International Business Law Exam 5

Importing

is the entering of goods into the customs territory of a country.

Customs Territory

is a geographic territory with uniform customs regulations.

Customs

is the place at a port or airport where officials check incoming goods, travelers, and luggage.

U.S. Bureau of Customs and Border Protection

is the customs regulatory authority in the U.S.

Customs Law

includes tariff law and the regulatory control over goods and people as they cross international borders.

Tariffs Law

is the body of laws and regulations that determines the tariff or “dutiable” status of goods and the rate of duty.

Dutiable Status

of goods is the legal status of the imported goods at the time of entry.

Tariff Classification

is a method of categorizing different types or kinds of goods based on uniform descriptive terminology according to their name, use, and physical characteristics.

how do we CLASSIFY this item so we know what TRADE to put on it?

determines what category a product belongs to so the government knows what tariff (tax) to charge when it is imported.

Tariff Schedule

includes classifications of all items and, next to the classicization’s, the tariff rates for each item.

Harmonized Commodity Description and Coding System

uses standardized terminology to classify goods.

Example of Harmonized Commodity Description and Coding System

Example:

Import chocolate

Tariff rate for “bars of chocolate” is 13.5%

Tariff rate for “liquid chocolate” is 2.9%

Classification by essential character

states that if an imported good is made up two or more different materials, that could be classified under different tariff schedules (with different tariff rates), then the imported good will be classified under the tariff schedule that describes the materials that give the article its essential character.

Example of Classification by essential character

Example:

A bath curtain set is imported

The set has:

A cloth curtain

And plastic liner

Example of Tariff Schedule

Example:

“Other household and toilet articles, of plastics” is 3.36%

“Curtain and interior blinds” is 12.8%

Essential Character

is the attribute which strongly marks and serves to distinguish what an article is.

Example:

• A fabric shower curtain

• With a plastic liner

Customs Value

is the transactional value of the goods.

Transactional Value

is the price actually paid for the merchandise when sold for exports in the U.S.

Purchase price

Country of Origin

is that country from which an imported good is said to have originated according to specific legal rules called the rules of origin.

Which country the product originated in

Rules of Origin

are the legal rules used to determine the country of origin of imported products.

steps/rules we follow to determine which country the product originated in

Example of Country of Origin

Example:

Imported bananas were grown completely in Honduras, and they were shipped directly from Honduras to the US

Country of origin is Honduras

Non-Preferential Rules of Origin

are those applicable to imports of developed countries that will receive normal tariff treatment.

these RULES say if a country or ORIGIN is a developed country, they will not receive PREFERENTIAL treatment by getting a lower tariff

Developed Country

generally has a high per capita income, has a higher standing of living, and are in later stages of industrialization.

Wholly Obtained Rule

is the general rule applicable to most non-preferential trade where the country of origin of an article imported into the U.S. is the country in which the article was wholly obtained.

Wholly Obtained

means that it was wholly the growth, product, or manufacture of one country.

Substantial Transformation

occurs when the original article/good loses its identify as such and is transformed into a new and different article of commerce having a “a new name, character, or use” different from the original item.

Example of Substantial Transformation

Example:

Japan makes wooden handles

Japan sends them to China

China drills holes in the wooden handles and adds bristles to makes it into a hairbrush

China sends those hairbrushes to the US

A substantial transformation happened in China

Preferential Rules of Origin

are those applicable to goods traded within a free trade area or customs union, or that receive preferential tariff treatment under trade preference programs for developing countries.

determine whether a product qualifies for lower or zero tariffs under a trade agreement.

Free Trade Area

consists of two or more countries that are a party to a free trade agreement that reduces or eliminates tariffs on goods and removes trade barriers.

The United States-Mexico-Canada Agreement (USCMA)

is a free trade agreement between the United States, Mexico, and Canada, and it replaced the North American Free Trade Act (NAFTA).

Customs Union

is a group of countries that have agreed to charge the same import tariffs as each other and allow free trade between themselves.

Example:

The European UNION is a customs UNION

Developing Country

generally has lower per capita income, lower standard of living, higher foreign debt, more rapid population growth, and a history of greater state control over their economy.

Trade Preferences

or preferential tariff treatment, to developing countries to help further their social and economic developments.

are special benefits that countries give each other to make trading easier and cheaper.

Tariff-Shift Rule

states that the country of origin is the last country in which all “inputs” (raw materials, component parts, etc.) in the finished product underwent a defined change in tariff classification.

determines whether a product qualifies as originating from a country based on whether its materials were changed into a different product during manufacturing.

Example of tariff Shift Rule

Example:

China makes wooden handles

China sends wooden handles to Canada

Canada drills holes in wooden handle and adds bristles

It went from the tariff classification of “wooden handles” and shifted to a tariff classification of “wooden hairbrushes”

So the country of origin is Canada

So we will do really low tariffs or no tariffs at all on Canada, because its in a free trade area with us

Regional Value Content Test

requires some minimum percentage of the value of a finished article to be added in a country in order for it to have “originated” there.

test determines how much of a product was made or produced in a specific country or region.

Example of Regional Value Content Test

Example:

The US has a preference program for Caribbean countries

These Caribbean countries are considered beneficiary developing countries

This preference program requires that at least 35% of the makeup of that product be done with Caribbean products, then it will pass the regional value test and receive preferential tariff treatment

Antidumping Duties

are special import tariffs assessed in addition to the normal tariffs already imposed on those particular goods, for the purpose of offsetting the unfairly low price of dumped goods.

