Importing

Common Mistakes

By: Rudy Pina

      The Customs Modernization Act (Mod Act) - Public Law 103-82 instituted in December 1993- imposes on the Customs Service and importers a shared responsibility in the administration of trade.

      Pursuant to Section 484(a) of the Tariff Act of 1930, as amended (19 U.S.C. 1484(a)), an importer has an obligation to use reasonable care in (a) making an entry for merchandise by providing such information as is necessary to enable Customs to determine whether the merchandise may be released from Customs custody, and (b) in completing the entry by filing the declared value, classification and rate of duty applicable to the merchandise and such other information as is necessary to enable Customs to properly assess duties, collect accurate statistics and determine whether any other requirement of law (other than relating to release from Customs custody) is met.

      In an effort to assist importers to comply with the requirements of the Mod Act, I have complied a list of the most common mistakes made by maquilas and importers of maquila shipments documented for entry into the United States. 

U.S. Commercial Invoices

§141.86

U.S. Customs regulations
      A commercial invoice, signed by the maquila is acceptable for customs purposes if it is prepared in accordance with Section 141.86, Customs Regulations.  Special information may be required on certain goods or classes of goods in addition to the information normally required on the invoice.  The special information is found in §141.89 of the Customs Regulations.

      •Invoice descriptions are vague, listing only part numbers, truncated or coded descriptions, or lumping various together as one when several distinct items are included.

      •Incorrect HTSUS numbers.

      •Incorrect part numbers.

      •Columns added up incorrectly.

      •Invoice is not provided to the broker on time.

      •The merchandise enters the U.S. under preferential tariff provision number 9802.0050, HTSUS but the special invoice is not used.

      •The merchandise enters the U.S. under 9802.0050, HTSUS but the cost of the repair is not calculated correctly.

      •The merchandise enters the U.S. under preferential tariff provision number 9802.0080, HTSUS but the special invoice is not used.

      •The name of a responsible individual does not appear on the invoice.

      •The country of origin of the imported goods does not appear on the invoice.

      •The merchandise is appraised under the computed value method but the fact that the method of appraisement is computed value does not appear on the commercial invoice.

      •The imported merchandise is entered using estimated values and the invoice does not state that the values are estimated.

      •The imported merchandise is appraised under the transaction value method and the invoice does not reflect the value of assists provided the foreign producer.

      •The imported merchandise falls under §141.89 of the U.S. Customs Regulations and the additional information that is required does not appear on the invoice, i.e. the commercial invoice covering chemicals imported into the U.S. must contain the use of the chemical and Chemical Abstracts Service number(s).

      •The quantity per part number reflected in the invoice does not agree with the quantity per number that appears on the manifest and what is actually on board the truck.

NAFTA

§181

U.S. Customs regulations

      Goods produced in Mexico that satisfy Article 401 of the NAFTA are allowed to enter the U.S. as originating goods subject to preferential tariff treatment provided the importer has a valid NAFTA Certificate issued by the maquila at the time of importation.

      •The NAFTA Certificate of Origin has expired.

      •The importer does not have a valid NAFTA Certificate in its possession at the time the goods enter the U.S. as originating goods.

      •The importer does not advise the U.S. customs broker that a good satisfied a RVC requirement using the net cost method.

      •The maquila assumes that because a good originated in 2001 the good originates in 2002.

      •The maquila does not have documentary evidence covering each material claimed to be an originating material.

      •The person performing the NAFTA analysis does not have sufficient training to determine if the General Note 12(t) rule of origin has been satisfied.

      •The maquila used estimated costs to determine the RVC percentage and did not recalculate the RVC percent -using actual costs- at the end of the producer’s fiscal period as required.

      •The maquila did not use the GATT Valuation Code to determine de minimis or regional value content.

Valuation

§152

U.S. Customs Regulations

      Importers are required to include in the commercial invoice submitted to Customs the customs value of the imported merchandise.  The valuation provisions of the Tariff Act of 1930 are found in section 402, as amended by the Trade Agreements Act of 1979.

      •The customs value of the imported merchandise is not determined in accordance with the valuation principles stipulated in the Trade Agreements Act of 1979.

