Customs Valuation

In this continued era of protectionist and mercantilist trade policies arising from the United States, there are strategies that can be carefully evaluated and pursued to maximize Customs duty savings when importing. This article briefly summarizes a few strategies. Importantly, all duty saving strategies are heavily scrutinized by the government and should be carefully evaluated before implementation. 

Ending a legal saga that began in 2013 and involved an appeal to the Supreme Court, which declined to hear the case, the Department of Justice (“DOJ”) on March 11 announced that Ford Motor Company (“Ford”) agreed to pay $365 million to resolve penalties related to the customs misclassification and undervaluation of approximately 162,833 cargo vans imported into the United States. DOJ alleged that from April 2009 to August 2013 Ford engaged in a scheme whereby the company imported Transit Connect vans from Turkey with a “sham” rear seat to make these vans appear to be passenger vehicles rather than cargo vehicles. Per the DOJ press release, the rear seats “were never intended to be, and never were, used to carry passengers.”

On February 7, the U.S. Department of Justice (DOJ) announced that settlements and judgements under the False Claims Act (FCA) exceeded $2 billion for the 2022 fiscal year. The 2022 fiscal year also had the second-highest number of settlements and judgments for any given year in the history of the act.

Many importers have experienced at one time or another that horrible, stomach-turning feeling that comes with the realization that merchandise they have been importing has been entered under the wrong HTS code, with the incorrect value, or with the incorrect country of origin. These and similar errors constitute violations of 19 U.S.C. § 1592, and upon such discovery, the importer must ask, “Should I submit a Prior Disclosure to U.S. Customs and Border Protection (“CBP”)?” The answer to that question will depend on a variety of factors, which will be discussed in this article.

In 2022, Customs and Border Protection (“CBP” or “Customs”) processed $3.35 trillion in imports, issued 2,121 penalties, and collected $19.3 million from penalties and liquidated damages. [1] Section 1592 of the Tariff Act of 1930 is the primary customs penalty provision and is the enforcement tool used by CBP to ensure compliance with Harmonized Tariff Schedule of the United States (“HTSUS”) classification, valuation, and other entry requirements. 

In 2016, the United States implemented legislation revising 19 U.S.C. § 1321 (“Section 321”) and thereby increasing the de minimis amount for imports into the United States from $200 to $800, meaning an importer is not required to pay duties if the merchandise has a fair market retail value at or below $800. In 2018, the U.S. began imposing a 25% tariff on most goods from China. The convergence of these two issues – the ability to import duty-free under $800 and the steep duties applicable to Chinese goods – led many vendors of Chinese merchandise to take advantage of Section 321 de minimis treatment for certain imports.

Importing merchandise into the United States can be a tricky process for even magical folk. There are a variety laws and regulations enforced by U.S. Customs and Border Protection (“CBP” or “Customs”), and violations can lead to significant consequences including monetary penalties. In a more practical sense, lack of compliance with the Customs regulations can cause increased regulatory scrutiny, delay the release of merchandise by CBP, and affect an importer’s ability to meet internal deadlines or other obligations related to the imported merchandise. Quite the impediment for a man whose distribution business is conducted over the course of one night!

On February 7, 2023, the U.S. Department of Justice (“DOJ”) announced that settlements and judgements under the False Claims Act (“FCA”) exceeded $2 billion for the 2022 fiscal year. The 2022 fiscal year also had the second-highest number of settlements and judgments for any given year in FCA history. 

As January 20, 2021 approaches and the advent of a new president and presidency emerges, what can we expect from a Biden administration and its Customs and Border Protection (“CBP” or “Customs”) Transfer Pricing policy? What opportunities are available for global companies to manage and make retrospective inter-company Transfer Pricing adjustments? Different customs options and opportunities exist depending upon each companies’ analysis and needs.

Very few words evoke feelings of fear and loathing quite like the word “audit.” But Compliance professionals understand that auditing internal trade compliance processes is a necessary method of maintaining healthy trade controls and avoiding costly penalties.

Since President Trump took office in January of 2017, he has shown his desire to follow through with trade policies that were a central part of his campaign. 

This article discusses how new regulations significantly change foreign investments in U.S. businesses and the temporary Pilot Program, which addresses specific risks related to U.S. critical technologies.

This article first appeared in the Newsletter of the International Law Section (www.ilstexas.org) of the State Bar of Texas, and is reproduced with the Section’s permission.

Since the Trade Facilitation and Trade Enforcement Act of 2015 (“TFTEA”) was signed into law in February 2016, U.S. Customs and Border Protection (“CBP”) has increased enforcement of U.S. import laws and regulations. Increased enforcement and associated risks should drive an increased focus by importers on compliance with CBP regulations. However, there remains a knowledge gap among some importing companies and non-trade attorneys related to a few of the basics of import regulations. In this regard, businesses and corporate attorneys should familiarize themselves with the issues below in order to navigate the increasingly risky waters of customs compliance.

From time to time importers may receive from U.S. Customs and Border Protection (“CBP” or “Customs”) a CBP Form 28 (“CF 28”) Request for Information. The issuance of a CF 28 is a standard procedure used by Customs to gain more information about entered merchandise. Totally harmless, right? Not necessarily. As discussed below, it is important for importers, and customs brokers responding on behalf of importers, to take the issuance and response to a CF 28 seriously.

On December 31, 2017 the Generalized System of Preferences (“GSP”) trade program expired after Congress failed to reauthorize the program.

On June 29, 2017, in an effort to continue to transform the way U.S. Customs and Border Protection (“CBP”) approaches trade through the Centers of Excellence and Expertise (“Centers”), CBP released a new trade process document that includes new responsibilities and procedures for importers, brokers, agents, or filers.