LEGL4900 Ch. 12
manufacturing drawback
designed to encourage US manufacturers to export; a refund of duties and taxes paid on merchandise that is imported, subjected to manufacture or production, then exported within five years
General Rules of Interpretation (GRI)
found at beginning of tariff schedule; first step in determining the dutiable status of an article is to determine its tariff classification using ___ ___ __ ___
production assists
goods, services, or intellectual property furnished by the importer to a foreign producer, free or at a reduced price, for use in producing merchandise for import into the US
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
prior disclosure
if an importer admits its mistake and informs Customs of a possible violation before learning that it is being investigated, penalties are limited; encourages importers to voluntarily report their own possible violations of the customs law
essential character
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 ____ ___
informed compliance
the "softer" mechanisms designed to place the burden of voluntary compliance on importers
enforced compliance
the active investigation of customs violations and the prosecution of violators
formal entry
the administrative process required to import goods into the customs territory of a country
importing
the entering of goods into the customs territory of a country or the receipt of services from a foreign provider
liquidation
the final computation and assessment of the applicable duty on entered goods by Customs; this "closes the book" making the entry complete
ultimate purchaser
the last person in the US who receives an article in the form in which it was imported
dutiable status
the legal status of imported goods at the time of entry for purposes of compliance with the tariff and customs laws; determined by 3 factors -- (1) the classification & numerical coding of the article (2) the customs value of the article (3) country of origin of the article
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 the merchandise when sold for export to the United States, plus the following amounts if not included in the purchase price: (1) packing and container costs (2) selling commission paid by the buyer (importer) to or for an agent of the seller (3) value of any "assist" as defined below (4) any royalty or license fee that they buyer is required to pay as a condition of sale (5) the proceeds of any subsequent resale of the merchandise that accrues to the seller
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
non-preferential rules of origin
those applicable to imports from developed countries that receive normal tariff treatment (or that have "normal trade relations")
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 pursuant to a trade agreement, (3) goods imported under a trade preference programs for developing countries
regional value contest test
type of value-added test; 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
notice of adjustment
when Customs at the port of entry determines that additional duties are owed, this is sent to the importer
entry process
all commercial shipments must go through administrative ____ ____ supervised by national customs authorities and informally referred to as "clearing customs"; purpose is for customs authorities to determine whether any import prohibitions or restrictions apply to the goods, whether the goods are subject to any other laws/regulations affecting their entry, and whether any import duties are due
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
customs broker
An authorized agent, licensed by federal law, to act for and on behalf of importers in making entry of goods
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
commercial invoice
required for all shipments intended for sale or commercial use in the US
binding rule
ruling letter; represents the official position of Customs with respect to the specific transaction for which it was issued; binding on Customs personnel unit revoked
specific tariff rate
specified dollar amount per piece, or unit of weight or measure
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
ad valorem tariff rate
tariff based on a percentage value of the articles imported
country of origin
that country from which an imported article is said to have originated according to specific rules, known as rules of origin
Better Home Plastics Corp. v. United States
Court applies GRI and essential character test Plaintiff, Better Home Plastics Corp., imported shower curtain sets consisting of outer textile curtain, inner plastic liner, and plastic hooks. Customs classified the item under provision for the set's outer curtain at duty rate of 12.8% but Better Home argues that classification should be based on inner plastic liner at duty of 3.36% ad valorem. When articles are made up of component parts, or in sets, and their parts are referred to in two equally specific headings, then the rule of specificity does no apply, and their classification must be determined by which part gives the article its essential character. In this case, shower liner imparted the essential character to the set.
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
Carl Zeiss, Inc. v. United States
Discusses rule of relative specificity and is one of most frequently cited Zeiss imported ZMS 319 microscopes, stands, and accessories, including a camera--all specially tailored for neurosurgical use. Customs classified these under Heading 9011 for "stereoscopic compound microscope with means for photographing the image" but Zeiss disagreed and wanted it under Heading 9018 for "instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electro-medical apparatus and sight-testing instruments." Zeiss filed protest and brought action in Court of International Trade. Court held for government and Zeiss appealed. Affirmed for the government. Customs properly classified the item. Items are to be constructed according to their common and commercial meaning. Heading 9011 for compound microscopes is narrower, more specific, and describes article with more accuracy and certainty.
