by M. Sigmund Shapiro
November 2, 1999
It’s been apparent for some time that Customs, in its
interminable effort to implement the 1994 modernization act, is
trying its best to push the enforcement envelope to the ultimate.
Compliance reviews of unlimited duration and full- blown audits are
felt by importers to be overkill at best and harassment at worst.
But at least judicial review is having some effect in bringing the
agency to heel.
The Journal of Commerce has recently reported on two cases that
exemplify the excesses.
In The Tri-State Hospital case, Customs attempted to prove fraud
against the importer for overvaluing merchandise in order to meet
the statutory Pakistan floor price to allow exportation. (The excess
value was later rebated back to Pakistan.) Customs took the
narrowest view of the materiality of the higher value since the
goods were free of duty, and claimed that it distorted our trade
statistics. I only wish that our statistics were accurate enough
that a couple of hundred thousand dollars made a difference. On its
face, the Customs action seems a spiteful one and came about because
Customs couldn’t prove a money laundering suspicion. A jury found
for the importer.
The well publicized Heartland ruling concerned importation of an
engineered product solely to extract the sugar and compete with
domestic interests by avoiding the sugar quota. Heartland had
obtained a ruling from the agency as to the Tariff status of the
commodity, and on that basis, established its business. When U.S.
sugar interests bombarded Congress for help, political pressure
forced a rescinding of the several year old ruling. Customs
reasoning was that the product had no commercial use in its
condition as imported except to extract the sugar. A judge in the
Court of International Trade disagreed. She cited the long
established right of an importer to engineer its product to obtain
the most favorable Tariff treatment and furthermore ruled that there
was no statutory requirement to furnish proof of use on the
commodity as is required on a few other items in the Tariff.
It appears the Government lost that one too.
The yin and yang of Customs enforcement versus trade facilitation
will always be with us and Customs is constantly trying to maintain
a balance. By and large they are successful, but even so, it’s
comforting when agency overzealousness is reined in.
