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.