Coudert Brothers' Customs And International Trade Practice: At The Heart Of Business In The Global Marketplace

Saturday, May 1, 2004 - 01:00
Robert L. Eisen

Editor: Mr. Eisen, please provide our readers with something of your background and experience.

After graduating from the NYU School of Law in 1970, I went to work with U.S. Customs in their General Counsel's office. I worked there for ten years, in both New York and Washington, DC. For the last 24 years I have been in private practice. I came to Coudert Brothers in 1985 to add customs law to its existing trade law expertise.

Editor: As one of the first - perhaps the first international law firm - Coudert Brothers has been engaged in customs and international trade for a very long time. As the head of this practice group at the firm, would you describe its work?

Coudert Brothers is unique in having both global depth and local market expertise in both the customs and trade areas. For the most part, we handle U.S and global customs work out of our New York office. U.S. trade work is performed in our Washington, DC office, and EU customs and trade work is done out of our Brussels office. While the three major concentrations of expertise in customs and international trade reside in those offices, we also have customs and trade capabilities in other locales, most particularly in our China offices - Hong Kong, Shanghai and Beijing - in London, Thailand and in Germany. At the moment we are focused on increasing our customs and trade capabilities in China. China is simply synonymous with trade, particularly for the U.S. markets. This is extremely exciting for Coudert because we were the first U.S. law firm in China - something your publication noted in interviewing our Shanghai partner Owen Nee last December - and we benefit from a longstanding presence in the country. With the phenomenal growth of the Chinese economy in recent years, there has been a dramatic change in the pattern of our work. Where we once represented an inflow of investment, foreign enterprises desiring to do business in China, it is now a two-way street. Today we represent a great number of Chinese corporations. They are mature consumers of legal services, and we see in this development the largest growth area for our business.

Editor: Do the lawyers in the customs and international trade group team with lawyers from other practice areas in representing the firm's clients?

Coudert's business model is to service clients in the global marketplace through interrelated cross-border practices combined with an unusually deep commitment at the local level. So it is natural that the customs and trade group works with many, if not most, other Coudert practice groups on an ongoing basis. First and foremost, we work hand-in-hand with the tax group. That is an obvious connection because of transfer pricing issues that cross over between customs and tax. Too many companies have received sound tax advice only to find that it created serious customs problems and vice versa. The second most important practice group, from this standpoint, is intellectual property. Customs has a particular tie to intellectual property because of the ongoing issues of gray market goods, counterfeiting and so on. A third area is litigation, especially white-collar crime. There are many other areas of interface, of course, and there are geographical links as well. Everyone in the customs and international trade practice group is working with colleagues in New York, Washington and Brussels on a regular basis, but also with colleagues all across the world. We just sent one of our senior associates to the Beijing office, for example, and we are planning to send another to Shanghai in the near future.

Editor: Would you tell us about global duty strategies for U.S. imports?

At least half of what we do is concerned with the development of duty saving strategies and techniques, both nationally and on a global level. At present we are working with our tax lawyers to implement a series of strategies to effectively reduce the duty on the "entered value" of goods for customs purposes. These strategies also have applicability in other countries, and the utilization of U.S. judicial and administrative precedent in these other jurisdictions is an exciting and interesting development for us. We are also one of the lead firms involved in the Harbor Maintenance Tax case, which concerns a tax on exports. We managed to have this overturned by the U.S. Supreme Court as violative of the "Export Clause" of the Constitution. While that case is ongoing, we have expanded the concept to eliminate or reduce taxes on exports of specific products. We represent, for example, virtually the entire coal industry in the United States in seeking to have these export taxes overturned.

Editor: You are really touching on just about all bases.

Superficially, the customs practice might appear to be very much of a specialty. There are perhaps 200 customs lawyers in the country, and half of them work for the government. The reality of the practice, however, is that it goes to the very heart of a client's business, and it touches upon just about every other practice area that a law firm - particularly one that provides cross-border solutions - offers to its clients. The global marketplace is increasingly interrelated, and so are the cross-border global practices at Coudert.
Editor: What about the future? Is the gradual extension of free trade agreements across the world likely to continue? What are the implications of a world without tariffs, import duties and the like?

