Imports, Customs
and Tariff Law
Chapter 12
© 2002 West/Thomson Learning
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Customs Entry Process
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4 Basic Requirements:
 Goods arrive at US port of entry
 Goods not barred or embargoed from entry
 Customs authorizes delivery after inspection and
release
 Estimated duty paid or Customs bond posted
Required Documentation must be filed within 5 days:
 Entry manifest or merchandise release form
 US Customs Entry Summary Form
 Proof of right to make entry (B/L, air waybill,
carrier’s certificate)
 Commercial invoice from seller
 Packing slips
 Any other documents required under special regs.
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Entry Process (Cont.)
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Liquidation: final computation and assessment
of applicable duty
 Any additional duty owed must be paid in 15
days
 Time limit for liquidation is 1 year
Protest: must be made within 90 days
 Customs response
 30 days for denial of entry
 2 years in other cases
 Appeals to Customs Office in D.C.
Judicial review in the Court of Int. Trade
 Must pay assessed duty first
 180 days to file for review
 Appeal to Federal Circuit Court of Appeals
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Enforcement and Penalties
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Civil and Criminal Penalties
Making false material statements
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Whether intentional or negligent
Negligent: failure to use reasonable care
 Penalties can be severe – 2x loss of duty or 20%
of value
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U.S. v. Golden Ship Trading
Gross negligence: “act or omission done with
actual knowledge or reckless disregard” – 2x
penalty for negligent violations
Fraud: knowingly making false statements – up to
full value of good
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Aggravating or Mitigating factors affect
penalty
Limitations:
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Negligence or gross negligence: 5 years
Fraud: 5 years from discovery
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Informed Compliance System
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Relies on voluntary compliance –
responsibility on importer to comply
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Must use reasonable care (Checklist)
Encourage prior disclosure – report errors
before Customs investigation
Pay unpaid duties within 30 days
Record Keeping Requirements: retain
records for 5 years
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Willful failure: $100K or 75% of value
Negligent failure: $10K or 40% of value
Willful concealing or destruction: $5K and
/or 2 years imprisonment
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Preimportation Rulings
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Importer can make written request for
ruling in advance of entry
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Judicial Review of Customs Actions
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Binding ruling or ruling letter
Apply only to particular importer
Formal Rulemaking: judicial deference
(U.S. v. Haggar Apparel Co.)
Informal Decisions (Binding Rulings):
limited deference (U.S. v. Mead Corp.)
Pre-importation judicial review in
extraordinary circumstances:
irreparable harm to importer
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Dutiable Status of Goods
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Determined by classification, value and
country of origin
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Classification of goods:
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Locate article in HTS, then determine rate
Special schedules for NAFTA, GSP
Importers must use reasonable care
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Camel Mfg. Co. v. U.S.
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Harmonized Tariff schedule of U.S. 1989
called the Harmonized Code
All entering goods dutiable unless exempted
Common Meaning Rule: understanding
HTS descriptions: look to common
meaning
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General Rules of Interpretation
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Govern use of HTS
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Headings are only guides
Essential character controls
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Eo nominee - common name
Physical characteristics
Article’s use
Common popular over commercial
meaning
Use most specific description
All else equal, last in numerical order
Better Home Plastics Corp. v. U.S.
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Customs Valuation
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Establish dutiable value at time of entry
Dutiable value: transaction value of
goods
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Price actually paid for goods plus packing
costs, selling commission paid by buyer,
value of an assist, royalty buyer is
responsible to pay, proceeds of any resale
that accrues to buyer
Exclusions: freight charges, insurance or
broker’s fee, inland freight, assembly fees,
import duties
GATT 1994 Agt. on Customs Valuation:
attempt to unify methods of calculation
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Country of Origin
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Critical in entry process
 Rules of Origin – determine and report country of origin
 Various tests:
 Substantial transformation
 Gibson-Thomsen Co. v. U.S. – new article
 National Juice Products Assoc. v. U.S. – value
added
 Uniroyal, Inc. v. U.S. – major feature
 Ferrostaal Metals Corp. v. U.S. – changes
character
 Name, character or use test
 NAFTA Tariff Shift rule
 Trade preference rules
 Textile and apparel rules of origin
 GATT / WTO rules – develop uniform approach
 FTC & Customs rules for labeling and marking imports
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U.S. Trade Preferences
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Generalized System of Preferences
(GSP)
Beneficiaries are developing countries –
“graduate” off list
 Products must be designated as eligible –
Competitive annual review
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GSP rules of origin: at least 35% value
added in GSP country
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Product of, or substantially transformed in
designated beneficiary
Imported directly into US
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Other US Preferences
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NAFTA, CAFTA, other free trade
agreements
Caribbean Basin Economic Recovery Act
(1983)
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Encourages manufacturing in Caribbean:
goods imported to U.S. at favorable rate
2000 Caribbean Basin Trade Partnership
Act: increased scope of preferences
Africa Growth and Opportunity Act of
2000: aid sub-Saharan countries
Andean Trade Program: promote
development and combat drug
trafficking
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Other Customs Issues
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Drawbacks – refunds of duties paid
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99% of duties refunded on imports
that are processed, etc. and reexported within 5 years
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Same-condition drawbacks – re-exported
but not re-processed
Substitution drawbacks – for fungible
goods or commodities
Return of US Exports – subject to
duty on re-importation
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Exceptions: not substantially altered;
repaired goods; US components
assembled abroad
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FTZ: Foreign Trade Zones
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Goods imported into FTZ not subject to
tariff until goods are released into the
stream of commerce
 No time limit for stay in FTZ
 Not subject to quotas while in FTZ
 Firms can set up special purpose subzones
 Nissan v. U.S.: FTZ preference not for
goods installed, used or operated in
FTZ
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Business Implications
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Planning essential
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Margin may be ruined by adverse Customs
ruling
Knowledge of appropriate classification, entry
process and rules of origin
Tariff engineering
Potential benefits of FTZ’s
Stay current with GSP’s and free
trade agreements
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Web Sites
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http://www.customs.ustreas.gov
http://www.usitc.gov
http://www.ftc.gov
http://www.nafta.org
http://www.access.gpo.gov
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