hand, interpreted “operate” to encompass driving as well as “other uses of a vehicle when it is within the control of the employee.” Id.

The Tenth Circuit looked to the purpose of the STAA whistleblower provisions—to “encourage employee reporting of noncompliance with safety regulations governing commercial motor vehicles.” Id. at 1212 (quoting Brock v. Roadway Express, Inc., 481 U.S. 252, 258 (1987)). The court found that the ARB’s interpretation of “operate,” and not TransAm’s, furthered that purpose because it “prohibit[ed] an employer from discharging an insubordinate employee whose insubordination was motivated by the employee’s reasonable apprehension of serious injury to himself or members of the public.” Id.

Therefore, the Tenth Circuit deferred to the ARB’s interpretation of “operate” and affirmed the ARB’s finding that Mr. Maddin’s unhitching the trailer and driving away in the truck, against his supervisor’s instructions, constituted a “refusal to operate” and so was protected conduct under the STAA. Id. at 1213. The court explained that “although Maddin actually drove the truck after unhitching it, he refused to operate his tractor-trailer in the manner instructed by his employer.” Id.

The Tenth Circuit found, moreover, that Mr. Maddin’s protected activity was a contributing factor in his firing. Id. Having found that the ARB’s findings—that Mr. Maddin engaged in STAA-protected conduct and was fired for doing so—were supported by substantial evidence, the Tenth Circuit denied TransAm’s petition for review.

Judge Gorsuch’s Dissent

Judge Gorsuch took issue with the ARB’s, and the majority’s, interpretation of “refusal to operate”:

The trucker in this case wasn’t fired for refusing to operate his vehicle. Indeed, his employer gave him the very option the statute says it must: once he voiced safety concerns, TransAm expressly—and by everyone’s admission—permitted him to sit and remain where he was and wait for help. The trucker was fired only after he declined the statutorily protected option (refuse to operate) and chose instead to operate his vehicle in a manner he thought wise but his employer did not. And there’s simply no law anyone has pointed us to giving employees the right to operate their vehicles in ways their employers forbid.

Id. at 1215–16 (Gorsuch, J., dissenting). Judge Gorsuch said the majority should not have even engaged in a Chevron analysis because the STAA is “perfectly plain.”

Relying on the Oxford English Dictionary, Judge Gorsuch found that “refuse” means “[t]o decline positively, to express or show a determination not to do something”; and “operate” means “[t]o cause or actuate the working of; to work (a machine, etc.).” Id. at 1216 (Gorsuch, J., dissenting) (alterations in original) (quoting The Oxford English Dictionary 495, 848 (2d ed. 1989)). Putting those two definitions together, Judge Gorsuch concluded that, under the STAA, “employees who voice safety concerns about their vehicles may decline to cause those vehicles to work without fear of reprisal” but may not “cause those vehicles to work in ways they happen to wish but an employer forbids.” Id. (Gorsuch, J., dissenting).

To illustrate the alleged absurdity of the majority’s contrary interpretation, Judge Gorsuch used an analogy: “Imagine a boss telling an employee he may either ‘operate’ an office computer as directed or ‘refuse to operate’ that computer. What serious employee would take that as license to use an office computer not for work but to compose the great American novel? Good luck.” Id. at 1217 (Gorsuch, J., dissenting).

Judge Gorsuch then criticized the majority for its reliance on the STAA’s purpose of protecting public health and safety. In a statement revealing his policy preferences, Judge Gorsuch said that, particularly where a statute’s purpose is as “ephemeral and generic” as “health and safety,” the majority should stick strictly to the text of the statute. Id. (Gorsuch, J., dissenting).

Judge Gorsuch’s Dissent Reveals the Intellectual Dishonesty of his Alleged Strict Textualism

Read in isolation, Judge Gorsuch’s dissent sounds plausible. He takes a strict textualist approach to statutory interpretation and so rejects any consideration of legislative intent. But a closer examination reveals that his alleged use of textualism is really a cloak for his policy preferences.

