Chapter 12- Imports, Customs, and Tariff Laws

Two Laws that Require Goods to be Marked with Country of Origin:

1. U.S. Customs Marking Rule. 2. Federal Trade Commission (FTC) Marking Rule.

Free Trade Area:

Consists of two or more countries that are a party to a free trade agreement that reduces or eliminates tariffs on goods and removes trade barriers (ex: NAFTA).

Beneficiary Developing Countries:

Countries that benefit from tariff treatment

Customs Law:

Includes tariff law and the regulatory control over goods and people as they cross international borders.

Quality Claims:

Indicate that the product was partially made or processed in the U.S.

Generalized System of Preference (GSP):

Most well known; U.S. aids in economic development of a certain developing country by allowing that country's products to enter the U.S. for a reduced rate or rate free.

Substantial Transformation:

Occurs when the original article losses its identity as such and is transformed into a new and different article of commerce having a new name, character, or use different from the original item. EX: Japan sends wooden handle to China, China drills holes and adds bristles to make into hair brush; origin = China.

Tariff Shift Rule:

The country of origin is the last country in which all inputs (i.e. raw materials/ component parts) into the finished product underwent a defined change in tariff classification.

Holy Obtained Rule:

The country of origin of an article being imported into the US is where the article was "holy obtained" (i.e. completely made in one country).

Importing:

The entering of goods into the customs territory of a country.

What happens if U.S. denies formal entry of an imported good?

The importer will file with the Court of International Trade to review the ruling.

Rules of Origin:

The legal rules used to determine the country of origin. -Determines if the good is subject to an embargo, anti- dumping duties, punitive tariffs, etc.

Dutiable Status:

The legal status of the imported goods at the time of entry.

Transactional Value:

The price actually paid for the merchandise when sold for export in the U.S.

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 of DEVELOPED countries that will receive normal tariff treatment.

The U.S. Bureau of Customs and Border Protection:

-An agency within the Department of Homeland Security. -The customs regulatory authority.

Port of Entry:

-Any major seaport, airport, or border crossing. -Where customs officers are located.

Federal Trade Commission (FTC) Marking Rule:

-Applies primarily to the use of goods made in the U.S. -Main focus is to prevent unfair or deceptive practices.

U.S. Customs Marking Rule:

-Applies to all foreign imports. -Requires that the country of origin of every article to foreign origin imported into the U.S. must be: 1. Permanently marked. 2. In English. 3. In a conspicuous place. 4. Presented in such a way that the ultimate purchaser understands where the good came from.

Customs/ Dutiable Value:

-Transactional value of the goods. -Must be reported by the importer to the customs agent

Three Factors of Dutiable Status:

1. Classification and coding (what is being imported) 2. Customs/ dutiable value (worth of the good) 3. Country of Origin (where did the good come from)

Steps for goods to officially enter into the U.S:

1. Goods have arrived at a port of entry. 2. Goods are permitted. 3. Authorized delivery of the goods after custom's inspection. 4. Tariffs have been paid.

Two Tests to Determine Country of Origin for Developed Countries:

1. Holy Obtained Rule. 2. Substantial Transformation Test.

Two Types of Rules of Origin:

1. Non- Preferential Rules of Origin 2. Preferential Rules of Origin

Two Tests to Determine Country of Origin for FTA or Developing Country:

1. Tariff Shift Rule. 2. Regional Value Content Test.

Tariff Classification:

A method of categorizing different types or kinds of goods based on uniform descriptive terminology according to their name, use, or physical characteristics.

Administrative Entry Process:

All commercial shipments must go through this (i.e. clear customs); supervised by national customs authorities.

Harmonized Commodity, Description and Coding System:

An international convention that determines tariff schedule.

Purpose behind the Entry Process:

Do any restrictions apply? -Customs agents determine if there are any import restrictions (ex: embargo). Are any tariffs due on those goods? -Customs agents will have to determine if tariff is due and if so how much.

Tariff Schedule:

Has the classification and tariff rate for that item; where tariff classifications are listed. Every country has on based on the Harmonized Commodity, Description and Coding System.

Classification by Essential Character:

If an imported good is made of two or more different materials, the good that can be classified under different tariffs. THEREFORE, to determine the real rate, the imported good will be classified under the tariff schedule that describes the materials that gives the article its essential character.

"Partly Made in the U.S." Rules:

If bears "quality claims."

Formal Entry:

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

Regional Value Content Test:

Requires some minimum percentage of the value of a finished article to be added in a country in order for it to have originated there.

"Made in the USA" Rules:

Seller may not claim unless all, or virtually all, of the materials, processing, or component parts are made in the USA in there final assembling or processing to place there. -Foreign content has to be a negligible amount.

Country of Origin:

That country from which an imported good is said to have originated according to specific legal rules called the Rules of Origin.

Tariff Law:

The body of laws and regulations that determines the tariff or dutiable status of goods and the rate of duty.

Trade Preference/ Preferential Tariff Treatment:

U.S. grants to developing countries in order to promote development.

The WTO Agreement on Rules of Origin:

Usually applies the Tariff Shift Rule for the country of origin over the other three rules.

Substantial Transformation Test:

When the good is made in more than one country, the COO is that country where the good last underwent a substantial transformation into a new and different good.