Category: Classification

CBP to Help U.S. Exporters Resolve Tariff Disputes with Foreign Governments

Posted by Jason P. Wapiennik on

A very long but worthy read appears in today’s Federal Register. It is a new opportunity from U.S. Customs & Border Protection to make U.S. products more competitive overseas. Essentially, if you are a U.S. exporter whose exports are being incorrectly classified or valued by a foreign government, you now have recourse to the CBP who will, if they agree with your position, work through the appropriate channels to achieve a resolution. Here is the most relevant text from the notice:

Inquiries Concerning Tariff Classification or Customs Valuation by 
Other Customs Administrations Affecting U.S. Exports

    By publication of this notice, U.S. Customs and Border Protection 
emphasizes that opportunities exist to strengthen communication and 
coordination between industry, CBP, other customs administrations, and 
the WCO to advance the shared goal of facilitating international trade. 
Greater collaboration with industry promotes improved technical 
understanding among contracting parties and helps to foster uniformity 
in the interpretation and application of the HS Convention and WTO 
Valuation Agreement.
    On matters involving non-uniform tariff classification or customs 
valuation treatment by other customs administrations, individual 
parties or firms do not have standing to initiate dispute settlement 
procedures or consultations under the HS Convention or the WTO 
Valuation Agreement. Consequently, for a U.S. individual or firm to 
raise a tariff classification or customs valuation dispute, that party 
must file an inquiry or complaint with the U.S. government and provide, 
or assist in the collection of, any information relating to the matter 
which may be required.
    Accordingly, CBP hereby invites U.S. exporters to file with CBP 
requests for assistance in resolving any tariff classification or 
customs valuation treatment by other customs administrations affecting 
U.S. exports.Of course, as a threshold technical matter, in order to provide the 
requested assistance, CBP must agree with the position of the exporter 
with regard to the specific matter brought to CBP's attention.
    CBP will endeavor to provide an initial response to such requests 
within 60 days of their receipt. Thereafter, in cooperation with the 
appropriate agencies, CBP will consider the appropriate course of 
action, including but not limited to the initiation of consultations or 
dispute settlement at meetings of the HSC or TCCV at the WCO. The 
inquirer or complainant will be informed of the progress achieved in 
resolving the matter. Requests for assistance on tariff classification 
or customs valuation treatment by other customs administrations 
affecting U.S. exports should be addressed to U.S. Customs and Border 
Protection, Office of International Trade, Regulations & Rulings, 
Attention: Commercial and Trade Facilitation Division, 90 K St. NE., 
10th Floor, Washington, DC 20229-1177.

Confidentiality

    Information submitted by U.S. exporters concerning requests for 
assistance may, in some instances, include confidential commercial or 
financial information, the disclosure of which could result in 
competitive harm to the business submitter. Such information is, 
generally, protected under the provisions of the Freedom of Information 
Act (5 U.S.C. 552) (FOIA), the Privacy Act (5 U.S.C. 552a), and the 
Trade Secrets Act (18 U.S.C. 1905). If confidential treatment is 
requested, submitters should specifically designate the information it 
considers confidential. Such requests will be handled in accordance 
with CBP Regulations (19 CFR 103.35) regarding the protection of such 
information.

If you need help classifying your exports and want the assistance of CBP, you should contact our office by e-mail or call (734) 855-4999. We are experienced in adressing specific concerns of clients before federal angencies, congressional committees, and classifying products in the HTSUS. You can also make use of our other articles, such as:

Customs Seeks to Enforce § 1592 Penalties for Misclassification at CIT

Posted by Jason P. Wapiennik on

The industry website RubberNews.com has a story about a tire distributor called China Tire out of California who is facing a potential $17 million fraud penaltiy under 19 USC  § 1592 for allegedly fradulent, negligent, or grossly negligent mis-classification of certain bus and truck tires into the United States. According to the story, which relies on the government’s allegations filed in the Court of International Trade, China Tire basically did some broker-shopping after its first customs broker refused to re-classify its product into a duty free Customs Money Seizureprovision of the Harmonized Tariff Schedule (HTS).

Instead of classifying them as bus and truck tires, they were classified as duty-free pneumatic tires. This classification caught the attention of Customs and requests for information were sent out. China Tire responded to these requests that “they were pneumatic tires for passenger cars.” Subsequently, China Tire directed its broker to again change classification to tires that were for agriculture and forestry uses.

What followed were standard 19 USC  § 1592 administrative penalty proceedings:

In July 2011, CBP issued a pre-penalty notice against China Tire and its executives John Cheng and Licheng Wang. In that notice, the complaint said, Wang and Cheng were held jointly and severally liable for 253 false entries, with a proposed penalty of nearly $8.1 million.

China Tire’s fraudulent entries cost CBP more than $404,000 in revenue, of which more than $242,000 is still unpaid, according to the complaint.

The current complaint proposes three alternative counts against China Tire, based on charges of fraud, gross negligence or negligence.

If found guilty of fraud, China Tire would face a penalty of nearly $16.9 million, plus the unpaid tariff balance. If found guilty of gross negligence, it would face a penalty of just over $1.6 million, plus the unpaid tariffs. If found guilty of negligence, it would face a penalty of $808,000, plus the unpaid tariffs.