Here, Judge Gorsuch purportedly relies on the Oxford English Dictionary to support his conclusion that “operate” means, by definition, “[t]o cause or actuate the working of; to work (a machine, etc.).” And the rest of his analysis follows naturally. But the same textualist approach was also relied upon by the majority to reach a contrary conclusion, one that is consistent with the purpose of the statute:

The dissent believes Congress’s intent can be easily determined by simply choosing a favorite dictionary definition of the word and applying that to quickly conclude the statute is not ambiguous at all. . . .

. . . We, too, have found a dictionary definition of the word “operate” and discovered it means to “control the functioning of.” This definition clearly encompasses activities other than driving. . . . The only logical explanation [for the dissent’s interpretation] is that the dissent has concluded Congress used the word “operate” in the statute when it really meant “drive.” We are more comfortable limiting our review to the language Congress actually used. 

Id. at 1212 n.4 (emphasis added) (quoting Operate, Oxford Dictionaries Pro, http://www.oxforddictionaries.com/us/definition/american_english/operate).

Judge Gorsuch artfully concealed the discretion inherent in his analysis, and in doing so maintained the facade of being bound by the text of the STAA. Here, he used his discretion to conclude that an employee’s firing did not violate the STAA—even though that employee spent more than three hours in subzero temperatures, without heat, after notifying his employer that his trailer’s brakes had frozen—because the employee’s actions did not meet Judge Gorsuch’s cherry-picked definition of refusal to “operate.”

Instead of taking statutory text out of context, Judge Gorsuch could have relied upon well-established STAA precedent holding that an employee who moves a disabled trailer from the middle of a busy roadway to the shoulder of the road, after being told by his employer to remain in the roadway, has refused to operate his vehicle for purposes of the STAA whistleblower law. He could also consider the purpose of the statute the majority relies upon: “to promote the safe operation of commercial motor vehicles,” “to minimize dangers to the health of operators of commercial motor vehicles,” and “to ensure increased compliance with traffic laws and with . . . commercial motor vehicle safety and health regulations and standards.” 49 U.S.C. § 31131(a).

Judge Gorsuch’s dissent fails to address the fact that Mr. Maddin’s supervisor gave him another option other than waiting in the truck without heat—dragging a 41,000-pound trailer with inoperable brakes, which is prohibited by Department of Transportation regulations. Mr. Maddin refused to carry out that instruction, and therefore he is protected under the STAA. And Judge Gorsuch’s dissent does not address the ARB’s finding that Mr. Maddin engaged in STAA-protected conduct by reporting the faulty condition of the trailer (i.e., the frozen brakes).

Judge Gorsuch will likely testify at his confirmation hearing that he is a values-neutral umpire who interprets statutes according to their plain meaning. Here, the umpire had two choices in a case decided under substantial-evidence review—a standard of review that is highly deferential to the agency. Option One was to rely on the majority’s equally compelling dictionary definition that favored the worker, the purpose of the STAA whistleblower law, well-established case precedent construing the STAA, and common sense. Option Two was to rely upon an out-of-context dictionary definition to reverse the agency, while omitting key facts from the record and ignoring case precedent and the purpose of the statute. Is it a mere coincidence that Option Two favored the employer and left the worker out in the cold? It strains credulity to claim that the author of this dissent is merely calling balls and strikes.

Judge Gorsuch’s Derision of Worker-Protection Laws

Perhaps more revealing than Judge Gorsuch’s selective use of the dictionary, however, are his characterization of “health and safety” as “ephemeral and generic” statutory goals, as well as the wording and tone of his dissent. Judge Gorsuch refuses to consider the purpose of the STAA whistleblower-protection law because “[a]fter all, what under the sun, at least at some level of generality, doesn’t relate to ‘health and safety’?” TransAm Trucking, 833 F.3d at 1217 (Gorsuch, J., dissenting). If Judge Gorsuch were construing the Religious Freedom Restoration Act, however, he would very likely consider and apply the purpose of the statute.  But according to Judge Gorsuch, the remedial goals of worker-protection laws should be ignored when construing those laws.

