Customs Law Advisory - Federal Appeals Court Describes Assembled Goods for Tariff Classification; Customs Posts Current Entry Summary Form

Federal Appeals Court Describes Assembled Goods for Tariff Classification; Customs Posts Current Entry Summary Form  
Appeals Court Finds Goods To Be Bundled Together After Importation Are Not Necessarily “Unassembled.” It is a rule of classification that merchandise imported in unassembled form generally is classified using the tariff number of the assembled item.  In contrast, certain specific tariff provisions require different classification depending on whether the merchandise is in its assembled or unassembled form.  Therefore, whether imported goods comprise multiple separate items or the unassembled parts of a single item can have a significant impact on classification and the corresponding duty rate that applies. 

The recent case of ABB, Inc. v. United States concerned ABB’s importation of a fiber optic cable and a pair of high-voltage electric cables.  After entry, but before installation, the three cables were bundled together to be used in an electric power grid.  It was not possible to enclose all three cables within a common sheath at the time of manufacture, due to their considerable size.  Because the merchandise would be bundled together after importation, ABB declared a single, duty free tariff number covering optical fiber cables “whether or not assembled with electric conductors.”  ABB reasoned that this tariff number correctly described the post-entry bundled cables, and thus, also described the imported merchandise which was simply the bundled item in unassembled form.

The U.S. Court of Appeals for the Federal Circuit (“CAFC”) upheld U.S. Customs and Border Protection’s (“Customs”) denial of ABB’s declared classification.  Customs found that the imported merchandise should have been classified in separate tariff numbers for optic cables (duty free) and for electric cables (dutiable at 3.5%).  The CAFC found that the cables could not be considered parts of a single item solely because they would be used together.  The Court explained that each of the three cables was a “distinct and separate commercial entity” and each was “capable of functioning independently of the other two cables.”  Therefore, the cables did not constitute parts of a single, unassembled item at entry.  

In light of this recent decision, importers of merchandise not in its final, finished condition, or that will be combined with other parts after importation, should closely examine the tariff classification that applies at entry.  

Importers Should Review The Entry Summary Form 7501
Recently, Customs posted on its website an updated version of the Entry Summary, known as Customs Form Number 7501, along with up-to-date instructions for completing the form.  The Entry Summary is the form most often used by importers to declare imported merchandise to Customs.  When a customs broker files import paperwork, Customs expects that the importer has given the broker instructions regarding the data to report in each field on this form.  Although specialized transactions may need other, additional information and paperwork, the fields on the Entry Summary generally represent the data for which Customs requires importers to be able to produce supporting documentation upon request.  All importing companies, and especially the personnel responsible for managing the relationships with customs brokers, should review the Entry Summary to ensure that they direct and approve the information being reported on their behalf.

The latest Entry Summary form 7501 and instructions are on Customs’ website.

If you have any questions regarding U.S. Customs import classification or declarations, please contact Greg McCue at (202) 429-6421.