“Tariff engineering” on imports of motor vehicles | KPMG | US

Claims of “tariff engineering” on imports of motor vehicles

“Tariff engineering” on imports of motor vehicles

The U.S. Court of International Trade publicly released a decision concerning the tariff classification of imported motor vehicles.

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The trade court granted the car manufacturer’s motion for summary judgment, finding that the imports were properly classified under the Harmonized Tariff Schedule of the United States (HTSUS) as “motor cars and other motor vehicles principally designed for the transport of persons” and subject to customs duty of 2.5% (instead of the 25% rate of customs duty imposed on “motor vehicles for the transport of goods”).

The case is: Ford Motor Co. v. United States, Slip Op. 17-102 (CIT August 9, 2017*). Read the trade court’s decision [PDF 695 KB]

* The case was decided on August 9, 2017, but the decision was not publicly released until August 16, 2017.

Summary

The car company manufactured vehicles in Turkey and imported them into the United States. The vehicles were made to order and were ordered as cargo vans (subject to customs duty at a rate of 25%). The company manufactured and imported the vehicles with a second row seat, declaring them as passenger vehicles (subject to customs duty at a rate of 2.5%). 

After clearing customs but before leaving the port, the car company (using a subcontractor) removed the second row seat and made other changes, and delivered the vehicles as cargo vans. 

Customs and Border Protection (CBP) determined that the inclusion of the second row seat was an improper artifice or disguise that was masking the true nature of the vehicles at importation and that such vehicles were properly classified under subheading 8704.31.00 and subject to a 25% customs duty. The car company countered that this was “legitimate tariff engineering.”

The trade court found that the subject imports were properly classified under subheading 8703.23.00, HTSUS, as motor cars and other motor vehicles principally designed for the transport of persons, and thus granted the car company’s motion for summary judgment.

 

For more information, contact a professional with KPMG’s Trade & Customs practice:

Douglas Zuvich | +1 (312) 665-1022 | dzuvich@kpmg.com

Andrew Siciliano | +1 (631) 425-6057 | asiciliano@kpmg.com

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