Chapter 12, Imports, Customs, and Tariff Law Video Solutions, International Business Law and Its Environment

Problem 1

CamelBak imported back-mounted packs used for outdoor activities and designed to deliver "hands-free" water on-the-go. Each of the subject articles is a textile bag with padded shoulder straps and an insulated polyurethane reservoir, flexible tubing, a bite valve and a cargo compartment designed to hold food, clothing, and supplies. Each reservoir would hold 35 to 100 ounces of liquid, and each cargo compartment would hold 300 to 1,680 cubic inches, depending on the style of pack. U.S. Customs entered the articles under heading 4202 covering "backpacks" and subheading and item 4202.92.30 for "travel, sports and similar bags" at a rate of duty of 17.8 percent. CamelBak argued that the articles were "insulated food or beverage bags" under subheading 4202.92 dutiable at a rate of 7 percent. The Court of International Trade ruled in favor of Customs, holding that under GRI 1 the articles were specifically and completely encompassed under the heading for backpacks. CamelBak appealed to the Court of Appeals. What was the result? Are the articles "backpacks" or
"insulated beverage bags"? Does GRI 1 apply, or are the articles "composite goods," requiring analysis under GRI 3? If so, what component makes up the "essential character" of the article? What is the effect of adding a feature to an article (i.e., insulated reservoir) that is substantially in excess of those within the common meaning of that article (i.e., backpacks)? In other words, does the addition of the insulated reservoir just make it an "improved" backpack or does it become something else for tariff purposes? Outdoor enthusiasts might be surprised at the result! CamelBak Products, LLC v. U.S., 649 F.3d 1361 (Fed. Cir. 2011).

Check back soon!

Problem 2

Inner Secrets entered 2,000 dozen boxer-style shorts from Hong Kong. The boxer shorts were made of cotton flannel in a plaid pattern, with a waistband, a side length of 17 inches, and two small nonfunctional buttons on the waistband above the fly. Two seams were sewn horizontally across the fly, dividing the fly opening into thirds. The boxers did not have belt loops, inner or outer pockets, or fly closures. They were marketed under the label "No Excuses." Customs
classified the garments as outerwear shorts under HTSUS 6204.62.4055: 'Women's or girls' suits, ensembles, suit-type jackets and blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts ... . Trousers, bib and brace overalls, breeches and shorts ... of cotton... $17.7 \%$." The Customs Service based its decision on its determination that the boxers will be worn by women as outer clothing. Inner Secrets maintains that the items are not outerwear, as Customs claims, but are actually underwear properly classified under HTSUS 6208.91.3010: "Women's or girls' singlets and other undershirts, slips, petticoats, briefs, panties, nightdresses, pajamas, negligees, bathrobes, dressing gowns and similar articles ... of cotton ...$$11.9\%$$." Inner Secrets filed a protest with the agency, which was denied. Inner Secrets brought this action with the Court of International Trade. What is the proper classification of the boxers? How would a camisole worn under a sport jacket or a slip worn as a dress be classified? Inner Secrets v. United States, 885 F. Supp. 248 (C.I.T. 1995). See also St. Eve International v. United States, 267 F. Supp. 1371 (C.I.T. 2003).

Check back soon!

Problem 3

Sports Graphics imported soft-sided "Chill" coolers from Taiwan, consisting of an outer shell of nylon, an insulating core of foam, a top secured by a zippered flap, an inner liner of vinyl, and a handle or shoulder strap. Customs classified the merchandise as "Travel goods, such as trunks... suitcases, overnight bags, traveling bags, .... and like articles designed to contain ... personal effects during travel ... and brief cases, golf bags, and like containers and cases designed to be carried with the person ... . Luggage and handbags, whether or not fitted with bottle, dining, drinking... or similar sets ... and flat goods ... of laminated plastics ..." at a 20 percent rate of duty. Sports Graphics contended that the imported soft-sided coolers were properly classifiable as "Articles chiefly used for preparing, serving, or storing food or beverages" and were dutiable at a rate of 4 or 3.4 percent ad valorem. How do you determine the proper classification? Does the use of this product have a bearing on its classification? What result? Sports Graphics, Inc. v. United States, 24 F.3d 1390 (Fed. Cir. 1994).

