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.
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.
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 | firstname.lastname@example.org
Andrew Siciliano | +1 (631) 425-6057 | email@example.com
© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.