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ENTRY COMPLIANCE

Customs advises that it has found a number of undeclared or misdeclared errors made by importers. Following are representative examples that importers should be aware of. Although these errors are common to importers of machinery and production equipment, they may also apply to other imported products.

Packing Costs

Because of the nature of production equipment, special packing is sometimes required for shipping. The special packing is sometimes performed by parties other than the exporter, and paid for separately by the importer. The cost of the special packing is dutiable. When importers receive an invoice for special packing costs, the value must be declared to Customs.

Repairs and Modification Costs

In certain instances machinery has been returned to the exporter for repair or alterations. Upon importing repaired machinery, the full cost or value of the repairs or alterations actually performed abroad is subject to duty under tariff item numbers 9802.00.40 or 9802.00.50 (returned articles). The full costs or value of the repairs or alterations includes all domestic and foreign articles furnished for the repairs or alterations but not including any expenses incurred in the U.S.

Research and Development Fees

Research and Development Fees for work performed outside the U.S. have been paid to foreign vendors separate from the payment for merchandise imported as a result of the R & D. These separate payments include Royalties, Licensing fees, and Technology transfers. They are all dutiable as assists.

Testing Costs

In some instances, testing of completed machinery was done by the exporter and billed separately to the importer. The cost of testing performed by the exporter and billed to the importer is dutiable.

Exchange Rate Risk Sharing Agreement

In certain instances suppliers and importers agree on a price for merchandise based on a given exchange rate (130 yen to the dollar as an example). The supplier and the importer also agree that if the actual exchange rate (as quoted by a specified bank or newspaper) at the time of shipment of the merchandise differed from the agreed upon rate by more than a specified percentage the party benefiting from the fluctuation would pay the other party 50% of the windfall. Additional payments by the importer under these agreements are dutiable.

Antidumping Duty Concerns

Machinery parts consisting of import bearings and industrial belts are subject to antidumping duty.

Assists

Merchandise supplied by the importer free of charge or reduced cost to the overseas manufacturer must be declared and applicable duties paid. Examples include casting patterns and components for machinery and supplies to test equipment.

Engineering Charges to Modify Equipment

A customer requests that generic machinery be modified for their particular use. The exporter bills the importer for engineering charges to modify the equipment separately from the cost of the equipment. The additional price paid is dutiable and must be declared.

EXPORT

Exporters and forwarders are advised by the Bureau of Export Administration to screen their export orders prior to shipment against four government lists of prohibited parties. The lists are :

1. Debarred Parties. Parties denied export privileges under the International Traffic in Arms Regulations (ITAR) administered by the office of Defense Trade Control (DTC).

2. Denied Persons List. Parties denied export privileges administered by the Bureau of Export Administration. (Export Administration Regulations, 15 CFR Part 764, Supp. No.2).

3. Entity List – Entities subject to license requirements because of their proliferation of weapons of mass destruction. The list may be found in the Export Administration Regulations, 15CFR, Part 774, Supp. No.4.

4. Specially Designed Nationals, Terrorists, Narcotics Traffickers, Blocked Persons and Vessels. Parties subject to various economic sanctioned programs administered by the Office of Foreign Assets Control.