Chapter 12 Textbook

importing
entering goods into the customs territory of a country, requiring an administrative entry process supervised by national customs authorities

clearing customs
informal term for the administrative entry process where customs authorities determine import restrictions, applicable laws, and tariffs

tariff classification
categorizing imported goods under a specific numerical code to determine applicable tariffs and regulations

customs value
the declared value of imported goods used to calculate duties and taxes

country of origin
the country where a product was manufactured or substantially transformed, impacting tariffs and trade regulations

customs drawbacks
tariff-saving mechanism allowing refunds on duties paid for imported goods that are later exported

foreign trade zones
designated areas where imported goods can be stored, processed, or assembled without immediate customs duties

customs enforcement
process of ensuring compliance with import laws, including civil and criminal penalties for violations

harmonized system
international agreement standardizing the classification and coding of goods for trade

U.S. Bureau of Customs and Border Protection
government agency responsible for enforcing customs regulations in the United States, commonly referred to as U.S. Customs

port of entry
location where customs or immigration authorities permit the entry of goods or people, including sea, air, and inland ports

dutiable status
legal status of imported goods determining tariff rates, quotas, and labeling requirements, based on classification, value, and origin

tariff schedule
official list categorizing goods numerically with assigned tariff rates based on their classification and country of origin

Harmonized Tariff Schedule of the United States (HTSUS)
U.S. tariff schedule based on the harmonized system, maintained by the International Trade Commission

reasonable care standard
importer's responsibility to accurately classify, value, and declare imported goods to customs authorities

U.S. Court of International Trade
specialized federal court in New York City that reviews decisions made by U.S. Customs and Border Protection

U.S. Court of Appeals for the Federal Circuit
appellate court with nationwide jurisdiction over international trade cases, patents, trademarks, and administrative law appeals

Combined Nomenclature (CN)
European Union’s version of the harmonized tariff schedule, published in the Official Journal of the European Union

Customs Tariff
Canada’s version of the harmonized tariff schedule, administered by the Canada Border Services Agency

general rules of interpretation (GRI)
guidelines used to classify imported goods in the tariff schedule, requiring specialized training or professional assistance

tariff classification
process of determining the appropriate heading, subheading, and tariff item for an imported article

common and commercial meaning
interpretation of tariff terms based on dictionaries, trade literature, and industry standards unless a scientific meaning applies

two-step classification process
legal determination of tariff terms followed by factual assessment of whether an article fits within those terms

rule of relative specificity
principle that an article should be classified under the most specific tariff heading that accurately describes it

composite goods
articles made of multiple materials or components classified based on the component that gives them their essential character

principal use
classification based on the ordinary and primary use of an article rather than secondary or potential uses

actual use
classification requiring proof that an article is used as declared at the time of importation and for three years after entry

classification by use
method of tariff classification based on an article’s intended function rather than its material or composition

tariff engineering
intentional design or modification of a product before importation to achieve a lower duty rate

disguise and artifice
prohibited practice of altering a product solely to manipulate tariff classification without genuine manufacturing purpose

eo nomine provision
tariff classification based on an article’s specific name rather than its function or material

goods put up in sets for retail sale
products packaged together and classified based on the item that gives the set its essential character

explanatory notes
nonbinding guidelines from the world customs organization used to assist in interpreting tariff classifications

alphabetical index
tool at the end of the tariff schedule that helps locate the correct section, chapter, and heading for classification

heading 6306
tariff category that includes tarpaulins, awnings, sunblinds, tents, sails, and other camping goods

customs binding notes
legally binding explanations found at the beginning of tariff sections and chapters that clarify classification rules

Carl Zeiss Inc v United States
court case emphasizing the rule of relative specificity in tariff classification

Otter Products LLC v United States
court case addressing the challenge of classifying items not explicitly described in the tariff schedule

Heartland By-Products Inc v United States
court case ruling against the use of disguise and artifice in tariff engineering to circumvent trade regulations

customs value
the transaction value of imported goods, including price paid plus certain additional costs like packing, assists, and royalties

transaction value
the price actually paid or payable for imported goods when sold for export, plus specified additional charges

excluded costs from transaction value
international freight, insurance, customs brokerage fees, inland freight after importation, and import duties

royalty and license fees
payments required as a condition of sale that may be included in transaction value, such as design or patent fees

production assists
goods, services, or intellectual property provided by the importer to the foreign producer to aid in manufacturing

examples of production assists
component parts, tools, engineering services, design sketches, or specialized equipment provided to a foreign manufacturer

contract manufacturing
business arrangement where a firm outsources production to an overseas manufacturing company

rules of origin
legal rules used to determine the country from which an imported product is considered to have originated

country of origin
the economic nationality of a product, determined based on specific rules outlined in trade agreements and customs regulations

importance of country of origin
affects tariff rates, trade restrictions, antidumping duties, quotas, government procurement rules, and labeling requirements

substantial transformation
a process that changes an article’s name, character, or use, determining a new country of origin

false country of origin claims
severe penalties apply for willfully misstating a country of origin or obtaining false origin certificates

global supply chain
an international network of logistics, trade, and production relationships used to create and deliver products worldwide

tracking country of origin in supply chains
companies must monitor all inputs and manufacturing stages to comply with rules of origin and trade regulations

non-preferential rules of origin
rules that apply to imports receiving normal tariff treatment, used to calculate duties, enforce quotas, and embargoes

preferential rules of origin
rules that apply to goods traded under free trade agreements, customs unions, or trade preference programs

wholly obtained
a product that is entirely produced, grown, or manufactured in a single country from raw materials originating there

substantial transformation
a process in which a product undergoes a change in name, character, or use, making it a new and different article of commerce

