legal 4900 ch 12
to prove criminal fraud, you need:
Beyond reasonable doubt
Ferrostaal Metals Corp.
Got steel from Japan, then "hot dipped" in zinc in NZ -Customs says it's Japanese, got appealed → then court says it's NZ bc it changes the chemical composition of the steel = customs overruled -Looked at cost, how much value the hot dipping adds, and the use (you can use dipped steel for things you can't use undipped steel for)
Tariff-Shift Rule
States that the country of origin is the last country in which all "inputs" into the finished article underwent a required change in tariff classification
"screwdriver plants"
Take a product made in China and ship it across the border and make some insignificant changes to it Ex. get a bunch of furniture made in China but not assembled, ship it to Vietnam where it is put all together (in the "screwdriver plant"), then shipped to US This is transshipment, but they're trying to pretend it's substantial transformation
substantial transformation
When a product undergoes significant change -Look at name, character, and use -common in the US 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, article, or use
dutiable status
refers to the legal status of imported goods at the time of entry for purposes of compliance with the tariff and customs laws -classification -customs value -country of origin
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 -transshipment, screwdriver plants
dutiable value
the transaction value of the goods aka customs value
penalty for material false statements due to negligence
up to 2x duty lost or full value of product
General Rules of Interpretation (GRIs)
used to determine a product's tariff classification -first step in determining the dutiable status of an article -found at the beginning of the tariff schedule
Nissan motor MFG Corp. v US
Nissan imported machinery into their warehouse in the FTZ, but started making cars with the machinery, claiming they were "testing" the machinery -the cars were leaving and being taxed, but not the machinery -decision: use of production equipment FTZ is consumption, may not be entered "duty-free"
manufacturing drawback
import input products, put them into some final product, and export the final product; you get taxes refunded
rejected merchandise drawback
allowed for imported merchandise that was shipped without consent, is defective, or does not conform to specifications or to samples
Terms used to describe an article in the schedule are interpreted according to their:
common and commercial meaning
Buy American Act
gives government procurement preferences -"Substantially all" - Eisenhower said 50% of the content of all products that are considered for gov't preferences must be made in the US (so, half of the products could be made outside of the US) -95% for iron/steel and 55% for others, bigger preferences (Trump proposed this change in his own Executive Order; not yet implemented) -makes it harder to deem a domestic product "Made in the USA" particularly for aluminum and steel
customs enforcement
how customs makes sure you're telling the truth Right to Inspect, audit, 5 year record keeping (supposed to keep your records for 5 years)
Rule of relative specificity
if an article can be classified by two or more headings or subheadings, it must be classified under the one that most specifically describes the article with the greatest degree of accuracy and certainty → common of goods with several materials/components relates to Carl Zeiss, Inc. v. United States Case
tariff shift
similar to substantial transformation but a more objective standard -When a product got one HTS code coming into the country and a different one going out of the country -Finished product will be treated as a product of the country where it went through the tariff shift -more popular in Europe/EU
country of origin
that country from which an imported article is said to have originated according to specific rules (rules of origin)
liquidation
the final computation and assessment of the applicable duty on entered goods by Customs Customs has 314 days to make a final determination (follow up, maybe you didn't classify something correctly, etc) Protest -- importer has 180 days to challenge
principal use
the ordinary use to which articles of the same class and kinds as those being imported are usually put and which is greater than any other single use of the article
customs value
value the product has to the importer
Better Home Plastics Corp vs US
-Shower curtain set -Curtain or household and toilet article of plastic? - -Decision: classification must be determined by which part gives the article its *essential character*; in this case, the shower liner did that Note: rule of relative specificity does not apply to things in sets
3 factors of dutiable status
-classification -customs value -country of origin
3 types of preferential rules of origin if product was not "wholly obtained"
-tariff shift rule -The Domestic or Regional Value Content Rule/Test -Specific Processing Rules
Classifying an articles is a "two-step" process:
1. determine the meaning of specific terms in the tariff provisions 2. see if merchandise in question falls within the meaning of those terms
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.