      •The value of assists provided the maquila is not declared at the time of entry.

      •Valuation reports are not submitted on time.

      •Non-production articles consigned to the maquila are not listed in the valuation report.

      •The person preparing a valuation report is not up to date on changes in the U.S. valuation law- The Trade Agreements Act of 1979.

      •Waste and scrap generated during production is not reported as an assist in the valuation report.

      •The imported merchandise is entered into the U.S. using estimated costs and the importer is not participating in the ACS Reconciliation Prototype.

Country of origin determination

§102

U.S. Customs regulations

      Importers are required to include in the commercial invoice submitted to Customs the country of origin of the imported article.   The country of origin of goods produced in Mexico must be determined in accordance with the requirements of §102.11 U.S. Customs Regulations.

      •The person preparing the commercial invoice assumes that the country of origin of a good is Mexico because the good is produced in Mexico.

      •The person preparing the commercial invoice does not use the Nafta Marking Rules to determine the country of origin of a good.

      *The person making the country of origin determination does not have sufficient training to understand the §102.11 rules of origin.

Country of origin markings

§134

U.S. Customs regulations

      The United States Customs laws require each imported article produced abroad to be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article permits, with the English name of the country of origin, to indicate to the ultimate purchaser in the United States the name of the country of origin in which the article was manufactured or produced.

      •The imported merchandise is not marked with its country of origin and a valid country of origin marking waiver does not cover the good.

      •The country of origin marking waiver has expired.

      •A U.S. address appears on the product or its container and the legend “Made In Mexico” or “Product of Mexico” does not appear next to the U.S. address.

      •The “Made In Mexico” or “Product of Mexico” legend is not in comparable size to the U.S. address.

      •The “Made In Mexico” or “Product of Mexico” legend is not in close proximity to the U.S. address.

      •The country of origin marking is not conspicuous, legible, permanent, and indelible.

      •The importer repackages imported goods not individually marked with their country of origin and does not send the required letter of certification to the port director.

      •The importer sells imported goods not individually marked with their country of origin to companies that repack the goods & fails to advise them of responsibilities under §134 of the U.S. Customs Regulations.

Preferential tariff provision 9802.0080

§10.13

U.S.Customs regulations

      Articles assembled abroad in whole or in part of fabricated components, the product of the U.S. which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process are subject to a duty upon the full value of the imported article, less the value of such products of the United States provided the statutory requirements of §10.13 U.S. Customs Regulations are satisfied. The rate of duty that is assessed upon the dutiable portion of the imported article is that which is applicable to the imported article as a whole under the appropriate provision of the HTSUS (19 U.S.C.1202) for such article.

      •The imported articles qualify for entry under 9802.0080, HTSUS but the importer does not enter them under the preferential tariff provision consequently U.S. customs duties are assessed on the American-made components.

      •The Foreign Assembler’s Declaration is not submitted at the time of entry.

      •The Foreign Assembler’s Declaration is invalid.

      •The U.S.-made components claimed to be duty exempt are not covered by a valid Manufacturer’s Affidavit or NAFTA Certificate of Origin.

      •The U.S.- made components were changed in condition while in Mexico and therefore not entitled to duty-free entry under the exemption.

      •The country of origin of a component changes from U.S. to foreign and the Assembly Description Form is not revised to reflect the change.

      •An Assembly Description Form is not submitted to Customs before the first importation of the good.

      •The Assembly Description Forms are not renewed each year as required.

      •The Assembly Description Forms are not revised when the total cost of the good changes by 5 percent.

      •The importer is not submitting to Customs actual cost data every six months as required.

      •A company continues to import goods under 9802.0080, HTSUS, while the goods are allowed duty free entry into the U.S.

Preferential tariff provision 9802.0050

§10.8

U.S. Customs regulations

      Articles sent to Mexico to be repaired or altered are allowed duty free entry into the United States under preferential tariff provision 9802.0050, HTSUS provided they satisfy all of the statutory requirements of §10.8 U.S. Customs Regulations.

