Chapter 12

liquidation

final computation and assessment of the applicable duty on entered goods by Customs.

rule of relative specificity

If an article can be classified under two or more headings or subheadings, it must be classified under the one that most specifically - most narrowly - describes the article with the greatest degree of accuracy and certainty (GRI 3a). This is common with goods that are made of several materials or components.

essential character

in composite goods, this is what will determine the way to classify the article in the GRI's heading.

formal entry

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

ultimate purchaser

the last person in the US who receives an article in the form in which it was imported

Rules of Orgin

the legal rules used to determine the country of origin of imported products. If an item is wholly grown, produced, or manufactured in one country, then that country is the country of origin. If not, the "substantial transformation test" is used.

dutiable status

the legal status of imported goods at the time of entry for purposes of compliance with the tariff and customs laws

principal use

the ordinary use to which articles of the same class and kind as those being imported are usually put and which is greater than any other single use of the article.

transaction value

the price actually paid or payable for goods when sold for export

Preferential Rules of Origin

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

Non-preferential rules of origin

those applicable to imports from developed countries that receive normal tariff treatment (or that have "normal trade relations")

binding ruling

A determination, made by U.S. Customs, and only applicable to the United States, that classifies a specific product and assigns it a tariff rate before the goods are imported.

rejected merchandise drawback

allowed for imported merchandise that was shipped without consent, is defective, or does not conform to specifications or to samples.

same-condition drawback

A drawback of duties paid on imported goods that are re-exported in the "same condition" as they were imported, provided they were not significantly altered.

Entry Process

All commercial shipments must go through these administrative procedures that are supervised by national customs authorities and informally referred to as "clearing customs."

Harmonized Commodity Description and Coding System (HS)

An International convention adopted by the U.S. in 1989 that is administered by International Trade Commission (ITC) which is the uniform descriptive terminology based on name, use, or physical characteristics.

Customs Broker

An individual or company which provides customs clearing services to shippers of goods to and from another country.

global supply chain

an integrated international network of logistics, communications, finance, and trade relationships designed to take a product from inception through production and delivery to customers.

port of entry

any place when customs or immigration authorities permit the entry of goods or people.

composite goods

articles made of different materials or components are considered this in the GRI.

Tariff Engineering

process of modifying or engineering a product prior to importation for the purposes of obtaining a lower rate of duty

tariff-shift rule

states that the country of origin is the last country in which all 'inputs' into the finished article underwent a defined change in tariff classification

In the customs entry process what do customs authorities determine?

1. Prohibitions or product restrictions 2. Laws applicable to goods (labeling, etc.) 3. Determine tariffs or import duties (dutiable status) a. Tariff classification b. Customs value c. Country of Origin

dutiable value

Customs value of goods entered into any country - must be reported by the importer-of-record to national customs authorities at time of entry

manufacturing drawback

Designed to encourage U.S. manufacturers to export that is a refund of duties and taxes paid on merchandise that is imported.

substitution drawback

Duties paid on imported goods may be received by a U.S. firm that imports goods and then exports other goods of the "same kind and quality "

Civil customs fraud

Far more serious than negligence and this exists where there is clear and convincing evidence that the importer knowingly made a materially false statement or omission while entering or attempting to enter goods into the U.S.

US Harmonized Tariff Schedule (HTSUS)

Products fall under general headings and more specific numbers (8-10 digit codes) based on ad valorem rate, specific tariff rate, or a compound tariff rate.

Production Assists

Providing property, services, or IP to the seller by the buyer.

informed compliance

Refers to "softer" mechanisms designed to place the burden of voluntary compliance on importers.

Enforce compliance

Refers to the active investigation of customs violations and the prosecution of violators.

domestic or regional value content test

Some minimum percentage of the value of materials and direct processing operations be performed in a country in order for it to have "originated" there.

To locate the classification of an article in the HTSUS you begin where?

The description of the goods and classify by the common and commercial meaning. First you determine the meaning of the specific terms then you determine whether the actual item falls within that meaning.

General Rules of Interpretation (GRIs)

The first step in determining the dutiable status of an article is to determine its tariff classification using this, which can be found at the beginning of the tariff schedule.

Tariff Classification Question of Law

The first step is to determine the meaning of the specific terms in the tariff provisions.

When an article has several different uses what controls?

The principle use controls

Tariff Classification Question of Fact

The second step is to see if the merchandise in question falls within the meaning of the specific terms in the classification.

What is the formula for the dutiable value of goods?

The transaction value or price actually paid for goods when sold for export plus packing and crating costs, value of production assists, any royalties, and accruable proceeds of the resale.

notice of adjustment

When Customs at the port of entry determines that additional duties are owed, this is sent to the importer.

Prior Disclosure

When importers voluntarily report their own possible violations of the customs laws.

contract manufacturing

a business arrangement in which the production of goods is contracted or "outsourced" by one firm to a manufacturing firm, often overseas.

compound tax rate

a combination of both ad valorem and specific rates

tariff schedule

a listing of specific items, coded numerically and described by name or use.

drawback

a refund of duties already paid on imported goods (or other goods manufactured from the original goods) when the goods are reexported or destroyed.

Foreign Trade Zone (FTZ)

legally defined sites operated pursuant to legislation and under government license, that are legally "outside" the customs territory of the country they are in.

substantial transformation

occurs when the processing of an article results in a new and different article having a distinct name, character, or use; occurs when an HS classification changes

informal entry

personal and commercial shipments valued at $2,500 or less may be cleared through this.