Chapter 12 - Imports, Customs, and Tariff Law

Rules for non-preferential

Country of origin is that single country where an article was wholly or completely produced from raw materials originating in that country - not applicable today

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

Substantial Transformation Test

US courts hold substantial transformation occurs when the original article 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 that of the original item - name, character, or use test

Tariff Engineering

the process of modifying or engineering a product prior to importation for the purposes of obtaining a lower rate of duty - permits importers to enter their goods at any step in the manufacturing or assembly process in order to obtain a lower rate of duty

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

Ways to use FTZ's

- hold pending buyer's orders or more favorable market conditions - held for exhibition and display without payment of duties - goods that arrive damaged can be destroyed - not subject to quotas and may be held until quota ends - foreign component parts can be assembled making duties payable when finished instead of individual components

Country of Origin determines

- normal tariff rates - whether import subject to a preferential tariff rate or increased rate - whether subject to antidumping or countervailing duties - whether subject to quota, embargo or other - applicability of government procurement rules - proper country of origin marking or labeling - statistical information

Tariff Clasification

A method of categorizing different types or kinds of goods based on a uniform descriptive nomenclature or terminology, according to their tariff name, use, or physical characteristics - The first step to determining the dutiable status of an item

Tariff Schedule

A nation's official schedule where classifications are found together with the tariff rate for each item according to the country form which it originated

Formal Entry

Administrative process required for the importation of goods into the customs territory of a country Goods have officially entered when: - arrived at US port of entry - goods are permitted - delivery authorized by Customs after inspection and release

Value-Added Test

Many cases look to see whether the substantial transformation has resulted in an increase in value - complying with the test can be difficult and expensive because requires firms to calculate, trace, and record all costs

Name, character, or use test

If a substantial transformation created a new and different article of commerce with a new name, character, or use - if foreign raw materials were transformed into a product of the US because that is where the last substantial transformation occurred - great emphasis given to whether the character, sometimes said to be the "essential nature" of the product or use has changed - simple assembly of component parts is not a substantial transformation unless the assembly is meaningful and significant and if it results in the creation of an article with a new name, character or use

Classification by Essential Character

If two or more headings each describe only certain materials or components of the article, the GRI (General Rules of Interpretation) requires the article be classified under the heading that describes those materials or components that give its essential character -- daytime calendar example

Ferrostall Metals Corp v. US

Japanese steel that was galvanized in New Zealand was substantially transformed to a New Zealand product, not subject to voluntary restraints between US and Japan

Foreign Trade Zones

Legally defined sites within a country that are subject to special customs procedures - monitored by the customs authorities of that country - US operate under a license from the Foreign Trade Zone Board and according to regulations of the board and the US Customs and Border Protection - FTZ's must be within a 60-mile radius of a US port of entry - intended to encourage US firms to participate in international trade by providing a "free port" into which foreign-made goods could be transported etc without payment of import duties - now used for many different purposes from warehousing to manufacturing - goods may be held for unlimited time

International Trade Commission

Maintains the US tariff schedule

Ad valorem rate

Most common basis for tariffs Based on a percentage of the value of the articles imported

Dutiable Status of Goods

Refers to the legal status of imported goods at the time of entry for purposes of compliance with the tariff and customs laws Defined by: 1. classification and coding of the article 2. customs value of the article 3. the country of origin of the article - should be determined in early stages of planning -- imperative for determining the tariff rate, possible quotas, country of origin marketing and labeling, and more -- gives essential information for determining the product costs, pricing, marketing and labeling

United States v. Mead Corp

US agencies and courts must grant limited deference to US Customs letters and rulings - Court reversed for Mead holding that the planners were not "bound diaries" on the basis of the dictionary meaning of those words - held that it owed no deference to Customs' classification, but was free to decide the classification issue anew as a matter of law

Harmonized Commodity Description and Coding System

The basis for the tariff schedules of virtually all nations - an international convention that uses uniform rules and a standardized tariff nomenclature to describe and code or classify goods

Liquidation

The final computation and assessment of the applicable duty on entered goods by Customs - makes the entry complete Time limit: within one year of entry Protest: within 90 days

Rules of Origin

The legal rules used to determine the country of origin of imported products

Binding Ruling

represents the official position of Customs with respect to the specific transaction for which it was issued

Country of Origin

that country from which an imported article is said to have originated according to specific legal rules, known as the rules of origin

Principle Use

that use to which articles of the class and kind being imported are usually put and which is greater than any other single use of the article - when an article has several different uses, the principal use controls

Transaction value

the actual price paid or payable for the merchandise when sold for exporting to the US plus some other amounts

If not wholly the growth, product, or manufacture of one country

the country o origin is that country where the article last underwent a substantial transformation into a new and different article of commerce