Embargo

is an official ban on trade with a particular country.

U.S. Bureau of Customs and Border Protection

is the customs regulatory authority in the U.S.

Ports of Entry

include major seaports, airports, and border crossings.

Formal Entry

refers to the administrative process required to import goods into the customs territory of a country.

Customs Fraud

involves civil and criminal violations when a person knowingly makes false information to Customs about imported goods or actual people when entering or attempting to enter the U.S.

The U.S. Customs Marking Rules

require that the country of origin of every article of foreign origin imported into the U.S. must be permanently marked in English in a conspicuous place.

Conspicuous

means to attract attention or notice.

means something that is easy to see, notice, or recognize.

Ultimate Purchaser

is the last person in the U.S. that receives an article in the form in which it was imported.

Ultimate

means to happen at the end of a process; final.

The Federal Trade Commission (FTC)’s Marking Rules

apply primarily to the use of goods made in the U.S.A.

Unfair or Deceptive Trade Practices

are representations, omissions, or practices that misleads a consumer.

Deceptive

is giving an appearance or impression different from the true one; misleading

Omission

is the act of excluding or leaving out something.

doesn’t tell you what they should

Virtually All

means almost entirely.

Materials

involves all raw materials needed for the manufacturing of a product.

Example of Materials

Example:

A business here in the US uses cotton as a material to make some pillows

That cotton was all grown here in the US

Processing

is to perform a series of mechanical or chemical operations in order to change something.

Example of Processing

Example:

The cotton grown here in the US is also processed here in the US

Component Part

is a small part that can be considered separate from the whole.

a small part of a bigger item

Example of Component Part

Example:

The cotton was grown and processed in the US

When the pillow is being put together, the business uses one button on the front of the pillow as a decorative feature

The button was made here in the US

That button is a component part, because it’s a small piece of the pillow

Negligible

means a very small amount.

Example of Foreign Content

Example:

We make a pillow using cotton grown and processed here in the US

We add a small yarn tassel to the pillow to make it more decorative

The small yarn tassel was made in China

That tassel will be considered negligible foreign content

Qualified Claim

is one that indicates that the product was partially made or processed in the U.S.

Substantial Transformation

occurs when the original article/good loses its identify as such and is into a new and different article of commerce having a “a new name, character, or use” different from the original item.

Significant Amount

is large enough to be important or affect a situation to a noticeable degree.

export

is the act of shipping controlled items out of the U.S. OR the transfer of controlled items or technology to a foreign national, whether they are located inside or outside the U.S.

foreign national

is an individual who is neither a U.S. citizen nor a permanent legal resident of the U.S.

=foreigner from another nation

export control

is a law or regulation that governs the licensing of certain goods and technology exported from the U.S. or “transferred” in some way to non-U.S. citizens.

Commercial Items

are intended primarily for civilian use.

Dual-Use Items

are commercial items that may also have military or “proliferation” uses (relating to the proliferation of nuclear, chemical, or biological weapons).

DO NOT include weapons, munitions or defense systems

Proliferation

is defined as a rapid and often excessive spread or increase.

Example of Dual-Use items

Example:

A set of brake pads made for a fire engine can be used in heavy military equipment

items are products or technology that can be used for both everyday civilian purposes and military purposes.

controlled technology

as the specific information and know-how necessary for the development, production, or use of a product.

National security controls

are used to prohibit the export of goods or technology that would make a significant contribution to another country’s military that would be detrimental to the U.S.’s national security.

deemed export

is the communication or other transfer by an American citizen of technology, technical data, software and source code, encryption technology, or any other controlled information to a foreign national.

Foreign policy controls

ensure that the U.S. is not giving items to repressive governments so those repressive governments can use those items against their own people.

Items stay on the list for 1 year, unless renewed by the president

Example of Foreign policy controls

For example: Don’t want our handcuffs being use in a representative government

Short supply controls

apply to certain foodstuffs, medicines, basic metals, or natural resources.

Example of Short supply controls

For example: during wartime, the US may limit the export of brass because we need it to make weapons

export license

is required for each export of a controlled item. Apply and get a license from the Bureau of Industry and Security (BIS), which is part of the U.S. Department of Commerce.

Keep export records for 5 years

end user

the person that will ultimately END up with the item or technology and USE it

entity list

is a list of entities or organizations engaged in the proliferation of weapons of mass destruction.

a list of entities/governments that have weapons of mass destruction

Specially Designated Nationals and Blocked Persons List

is a list of individuals and organizations that represent countries known to be involved with terrorism and drug trafficking.

A list of people that have been designated as foreign nationals that are terrorists or drug traffickers, and we want to block exports to them

Denied Person’s List

is a list of persons whose export privileges have been denied or revoked.

a lists of persons that messed up their exports, so we are denying them the right to receive exports from US citizens when the denied person is outside the US

Sanctions

are regulations that prohibit U.S. citizens or companies from doing business with certain foreign governments, organizations, or individuals that:

USA Patriot Act

allowed for new federal crimes and penalties to be made relating to terrorism.

A law that gives the government additional tools to investigate and prevent terrorism.

International Emergency Economy Powers Act (IEEPA)

is the statute that gives the president power to deal with peacetime emergencies.

The president has power to do sanctions at time of peace for emergencies