Note that in his dissent, Judge Gorsuch does not once refer to Mr. Maddin by name. Instead, he refers to Mr. Maddin repeatedly as a “trucker” and once as an “employee.” TransAm, on the other hand, is identified by name several times throughout the dissent. Moreover, Judge Gorsuch states that Mr. Maddin was stranded in “cold weather” and omits the fact that Mr. Madden was stuck in a truck, without heat, in subzero weather, and feared losing his feet, dying, and never seeing his family again. Minimizing Mr. Maddin’s precarious predicament enabled Judge Gorsuch to analogize Mr. Maddin’s conduct to that of an office worker who misused a work computer to “compose the great American novel.” Id. (Gorsuch, J., dissenting). But presumably, the officer worker’s appendages are not going numb in this irrelevant analogy. Given Judge Gorsuch’s dehumanization of Mr. Maddin, it is no surprise that he admits in his dissent that he deems “health and safety” to be “ephemeral and generic” statutory goals.

According to the National Highway Traffic Safety Administration, there were approximately 3500 fatal crashes involving large trucks from 2011–2014. There is nothing “ephemeral” about laws regulating the safe operation of tractor-trailers or a whistleblower-protection law that enables truck drivers to refuse to drive unsafe vehicles. As Judge Gorsuch sat comfortably in his chambers, penning his dissent, did it occur to him that human lives are at stake when TransAm orders a driver to drag a 41,000-pound trailer with frozen brakes? Did this “pro-life” jurist consider that Mr. Maddin was having difficulty breathing and his appendages were going numb when he pleaded with his supervisor for permission to drive the truck, without the trailer, to a nearby gas station? Apparently, all those considerations, along with the purpose of the statute, are irrelevant where a cherry-picked dictionary definition enables Judge Gorsuch to construe a remedial law narrowly enough for the employer to prevail. If Judge Gorsuch is really acting as a values-neutral umpire, why does he deride the purpose of the STAA whistleblower-protection law as “ephemeral” and “generic”?

Many American workers often face the daunting choice of engaging in unsafe practices on the job or instead losing their jobs for opposing such practices. Federal enforcement of worker-safety and worker-protection laws is already feeble due to Congress’s deliberately starving OSHA of resources. And with a new Administration committed to gutting worker-safety laws and enforcement thereof, we can expect that the current unacceptable number of workers killed on the job—4836 in 2015—will increase. Judge Gorsuch’s dissent in TransAm Trucking portends that such laws will be further crippled using sham textualism.

Undoubtedly Judge Gorsuch is a talented jurist and dedicated public servant. But the “forgotten man” that President Trump claims to represent would be far better served by a mainstream jurist, such as Judge Merrick Garland, who would be faithful to the statutory language and purpose of worker-protection laws.

How to Develop an Effective Law Firm SEO Action Plan for 2017 [WEBINAR]

What used to work in SEO just a few years ago won’t work today.12-must-do-action-steps.png Learn how to make this year your most profitable ever by getting consistent leads from SEO and positioning your firm as thought leaders.

Tuesday, March 14, 2017 – 3:00pm EST

Join John McDougall from McDougall Interactive and Nicole Minnis, Esq. from The National Law Review for a free 60-minute digital marketing webinar, where you will learn:

  • Step-by-step actions you should take in the next 12 months to substantially increase your revenues.
  • Powerful strategies that are based on the 10,000 keyword study from Searchmetrics, including the latest Google ranking factors including Content, Social Signals, Technical Factors, Backlinks, User Signals, and User Experience
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Some examples of cutting-edge topics we’ll be discussing (this is way more than just “add keywords” and “add more content”):

  • Why click-through-rate, time-on-site, and bounce rate are more important than ever
  • Why merely having keywords in your meta tags and copy is not nearly enough
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  • How video and podcasts can enhance your thought leadership and improve your mobile user experience and search rankings at the same time
  • Why links are still significant, especially deep links to inner pages
  • The extremely high correlation between social signals and ranking position
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This webinar will leave you with 12 must-do action steps for success, based on data from industry leaders, as well as a list of ridiculously great tools you can use to speed up your process and spy on competitors.