Check back soon!

Problem 4

You intend to import raw, frozen calamari (squid) from China, Vietnam, and Peru into the United States, where it will be defrosted and tenderized. The tenderization process entails placing the imported squid into a solution consisting of ice water mixed with salt, citric acid, sodium citrate, active oxygen, and potassium carbonate. The squid is kept cold as it sits in the solution within a large tank for a period of 15 to 18 hours. The process does not change the size or shape of the calamari, but makes it whiter and plumper. Then it is washed with clean water before being refrozen and
repacked for sale. Can your calamari be labeled "Product of U.S.A."? Why or why not? Can you locate any cases like this in the Customs Rulings Online Search System?

Check back soon!

02:51

Problem 5

You intend to import vodka that is produced in Denmark. The strength of the vodka when imported will be at least 80 percent by volume. In the United States, the vodka will be diluted with water, sugar, and flavor to produce flavored vodka with 35 percent alcohol by volume. What is the correct country of origin for labeling purposes? Why?

David Collins

Numerade Educator

04:39

Problem 6

You intend to obtain a saw blade produced in England and then ship it to China to be assembled with a handle that is manufactured in China. The finished saw is then packaged in China for export. What is the country of origin of the saw? Why?

Crystal Wang

Numerade Educator

Problem 7

Visit the Website of the Bureau of Customs and Border Protection. What resources does it contain for the trade community? Go to the "Trade" page and link to "Legal Decisions/Publications." What legal resources appear here that you have studied or used in this chapter?
a. The Customs Rulings Online Search System (CROSS) is a searchable database of about 100,000 ruling letters. Access the database and try locating rulings on some of the issues discussed in this chapter. For example, enter "country of origin" together with the name of a product or class of products and see what you can find. Remember, these letters are binding only for the individual to whom they are written and only for that transaction. Nevertheless, they are a helpful guide to importers.
b. The Customs Bulletins and Decisions is a weekly diary of all official acts of the agency. What type of information does it contain, and who might want to follow this on a regular basis?
c. Go to the "Trade" page and link to "Cargo Security." Look at the Container Security Initiative. More than eleven million ocean containers enter U.S. ports every year. Only a tiny fraction of the containers can be inspected by hand. Any one of them could be used to hide a weapon of mass destruction. Look at the Customs-Trade Partnership Against Terrorism (C-TPAT), a process for enhancing security between U.S. importers and their foreign supply chains based on utilizing intelligence, pre-screening, detection technology, and tamper-evident containers. How do you think the threat of terrorism and Customs' security programs will affect global transportation in the years to come? What is Customs" "24-hour rule" for loading cargo aboard ships destined for the United States?

Check back soon!

Problem 8

Acquaint yourself with the Harmonized Tariff Schedule of the United States.
a. Which countries receive GSP tariff preference treatment?
b. Which countries qualify for duty-free treatment as "least developed beneficiary developing countries?"
c. Which countries qualify for the African Growth and Opportunity Act preferences?
d. A good portion of the HTSUS is devoted to the dutiable status of goods moving in North America. NAFTA is the subject of the next chapter. Can you locate the NAFTA rules of origin, known as the "tariff-shift rules," in the schedules?
e. Choose several products with which you are familiar, and attempt to classify them using the schedule.

Check back soon!

Problem 9

The primary body of U.S. customs law is found in Title 19 of the U.S. Code. The regulations are found in the Code of Federal Regulations. You can access the CFR either through the Website of the U.S. Customs and Border Protection ("Legal" section) or through the Government Printing Office site. Can you find Customs' record-keeping rules? What are the rules for filing a protest with U.S. Customs?

Check back soon!