Abady Law Firm, P.C. – Customs and Import/Export Attorney Blog
Learn the Basics of Customs and International Trade Policy and Procedure
Archive for the "Customs Duty" Category
Liquidated Damages are predetermined civil penalties assessed against importers who have breached the terms of Customs bond. These liquidated damages claims arise when an importer fails to adhere to the Customs regulations and/or requests made by Customs on behalf of other government agencies (e.g. FDA). Specifically, a majority of the claims for liquidated damages stem from issues related to failure to redeliver goods, or improper classification, valuation, or marking.
Petitions for relief from liquidated damages must be filed within sixty (60) days from the date of mailing to the bond principal, the notice of claim for liquidated damages, or penalty secured by a bond. The degree at which Customs will grant mitigation is dependent on Customs mitigation guidelines and the facts and circumstances of the case.
As always when faced with a liquidated damages claim it is best to consult with a customs attorney about your options when preparing a petition to file with Customs.
For more information about this blog post, please contact Abady Law Firm, P.C. and speak with our customs attorney at (800) 549-5099. Also visit www.customsesq.com to chat with an import export attorney — who has insight into liquidated damages claims — about your company’s import or export situation and to schedule a consultation. To chat with us, click the bottom right corner tab of our homepage.
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A protest (Customs Form 19) is a means by which an importer can contest the way in which an entry was finalized or liquidated. Generally, any issue regarding the value, classification, or admissibility of an entry may be raised after liquidation. 19 U.S.C. § 1514; 19 C.F.R. § 174.13.
A protest is required to be filed within 180 days (no extensions permitted) after liquidation or reliquidation of the entry (19 U.S.C. § 1514(c)(3)(A); 19 C.F.R. § 174.12(e)) or within 180 days if liquidation is inapplicable (19 U.S.C. § 1514(c)(3)(B); 19 C.F.R. § 174.12(e)(2)).
The protest form asks for basic information regarding the entry, however it is in the importers best interest to supplement the protest with a detailed analysis of why Customs should grant the claim. Generally, the protest is reviewed by local Customs, however there is an option to request that the protest be reviewed by Customs Headquarters in Washington.
If the protest is approved the entry will be reliquidated and refund due (if applicable) to those entries that were protested. 19 U.S.C. § 1515(a); 19 C.F.R. § 174.29.
For protests involving the payment of duties, if the duties have been paid and the protest is approved then Customs pays the refund amount plus interest that has accrued from the payment date. If the duty has not been paid and the protest is rejected the importer pays the duty plus interest accrued from the date that payment was due. 19 C.F.R. § 24.36.
You may call us at 347-512-9007 for legal assistance in preparing a proper protest.
A quick explanation of substantial transformation:
As mentioned in the earlier post – Country of Origin – substantial transformation is the degree to which processing of an article leads to a new article, with a different name, character, and use. In addition, Customs uses a second method known as the “tariff shift” i.e. change in tariff classification, which is also used to determine substantial transformation. As of now, there are no uniform rules that settle country of origin questions.
As a result, substantial transformation can be highly subjective and tend to be based on political considerations. There has been much litigation in this area and have case-specific interpretations. Further, determinations as to what is considered a substantial transformation change periodically. Thus, it would be wise to discuss the nature of the product with Customs prior to importation because you are not excused from exercising reasonable care when determining the proper country of origin for your goods.
The United States offers a number of special duty reduction programs for products that originate from certain countries. Each of the programs requires that the good originate from beneficiary country. If the good was imported into the beneficiary country then the material must be “transformed” by a process or manufactured into a product of that country. Transformation is where things get a bit gray, contact an expert to determine if and how a good can be transformed.
The amount of value to be added consists of:
1. the materials produced in the beneficiary country
2. the direct costs of processing operations performed in the beneficiary country
Most duty reduction programs require a certificate of origin and basis for qualifying under the program. It must be filed with each entry of goods into the U.S.
Some examples of Duty Free Reduction Programs:
The U.S.-Australia Free Trade Agreement
The U.S.-Israel Free Trade Area Agreement
The North American Free Trade Agreement
Happy Importing 🙂
For Tariff Classification purposes, there are circumstances in which more than one word can describe an item. What do you do?! Well the law provides under the “General Rules of Interpretation” 2(b) that consideration is to be given to every heading that identifies an item by name, language or description. Okay, that is great but my goods can be described in more than one way.
General Rules of Interpretation 3 comes along and simplifies the identification of the goods.
Relative Specificity More SPECIFIC language is preferred over general language, thus the heading which more precisely describes the good will be used and the others will be ignored.
Composite Goods and Goods Sold in Retail Sets when a good is a mixture or a composite of different material, components, or sets Customs again uses the concept of Essential Character. In these cases, the question becomes which part of the retail set is causing you to purchase the item? To qualify as a retail set 1) there must be two or more articles with different classifications 2)a single commercial purpose and 3) packaged as ready for sale.