essential character
the primary attribute of a product that determines its origin, often used in assessing substantial transformation

tariff-shift rule
a rule stating that the country of origin is where the last change in tariff classification of the inputs occurred

domestic or regional value content rule
a rule requiring a minimum percentage of a product’s value to be added in a specific country or region to qualify as originating there

specific processing rules
rules that define a product’s origin based on specific types of manufacturing or processing performed in a country

generalized system of preferences (GSP)
a trade program that grants preferential tariff treatment to imports from developing countries

africa growth and opportunity act (AGOA)
a U.S. trade preference program that provides duty-free access to eligible African countries

north american free trade agreement (NAFTA)
a trade agreement between the U.S., Canada, and Mexico with specific rules of origin for determining tariff benefits

buy american act
a U.S. law requiring government purchases to favor domestically produced goods unless exemptions apply

WTO agreement on rules of origin
long-term project to standardize and simplify country of origin rules, aiming for uniformity across WTO countries

European union rules of origin
EU's shift to more objective rules such as tariff-shift, value-added, and specific processing for non-preferential rules

marking and labeling of imports
US requirement for foreign-origin articles to be marked with country of origin in English, except for certain exemptions

special marking requirements for assembled articles
rules for products assembled in foreign countries from components from multiple countries, indicating final assembly location

articles not requiring marks
exemptions from marking include products incapable of being marked, crude substances, and items for personal use

federal trade commission “made in U.s.a.” rules
FTC regulates “Made in U.S.A.” claims, ensuring all or nearly all materials, processing, and components come from the U.S.

qualified claims
marking or descriptions that refer to specific processes or parts, like “Designed by XYZ in California, Assembled in China”

drawbacks
refund of duties paid on imported goods that are reexported or destroyed, to encourage U.S. manufacturers to export

foreign trade zones
legally defined sites outside customs territory for duty-deferral and saving, allowing goods to be processed or stored without paying tariffs until entered for consumption

creative uses for foreign trade zones
FTZs allow flexible strategies, such as warehousing goods duty-free, avoiding quotas, and even reexporting to space without paying duties

administration of u.s. customs and tariff laws
enforced by the u.s. bureau of customs and border protection within the department of homeland security, responsible for preventing terrorism, illegal drugs, and trafficking, collecting tariff revenue, enforcing immigration laws, and regulating imports

u.s. border patrol
part of u.s. customs, responsible for border and entry point enforcement of customs and immigration laws

customs officers
located at ports of entry, including seaports, airports, inland ports, and border crossings; supervise imports, make initial decisions on entry of goods, and enforce rules

formal entry
administrative process required to import goods, including arrival at a u.s. port of entry, inspection, payment of duties, and filing necessary documentation

entry documents
required documents include entry manifest, commercial invoice, and packing slips; must be filed within five days of arrival

commercial invoice
provides detailed information about a shipment, including names of ports, buyer and seller, description, country of origin, quantity, weight, and value of goods

payment of duties
importer must deposit estimated duties with customs or post a customs bond to ensure payment, and the duties are a personal debt of the importer

informal entries
shipments valued at $2,500 or less can be processed through an informal entry without a surety bond; mail entries valued under $2,500 can be processed through u.s. postal service

liquidation
final computation and assessment of duties by customs to close the import transaction; adjustment notices are sent if additional duties are owed

enforcement and penalties
bureau of customs and border protection has powers to establish regulations, investigate violations, and impose penalties on importers

title 19, section 1592
sets out basic enforcement and civil penalty provisions for customs laws, addressing civil violations and penalties imposed by customs

materially false statements
false statements that affect the identity, quality, value, source, country of origin, or duty rate of merchandise, can lead to penalties

negligent violations
failure to use reasonable care, skill, and competence in ensuring compliance with customs laws, can result in penalties based on the value of goods or loss of duty

gross negligence
clear evidence of reckless disregard for facts and obligations under the law, leading to penalties up to twice that for negligent violations

civil fraud
knowingly making materially false statements or omissions in entering goods into the u.s., resulting in penalties equal to 100% of the value of goods

criminal penalties
set out in title 18, chapter 27 of the u.s. code, including fines, imprisonment, and forfeiture of goods for activities like smuggling or using fraudulent customs documents

aggravating circumstances
include withholding evidence, misleading information, and illegal transshipments, which can increase penalties

mitigating circumstances
include cooperation, voluntary reporting, and good past compliance, which can reduce penalties

enforced compliance
active investigation and prosecution of customs violations by customs authorities

informed compliance
encourages voluntary compliance through education and assistance to importers on customs laws and regulations

reasonable care
importers must exercise reasonable care when handling import transactions and ensuring compliance with customs laws

reasonable care checklist
a set of guidelines published by customs to help importers understand their obligation to use reasonable care in compliance with customs laws

prior disclosure
a statute allowing importers to report their own possible violations before an investigation, limiting penalties

statute of limitations
bars actions to collect import duties after five years from the date of violation for negligence or gross negligence, or from discovery for fraud

record-keeping requirements
importers must keep records of transactions for five years, including contracts, invoices, and shipping documents, for customs verification

enforcement of penalty actions
customs can sue to collect penalties in the court of international trade, with the burden of proof depending on the violation type

binding rulings
written requests to customs for clarification of tariff classifications or duty rates, binding only to the requesting party

customs rulings online search system (cross)
a searchable database of customs rulings from 1989 to present, used by importers to find relevant rulings for their products

customs enforcement and security
customs balances security measures with the need to expedite cargo entry and facilitate international trade

informed compliance in international business
businesses must adhere to customs laws with reasonable care, often relying on trained professionals for compliance