Virginia Conference on World Trade Williamsburg, Virginia October 6-8, 2004

1. Virginia Conferenceon World TradeWilliamsburg, VirginiaOctober 6-8, 2004 Section II: Import Product Classification General Introduction Leonard L. Fleisig Troutman Sanders LLP Washington, D.C. leonard.fleisig@troutmansanders.com 202.274.2863

2. Customs Compliance • Why does it matter? • What is at stake? • What do you need to do to protect yourself and your company?

3. Why Does it Matter? • It is the law • Non-compliance has commercial and security implications • Mistakes cost money • Fixing mistakes takes time away from focus on core business

4. What Do You Need to Do • Informed compliance & Shared Responsibility • Mutual obligation of CBP and stakeholders • Reasonable care • Standard by which your actions are judged

5. Reasonable Care • CBP responsible for: • Providing you with sufficient information and tools to make informed and appropriate decisions with regard to your import transactions • You are responsible for: • Utilizing that information and those tools to make informed and appropriate decisions with regard to your import transactions

6. Reasonable Care - 2 • If you use reasonable care you will • Lessen the number of mistake and • Your mistakes will be less costly • Mistakes will happen but • If you can show that you used reasonable care the ‘cost’ of those mistakes should be significantly lower or eliminated

7. General Tips • Don’t under-utilize your Customs House Broker • Are they just pushing paper for you or: • Do they assist with classification, marking, valuation issues? • Do you tell them your classifications or do you seek their feedback? • Do you ask them about recent rulings or other issues relating to your products?

8. General Tips - 2 • Don’t rely solely on your Customs House Broker • Keep yourself informed • Keep a copy of the regs; [19 CFR] – free and available on-line • Keep and use a copy of the Harmonized Tariffs Schedules of the US • Go on line and check for rulings about your products

9. General Tips - 3 • Why? • The more you can show reliance on a professional and that you provided a professional with the means to provide you with informed advice – the more reasonable care you will have shown • The more you can show that you are also acting independently to stay informed – the more reasonable care you will have shown

10. Three Key Areas • Country of Origin Marking • Valuation • Classification

11. Country of Origin Marking • Where do your goods come from? • Are they marked with the country of origin? • Any marking rulings on your product or similar products? • What will happen to the goods once they arrive? • Are you the end user? • If not, what will you do, if anything, to change or modify the goods once they get here?

12. Valuation • Fair market value • Are you and the supplier related parties? • Does commercial invoice represent total invoice price?

13. Classification-1 • Its not a simple world anymore • Products more complex • Supply chain and assembly regimes • have created shipments of parts, components, etc. • Multiple possible classifications for any given product

14. Classification • Have you checked • the HTSUS? • Rulings? • Formal/informal classification requests • CHB?

15. Conclusion • Remember: • In the event of a dispute you will not always be wrong and Customs won’t always be right. • You know your product better than most. • But, if you are wrong the more you have done to get it right will limit your potential exposure