More Than One Essential Character What happens if the good has more than one essential character? Customs Answer: Look to the feature of the good that appears in the Tariff Schedule the last numerically.
Good Cannot be found in the Tariff Self Explanatory. Answer, General Rule of Interpretation 4 says pretend like the goods have changed to one in the tariff to which it is most akin.
Packing and Packaging Whether certain types of packaging are treated as part of the merchandise or must be classified separately. Fitted cases for example, camera cases, musical cases, gun cases, specifically designed for the particular product and have long term use are to be classified with the merchandise for which they are imported. However, if you import these separately then they would need there own tariff number.
Many goods are unassembled or incomplete when they arrive at the port. The U.S. Harmonized Tariff Schedule for classification predominantly addresses complete and assembled products. However, the law provides via the “General Rules of Interpretation” for unassembled or incomplete goods by allowing certain goods to be classified as though they are complete and assembled.
The rule qualifies these goods by its ESSENTIAL CHARACTER. Essential character is not defined in the law but all depends on the specifications of the product. Can a person objectively recognize the product for what it is when incomplete? While Customs may have their own opinion it is within the importers best interest to convince them of the goods essential character for beneficial duty treatment.
CLASSIFICATION is the process by which goods are categorized for determining payment of duty as well as for statistical purposes. The United States is apart of the Harmonized System of Classification which functions under an International and a Domestic (Country Specific) level. On the international level all those who are parties to the Harmonized system will classify the product the same. However, at the domestic level each country has its own detailed descriptions and rates of duty one has to pay.
There are many laws and rules regarding interpreting the Harmonized Tariff Schedule of the United States (HTSUS). For every product there is a place for classifying it and if your good comes from outer space there are ways to squeeze your item some place in the tariff. I would hate to describe to you the tedious nature of columns, headings, and subheadings involved in tariff (if you do e-mail me). Thus, it is important to have a customs broker handling these transactions and counsel assisting on difficult matters if they should arise. Incorrectly classifying a product can result in improper duty liability, failure to meet the free trade opportunities if applicable, or major penalties. Be Cautious and choose your customs agents wisely.
Happy Importing 🙂
You may call us at 347-512-9007 for more information on your international trade and customs issues.
There are those importers who find themselves under the belief that duty rates are beyond their control. However, one of the ways an importer can use his or her whit and intelligence is known as “Tariff Engineering.”
The importing laws in the United States are for the most part narrowly tailored to a specific item. For example, you import an adult bicycle and there is a tariff duty rate for that bicycle. However, this strict construction of items based on a tariff may benefit the importer. That same adult bicycle may have different duty rates based on its wheels diameter!
The laws in the U.S. provide a framework for how to import your goods. During the manufacturing process the importer is recommended to speak with the manufacturer, customs broker, and/or attorney to determine the most cost effective way of manufacturing the product to save on import duties – i.e. Tariff Engineering. The earlier this is done in the production process the more one can predict how Customs will react to the product during importation.
Planning is the key word folks – you do not want to the surprise of owing thousands in duty after the goods left the dock.
One of the main functions of U.S. Customs and Border Protection is to collect duties. What are “duties”? Duties are a form of tax that an importer has an obligation to pay. Inherent in the payment of duties is liability to which the government defines to be a personal debt due from the importer to the U.S. that can only be discharged by paying the FULL amount. There is no haggling with Customs!
Please be careful because the failure to pay your duties on time may result in an audit, penalties, and other legal consequences leading you to be on Customs bad side.
When is duty due?
A deposit of estimated duties are due during the time of your merchandise entering the U.S. Any additional duty found is due 30 days after liquidation (Liquidation means the final computation or ascertainment of the duties).
Customs duties are often paid by the importers customs broker who is clearing the shipments to be paid over to Customs. However, Customs Brokers are not agents of Customs and therefore payment of duties to your Customs Broker does not relieve you from liability if Customs is not paid.
Two ways to pay Customs: 1) Checks Payable to Customs which are delivered with a Customs entry; 2) Automated Clearing House which permits Customs to withdraw duties from your bank account – allows a 10 day window to pay AFTER entry.
Feel Free to e-mail me with any questions 🙂
Documentation is the first stage of the government’s determination as to whether they will allow your product to cross the border. Further, these documents allow the government to assess duties and taxes on your container shipments. IMPORTERS ARE HELD RESPONSIBLE FOR THE ACCURACY OF DOCUMENTATION PRESENTED TO THE GOVERNMENT, even if the documentation was prepared by someone else (i.e. customs broker or exporter). I cannot stress this enough. If the documentation is misleading, inaccurate, incomplete, or false the transaction is compromised and you will be held responsible. Problems with the documentation can result in higher duties, penalties, exclusion of the goods, and seizure.