The United States International Trade Commission (“USITC”) has finalized recommended modifications to the Harmonized Tariff Schedule of the United States (“HTSUS”). The revisions, which are set to go into effect on January 1, 2022, conform the HTSUS with World Customs Organization (“WCO”) amendments to the Harmonized System commodity codes. A detailed report of all changes
On March 10, 2021, the United States Trade Representative (USTR) published an extension of the COVID-19 related medical-care and response product exclusions from Section 301 duties covering imports from China. The agency determined it would be inappropriate to allow the exclusions to lapse in consideration of the ongoing efforts to combat the COVID-19 pandemic. The…
On March 1, 2021, the U.S. Court of International Trade (CIT) issued a decision with important ramifications for any company that uses “first sale” to reduce customs duty liability for goods imported into the United States. The CIT’s ruling in Meyer Corp., U.S. v. United States calls into question the continued viability of first sale for suppliers located in non-market economies. This development has meaningfully altered the risk profile associated with using first sale for transactions in China and Vietnam. All companies relying on first sale should review their first sale programs to evaluate the impact of this ruling and take adequate precautions.
The First Sale Rule
The first sale rule permits importers to declare a lower customs value—and by extension, to lower the customs duty liability—for certain types of qualifying importations. To be eligible, an importation must involve a multi-tiered transaction (i.e., there must be three or more parties involved in the sequence of sales leading to the importer). Under U.S. law, the earliest sale in such a sequence of transactions may be declared as the customs value provided that the goods are clearly destined for the United States at the time of such sale and the first sale value otherwise satisfies the requirements applicable to any transaction value (i.e., it must be a bona fide sale that has been conducted at arm’s length).
First sale is thus commonly described as having “three elements”: the first sale in a multi-tiered transaction may be used as a customs value provided (1) it is a bona fide sale, (2) the goods are clearly destined for the United States at the time of the transaction, and (3) the value is an arm’s length price.
Meyer v. United States
The CIT’s decision in Meyer hinges on additional language from the seminal 30-year-old case that established first sale as a viable basis for customs valuation—language that has frequently been quoted, but seldom, if ever, scrutinized for meaning. The CIT interpreted that language to impose an overlooked requirement, namely that any legitimate first sale must be (4) absent any distortive non-market influences. While the first three requirements for the use of first sale are frequently assessed and litigated, the fourth requirement, the CIT notes, “has generally been neglected.”…
Continue Reading U.S. Importers Should Reevaluate “First Sale” Customs Programs
Updated August 24, 2020: CBP has extended the transition period for compliance with this rule change by 45 days until November 9, 2020. See the CSMS notice here.
Yesterday, U.S. Customs and Border Patrol (CBP) issued a new rule that requires importers to begin marking Hong Kong goods as “made in China” for…
On July 10, USTR published a notice of action in the Section 301 investigation of France’s digital services tax announcing the imposition of additional 25 percent duties on certain products from France covering an estimated $1.3 billion of trade. The additional tariffs are effective January 6, 2021, pursuant to a 180-day suspension period.
On Monday, April 20, 2020, U.S. Customs and Border Protection (CBP) issued interim instructions for implementation of the U.S.-Mexico-Canada Agreement (USMCA).* The instructions provide guidance regarding preferential tariff claims under the USMCA. The Agreement, once it enters into force, provides for the immediate or staged elimination of trade barriers for goods originating in one of the three countries. The instructions provide guidance regarding rules of origin (including for automotive goods), regional value content (RCV) calculation methods, de minimis rules, transshipment, eligibility for textiles and apparel, making preference claims, and certification and recordkeeping rules and requirements.
The instructions provide a rules of origin definition to determine whether a good qualifies as an “originating good” under the USMCA, such that it is eligible for preferential tariff treatment. Under USMCA a good is “originating” in the United States, Mexico, or Canada when:
a) The good is wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 4.3 of the Agreement;
b) The good is produced entirely in the territory of one or more of the Parties using non-originating materials provided the good satisfies all applicable requirements of product- specific rules of origin;
c) The good is produced entirely in the territory of one or more of the Parties exclusively from originating materials; or…
Continue Reading CBP Posts Interim Instructions for USMCA Implementation
On November 7, the United States Government Accountability Office (“GAO”) released a report assessing actions the U.S. Department of Commerce (“Commerce”) and U.S. Customs and Border Protection (“CBP”) have taken to address weaknesses in the process for collecting antidumping (“AD”) and countervailing (“CV”) duties.
The report noted the following facts:
- For bills issued in fiscal years 2001 – 2018, CBP collected over $20 billion in uncollected AD/CV duties.
- For bills issued over the same period, $4.5 billion in AD/CV duties remained uncollected as of May 2019.
- Only 20 importers accounted for $1.93 billion (or 43.3 percent) of the $4.5 billion in AD/CV duties with the remaining $2.52 billion (or 56.7 percent) in uncollected duties accounted for by 1,118 importers.
The report also notes that one cause for concern at Commerce is the significantly increased workload, with a lack of corresponding increase in staff. The report explains that from fiscal years 2012 to 2018, the total number of AD/CV duty orders enforced by Commerce has increased from 280 to 457, with the number of case analysts increasing only from 118 to 127. Commerce has sought to address the increased workloads by implementing a variety of internal procedures and establishing a training unit.
CBP has also undertaken variety of measures to address uncollected duties. Perhaps most interesting is CBP’s use of new statistical models to identify key risk factors associated with nonpayment. As noted above, with only 20 importers accounting for more than 43 percent of the value of billed but uncollected duties, identifying high risk importers would appear to be a prudent step.
The report also identified the United States’ retrospective system of duty assessment as one factor contributing to complexities in duty collection faced by both agencies. The retrospective system is widely viewed as a net positive, however, which leads to more accurate duty assessment over time. The report concludes that while the two agencies have undertaken measures to address weaknesses in the process for collecting duties, more can be done.…
Continue Reading GAO Report Reveals Deficiencies in Process for Collecting Antidumping and Countervailing Duties
Thursday, October 10, 2019
12:00 PM – 1:00 PM
Many companies are looking for opportunities to reduce or eliminate duties on products they import. In 2015, Congress passed legislation codifying a duty reduction process, known as the Miscellaneous Tariff Bill (MTB), that reduces duties assessed on more than a thousand imported raw materials and intermediate…
Effective May 10, 2019 importations of merchandise covered under the Section 301 third tranche, manufactured in China and entered into the U.S., are subject to the increase in additional duties from 10 to 25%. However, according to U.S. Customs and Border Protection updated guidance, the increased duties of 25% will not apply to goods a)…
On Monday, March 4th, President Trump announced that India and Turkey will no longer benefit from the United States’ Generalized System of Preferences (“GSP”) program. The GSP program, established by the Trade Act of 1974, is designed to promote economic development by eliminating duties on certain eligible products when imported from a beneficiary…