Chapter 12: Imports, Customs, and Tariff Law

what is the harmonized commodity description and coding system (the harmonized system)?

an international agreement developed by the World Customs Organiza- tion (WCO), an intergovernmental organization located in Brussels with 180 member nations

how are HTSUS chapters broken down?

broken down into headings, subheadings, tariff items, and in some countries such as the United States, to ten digits (to allow for detailed compiling of statistical data on imports)

how are articles described in the tariff schedule?

by name (an eo nomine provision), by a description of its physical characteristics, by a descrip- tion of its component parts, or by its use

the country of origin is typically determined by wbo?

by the exporter or supplier and is stated in a country of origin certificate or similar document provided to the buyer or importer.

the schedules frequently classified by what?

by use.

the harmonized schedule of the EU union is? And where is it published?

the Combined Nomenclature (CN) of the European Union and is published in the Official Journal of the European Union

the tariff schedule of virtually all nations is based on what?

the Harmonized Commodity Description and Cod- ing System (the "harmonized system"

import professionals consult who for guidelines for interpreting the schedule published by the World Customs Organization.

the WCO Explanatory Notes, which are subscription-based (nonbinding) guidelines

what was the issue in the Better Home case?

the court had to determine whether a shower curtain set was classified under the heading for "Curtains" or under the heading for "Tableware, kitchenware, other household articles and toilet articles, of plastics

what is importing?

the entering of goods into the customs territory of a country

in the U.S, the tariff schedule is maintained by who?

the international trade commission

what are rules of origin?

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

the harmonized system standardizes what?

the nomenclature used to identify describe, and classify goods

in the U.S, what is 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.

what is transaction value?

the price actually paid or payable for the merchandise when sold for export to the United States, plus the following amounts if not included in the purchase price: (1) pack- ing and container costs, (2) selling commission paid by the buyer (importer) to or for an agent of the seller, (3) the value of any "assist" as defined below, (4) any royalty or license fee that the buyer is required to pay as a condition of sale, and (5) the proceeds of any subse- quent resale of the merchandise that accrues to the seller

what s tariff engineering?

the process of modifying or engineering a product prior to importation, or importing it at an earlier stage of manufacturing, for the purposes of obtaining a lower rate of duty.

what is the general rate of duty?

the tariff rate applicable to imports from countries with whom the United States has "normal trade relations."

what is the special rate of duty?

the tariff rate applicable to imports under one or more tariff preference programs, such as those for developing countries under the Generalized System of Preferences, or for trade within a free trade area

what is custom value?

the transaction value of the goods

what are non-preferential rules of origin?

those applicable to imports from developed countries that receive normal tariff treatment (or that have "normal trade relations" as discussed in earlier chapters).

what are preferential rules of origin?

those applicable to: (1) goods traded within a free trade area or customs union, (2) goods imported from countries that receive special tariff treatment pur- suant to a trade agreement (such as the WTO Agreement on Government Procurement), or (3) goods imported under a trade preference programs for developing coun- tries

what is the first step in determining the schedule status of an article?

to determine its tariff classification using the General Rules of Interpretation (GRI), found at the beginning of the tariff schedule

what is the first step in determing the dutiable status of an item?

to locate it in the tariff schedule of the country of import

what are rules of origin found in?

trade agreements, national statutes, and the regulations of customs authorities.

the schedule is divided into how many columns?

two

it is said that classifying an article is a how many step process?

two step

The use of a sin- gle, specialized court for customs and trade issues, with appeal to a single appellate court, provides what?

uniformity of the law

what are contract manufacturing?

what assists are often used in. manufacturing—a business arrangement in which the production of goods is contracted or "outsourced" by one firm to a manufac- turing firm, often overseas.

when does substantial transformation occur?

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

how are tariff rates determined?

rates for each country can be very different and are determined by each country's tariff schedule

what is a global supply chain?

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

the tariff rate for each item is given by what?

according to the country of origin

how are terms used to describe an article in the schedule interpreted?

according to their common and commercial meaning, unless a different scientific meaning is more applicable

what is the most common tarrif based on?

ad valorem tariff rate,

what does the WCO do?

administers the numbering and descriptions of goods listed in the schedule, reviews changes in technology and new prod- ucts, and revises the harmonized schedules every five years.

what was the decisino in the metals crop. Case?

Japanese steel that had been galvanized in New Zealand prior to its importation into the United States was substantially transformed so that it had become a product of New Zealand and thus was not subject to voluntary restraint agreements between the United States and Japan

what was the decision of the otter products case?

Judgment is affirmed for Otter Products.The cases cannot be classified under Heading 4201 because they are not listed by name, and because they are not "similar containers" to the other items listed therein but have different characteristics and purposes

dutiable status is determined by what three factors?

(1) the classification and numerical coding of the article, (2) the customs value of the article, and (3) the coun- try of origin of the article

if the imported item consists of mate- rials from more than one country, or results from processes in more than one country, then what?

(1) the tariff-shift rule, (2) the domestic or regional value con- tent rule, and (3) specific processing requirements

all commercial shipments must go through what?

"an administrative entry process

In order to qualify for a tariff preference, an item imported into the United States must be what?

"wholly obtained" from a country qualifying for a trade preference

what was the issue of the metals corp. case?

, involved steel from Japan that was galvanized in New Zealand prior to its import into the United States

the HTSUS is organized into how many sections and chapters?

