CPL International Trade & Customs Compliance 2 — Questions and Answers
Question 1: Under the Harmonized Tariff Schedule (HTS), what is the primary basis used to classify imported goods?
- Country of origin
- Commercial value of the shipment
- Physical description and composition of the goods (Correct answer)
- The importer's industry sector
Correct answer: Physical description and composition of the goods
HTS classification is based on the physical characteristics and composition of goods, following General Rules of Interpretation.
Question 2: A U.S. importer receives goods with a First Sale valuation that is lower than the final transaction price. What is the primary benefit of using First Sale valuation?
- It eliminates the need for a customs broker
- It reduces the dutiable value, lowering import duties (Correct answer)
- It accelerates customs clearance processing time
- It exempts goods from anti-dumping duties
Correct answer: It reduces the dutiable value, lowering import duties
First Sale valuation allows importers to declare the earlier factory price rather than the higher resale price, reducing the customs duty base.
Question 3: Which U.S. government agency is primarily responsible for enforcing export controls on dual-use items?
- U.S. Customs and Border Protection (CBP)
- Bureau of Industry and Security (BIS) (Correct answer)
- Office of Foreign Assets Control (OFAC)
- Transportation Security Administration (TSA)
Correct answer: Bureau of Industry and Security (BIS)
BIS administers the Export Administration Regulations (EAR), which govern dual-use items that have both commercial and military applications.
Question 4: What is the purpose of an Importer Security Filing (ISF), commonly called '10+2'?
- To declare the value of goods for duty purposes
- To provide advance cargo information to CBP before ocean shipments arrive (Correct answer)
- To register importers in the Automated Broker Interface system
- To apply for preferential tariff treatment under a free trade agreement
Correct answer: To provide advance cargo information to CBP before ocean shipments arrive
ISF requires importers to submit 10 data elements (plus 2 from carriers) to CBP at least 24 hours before cargo is loaded at the foreign port.
Question 5: Under INCOTERMS 2020, which term places maximum responsibility on the seller, including delivery to the buyer's named destination with import duties paid?
- EXW (Ex Works)
- FOB (Free on Board)
- CIP (Carriage and Insurance Paid To)
- DDP (Delivered Duty Paid) (Correct answer)
Correct answer: DDP (Delivered Duty Paid)
DDP requires the seller to bear all costs and risks including import duties, taxes, and customs clearance at the destination country.
Question 6: A company discovers it has been underpaying customs duties for the past three years due to misclassification. What is the recommended compliance approach?
- Continue current practices until audited
- File a prior disclosure with CBP to reduce potential penalties (Correct answer)
- Reclassify goods only for future shipments without correcting past entries
- Request an advance ruling to override the past underpayments
Correct answer: File a prior disclosure with CBP to reduce potential penalties
A Prior Disclosure to CBP, made before a formal investigation begins, significantly reduces penalty exposure under 19 CFR Part 162.
Question 7: What is the role of a Customs Trade Partnership Against Terrorism (C-TPAT) certification?
- It waives import duties for certified importers
- It provides expedited customs processing and fewer inspections for trusted trade partners (Correct answer)
- It replaces the need for an Importer of Record
- It allows goods to bypass the Automated Manifest System
Correct answer: It provides expedited customs processing and fewer inspections for trusted trade partners
C-TPAT members who meet CBP security standards receive benefits such as reduced examination rates and priority processing at the border.
CPL International Trade & Customs Compliance 2
Under the Harmonized Tariff Schedule (HTS), what is the primary basis used to classify imported goods?