      •The imported articles qualify for entry under 9802.0050, HTSUS but were not entered under the preferential tariff provision consequently duties and MPF were assessed on the imported articles.

      •The article sent to Mexico does not satisfy the requirements of what is considered to be a bona fide repair or alteration.

      •Foreign articles are sent to Mexico for repair or alteration without first entering the commerce of the U.S.

      •The value of the repair or alteration is incorrectly calculated.

      •The commercial invoice does not contain the certification statements required under §10.8 (a)(1) and (2).

Preferential tariff provision 9801.0010

§10.1

U.S. Customs regulations

      Articles of U.S. origin sent to Mexico and subsequently returned to the U.S. are allowed duty-free entry into the U.S. under preferential tariff provision 9801.0010, HTSUS, provided they were not advanced in value or changed in condition while abroad.

      •The imported articles met the requirements of item 9801.0010, but were not entered under the preferential tariff provision thereby causing the importer to pay U.S. customs duties and MPF on the imported articles.

      •A valid NAFTA Certificate of Origin or Manufacturer’s Affidavit does not cover the imported articles.

      •The value of the imported articles exceeds $2,000 and the Certification statements required by §10.1 (a)(1) & (2) are not attached to the commercial invoice.

Preferential tariff provision 9801.0020
§10.108

U.S. Customs regulations

      Articles of foreign origin that were imported into the U.S. and then sent to Mexico are allowed duty free entry into the U.S. under preferential tariff provision 9801.0020, HTSUS, provided duties were paid on the original importation and the foreign articles were not advanced in value or improved in condition by any process of manufacture or other means while in Mexico and reimported by or for the account of the person who imported them into, and exported them from, the United States.

      •The imported articles meet the requirements of item 9801.0020, but were not entered under the preferential tariff provision thereby causing the importer to pay U.S. customs duties on the goods.

      •The article was advanced in value or improved in condition by a process of manufacture or other means while in Mexico.

      •The importer does not have documentary evidence in the form of CF 7501 that it was the original importer of record and that duties were deposited at the time the foreign articles originally entered the United States.

Trademarked or trade-named merchandise
§133.31

U.S. Customs regulations

      It is unlawful to import articles bearing genuine trademarks owned by a U.S. citizen or corporation without permission of the U.S. trademark owner, if the foreign and domestic trademark owners are not parent and subsidiary companies or otherwise under common ownership and control, provided the trademark has been recorded with Customs (15 U.S.C. 1124; 19 U.S.C. 1526).

      •The importer enters goods that contain a trademark or trade name registered by another company and does not have a letter -on file at Customs- issued by the company that owns the trademark or trade name authorizing the importer to enter the goods into the U.S.

Power of attorney

§141.31

U.S. Customs regulations

      In order for a customs broker to transact customs business in behalf of an importer the broker must have a power of attorney form issued by the importer or record.

      •The person who executed the Power of Attorney is no longer with the company.

      •The company is a partnership and the Power of Attorney is not renewed every two years as required.

Record keeping requirements
§163

U.S. Customs regulations

      The importer must retain records pertaining to the importation of foreign articles for a period of five years.  Included in §163 U.S. Customs Regulations is the (a)(1)(A) List of records that importers must maintain for a period of five years. Under the Mod Act, importers must be able to produce a listed record within 30 days from the date of request in order to avoid penalties under §163.6(b) U.S. Customs Regulations.

      •The importer does not have a current copy of the (a)(1)(A) List.

      •The importer does not have a record keeping system in place which allows the company to retrieve a listed record within 30 days from the date the record is requested by Customs.

In bond shipments
§18

U.S. Customs regulations

      Articles of foreign origin are allowed to transit the U.S. in-bond without being entered into the commerce of the United States provided the shipment is in compliance with the requirements of §18 U.S. Customs Regulations.

      •The maquila wishes to ship the goods in-bond through the U.S. and does not notify the U.S. customs broker.

      •The name of the bonded carrier is not stated on the commercial invoice.

      •The U.S. port of exportation is not stated on the commercial invoice.

Rudy A. Piña is a customs consultant and president of R.A. Piña & Associates, Inc. of Nogales, Ariz. (www.rpina.com).