Court Decision Emboldens Customs' Scrutiny of NAFTA, AGOA, and CBTPA Claims.

November 2001

A recent Court of International Trade case, United States v. Golden Ship Trading Company, Slip Op. 01-07, has provided Customs with support for more vigorous review of importers' claims for preferential treatment under NAFTA, AGOA, and CBTPA. Golden Ship had signed entry documents for its merchandise, tee-shirts, which stated that the country of origin was the Dominican Republic. The actual country of origin was China and Customs filed a penalty action against Golden Ship.

Golden Ship claimed, in its defense, that it relied on the representations of the exporter and on the expertise of its customs broker. The Court found that Golden Ship was negligent and had not exercised reasonable care because it failed to attempt to verify the country of origin of the goods.

This case has implications for importers who seek to establish preferential tariff treatment for their goods under NAFTA, AGOA, and CBTPA. These free trade agreements, particularly AGOA and CBTPA require importers to maintain extensive documentation to support their claims for preferential treatment. The Golden Ship holding would seem to require importers to make efforts to verify information obtained from the exporter; it is not sufficient to rely on a certificate of origin. If independent verification is required for the importer to meet its burden of reasonable care, failure to due so could expose the importer to penalties and denials of its claims for duty-free treatment for its importations. For textiles importers, the latter risk is particularly serious due to the high tariff rates for non-qualifying goods.

To protect themselves from the risk of Customs rejecting their claims for duty free treatment under NAFTA, AGOA, and CBTPA, importers should carefully review with their attorney which documents they must maintain to be able to support their claims if they are questioned by Customs.