A prior disclosure of the mis-classification would have potentially substantially reduced China Tires’ liability. If you face duty or penalty liability with customs you should contact our office by e-mail or call (734) 855-4999. We are experienced in defending customs 592 penalties, disclosing potential violations through prior disclosures, responding to notices of penalties, and preparing detailed and well argued petitions for mitigation of penalties or liquidated damages. You can also make use of our other articles, such as:

Customs 592 penalties articles:

Importer Allegedly Undervalues Shoe Imports and Gets Criminally Charged

Posted by Jason P. Wapiennik on

Imports into the United States must be properly classified and valued. Classification has to do with categorizing them on the Harmonized Tariff Schedule of the United States (HTSUS) in an 8 digit tariff code, and a 2 digit statistical suffix; valuation has to do with reporting the dutiable value of the merchandise which is usually the amount paid for the merchandise, plus certain other charges. Classification and valuation are bedrock principles of customs compliance.

In this vein, I was alerted  to a story about about a company that sells shoes/footwear which was, allegedly, reporting incorrect values to customs in order to save on duties. It looks like the company has been making its way in the courts for other reasons to, including trademark and breach of contract disputes. This story illustrates the importance of verify correct classification and valuation of merchandise; this can easily be done by requesting a prospective ruling from customs.

A federal grand jury in Sacramento on Thursday charged Romeo with evading about $5.6 million in customs duties. The company imports the popular Bearpaw brand of shearling slippers and boots and sells them nationally.Customs Classification and Valuation

. . .

“Tom has been fully cooperating with customs over the past several years,” said attorney Malcolm Segal, with Segal & Associates PC in Sacramento.

…

Romeo has deposited more than $4 million with U.S. Customs while the issue remains unsettled, Segal said.

Segal said the dispute arises from a technical issue over whether the shoes are completed products or component parts. The duties are different depending on how the shoes are classified.

Romeo owns and operates Romeo & Juliette Inc., a company that imports shoes and boots made in China and distributed under the brand names Bearpaw and Attix. The company sells to many national retailers.

The indictment alleges that from 1994 through 2011 Romeo had employees and others create false invoices that undervalued footwear he imported from China.

Source: Sacramento Business Journal. It sounds as though Romeo & Juliette filed a prior disclosure based on their attorney’s statement that $4 million was deposited with customs while it considers if it owes any money. That’s a smart move. Unfortunately, violations of the customs laws often involve criminal consequences in addition to severe civil penalties. It appears in vogue for Customs to pursue criminal charges for import violations: In August we posted analysis of a story of smugglers circumventing anti-dumping duties by transshipping aluminum extrusions from China to Malayasia and importing them via false documentation in San Juan.
If you need help conducting due diligence, or face duty or penalty liability with customs you should contact our office by e-mail or call (734) 855-4999. We are experienced in defending customs 592 penalties, disclosing potential violations through prior disclosures, responding to notices of penalties, and preparing detailed and well argued petitions for mitigation of penalties or liquidated damages You can also make use of our other articles, such as:

Tariff Classification – Proposed HTSUS Modifications

Posted by Jason P. Wapiennik on

Imports into the United States must be properly classified in the HTSUS tariff schedules, officially known as the Harmonized Tariff Schedule of the United States (“HTSUS”). The HTSUS is based off the nomenclature published by the Word Customs Organization (WCO). A good importer knows that if your tariff classifications for imports are wrong you may find yourself facing some serious 592 penalties if you do not make a valid prior disclosure to U.S. Customs & Border Protection (CBP).

When changes are made to the nomenclature that the HTSUS is based on then the United States is to make changes to the HTSUS. This can sometimes have an affect on tariff classification. Recently, the agency responsible for maintaining the HTSUS, the United States International

HTSUS Tariff Classification
HTSUS Chapter 84 Classification Affected by the Proposed Changes

Trade Commission (USITC), notified the public about upcoming recommended changes and will provide an opportunity to comment on them. An invitation to comment is likely to begin sometime around December 2014. A notice about this was also published in the Federal Register.

Though the United States is still preparing its proposed modifications to the HTSUS you can get a preview of the changes by viewing the WCO’s original recommendations HERE (PDF). As can be seen, there are numerous proposed changes that may affect HTSUS tariff classification of imported fish and seafoods, dairy products, infant formulas, beverages, inorganic chemicals, pharmaceuticals, plastics, wood and wooden articles, fabrics, ceramics, copper and copper articles, mechanical/agricultural appliances, and many others imported goods in almost every chapter of the HTSUS.

In addition to the recommended changes to the HTSUS the USITC is proposing changes from by CBP that would potentially effect the proper classification (at least for statistical purposes) of corned beef and taros, otherwise known as dasheens.

As the director of the HTSUS division wisely said, importers and exporters who might “be affected … will want to stay on top of the process as it moves forward.” This is because interested parties will have an opportunity to comment on the proposed changes, and possibly make a difference in how the changes are implemented, if at all.

If you need help classifying your imports privately or by requesting a prospective ruling from CBP, need to protest a classification decision of CBP, or want to comment on the proposed changes to the HTSUS that will affect how your company’s imports are classified for customs purposes, you should contact our office by e-mail or call (734) 855-4999. We are experienced in adressing specific concerns of clients before federal angencies, congressional committees, and classifying products in the HTSUS. You can also make use of our other articles, such as: