Passport to U.S. Customs Compliance

HTS Classification:

• How to use the Harmonized Tariff Schedule and where importers make mistakes
• Understanding HTSUS structure and framework
• Applying the General Rules of Interpretation, heading terms, relevant section, and chapter notes, heading and subheading notes, general notes, and explanatory notes, and using the rulings as guides
• Navigating the ambiguities in HTS classification, especially for products that can fit multiple descriptions
• Special HTS classification resulting in increased duties (chapter 99, 301, 232, IEEPA) or decreased duties (chapter 98, goods returned, Us government imports, agricultural imports, samples/test products, temporary imports)
• Understanding the impact of proper classification on duty rates and compliance
• Key pitfalls to avoid
• Mitigating risks and CBP rulings

• Types of origin rules, non-preferential and preferential rules
• Applying the appropriate rules of origin for different tariff determinations
• substantial transformation test
• textile and apparel rules
• free trade agreement (e.g., USMCA) rules
• Understanding the criteria for substantial transformation, including how a product’s name, character, or use must change during the manufacturing process
• How to eliminate duties through origin changes (IEEPA, 232, 301, etc.)
• Ensuring compliance with country-specific labeling and marking requirements to avoid penalties and facilitate smooth customs clearance
• Working with your supplier to get the origin information you need
• Responding to CBP enforcement
• CF 28s and origin verifications
• Documents and analysis needed to support origin claims
• Penalty Risks and Mitigation
• CBP rulings, legal opinions, and recent court cases

Toward solidifying your understanding of this session, the instructors will take you through a series of hypothetical scenarios, sample records, and how to put the “rubber to the road.” Ample time will be left for Q&A. Attendees will be able to ask questions and benchmark with fellow attendees via anonymous audience polling.

• Key pitfalls to avoid at the classification stage
• What to do when classifying unusual goods and working through grey areas
• Understanding the most common triggers for delays and penalties
• New audit regimes for classification
• New Chapter 99 provisions for duty rates
• Developing internal controls, policies, and procedures to ensure compliance
• The Generalized System of Preferences (GSP) and Chapter 98/99 provisions: Taking advantage of these opportunities
• Leveraging automated systems for HTS classification to reduce errors and processing times.
  • Example: Implementing an HTS lookup tool for high-volume shipments to improve operational efficiency.
• Modifications to products or production processes that can shift classification to a lower tariff bracket
• Understanding impact of reinstated 301 tariffs on classification
• Responding to directed disclosure and government requests for information

How to Classify a “Set” and How to Handle “Parts of a Product” In this classification exercise, the instructors will take you through a real-life case study on how to use the Harmonized Tariff Schedule to properly classify your products and how to handle “sets” and “parts of a product”. Session leaders will first discuss how to interpret the relevant definitions, then lead an interactive discussion on how to correctly classify these items, making sure to highlight common and lesser-known mistakes to avoid. Attendees will be able to ask questions and benchmark with fellow attendees via anonymous audience polling.

• Transaction value: Is there a sale?
• Transaction value of identical or similar merchandise
• Deductive value: First unrelated party
• Computed value: Consideration of variances for merchandise under appraisement
• A derived (fall‐back) method reasonably adjusted to circumstances
• Understanding assists, royalties and other additions as part of the dutiable value

• Valuation checklist: Regulations, process, methodologies and forms
• Examining the transaction value process – Defining a “related party transaction” – When not to use transaction value
• Making sense of the other five valuation methodologies and when they should be applied (transaction value of identical merchandise, transaction value of similar merchandise, deductive value, computed value, derivative method)
• CASE STUDY: Fall back method ruling request
• Identifying the different types of deductions and how deductions are determined – What you need to prove eligibility for a deduction
• CASE STUDY: Review of sample invoices-How to identify and correct mistakes before it’s too late
• Getting transfer pricing right: When you can rely on tax transfer pricing studies, and the latest word from CBP

• First sale for export: Leveraging lower transaction values earlier in the supply chain
  • Overview of first sale valuation and use of first sale rule to lower Section 301, IEEPA, and other tariff increases
  • Identification of suppliers for first sale valuation to maximize savings
  • Determining whether your suppliers are candidates for first sale
• Unbundling: Separating non-dutiable charges that are not subject to duty
• Transfer pricing: Aligning intercompany and transfer pricing to optimize declared values
• Understanding what a revoking of China’s PNTR status would do to valuation of goods coming out of China

Given the uncertainty surrounding the implementation of new tariffs by the United States and the potential for retaliatory tariffs by targeted countries, it is essential that importers dig into the impact of these policies and develop plans to mitigate the financial and other negative consequences. A strategic tariff-mitigation strategy can result in significant savings for businesses in an era increasingly marked by uncertainty in international markets.

• Implementing tariff engineering strategies:
  • Considering minor modifications to products or production processes to shift classification to a lower tariff bracket
  • Conducting a thorough review of the Harmonized Tariff Schedule of the United States is essential for this strategy
• Getting a handle on your import operations to better understand the potential impacts of tariffs on your business
  • Identifying all importer-of-record (IOR) numbers associated with your company at all divisions and subsidiaries
  • Taking stock of all customs brokers used by your organization over the last five years, and determining which ones are still active
  • Identifying which types, which product lines, or which divisions each broker is handling
  • Pulling the Automated Commercial Environment (ACE) data with all your company’s identified IORs to gather the data needed to analyze import trends and the accuracy of information submitted to Customs at the time of entry
  • Collaborating with procurement teams to anticipate future orders, including for new products, suppliers, and sourcing regions under consideration
• USMCA scenario planning: Pulling and analyzing data, and calculating the supply chain impacts of potential changes
• Revisiting product classification and valuation: Ensuring accurate tariff classifications and properly valuating imports to prevent overpayment and reduce compliance risks
• Conducting a product classification review to determine if you should apply for tariff exemptions or reclassifications
• Utilizing tariff drawback programs, or bonded warehousing to manage or defer costs
• Participating in Foreign-Trade Zones, or FTZs
  • Getting CBP approval for an FTZ
  • What may be placed in Zones
  • Entering merchandise from a zone into the United States for consumption
  • Privileged foreign status
  • Zone restricted status
  • Nonprivileged foreign status
  • Domestic status
• Strategic Contract Negotiation: Businesses may negotiate cost-sharing arrangements or tariff-specific price adjustment provisions with suppliers or customers to distribute the burden of tariffs

Toward solidifying your understanding of this session, the instructors will take you through a series of hypothetical scenarios, and how to put the “rubber to the road.” Ample time will be left for Q&A. Attendees will be able to ask questions and benchmark with fellow attendees via anonymous audience polling.

• The state of U.S. trade agreements
  • USMCA
  • Indo-Pacific Economic Framework
  • Re-aligning the US/China trade connection: The global impacts of this tense bilateral relationship
• Reviewing the contract: Understanding the scope of force majeure clauses, and holding other party to existing pricing terms
  • Preemptively evaluating dispute resolution processes in the event of a demand for pricing change
• Renegotiating with supplier agreements to absorb evolving tariff impacts
• Conducting an audit for sourcing vulnerabilities
• Building redundancy and diversification with multiple suppliers and manufacturing sites
• Demand planning: Ensuring that you have enough materials on hand for the looming interim period of possible further tariffs

• Data Collection: Gathering detailed information from all suppliers, including location, production capacity, lead times, and costs, to create a comprehensive data set
• Stakeholder Identification: Recognizing all entities involved in the supply chain, from raw material suppliers to distributors and end customers
• Process Mapping: Visually representing the flow of goods and services through the supply chain, including transportation, storage, and manufacturing stages
• Conducting a Risk Assessment: Identifying potential disruptions at each stage of the supply chain, such as natural disasters, supplier issues, or geopolitical instability
• Tier Analysis: Examining the supply chain beyond immediate suppliers to understand the broader network of vendors and potential vulnerabilities
• Collaboration and Communication: Fostering open communication and collaboration with all supply chain partners to share information and address issues promptly
• Technology Integration: Utilizing software tools for data analysis, visualization, and real-time tracking to monitor supply chain performance

• Data Collection and Prioritization: Deciding which crucial data points to track at each stage, focusing on aspects like raw material origin, production batches, expiry dates, and shipment details to ensure quality and compliance
• Technology Implementation: Utilizing systems like barcodes, RFID tags, GPS tracking, and specialized supply chain management software to capture and record product data throughout the process
• Collaborating with stakeholders: Establishing clear communication and data sharing protocols with all partners in the supply chain, including suppliers, distributors, and retailers
• Regulatory compliance: Adhering to industry-specific regulations regarding traceability, especially in sectors like food, pharmaceuticals, and electronics
• UFLPA Compliance, Due Diligence and Documentation Requirements:
  • Conducting thorough mapping of the entire supply chain to identify and trace suppliers, particularly those sourcing from the XUAR region
  • Implementing rigorous third-party audits of suppliers
  • Educating and training supply chain and procurement teams on identifying and mitigating risks related to forced labor, with a particular focus on the XUAR region

• Tailoring your customs compliance program to your company’s risk profile – Key factors to consider
  • Large vs. small importer
  • Number of imports
  • Complexity of classification
• Valuation transfer pricing approach
• Tax approach vs. customs compliance approach
• Raising awareness of your compliance program within your company
• Upgrading internal controls
• Working with other stakeholders in your company
• Developing effective written procedures
• Review of sample procedures

• Detecting communication breakdown warning signs
• Where the importer and broker responsibilities begin and end
• Incorporating contractual safeguards, including audit mechanisms
• How brokers and importers can work together to implement global policies and procedures

• What can now trigger a CBP audit: What has changed/what has stayed the same?
  • Red flags and errors that lead to penalty actions
    • When does a company fail to act with reasonable care?
  • How CBP determines civil penalty amounts
  • Determining “mitigation options”
  • CBP enforcement plans and priorities going forward
• Audit Notice and Process
  • CBP questionnaires eliciting information about internal procedures
  • CBP entry conference to discuss audit purpose, scope and duration
    • Estimating audit duration
    • Types of taxes and transactions to be examined
    • Auditing specific focus areas
      • Tariff classification
      • Valuation
      • Country of Origin
      • Filing a Prior Disclosure (PD) to obtain legal protection if penalties are found at commencement of audit
• Focused Assessment Audits
  • Pre-Assessment Survey (PAS)
  • Sufficiency of internal controls through review of entry records
  • Review of select ledger accounts and foreign vendor payments
  • Drafting the results and assessment of conclusions
• Assessment Compliance Audits
  • Identifying areas of non-compliance risk and audit sampling
  • Reevaluating compliance of each control sample
  • Calculating loss of revenue
  • Obtaining a “ruling” from CBP regarding the admissibility of your goods
• Quick Response Audits
  • Interviews and walkthroughs of selected customs entries to understand the import process
  • CBP reports with their determination of areas with acceptable/unacceptable transaction risk
• Audit Surveys
  • Quickly and efficiently obtaining onsite information about import activities relative to a specific trade area or issue
  • Issuing of a final audit report
  • No determination of acceptable/unacceptable transaction risk or level of compliance

In advance of this last module, participants will complete an assignment that will serve as a comprehensive review of all previous modules. The questions will be based on a case study of an import transaction from A to Z. Participants will share their responses to the assignment questions, followed by feedback from the expert instructors. There will also be ample time for additional, extended Q&A!

A worthwhile opportunity to test your knowledge and acumen, compare notes and gain more best practices!