United States v. Golden Ship Trading Co.
J. Wu entered three shipments of t-shirts purchased from Hui, who claimed that he operated a factory in the Dominican Republic. Hui furnished information necessary for the importer's broker to prepare the import documents and to obtain a permit for entry of wearing apparel into the US and Wu declared the country of origin as the DR. Customs discovered that Hui produced them in China and shipped them to DR where sleeves were attached and "Made in Dominican Republic" labels inserted. Finished shirts then transshipped to US. According to law, merely attaching sleeves did not make shirts product of DR and Chinese-made shirts could not have been imported without a textile visa, which Hui may not have been able to obtain. Government alleged that Wu acted without due care in determining country of origin and sought penalties of $44,000. Wu did not dispute that country of origin was China but denied that she had been negligent and claimed Hui had duped her. Wu did not exercise reasonable care because she failed to verify the info contained in the entry documents. Customs could assess a penalty that took into account the mitigating circumstances of the case.
Nissan Motor Mfg. Corp., U.S.A. v. United States
Nissan operated a foreign trade zone subzone at its automotive manufacturing and assembly plant located in TN. Nissan imported production machinery for use in subzone consisting of industrial robots, automated conveyor systems, and a computerized interface. Machinery was to be assembled and tested in the zone, and if it proved unsatisfactory it was to be replaced, redesigned, or scrapped. Customs ruled that production equipment was not "merchandise" as defined under FTZ act and was therefore dutiable. Duties were assessed at $3 million, and Nissan filed a protest. On denial, Court of International Trade ruled equipment was dutiable and appeal was filed. Decision of lower court was affirmed. Machinery entered into a foreign trade zone for use in the manufacture and assembly of automobiles is not "merchandise" under the act and may not be entered duty-free.
Ferrostaal Metals Corp. v. United States
Plaintiff attempted to enter steel products at the Port of Seattle. Products consisted of unpainted steel sheets that had originated in Japan but had been hot-dip galvanized in New Zealand. Plaintiff's entry documents identified New Zealand as country of origin but Customs ruled it was Japan and that the steel could not be entered due to an agreement between the US and Japan. Customs contented that hot-dip galvanizing was merely a "finishing process" and did not result in substantial transformation so as to change the country of origin. Plaintiff disagreed and brought this action for review. Japanese steel that had been galvanized in New Zealand prior to its importation into the US was substantially transformed so that it had become a product of NZ and thus was not subject to voluntary restraint agreements between the US and Japan.
Otter Products, LLC v. United States
Problem of classifying an item that most of us know, but that is not specifically described in the schedule Otter Products LLC imported protective cases for smartphones that have a clear plastic screen cover, rigid outer plastic shell, and flexible silicone component. Customs classified the article in Chapter 42 that included "Trunks, suitcases, vanity cases...and other similar containers" at 20% duty. Otterbox argued that it should be classified in Chapter 39 as "other articles of plastic" at 5.3% duty. Otterbox protested, paid the duties, filed with Court of International Trade. Court agreed with Otterbox and government appealed. Judgement affirmed for Otter Products. Cases cannot be listed under Heading 4201 because not listed by name and are not "similar containers" to the other items listed but have different characteristics and purposes.
substitution drawback
a ____ ____ of 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"; usually deal with fungible goods or agricultural commodities
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 tariff rate rule
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 when the goods (or other goods manufactured from the original goods) are reexported or destroyed
rules of origin
legal rules used to determine the country of origin of imported products
foreign trade zone
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; a duty-deferral and duty-saving device
civil customs fraud
more serious than negligence; where there is clear and convincing evidence that the importer knowingly (or with wanton disregard for the facts) made a materially false statement or omission while entering or attempting to enter goods into the US
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
informal entry
personal and commercial shipments valued at $2,500 or less may be cleared through an informal entry process