1. The Mod Act:
Per the Customs Modernization Act (“Mod Act”), importers are legally responsible for declaring the value, classification and rate of duty applicable to a particular import. “Informed compliance” is a mandatory requirement under the Mod Act, and the U.S. Customs and Border Protection (“CBP”) of the Department of Homeland Security (“DHS”) must inform importers of certain requirements. In turn, importers must use “reasonable care” in meeting those requirements and providing timely and accurate responses if the CBP raises any questions.
The “reasonable care” determination includes a compliance assessment by the CBP that will evaluate the importer’s customs operations. Information necessary for consideration in the evaluation includes, but is not limited to, the importer’s record-keeping, merchandise classification, merchandise quantities, merchandise valuation, the applicability of antidumping and countervailing duties to the imported articles and, where applicable, quota conformity.
2. Duties and the HTSUS:
All merchandise imported into the U.S. is subject to a duty or duty-free entry determination. The importer must look to the Harmonized Tariff Schedule of the United States (“HTSUS”) in order to determine the proper classification of a particular import. Based on the item’s classification under the HTSUS, the applicable rate of duty may be determined. Although this initial classification is solely the responsibility of the importer, the dutiable rate will ultimately be determined by the CBP.
3. Preferential Treatment and Free Trade Agreements:
Depending upon the country-of-origin and the merchandise in question, duty rates vary or may be inapplicable altogether. For example, the Generalized System of Preferences (“GSP”) and a number of free trade agreements, including the North American Free Trade Agreement (“NAFTA”), provide preferential treatment to certain imports that may enable its duty-free entry. Eligibility for such preferential treatment depends upon the specific merchandise and whether the country-of-origin is of a designated beneficiary country or territory. All imports are subject to the concept of “substantial transformation” where the country-of-origin is determined by the extent of not only where a good is processed but also where it is manufactured. Only originating goods from beneficiary countries or territories may receive preferential treatment.
4. Penalties for Import Violations:
Notably, penalties may be applied to an improperly classified or valued transaction or one that does not meet other U.S. compliance standards.
Antidumping and countervailing duties are additional duties that may be imposed on items imported into the U.S. that are found to be either “dumped” or subsidized. Antidumping and countervailing duties may be imposed only after lengthy investigations by the DOC and the U.S. International Trade Commission (“ITC”) that find unfair pricing or government subsidization that will cause a material injury to a U.S. industry. These duties are imposed as a method to offset “unfair competition.” After the conclusion of DOC proceedings, the duties are assessed by the CBP.
Further, the CBP may apply civil sanctions under 19 U.S.C. 1592 where persons have negligently, gross negligently or intentionally provided false information regarding an import. The CBP may also apply criminal sanctions under 18 U.S.C. 542, which include a monetary fine and up to two years’ imprisonment for each fraudulent violation. All merchandise involved will be seized and forfeited by the importer.
For further information or assistance on imports, please contact us.