Imports, Customs and Tariff Law

Chapter 12

2002 West/Thomson Learning

Customs Entry Process

4 Basic Requirements: Goods arrive at US port of entry Goods not barred or embargoed from entry Customs authorizes delivery after inspection and release Estimated duty paid or Customs bond posted Required Documentation must be filed within 5 days: Entry manifest or merchandise release form US Customs Entry Summary Form Proof of right to make entry (B/L, air waybill, carriers certificate) Commercial invoice from seller Packing slips Any other documents required under special regs.
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Entry Process (Cont.)

Liquidation: final computation and assessment of applicable duty Any additional duty owed must be paid in 15 days Time limit for liquidation is 1 year Protest: must be made within 90 days Customs response 30 days for denial of entry 2 years in other cases Appeals to Customs Office in D.C. Judicial review in the Court of Int. Trade Must pay assessed duty first 180 days to file for review Appeal to Federal Circuit Court of Appeals
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Enforcement and Penalties

Civil and Criminal Penalties Making false material statements

Whether intentional or negligent Negligent: failure to use reasonable care Penalties can be severe 2x loss of duty or 20% of value

U.S. v. Golden Ship Trading

Gross negligence: act or omission done with actual knowledge or reckless disregard 2x penalty for negligent violations Fraud: knowingly making false statements up to full value of good

Aggravating or Mitigating factors affect penalty Limitations:

Negligence or gross negligence: 5 years Fraud: 5 years from discovery

Informed Compliance System

Relies on voluntary compliance responsibility on importer to comply

Must use reasonable care (Checklist) Encourage prior disclosure report errors before Customs investigation Pay unpaid duties within 30 days

Record Keeping Requirements: retain records for 5 years

Willful failure: $100K or 75% of value Negligent failure: $10K or 40% of value Willful concealing or destruction: $5K and /or 2 years imprisonment
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Preimportation Rulings

Importer can make written request for ruling in advance of entry

Binding ruling or ruling letter Apply only to particular importer

Formal Rulemaking: judicial deference (U.S. v. Haggar Apparel Co.) Informal Decisions (Binding Rulings): limited deference (U.S. v. Mead Corp.)

Judicial Review of Customs Actions

Pre-importation judicial review in extraordinary circumstances: irreparable harm to importer

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Dutiable Status of Goods

Determined by classification, value and country of origin

Harmonized Tariff schedule of U.S. 1989 called the Harmonized Code All entering goods dutiable unless exempted Locate article in HTS, then determine rate Special schedules for NAFTA, GSP Importers must use reasonable care

Classification of goods:

Camel Mfg. Co. v. U.S.

Common Meaning Rule: understanding HTS descriptions: look to common meaning

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General Rules of Interpretation

Govern use of HTS

Headings are only guides Essential character controls

Eo nominee - common name

Physical characteristics Articles use Common popular over commercial meaning Use most specific description All else equal, last in numerical order

Better Home Plastics Corp. v. U.S.

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Customs Valuation

Establish dutiable value at time of entry Dutiable value: transaction value of goods

Price actually paid for goods plus packing costs, selling commission paid by buyer, value of an assist, royalty buyer is responsible to pay, proceeds of any resale that accrues to buyer Exclusions: freight charges, insurance or brokers fee, inland freight, assembly fees, import duties

GATT 1994 Agt. on Customs Valuation: attempt to unify methods of calculation

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Country of Origin

Critical in entry process Rules of Origin determine and report country of origin Various tests: Substantial transformation Gibson-Thomsen Co. v. U.S. new article National Juice Products Assoc. v. U.S. value added Uniroyal, Inc. v. U.S. major feature Ferrostaal Metals Corp. v. U.S. changes character Name, character or use test NAFTA Tariff Shift rule Trade preference rules Textile and apparel rules of origin GATT / WTO rules develop uniform approach FTC & Customs rules for labeling and marking imports
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U.S. Trade Preferences

Generalized System of Preferences (GSP)

Beneficiaries are developing countries graduate off list Products must be designated as eligible Competitive annual review

GSP rules of origin: at least 35% value added in GSP country

Product of, or substantially transformed in designated beneficiary Imported directly into US

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Other US Preferences

NAFTA, CAFTA, other free trade agreements Caribbean Basin Economic Recovery Act (1983)

Encourages manufacturing in Caribbean: goods imported to U.S. at favorable rate 2000 Caribbean Basin Trade Partnership Act: increased scope of preferences

Africa Growth and Opportunity Act of 2000: aid sub-Saharan countries Andean Trade Program: promote development and combat drug trafficking
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Other Customs Issues

Drawbacks refunds of duties paid

99% of duties refunded on imports that are processed, etc. and reexported within 5 years

Same-condition drawbacks re-exported but not re-processed Substitution drawbacks for fungible goods or commodities

Return of US Exports subject to duty on re-importation

Exceptions: not substantially altered; repaired goods; US components assembled abroad 13

FTZ: Foreign Trade Zones

Goods imported into FTZ not subject to tariff until goods are released into the stream of commerce No time limit for stay in FTZ Not subject to quotas while in FTZ Firms can set up special purpose subzones Nissan v. U.S.: FTZ preference not for goods installed, used or operated in FTZ
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Business Implications

Planning essential

Margin may be ruined by adverse Customs ruling Knowledge of appropriate classification, entry process and rules of origin Tariff engineering Potential benefits of FTZs

Stay current with GSPs and free trade agreements

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Web Sites

http://www.customs.ustreas.gov http://www.usitc.gov http://www.ftc.gov http://www.nafta.org http://www.access.gpo.gov

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