Chapter 12: Imports, Customs & Tariff

imports, customs & tariff

formal entry of goods into u.s. customs territory

u.s. customs territory

goods arrived at us “port of entry” (323 in us/10 in mn)

not forbidden entry

delivery is authorized after inspection and release

estimated duties paid or customs bond is posted

denied entry

entry documents must be filed in 5 days, including:

• entry manifest or merchandise release

• us customs entry summary form

• proof of right to make entry (bill of lading, air waybill, etc.)

• commercial invoice from seller

• other documents (e.g., certificate of origin)

formal entry

if duties assessed: deposit them when filing documents or post bond

paying a customs broker doesn’t relieve importer of liability to pay duties

lien attaches to the merchandise

liquidation and protest

liquidation: final computation and assessment of applicable duties

notice of adjustment: if additional duties are owed

liquidation must occur within a year of entry

importer may protest the liquidation

possibility of judicial review at court of international trade

ways to get in trouble (civil penalties)

making a materially false statement to customs (identity, quality, value, source, country of origin, or tariff rate)

negligence: importer failed to use reasonable care, skill, and competence

gross negligence: clear and convincing evidence of reckless disregard of legal obligations (double the penalties)

civil fraud: knowingly making a material false statement or omission (penalty: 100% of the value of goods)

ways to get in trouble (crimes)

use of false or fraudulent customs documents

destroying invoices to cover up fraud

making false statements to customs officer (max two years imprisonment &/or a fine)

smuggling or attempting to smuggle without customs clearance (up to 20 years in prison)

other crimes: drug smuggling, conspiracy, money laundering, etc.

binding rulings or ruling letter

request ruling on product from customs

can research online for similar rulings

ensure validity of approach/avoid compliance problems and audits

rulings have the force of law

dutiable status of goods

three factors impact the tariff that will be charged:

classification

customs value

country of origin

harmonized tariff schedule (us)

harmonized classification system (harmonized commodity description and coding system)

chapter: first 2 digits

heading: first 4 digits

subheading: first 6 digits

tariff items: first 8 digits

statistical break: 9th & 10th digits

dutiable status of goods

tariffs, restraints on imports, and other import controls are applied to goods according to the item’s dutiable status

classification of goods follows the harmonized commodity description and coding system

dutiable status of goods (tariff schedule)

outline of the u.s. harmonized tariff schedule (htsus) since 1989

ad valorem rate

specific tariff rate

compound tariff rate

dutiable status of goods (classification by common and commercial meaning)

classification by common and commercial meaning

see otter products, llc v. u.s. (2015 case)

dutiable status of goods (classification by use)

principal, ordinary use controls

actual use may be used (noted in customs documentation)

rule of relative specificity: more specific description trumps general description

Carl Zeiss Inc. v. US

• classification based on actual use of medical equipment

• when prima facia classifiable under 2 or more headings, more specific description trumps more general description

dutiable status of goods (classification by essential character)

see the better home plastics corp. v. united states (1996) case - shower curtain

interpretation rules

rule of relative specificity: find the most specific, accurate descriptor

example: christmas tree candles classified under candles, not christmas decorations

unfinished items classified as the finished item if they have essential character and are essentially described as it

interpretation rules (classification methods)

classify mixtures by broader references

• example: Dicalcium citrate is not in HTS, but it is a salt of citric acid. Classify as 2918.15.90.19: Salts and esters of citric acid, Other.

if something can be classified multiple ways, choose the most specific

heading describing the whole product is preferable to one describing components

if components, classify by essential character

if all else fails, use the higher number

rules of origin

country of origin determines:

normal tariff rate

preferential or increased tariff rate

antidumping or countervailing duties

quota, embargo, or other trade restrictions

government procurement rules

labeling and statistical information

rules of origin (general rule) in the US

if an item is wholly grown, produced, or manufactured in one country, then that country is the country of origin

substantial transformation test

ocurs when the original article or product loses its identity as such and is transformed into a new and different article of commerce having ‘a new name, character, or use’ different from original item

example: chair parts substantially transformed into chairs, winding ribbon for typewriter onto spool transformed it because imported spool

non-preferential rules of origin

substantial transformation test

ferrostall metals corp. v. united states (1987): galvanized japanese steel was substantially transformed into a new zealand product, not subject to voluntary restraints between US and Japan

the value-added test

bill of lading

once you, a carrier, is notified that the goods arrived at an import, you show up with the bill of lading which details the terms of shipment, shows a receipt for the goods, and authorizes you to be there so you can claim the goods

certificate of origin

one of the main pieces used to assess the right tariff (from the right country)

how to classify goods

classification by name, physical characteristics and principal use

• principal use: how products of that kind are actually used

• if use and name, usually the use is deemed more specific and controls

may also be classified by actual use

• product used for purpose listed in schedule

general rules of interpretation

integral part of HTS

headings are only guides

article described includes the completed finish product as well as the uncompleted if it has the character of the uncompleted product

nationality of items

rice grown in china, processed into cereal in Philippines, sold in eu

• the item’s nationality is from the Philippines

copper from chile, processed into wire in Canada for sale in us

• nationality is from Canada b/c it underwent a substantial transformation, but other answers can be correct if you justify it

car assembled in Mexico from parts manufactures in China, Japan, Taiwan, Mexico, and the US

• car is considered to be made in the country where the assembly plant is (where the final (substantial transformation) assembly takes place)