Over the last several years, U.S. Customs and Border Protection (Customs) has issued a number of rulings relating to the tariff classification of plywood that has one outer ply of birch and another outer ply of hardwood or tropical wood such as okoume, oak, and maple. As plywood importers may be aware, under the U.S. Harmonized Tariff schedules, plywood with a birch face normally has a duty-free rate. However, where the other outer ply is made of another hardwood such as okoume, oak, maple, etc., Customs has ruled that these types of plywood products should be classified at the 8% duty rate, rather than as free of duty.
For example, in 2007, Customs issued a ruling on a plywood panel 3mm thick that consisted of three plies with a crossband. One outer ply was birch (0.25mm thick), and the other outer ply was okoume (0.50mm thick). According to Customs, the birch ply was a “B” grade and showed some defects in coloration, and the okoume ply was a “C” grade. The imported plywood was used to make the backs of furniture, and, according to Customs, both outer plies were exposed in the manufactured products.
Customs determined that both outer plies were equally suitable to be faces, and in accordance with General Rule of Interpretation 3(c) of the Harmonized Tariff Schedules, the plywood product should be classified at the 8% duty rate rather than duty free. Customs has issued other rulings on similar products, which have arrived at the same conclusion. The result might be different if only the birch face were exposed in the manufactured product. However, that would have to be confirmed with a ruling issued by Customs.
Even though a ruling has not been issued to an importer on a similar plywood product, Customs expects an importer to be entering these types of products at the 8% rate rather than free of duty. It is Customs’ policy that since its rulings are published and made available to the public, the importing community is put on notice that similar products should be classified in accordance with published rulings. If an importer enters these types of products under the duty-free rate and Customs discovers this fact, it is possible that Customs will issue civil penalties against the importer. The amount of the penalty depends upon the degree of culpability. If Customs determines that the importer intentionally entered these types of products at the duty-free rate to defraud the revenue, then the maximum penalty that would be assessed is the domestic value (usually the U.S. wholesale value) of the shipments in issue going back five years. If the degree of culpability is “gross negligence,” then the penalty can be as high as four times the loss of revenue going back five years.
Fortunately, Customs has issued what are known as “prior disclosure” regulations, which allow an importer who has been entering merchandise at the incorrect rate to voluntarily come forth and disclose the discrepancy or violation to Customs before an investigation is initiated. If Customs determines that a valid prior disclosure is made, then the importer can obtain greatly reduced penalties, if any. It is important that all of the applicable regulations pertaining to prior disclosures be followed in order to obtain the benefits. Importers who are contemplating filing a prior disclosure should consult with lawyers having Customs expertise so that all of the guidelines relating to prior disclosures are complied with.
If you have any questions with regard to these issues, please contact Stephen Spraitzar at (415) 288-0427 or via email at email@example.com.
Steve Spraitzar is an attorney with the Law Offices of George R. Tuttle in San Francisco.
The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.
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