Virginia Conference on World Trade Williamsburg, Virginia October 6-8, 2004 Section II: Import Product Classification General Introduction Leonard L. Fleisig Troutman Sanders LLP Washington, D.C

Customs Compliance Why does it matter? What is at stake? What do you need to do to protect yourself and your company?

Why Does it Matter? It is the law Non-compliance has commercial and security implications Mistakes cost money Fixing mistakes takes time away from focus on core business

What Do You Need to Do Informed compliance & Shared Responsibility –Mutual obligation of CBP and stakeholders Reasonable care –Standard by which your actions are judged

Reasonable Care CBP responsible for: –Providing you with sufficient information and tools to make informed and appropriate decisions with regard to your import transactions You are responsible for: –Utilizing that information and those tools to make informed and appropriate decisions with regard to your import transactions

Reasonable Care - 2 If you use reasonable care you will –Lessen the number of mistake and –Your mistakes will be less costly Mistakes will happen but –If you can show that you used reasonable care the ‘cost’ of those mistakes should be significantly lower or eliminated

General Tips Don’t under-utilize your Customs House Broker –Are they just pushing paper for you or: Do they assist with classification, marking, valuation issues? Do you tell them your classifications or do you seek their feedback? Do you ask them about recent rulings or other issues relating to your products?

General Tips - 2 Don’t rely solely on your Customs House Broker –Keep yourself informed Keep a copy of the regs; [19 CFR] – free and available on-line Keep and use a copy of the Harmonized Tariffs Schedules of the US Go on line and check for rulings about your products

General Tips - 3 Why? –The more you can show reliance on a professional and that you provided a professional with the means to provide you with informed advice – the more reasonable care you will have shown –The more you can show that you are also acting independently to stay informed – the more reasonable care you will have shown

Three Key Areas Country of Origin Marking Valuation Classification

Country of Origin Marking Where do your goods come from? Are they marked with the country of origin? Any marking rulings on your product or similar products? What will happen to the goods once they arrive? –Are you the end user? –If not, what will you do, if anything, to change or modify the goods once they get here?

Valuation Fair market value –Are you and the supplier related parties? –Does commercial invoice represent total invoice price?

Classification-1 Its not a simple world anymore Products more complex Supply chain and assembly regimes –have created shipments of parts, components, etc. Multiple possible classifications for any given product

Classification Have you checked –the HTSUS? –Rulings? Formal/informal classification requests –CHB?

Conclusion Remember: –In the event of a dispute you will not always be wrong and Customs won’t always be right. –You know your product better than most. –But, if you are wrong the more you have done to get it right will limit your potential exposure