United States: Trade Compliance Handbook


This Thompson Coburn LLP Trade Compliance Handbook is intended to provide an overview of international trade regulatory compliance issues and related terms to corporate general counsel, as well as compliance and audit personnel. We provide this as a source of general information only. This is not intended to constitute legal advice. We suggest that you seek international trade counsel to resolve the specific issues that may arise in your business.

A Brief Summary of Import Trade Compliance

The customs laws of the United States are codified in Title 19 of the U.S. Code and Title 19 of the Code of Federal Regulations. These laws and regulations provide U.S. Customs and Border Protection (CBP) with the authority to collect revenue and trade statistics and to enforce the laws governing the importation, and to some degree the exportation, of goods from the United States.

The importer of record, using reasonable care, must file an entry for imported merchandise and accurately declare the classification, value, rate of duty and such other information (e.g., country of origin, duty-free treatment pursuant to special programs and free trade agreements, and antidumping duties) as that will permit CBP to properly assess duties, collect accurate statistics, and determine whether applicable legal requirements have been met. Generally, CBP has one year from the date of entry to review the entry. After this time the entry is liquidated and the statements made therein are final and binding on all parties.


Every product entered into the U.S. must be classified under one of the subheadings contained in the Harmonized Tariff Schedule of the United States (HTSUS). The tariff classification of a product will affect the duty to be paid, and is a matter that is often disputed with CBP and in the courts. CBP and other customs authorities regularly publish their classification decisions.


Imported merchandise is generally appraised based on transaction value. CBP presumes that all payments, whether direct or indirect, made by the buyer, to or for the benefit of the seller, are part of the transaction value. If not already included, the declared value of imported merchandise must include:

  • packing costs
  • any selling commissions
  • the value of any "assists"
  • certain royalties

Transaction value may be used between related parties if it can be shown that the relationship did not influence the price paid or payable, or if the transaction value closely approximates certain test values. Alternative methods of valuation may be used if transaction value is unavailable.


All goods imported into the U.S. must be marked so as to indicate to the ultimate purchaser in the United States the country of origin of the product. For marking purposes, the origin of an imported product is the last country in which the good was substantially transformed. Separate rules of origin, generally based on changes in tariff classification, may be used to determine origin of goods for purposes of free trade agreements.

Additional Duties

Goods that are unfairly traded with the United States may be subjected to Antidumping or Countervailing Duty orders. These orders may be used by U.S. industry as protection against predatory imports. For the importer, ADD and CVD orders create a contingent liability that may extend beyond the sale or use of the imported merchandise.

Duty Savings Opportunities

By carefully selecting suppliers and manufacturing locations, importers may be able to save or recover duties through the use of free trade agreements, special programs, duty drawback, foreign trade zones, the category of American Goods Returned or temporary import programs. Additionally, techniques can be used to reduce the value of imported merchandise.


CBP uses Focused Assessments to ascertain an importer's level of compliance. Companies and individuals who fail to comply with the customs laws of the U.S. face severe penalties, but the benefits of the prior disclosure of such violations are statutorily defined. Failure to maintain and produce the necessary records can result in recordkeeping penalties apart from any penalty that may be associated with a violation of a substantive customs law.

Intellectual Property Enforcement

CBP is the agency charged with enforcing intellectual property rights at the U.S. border. When informed, CBP will work vigorously with U.S. intellectual property rights owners to assure that infringing goods are not imported.

Cargo Security

CBP is part of the Department of Homeland Security and is charged with securing the borders while facilitating legitimate trade. The Importer Security Filing allows CBP to review shipment information for potential terrorism risks in advance of the loading of the vessel. See also 10+2. The Customs-Trade Partnership Against Terrorism (C-TPAT) encourages importers, carriers and international trade service providers to take steps to assure that their supply chain is secure. Prudent importers reduce their profile for CBP audits by fully complying with these programs.

A Brief Summary of U.S. Export Trade Compliance

Generally speaking, the export and reexport of items (which may include products, technology and/or services) from the United States to a foreign country or to a foreign person within the United States ("deemed export") is governed by one of three U.S. government export control regimes. Determining which regime or regimes apply to your export transaction is the most important first step when considering export controls. See Commodity Jurisdiction. Additionally, the specifics of the applicable export control depend on the nature of the item being exported, the destination country, the identity of the recipient, and the intended end use of the item.