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 " -fungible goods -Company could get credit if they export the same amount of wheat, even if it's not the exact wheat they imported
US v Golden Ship Trading
Importing t-shirts claimed to be from DR, but turned out to be from China; importer didn't know Importer's ignorance is no excuse
Carl Zeiss, Inc. v. US
Specialized microscopes that are used in brain surgery -Importer said it was medical and surgical goods (cheaper) -Customs said stereoscopic compound microscope-this was the result -it's both things, so Federal Circuit, said you have to go with the most specific one possible (Rule of Relative Specificity)
Wholly Obtained Rule
To say it's from a certain country, it needs to have been grown fully in that country -the product was wholly the "growth, product, or manufacture" of one country
rules of origin
are the legal rules used to determine the country of origin of imported products -found in national statutes, often little consistency between countries
Composite Goods
articles made of different materials or components considered this in GRI → if two or more headings or subheadings 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 -Apple Watch -Better Home Plastics Corp. v. United States)
Harmonized Tariff Schedule (HTS)
classification scheme used by many nations to determine tariffs on imported goods
informal entry (customs procedure)
expedited process for low value goods -under $2,500 value Ex. Coming back from vacation in Mexico
drawback
refund of collected tariffs when an import is not consumed in the US
transshipment
A problem when you have one country that has a lot of tariffs imposed upon it (like China), and a neighboring country that doesn't have a lot of tariffs imposed on it (like Vietnam) So, it might be tempting to have a Chinese factory right along the border of Vietnam, so the products could find their way across the border and be shipped without high tariffs, arriving in US customs claiming to be a product of Vietnam This is illegal, but hard to track down
to prove civil fraud, you need:
Clear and convincing evidence of intent
Otter Products, LLC v. US
Customs didn't have a HTSUS code for phone cases yet -Customs called it a "briefcase or similar container" - 20% tariff (very high), but OtterBOx said it was an other article of plastic - 5.3% tariff Went to Court of International Trade where OtterBox won -classification issue
yarn forward rule
Ex. treat a t-shirt as a product of the country where the yarn came from -Used to avoid a common issue of a company shipping the body of a t-shirt and sleeves of a t-shirt to a second country where it will be stitched together and is called a product of the second country
types of rules of origin
Non-preferential: those applicable to imports from developed countries that receive normal tariff treatment (or that have "normal trade relations") Preferential: -Goods traded within a free trade area or customs union -Goods imported from countries that receive special tariff treatment pursuant to a trade agreement (WTO agreement) -Goods imported under a trade preference program for developing countries
Operation Mega Flex
Operation where customs and border protection are seizing shipments from China that they claim violate US rules -fake shoes, pharma drugs, firearm suppressors
Made in the USA
Regulated by Federal Trade Commission mandatory for: -textiles to say "made in the USA", -Auto % and assembly disclosure If sold in a NAFTA country, must have a label showing the percentage of value that came from each country -Must disclose where the product was assembled This is otherwise voluntary and treated like false advertising Must be able to show that "all or virtually all" of the article came from the US
The Domestic or Regional Value Content Rule
Requires that 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
Specific Processing Rules
State that an item originates in a country if it was subjected to specific forms of manufacturing or processing in that country
foreign trade zones (FTZ)
legally defined sites — warehouses and manufacturing facilities — operated pursuant to legislation and under government license, that are legally "outside" the customs territory of the country they are in -Can assemble, repackage, and export without paying duties until it actually leaves the warehouse -Keep it near the port, and if it gets re-exported, no duties; duties will be imposed if you decide to keep it and sell it to the US -Companies must be licensed, regulated, and pay a bond -Nissan motor MFG Corp. v US
formal entry (customs procedure)
most big commercial shipments -Must make declarations to customs, inspection of goods, pay duties, then released and allowed to enter the country