CPP Global Sourcing & Import Regulations 3 — Questions and Answers
Question 1: A Harmonized Tariff Schedule (HTS) code is used to:
- Identify approved foreign suppliers
- Classify imported goods and determine applicable duty rates (Correct answer)
- Track shipment status through customs
- Certify country of origin for FTA purposes
Correct answer: Classify imported goods and determine applicable duty rates
HTS codes are standardized numerical codes that classify every imported product and are used by CBP to determine the applicable duty rate.
Question 2: Which of the following best describes 'countervailing duties' (CVDs)?
- Duties imposed on goods sold below fair market value
- Duties applied to offset foreign government subsidies given to exporters (Correct answer)
- Duties applied when imports surge and threaten domestic industry
- Duties collected to fund U.S. trade enforcement activities
Correct answer: Duties applied to offset foreign government subsidies given to exporters
Countervailing duties are imposed to neutralize subsidies provided by a foreign government to its exporters, which would otherwise give them an unfair price advantage.
Question 3: The Foreign Corrupt Practices Act (FCPA) is most relevant to global sourcing because it:
- Regulates import tariff rates for developing countries
- Prohibits U.S. companies from bribing foreign government officials to gain business advantages (Correct answer)
- Sets quality standards for foreign-manufactured goods
- Establishes environmental requirements for imported products
Correct answer: Prohibits U.S. companies from bribing foreign government officials to gain business advantages
The FCPA makes it illegal for U.S. companies and persons to bribe foreign government officials to obtain or retain business contracts.
Question 4: What is a 'First Sale' valuation method for customs purposes?
- Valuing goods at the price paid by the end consumer
- Using the earliest transaction price in the supply chain as the customs value (Correct answer)
- Setting customs value based on the current market price
- Applying the lowest price among multiple import transactions
Correct answer: Using the earliest transaction price in the supply chain as the customs value
First Sale valuation uses the price paid in the first sale of goods (e.g., manufacturer to middleman) rather than the last sale price, which can result in lower customs duties.
Question 5: Which program allows pre-approved low-risk importers to receive expedited customs processing in the United States?
- Trade Adjustment Assistance (TAA)
- Customs-Trade Partnership Against Terrorism (C-TPAT) (Correct answer)
- Foreign Trade Zone (FTZ) program
- Generalized System of Preferences (GSP)
Correct answer: Customs-Trade Partnership Against Terrorism (C-TPAT)
C-TPAT is a voluntary CBP program where importers who meet security standards gain expedited processing and fewer inspections at the border.
Question 6: Anti-dumping duties (ADD) are imposed when foreign goods are:
- Exported in quantities that cause environmental damage
- Sold in the U.S. at less than fair value, harming domestic producers (Correct answer)
- Produced using child labor or unsafe working conditions
- Subject to export restrictions by the country of origin
Correct answer: Sold in the U.S. at less than fair value, harming domestic producers
Anti-dumping duties are levied when imported goods are priced below fair market value (often below cost), injuring or threatening to injure U.S. domestic industry.
Question 7: In global procurement, a 'currency hedge' is most useful for:
- Reducing the time to clear customs
- Locking in exchange rates to protect against unfavorable currency fluctuations (Correct answer)
- Negotiating better payment terms with foreign suppliers
- Reducing import duty rates through trade agreements
Correct answer: Locking in exchange rates to protect against unfavorable currency fluctuations
A currency hedge uses financial instruments (like forward contracts or options) to fix an exchange rate in advance, protecting the buyer from adverse currency movements.
CPP Global Sourcing & Import Regulations 3
A Harmonized Tariff Schedule (HTS) code is used to: