KEY LEGAL ISSUES IN INTERNATIONAL TRADE
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1 KEY LEGAL ISSUES IN INTERNATIONAL TRADE 2016 Adduci, Mastriani & Schaumberg LLP BEAU JACKSON KANSAS INTERNATIONAL TRADE DAY JUNE 22, 2016
2 OBJECTIVES OF THIS PRESENTATION To identify the main U.S. federal agencies involved in international trade To address best practices in working with U.S. Customs To identify ways of protecting intellectual property in the trade context To address policy issues pertinent to a U.S. company s international business activities 2
3 U.S. International Trade Commission Adjudicates trade remedy cases WHAT U.S. FEDERAL AGENCIES ARE INVOLVED IN INTERNATIONAL TRADE? Conducts trade-related economic studies as requested by Congress and President Maintains the HTSUS Office of the U.S. Trade Representative Coordinates and implements U.S. trade policy, including negotiations and WTO litigation U.S. Department of Commerce Partially adjudicates trade remedy cases Involved in trade policy matters Administers Export Administration Regulations (within the Bureau of Industry & Security) 3
4 WHAT U.S. FEDERAL AGENCIES ARE INVOLVED IN INTERNATIONAL TRADE? U.S. Customs & Border Protection Manages all imports into the United States (Relatedly, USDA and FDA at certain ports of entry) Administers certain export-related regulations U.S. Trade & Development Agency Helps promote and facilitate U.S. private investment in developing economies U.S. Department of the Treasury (OFAC) Administers regulations concerning exports to prohibited countries/companies (sanctions programs) U.S. Department of State Involved in trade policy Administers the ITAR export control regulations 4
5 WORKING WITH U.S. CUSTOMS & BORDER PROTECTION (CBP) Before an audit (in the regular course of business): Establish a rapport with CBP personnel at all ports of entry used by the company (do not simply rely on your customs broker in this regard) Respond timely and comprehensively to all Requests for Information and Notices of Action When in doubt about a particular issue e.g., how to classify a good, whether an import qualifies for duty-free treatment under NAFTA talk to counsel and/or file a ruling request with CBP Develop, communicate, and adhere to document retention procedures Monitor CBP s website to stay current on potentially applicable rulings, Informed Compliance publications, rule changes, etc. 5
6 WORKING WITH CBP In preparation for an audit: Before the auditor s arrival, speak to him or her by telephone and establish the time and duration of the visit. Obtain as many specifics as possible. Appoint one person to coordinate all activities relating to the audit and to act as team leader during the entire process. Retrieve and examine all of the company s documents relevant to the subject of the audit, including those that are unfavorable and those that may be located abroad. Examine, but do not disclose to CBP, any privileged communications, e.g., correspondence and notes of telephone conversations with counsel. Before the arrival of the auditor, gather together in one room, in separate boxes by category, all of the relevant documents. Then, during the audit, the documents can be retrieved from this room and provided to the auditor in a separate room. Identify and interview all company personnel involved in matters relevant to the audit. Prepare potential interviewees in the same manner as a witness would be prepared for a deposition. 6
7 PROTECTING IP IN THE TRADE CONTEXT Foundational points to remember for U.S. companies investing or exporting abroad: YOU control your technology! Do not give it away in order to make deals, regardless of whatever pressure is placed on you by foreign governments or foreign business partners. The risk of IP theft is greater with overseas joint ventures than with simply exporting products to foreign markets. Be careful and cautious before entering into a foreign JV! Before investing in or exporting to a foreign market, research that country s IP system. The World Intellectual Property Office supplies a database that identifies national IPR offices around the world: Focus your foreign activities in countries that are members of the WTO. The TRIPS Agreement applies to all WTO members and requires signatories to uphold specific IPR requirements. 7
8 PROTECTING IP IN THE TRADE CONTEXT Patents, Trademarks, and Copyrights: Register your IP with CBP! Patents and trademarks are geographical and must be applied for in each country where protection is sought. Thus, try to obtain such IPR in all countries where you are selling goods or services. In particular, registering trademarks abroad is an important step in preventing brand theft and preventing foreign entities from registering competing trademarks in bad faith. A business may seek an international patent under the Patent Cooperation Treaty, which permits a single application to provide registered protection in some or all of the 148 signatory countries. This can be done through the U.S. Patent & Trademark Office: Similarly, a trademark owner may seek registration in any of the 94 countries that have joined the Madrid Protocol by filing with the PTO a single, international application: w.stopfakes.gov/faqs/how-do-i-register-my-trademark-patent-or-copyright-abroad Many countries do not require domestic copyright registration; however, registration in individual countries is advisable to secure proof of ownership in the event of infringement. The U.S. Copyright Office provides details on the copyright regimes of foreign countries: 8
9 Trade Secrets: PROTECTING IP IN THE TRADE CONTEXT Protecting trade secrets is often more important than protecting registered IP (such as patents), because trade secrets are relevant to all sorts of confidential information, including manufacturing methods, employment agreements, license agreements, and organizational policies. The WTO s TRIPS Agreement provides three requisite conditions for something to constitute a trade secret: (1) the information is not generally known or readily accessible to third parties; (2) the information has commercial value because it is kept secret; and (3) the rightful holder of the information has taken reasonable steps to keep it secret (for example, through confidentiality agreements). U.S. companies should try to target their activities in countries that have investment agreements with Western governments. A bilateral investment treaty can provide important protections to investors in the event trade secrets are misappropriated. 9
10 Enforcement: PROTECTING IP IN THE TRADE CONTEXT If faced with harmful infringing imports, take advantage of Section 337 a trade remedy administered by the U.S. ITC. Section 337 authorizes the ITC to investigate unfair methods of competition and unfair acts, including IP infringement, in the importation of articles into the United States. The vast majority of cases involve allegations of patent/trademark infringement and/or trade secret misappropriation. U.S. companies have been very successful in asserting such claims, particularly against Chinese exporters. If a violation of Section 337 is found, the ITC will completely exclude the infringing products from the U.S. market a powerful and effective remedy for U.S. companies! And Section 337 cases are resolved much quicker than district court cases, and without any jurisdictional concerns (because of in rem jurisdiction over the imported products). 10
11 SPECIAL TRADE PROGRAMS AND POLICY CONSIDERATIONS Importers and exporters should take advantage of programs and agreements that can be used to reduce duties (tariffs) and conduct business in a manner that minimizes the risk of problems arising with CBP or other authorities. Special opportunities include free trade agreements (e.g., NAFTA), preference programs (e.g., AGOA), the Importer Self-Assessment Program, the Customs-Trade Partnership Against Terrorism, and duty drawback. A list of all active free trade agreements, bilateral investment treaties, trade and investment framework agreements, and other initiatives are listed on the website of the U.S. Trade Representative, available at 11
12 SPECIAL TRADE PROGRAMS AND POLICY CONSIDERATIONS The biggest free trade agreement to date, the Trans-Pacific Partnership, is in the ratification process. Member countries are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the USA, and Vietnam. If implemented, the TPP will significantly reduce trade barriers among the signatories, opening up many opportunities for U.S. businesses. WTO developments do not directly impact most small and medium-sized U.S. companies. However, it is advisable to participate in an industry-specific trade association that can represent your company s interests on WTO and other multilateral trade issues. 12
13 CONTACT INFORMATION Beau Jackson ADDUCI, MASTRIANI & SCHAUMBERG, LLP Kansas City and Washington, DC 13
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