22 sections and 99 chapters, each covering different kinds of goods and arranged in a progression from crude materials, livestock, and agricultural products through manufactured goods such as vehicles, aircraft and even spacecraft and their component parts

what was the decision in the Carl Zeiss case?

Affirmed for the government. Customs properly classified the ZMS 319 under Heading 9011 as a "compound optical microscope." Items are to be construed according to their common and com- mercial meaning. The ZMS 319 meets the common dictionary meaning of compound microscope, and an eo nomine classification includes all forms of the named article, including this one adapted for surgery. Because the ZMS is also classifiable under F9018 as a "medical appliance," the court must then decide into which category the article fits. Heading 9011 for compound microscopes is narrower, more specific, and describes the article with more accuracy and certainty.

what are composite goods?

Articles made of different materials or components

what does column 1 of the schedule contain?

Column 1 contains the general rate of duty

the canadian version of the harmonized schedule is called what? And who is it administered by?

Customs Tariff and is administered by the Canada Border Services Agency

what is the rule of relative specificiy?

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

The time to begin thinking about an article's dutiable status is not when the goods arrive at the port of entry—which is far too late.

TRUE

t/f, The applicable rules of origin are those of the importing country, and there is often little consistency between countries

TRUE

t/f. But the country of origin is not merely the country from which the goods were purchased, or from where they were shipped, or from where they were sub- jected to some superficial processing

TRUE

t/f. But the uniformity of descriptions and numerical coding at least provides a common nomenclature and understanding

TRUE

t/f. Column 2 tariff rates are so high that imports from these countries (cuba and north korea) become cost-prohibitive.

TRUE

t/f. If two or more headings or subhead- ings each describe only certain materials or components in composite goods, the article must be classified under the heading that describes the material or components that give the article its essential character

TRUE

t/f. If, as a condition of purchasing goods, an importer is required to make certain payments to foreign parties other than the seller, those payments may be included in transaction value

TRUE

t/f. Production assists might be provided when a foreign firm needs special equipment or machinery to manufacture custom or specially designed goods

TRUE

t/f. Tariff engineering therefore permits importers to enter their goods at any step in the manufacturing or assem- bly process in order to obtain a lower rate of duty even though further postimportation work or processing will be done in the United States

TRUE

t/f. The tariff-shift rule has the advantage over other rules because it is more objective and more certain. It can also be the basis of internationally accepted rules because most countries use the harmonized tariff classi- fications on which the rule is based

TRUE

t/f. The value of an assist must be included in transaction value when the goods are imported into the United States

TRUE

t/f. Transaction value also does not include commissions or fees paid to an agent of the buyer as a "finder's fee" for helping to find a supplier and procure the goods

TRUE

t/f. When an article has several different uses, the principal use controls

TRUE

t/f. importers must know what it is that they are importing, what it's worth, and where it came from according to law

TRUE

t/f. it is the importer who must use reasonable care in submitting a correct certificate of origin.

TRUE

what are the steps in classifying an article?

The first step is to determine the meaning of specific terms in the tariff provisions. "question of law" The second step is to see if the merchandise in question falls within the meaning of those terms "question of fact"

what was the decision in the Better Home case?

When articles are made up of component parts, or are in sets, and their parts are referred to in two equally specific headings, then the rule of relative specificity does not apply, and their classification must be determined by which part gives the article its essen- tial character. In this case, the shower liner imparted the essential character to the set.

what is a compound tariff rate?

a combination of both ad valorem and specific rates.

what is a tariff schedule?

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

what is a specific tariff rate?

a specified dollar amount per piece, or unit of weight or measure.

Both U.S customs and the courts rely on what when interpreting an article in the schedule?

dictionaries, encyclopedias, industry trade literature (from compa- nies and industry trade association), scientific author- ities, as well as photographs, videos, and actual product samples submitted to them

what was the issue in the Carl Zeiss case?

discusses the rule of relative specificity and is one of the most frequently cited cases in this area of the law.

what does the HTSUS do?

divides products into several thousand tariff classifications, ranging from basic commodities and agricultural products to manufactured goods

t/f. Transaction value includes international freight charges, insurance or customs brokerage fees, inland freight after importation, charges for assembling or maintaining the goods after importation, or import duties.

false, no it does not include this

t/f. Because of the harmonized system, goods that fall into a certain classification in one country should not be similarly classified in all countries

false, they should!

It is not the importer's responsibility to use reasonable care to determine the dutiable status of an import, to accurately report it to customs authorities, and to provide the nec- essary documentation to verify the information

false, yes it is.

what is the issue in the otter products case?

illustrates the problem of classifying an item that most of us know, but that is not specifically described in the schedule

where can each country's schedule of good be found?

in its national legislation and is published and made available to the public.

when should dutiable status be considered?

in the earliest planning stages

If an articl can be classified under two or more headings or subheadings, what is true?

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)

the rate od duty Is listed in where?

next to each tariff item.

in the U.S and most developed countired there are two general types of rules of origin, which are?

non- preferential and preferential.

tariffs are most often based on what?

on ad valorem, specific, or compound rates

what does column 2 of the schedule contain?

original rates from the Smoot-Hawley Tariff Act of 1930, as amended, that today are applicable only to countries not granted nor- mal trade relations.

what is port of entry?

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

what is meant by the dutiable status of goods/articles/items?

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

assists might allow he importer what?

some greater control over the quality of the finished product.

what is the tariff shift rule?

states that the country of origin is the last country in which all "inputs" (raw materials, component parts, etc.) into the finished article underwent a required change in tariff classification

what is a country of origin?

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