Department of Commerce – Bureau of Industry and Security – EAR

The U.S. Department of Commerce's Bureau of Industry and Security (BIS) maintains jurisdiction and control over the export of purely commercial items and "dual use" items, i.e., those items that have a potential military or strategic use as well as a commercial use under the authority of the Export Administration Act of 1979, as amended (EAA, 50 U.S.C. app. 2401-2420). The statute is continued in force by Presidential executive orders under the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701-1706) and implemented by the Export Administration Regulations (EAR) as set out in 15 C.F.R. Parts 730-774.

Items that are Subject to the EAR must be classified under a particular Export Control Classification Number (ECCN) on the Commerce Control List (CCL) to determine whether a license may be required to export that item or related technology. The actual license requirement depends upon the country to which the item is to be exported, any General Prohibitions that may be applicable, the end user of the item, the end use to which the item will be put (see General Prohibitions and Reasons for Control) and whether any license exceptions are applicable. In some instances the EAR also controls the provision of services, support or technical assistance. A company may self-classify items or request that BIS make a classification determination. See BIS Form 748P, SNAP-R.

Department of State – Directorate of Defense Trade Controls – ITAR

The U.S. Department of State's Directorate of Defense Trade Controls (DDTC) maintains jurisdiction and control over the export and temporary import of defense articles, defense services and technical data. The statutory authority for the control of these defense items is found in Section 38 of the Arms Export Control Act (AECA, 22 U.S.C. 2778), which authorizes the President to control the export and import of defense articles and defense services for national security reasons. The statute is implemented by the International Traffic in Arms Regulations ((ITAR), 22 C.F.R. Parts 120-130). Generally, these regulations control the exportation of the following:

  • items, including technical data, listed on the U.S. Munitions List (USML) (22 C.F.R. 120.2, 120.6, 121.1);
  • items specifically designed, developed, configured, adapted or modified for a military application that do not have predominant civil application and do not have the performance equivalent of an article or service used for civil application (22 C.F.R. 120.3(a));
  • items specifically designed, developed, configured, adapted or modified for a military application and that have a significant military or intelligence application (22 C.F.R. 120.3(b));
  • assistance (including training) in the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing or use of defense articles (22 C.F.R. 120.9). See also Technical Assistance Agreement (TAA) and Manufacturing License Agreement (MLA).
  • information required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles (22 C.F.R. 120.10; see also TAA and MLA);
  • software that is directly related to defense articles (22 C.F.R. 120.10).

Under the ITAR, the exportation of defense articles and defense services is subject to specific licensing requirements. Items that fall within the Department of State's jurisdiction (see Commodity Jurisdiction) must undergo a classification review to determine the Category under which the item will be classified on the USML. Licensing requirements are further dependent upon the country to which the item is to be exported and the end user of the item. This classification review may be undertaken by the company itself, i.e., self-classification, or via a classification request made to the DDTC.

Department of Treasury – Office of Foreign Assets Control – Economic Sanctions

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) administers and enforces economic sanctions programs that can prohibit or greatly limit both imports and exports that relate to targeted countries or to specially designated persons (see "Specially Designated Nationals List"). The primary statutory authorities for these programs are the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701-1706) and the Trading With the Enemy Act (TWEA, 50 U.S.C. App. § § 5, 16; also at 12 U.S.C. § 95a). The specific programs are implemented through various sets of regulations found at 31 C.F.R. Parts 500-598. Currently OFAC administers comprehensive sanctions programs relating to Cuba, Iran and Sudan; there is also a general prohibition on imports from Burma. In addition, OFAC maintains a list of designated persons (both individuals and entities) with which U.S. persons cannot conduct most economic transactions, including trade transactions. The list includes those who either act for or on behalf of the targeted countries, or who are deemed to be terrorist organizations, narcotic traffickers, or those engaged in proliferating weapons of mass destruction.

OFAC's economic sanctions programs are typically imposed in order to advance U.S. national security, foreign policy or economic objectives by depriving the target of the benefits of trade and other dealings with the U.S. For this reason, they generally cover all goods, with exceptions for such categories as informational materials and humanitarian donations of items — such as food, clothing and medicine — that are intended to relieve human suffering. Sanctions regulations apply to U.S. persons wherever they are located, including foreign branches of U.S. companies, and generally prohibit activities with the sanctioned country, individual, or entity as well as facilitation of these activities by U.S. persons. U.S. sanctions against Cuba apply to foreign subsidiaries of U.S. companies. In some cases, licenses or authorizations to import or export to or from a particular country may have to be sought from OFAC and from either BIS or DDTC.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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