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Settlement Claims Are Not Capital Gains, Federal Circuit Rules

As if guiding taxpayers away from the hazards of the tax code, the Federal Circuit drew a line: settlement payments are not capital gains; they're regular income.

The difference between capital gain and regular income is material when the different tax liabilities are taken into account. In either case, settlements paid in exchange for someone to go away do not qualify as a "sale or exchange of a capital asset."

The Continued Dumping and Subsidy Offset Act's petition support requirement does not violate due process, the Federal Circuit ruled recently. That Act, also known as the Byrd Amendment, though in effect only briefly, allowed for the collection and distribution of duties on imported goods found to have been dumped into the U.S. market by foreign producers. Only domestic producers who supported the petition are allowed to receive the collected funds.

That petition support requirement, however, effected support decisions that were made before the law was passed. Thus, producers who did not support a petition were stopped from receiving antidumping duties, even though they had no prior warning that this would be the case. That was a reasonable requirement, the court found, one which rewarded producers for the support of the law.

What Is a Bra? Fed. Cir. Decides in Victoria's Secret Tariff Case

The Harmonized Tariff Schedule of the United States is a 3,000-page book that classifies every single thing that enters the country, all for the purpose of determining how to tax it when it gets here. For example, black tea is free, but flavored green tea will cost the importer 6.4 percent. A T-shirt made of man-made fibers has a whopping 32 percent tariff, but if it's cotton, then it's only 16.5 percent.

The point is that how you classify something makes a big difference when it comes to paying taxes. Victoria's Secret, like most clothing companies, manufactures clothes overseas and then imports them. They make something called a Bra Top and another thing called a Bodyshaper. The Court of International Trade said these were "other garments, knitted or crocheted," which requires a 10.8 percent tariff. Victoria's Secret, on the other hand, says they should be considered "brassieres, girdles, corsets [...] and other similar articles and parts thereof." That's only 6.6 percent.

It's not every day that we get to read a Federal Circuit opinion deciding what tariff classification a product should be given. It's your lucky day, as the Federal Circuit recently opined on the nature of paper hole punches used for scrapbooking.

The Federal Circuit had to determine, "[w]hat's in a name?," and found in this case, the answer was "everything."

Are Chinese Sacks Subject to Duty Tax?

A Chinese plastic manufacturer that did not cooperate with U.S. Commerce investigations was saddled with a “country-wide” duty on all of its woven plastic sacks being imported to the U.S., and the Federal Circuit Court upheld Commerce’s decision.

Are political squabbles with China affecting companies who export goods from China to the U.S.?

Fed. Circ. Remands Son-of-Boss Tax Sham Case

The Federal Circuit Court of Appeals came down with a ruling on a Son-of-Boss case.

Before we get into the details of what a “Son-of-Boss” case really means, let’s talk a bit about the court’s ruling.

Fed Circ. Dismisses Tax Refund Suit for Badly Filed Tax Returns

Tax day was earlier this week and a recent case before the Federal Circuit Court of Appeals came out just in time, elaborating the prerequisites of bringing a refund claim.

As with most tax claims that reach the Federal Circuit Court of Appeals, the case doesn’t break down tax issues as much as it talks about appellate procedure in tax cases.

U.S. Cannot Impose Countervailing Duties on Chinese Goods

In a ruling that has critics prophesying doom for American industries, a three-judge panel of the Federal Circuit Court of Appeals held that the government cannot impose countervailing duties against China's subsidized tires.

Because China is a non-market economy, the Federal Circuit upheld the U.S. Court of International Trade's order that U.S. countervailing duty law does not apply to Chinese imports. However, the federal court of appeal unanimously affirmed the Trade Court's ruling on a different ground.

The Trade Court initially held that imposing countervailing duties on non-market economy goods could lead to "double counting" since antidumping duties are already assessed on such goods. The Federal Circuit, on the other hand, held that Congress did not intend for government payments to companies in non-market economies be characterized as subsidies.

Fed Circuit: Mellorine Not an Article of Milk

I scream, you scream, we all scream for ... mellorine?

If Arko Foods International's mellorine is your preferred non-dairy, frozen dessert you can rest assured that your favorite treat remains something "other" than "an article of milk."

For those of you who are unfamiliar with the product, mellorine is frozen dessert similar to ice cream, but with vegetable or animal fat substituted for at least some of the butterfat. Arko imports six flavors of mellorine relevant to this case: purple yam, fruit salad, mango, macapuno, (a type of coconut), durian, (a fruit), and Quezo Royale, (a cheese and coconut flavor also known as Quezo Real).

SKF USA Inc. v. US, 10-1128

Antidumping duty orders on ball bearings

SKF USA Inc. v. US, 10-1128, concerned a challenge to the decision of  the Court of International Trade, affirming the final determination of the United States Department of Commerce in its seventeenth administrative review of antidumping duty orders on ball bearings and parts thereof from France, Germany, Italy, Japan, Singapore and the United Kingdom.