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Congress Begins to Evaluate Infrastructure Needs, Senate EPW to Hold Hearing this Week

Congress Capitol InfrastructureThe Trump Administration has provided few specifics on its trillion-dollar infrastructure proposal, and it has become increasingly clear that Congress will not act on a broad infrastructure bill in the first 100 days of the new administration. Recently, House Speaker Paul Ryan (R-WI) said the funding levels of any infrastructure proposal are unknown, and won’t be determined until Congress considers infrastructure funding in the greater context of the upcoming budget process this spring. To date, there is no consensus, even among Republicans, on how such infrastructure spending will be paid for.

However, Congress has begun to consider what issues and investments they will prioritize in an infrastructure bill by holding hearings in both the House and Senate. As we noted last week, the Senate Environment and Public Works (EPW) Committee will hold a hearing on “Oversight: Modernizing Our Nation’s Infrastructure” on Wednesday, February 8. The Senate EPW hearing follows last week’s kick-off hearing by the House Transportation and Infrastructure Committee on “Building a 21st Century Infrastructure for America.”

Recently, Senate Democrats have released their own $1 trillion infrastructure proposal. Their plan, “A Blueprint to Rebuild America’s Infrastructure,” would invest $1 trillion in infrastructure projects over ten years and create 15 million new jobs. The plan calls for enormous increases in Federal grant spending for a wide range of transportation and infrastructure projects, including schools, VA hospitals, and broadband service. For transportation, the plan pledges $210 billion on roads and bridges; $110 billion on water and sewer systems; $180 billion on rail and bus systems; $200 billion for a Vital Infrastructure Program (VIP) for mega-projects; $65 billion for ports, airports, and waterways; and $10 billion for new innovative financing tools such as an infrastructure bank.

Sen. Deb Fischer (R-NE) also recently introduced an infrastructure funding proposal, which would divert a total of $21.4 billion in revenues from Customs and Border Patrol fees to the Highway Trust Fund over FYs 2020-2024. Members of the House, including Rep. John Delaney (D-MD), are also advocating for their own infrastructure proposals.

This Week’s Hearings:

  • On Tuesday, February 7, the House Oversight and Government Reform Committee has scheduled a hearing titled “Accomplishing Postal Reform in the 115th Congress – H.R. 756, The Postal Service Reform Act of 2017.” The witnesses will be announced.

  • On Wednesday, February 8, the Senate Commerce, Science, and Transportation Committee has scheduled a hearing titled “A Look Ahead: Inspector General Recommendations for Improving Federal Agencies.” The witnesses will be:

    • The Honorable Peggy E. Gustafson, Inspector General, U.S. Department of Commerce;

    • The Honorable John Roth, Inspector General, U.S. Department of Homeland Security;

    • The Honorable Calvin L. Scovel III, Inspector General, U.S. Department of Transportation; and

    • Allison C. Lerner, Inspector General, National Science Foundation.

  • On Wednesday, February 8, the Senate Environment and Public Works Committee has scheduled a hearing titled “Oversight: Modernizing our Nation’s Infrastructure.” The witnesses will be:

    • William “Bill” T. Panos, Director, Wyoming Department of Transportation

    • Michael McNulty, General Manager, Putnam Public Service District, West Virginia

    • Cindy R. Bobbitt, Commissioner, Grant County, Oklahoma

    • Anthony P. Pratt, Administrator, President

    • Delaware Department of Natural Resources & Environmental Control, American Shore & Beach Preservation Association

