Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 12 Imports, Customs, and Tariff Law

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 Formal Entry Process Administrative process required to import goods into the customs territory of a country. Goods have officially “entered” when: –Arrived at U.S. port of entry. –Goods are permitted. –Delivery is authorized by Customs after inspection and release. –Estimated duties have been paid or customs bond posted. Documents filed within five (5) days. Commercial Invoice.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 Formal Entry Process Liquidation- final computation and payment of duty, within one year of entry. Protest within 90 days. Judicial review within 180 days (CIT in NYC).

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Enforcement and Penalties Materially false statements. Negligent- see the U.S. v. Golden Ship Trading case. Gross negligence “ actual knowledge or reckless disregard.”

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 Enforcement and Penalties Civil Fraud: clear and convincing, knowingly made materially false statements or omissions (goods can be seized, penalties up to the value of the merchandise). Criminal Fraud: 2 years plus fine. –Smuggling of certain items will carry longer penalties. –Better to disclose before investigation.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 Aggravating Factors Obstruction, withholding evidence, providing misleading information, prior improper shipments, illegal transshipments.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Mitigating Factors Errors by Customs. Cooperation. Immediate remedial action. Inexperience. Prior good record. Inability to pay penalty. Encouraged to report errors through PRIOR DISCLOSURE.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Mitigating Factors Statute of limitations: 5 years from the date of the violation. –Or 5 years from the date of discovery of a violation involving fraud.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Binding Rulings Requesting one can help plan business strategy. Should be submitted in writing.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 Judicial Review of Binding Rulings Judicial review of formal rulemaking. Judicial review of binding rulings, see the U.S. v Mead Corp case: U.S. agencies and courts must grant limited deference to U.S. Customs letters and rulings. Pre-Importation Judicial review in emergency situations

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 Dutiable Status of Goods Since 1989, Harmonized Tariff Schedule of U.S. (HTSUS). Special schedules in NAFTA agreement. How to classify a tent? See the Camel Manufacturing Co. v. United States case: tents were not sporting goods but camping equipment. Classification, value country of origin.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 General Rules of Interpretation Headings are only guides. Article described includes the completed finished product as well as the uncompleted if it has the character of the completed product. Specificity/ essential character. If does not fit, should go into the same category as a similar item. Last in numerical order.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 General Rules of Interpretation EO nominee- common name. Physical characteristics Article’s use Common popular over commercial meaning Use most specific Essential character controls All else equal, last in numerical order

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 General Rules of Interpretation: GRI GRI 1 : classification by terms of the headings. GRI 2 : classification includes complete as well as incomplete article if it has the essential character. GRI 3 : when goods could be classified under 2 headings. –Go to the most specific, if components go to essential character, when can’t be classified by above go to the last in numerical order

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 General Rules of Interpretation: GRI GRI 4 : If goods can not be classified based on above, one should find heading for goods they are most like. GRI 5 : a) cases (camera, music) should be entered with the article normally sold with b) packing goods shall be classified with the goods, unless containers have repetitive use. GRI 6 : subheadings at the same level are comparable.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16 Relative specificity: stereo cabinet case. Essential character: Better Home Plastics Corp. v. United States, essential character not relative specificity applies, goods are classified by shower liner not curtain. An importer is free to engineer his product in order to take advantage of the tariff laws (Tariff engineering. Classification of Items Packaged for Retail Sale as a Set

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 Customs Valuation Dutiable value equals transaction value or price actually paid for goods when sold for export 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. It does not include freight charges, insurance/broker’s fee, inland freight, assembly fees or import duties.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 18 Very important in NAFTA. Substantial transformation: The “Name, Character, or Use” test. See the Ferrostall Metals Corp. v. United States case. What about trade preference rules? WTO Committee on Rules of Origin—under development. Country-of-Origin Rules

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 19 Special Rules of Origin for Textiles and Apparel Textiles and clothing present complicated trade issues because companies move operations from country to country, raw materials from many locations. Textiles are governed by special rules into U.S. U.S. imports from Canada and Mexico are governed by separate rules.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 20 Marketing and Labeling of Imports U.S. Customs. FTC- if states Made in USA means, “all or virtually all of the materials, processing or component parts are made in the U.S. and that their final assembly or processing took place there”. Only negligible foreign content- all or virtually all is a very high standard.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 21 U.S. Trade Preferences for Developing Countries Trade Preference: granting of preferential access or trade advantage to imported goods not similar to other goods. Encourages manufacturing in Caribbean The goods are imported to U.S. at favorable tariff rate 2000 Caribbean Basin Trade Partnership Act: increased benefits

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 22 GSP: Generalized System of Preferences Beneficiaries are developing countries. Goods enter at lower tariff rate program- benefits 140 countries. In 1980’s 4 countries graduated: Hong Kong, Singapore, S.Korea & Taiwan. GSP rules of origin-35% value added in GSP country.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 23 Caribbean Basin Economic Recovery Act of 2000 CBERA Rules of Origin similar to GSP. Caribbean Basin Trade Partnership Act of –Now includes footware, luggage, and watches.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 24 Africa Growth and Opportunity Act of 2000 Established to help with political freedom in forty-eight poor countries in sub-Saharan Africa where per capita income is $500/year. AGOA broadens GSP for Africa and extends it to 2008.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 25 Andean Trade and CAFTA Andean Trade Program: U.S. program to promote economic development in Andean countries while combating drug trafficking and encouraging democracy. CAFTA: Central America-Dominican Republic Free Trade Agreement with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic.

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 26 Other Customs Laws Affecting U.S. Imports Drawbacks: refund of duties already paid. –Most common is the manufacturing drawback. –Same-condition drawbacks are utilized when the imported goods are not processed or manufactured, but are reexported in the “same condition” as they were imported. What about Returns of U.S. Exports?

Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 27 FTZ: Foreign Trade Zones Goods may be imported without being subjected to tariffs until goods are released into the stream of commerce See the Nissan Motor Mfg. Corp. v. United States case: machinery entering a foreign trade zone for assembly is not merchandise (not duty free).