As a general proposition, I would say, yes, free trade agreements are likely to extend into a great many new places across the world. However, the effect of such a development on a practice such as ours is not what you might expect. It is, indeed, counterintuitive. To the extent that the free trade process results in the reduction and ultimate elimination of duties, conventional wisdom would say that a direct result should be a reduction of work in the customs area. In point of fact, as duties go down, private trade remedies increase. Another way of saying this is that the diminution of the customs practice directly corresponds to an increase in the international trade practice as companies seek to protect themselves from unfair trade practices. Let me give you another example of how free trade agreements change the "playing field" in an unexpected way. The implementation of NAFTA, to use one example, has resulted in the reduction in a great deal of work that existed back in the 1980s, but a tremendous volume of work has arisen to replace it. Where customs work involving many agricultural products originating in Mexico has simply evaporated because the country of origin of a product such as asparagus is obvious, work involving the assembly of, say, cell phones in Mexico utilizing components from Finland and Japan for export to the United States has exploded. There are very complex country of origin rules that govern such a process, and NAFTA may or may not apply after the rules of origin are applied. That is not well understood by many enterprises seeking to utilize NAFTA to send their goods into the U.S. duty free, and the consequence is a tremendous amount of work for those law firms with customs and global trade expertise.

Editor: What about the accession of China to the World Trade Organization? This opens up enormous new markets for Western goods, but it also opens up markets in the West to goods manufactured in China where the Chinese have a great advantage as a result of their labor costs. What are the implications of such a development?

There is no way to overstate the impact on international trade that China is having at present and will have in the future. China has a reputation for having a good work ethic. Chinese employees are diligent and hardworking. They are very intelligent and increasingly comfortable with the production of sophisticated goods, and, at least so far, there has been little or no labor unrest in the workforce. I do not think any multinational company should put all of its eggs into the Chinese basket, but certainly bilateral trade with China (in both goods and services) is going to be the number one trade issue in the future.

Editor: Will you tell us about the elimination of textile quotas by the end of this year? What does that mean from our perspective? China's?

This is a very significant issue at present. Twenty years ago it certainly seemed like a good idea to everyone but the U.S. textile lobby. Even ten years ago, when the U.S. government committed to the elimination of quotas, it had great support among importers because of the expected reduction in cost. But, all of this took place before China had become a major exporter of apparel. Today China is the most important exporter of both finished apparel and textiles to the U.S. China is the clear winner in the elimination of quotas, and the losers are the other countries - Turkey, Mexico and Bangladesh, for example - that produce for the U.S. market. Those that advocated in favor of the elimination of quotas have now become aware that their elimination benefits China and injures, and possibly devastates, those other countries. These other exporting countries, of course, are now actively opposed to the elimination of quotas. So too are many American importers. They know how to operate under the current quota system ("the devil you know"), but there is a great deal of uncertainty about what is going to happen once it is scrapped. I think there are several factors that must be taken into consideration. In the first place, I believe it imperative that the U.S. avoid a trade war with China. There are too many ways in which a hostile China might undermine U.S. interests in the political sphere. Nevertheless, there is going to be considerable pressure on the U.S. to address the negative implications of eliminating quotas through the "safeguard" provisions that are incorporated into the agreement, and I think that all of the consequences - both immediate and longer-term - must be thought through with considerable care.

If, for example, the U.S. eliminates quotas and, as a result, U.S. corporations begin to file anti-dumping cases, what is the Chinese response likely to be? Suppose China counters such a development by filing anti-dumping cases of its own? These are questions that clients are asking of our international trade lawyers on a daily basis.

Editor: Globalization is one of the most passionate issues before the international community at present. People tend to be strongly in favor of it or very much opposed. Is it a good thing in your view? Is it irreversible at this point?

Globalization is a fact of the times in which we live. Currently, the term "outsourcing" has attracted a great deal of attention. Those companies that embraced the concept early on - and I have represented more than a few - have undeniably benefited. They went to cheaper labor markets for their products, and as a result they have been able to sell their goods in the U.S. at more competitive prices. To be sure, workers in the U.S. have been displaced, and that is certainly not a good thing. On the other hand, the company and its shareholders have benefited and so have the consumers. It is very difficult to categorize globalization as either good or bad. It is simply the prevailing state of affairs, and I think it is necessary to acknowledge that fact. Is it inevitable? In light of what has taken place in recent years, it is difficult to see how it can be seen as otherwise. Of course, it is nothing new for Coudert. It is a development that is an historical tradition here. Its current manifestation will also receive a great deal of attention from the customs and trade group at Coudert Brothers - we plan to go where we can best help our clients achieve their cross-border business goals in the global marketplace.

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