    • Shailen P. Bhatt, Executive Director, Colorado Department of Transportation

© Copyright 2017 Squire Patton Boggs (US) LLP

You’ve Got Mail … if You’re an Employer: Seventh Circuit Rules Employees Are Not Entitled to Same Visa Revocation Notice

visa revocationOn August 3, 2016, the U. S. Court of Appeals for the Seventh Circuit ruled that only employers are to be provided notice and receive information on decisions on visa petitions issued by United States Citizenship and Immigration Services (USCIS), and reversed in part a lower court ruling that had stopped short of requiring notice to the successor employer. This case has important implications for employers that file employment-based immigration petitions. Musunuru v. Lynch, No. 15-1577 (August 3, 2016).

Srinivasa Musunuru, an Indian national, was employed by Vision Systems Group (VSG) as a programmer analyst in H-1B status. VSG started a green card petition for Musunuru, in which he was assigned a priority date of February 17, 2004, under the employment-based third preference category (the EB-3 category). A priority date controls when an applicant can file an I-485 Adjustment of Status application, the last step in the green card process. Musunuru was eventually able to file his I-485 application in 2007. He subsequently changed employers and was hired by Crescent Solutions in a similar position, which allowed him to “port” or transfer his green card process to his second employer without affecting his original priority date of February 17, 2004, or his pending I-485 application.

Crescent filed another labor certification application and I-140 petition for Musunuru, both of which were approved in the EB-2 category (the employment-based second preference category). USCIS eventually issued an amended I-140 approval notice, reflecting a later priority date of January 28, 2011 (i.e., the date Crescent filed its labor certification application on behalf of Musunuru). This new priority date impacted the ability of his pending green card application to be adjudicated immediately and added several more years of wait time.

Unknown to Musunuru, USCIS had revoked the I-140 petition that VSG had filed on his behalf (and which had established his original priority date of February 2004). USCIS took this action because VSG’s owners pled guilty to fraud in connection with a separate and unrelated H-1B nonimmigrant petition that the company had also filed. As a result, USCIS presumed all visas that VSG filed were fraudulent, including Musunuru’s I-140 petition. USCIS sent notice of its intent to revoke this petition to VSG only. It did not send notice to Musunuru. However, VSG had gone out of business and did not respond to the notice, and Musunuru had already been employed at Crescent for some time so he did not become aware of the revocation.

Both Musunuru and Crescent learned that the underlying VSG I-140 had been revoked only after USCIS sent Crescent a notice of intent to revoke Crescent’s I-140 petition filed on behalf of Musunuru. The notice explained that because of VSG’s fraud charges, Musunuru’s work experience at VSG was not considered legitimate and therefore the approval of Crescent’s I-140 petition, which relied on that work experience, should also be revoked. Crescent and Musunuru, however, were able to overcome these assertions in their response to USCIS, which did not revoke Crescent’s I-140 petition but maintained the January 28, 2011 priority date.

Musunuru filed a lawsuit in district court arguing that USCIS should have sent him the notice about the revocation of VSG’s I-140 petition and an opportunity to respond to that notice. The district court, however, found that Musunuru was not required to receive notice based on existing “porting” regulations, noting that it is the “petitioner” or employer that must receive notice and that, as the employee, Musunuru would not be given an opportunity to challenge the revocation (but the employer is).

In contrast, the circuit court found that that the new employer was the “de facto petitioner” and that Congress, through the port provisions, intended for the successor employer to adopt the ported I-140 petition filed by the beneficiary’s previous employer. Therefore, the court stated USCIS should have given Crescent notice of intent to revoke the approval of the prior employer’s I-140 petition, and Crescent should have been given the opportunity to respond to the change in the priority date. The court, however, agreed with USCIS and the lower court regarding Musunuru’s rights, stating that the employee did not have a right to receive any notice.

The Seventh Circuit recently indicated that it would not rehear its decision (issued in August of 2016) and that Musunuru’s new employer should be given an opportunity to respond to the change in priority dates.

© 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.