CIT Finds Ford's Tariff Engineering 'Legitimate'
The addition of seats to a cargo van and their removal immediately after importation constitutes “legitimate tariff engineering” to obtain a lower duty rate applicable to passenger vehicles, said the Court of International Trade in an Aug. 9 decision that was released the evening of Aug. 16. Tariff classification is determined based on an article’s condition at the time of importation, and the steps Ford took to manufacture its Ford Transit Connect vans after importation are irrelevant to the classification analysis, CIT said.
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A manufacturer has the right to make its goods as it chooses, even if a process lacks a
"manufacturing or commercial purpose” and is meant only to achieve a lower duty rate, said CIT, citing a 19th century Supreme Court ruling. Tariff engineering is legitimate as long as not by means of “disguise or artifice,” the trade court said.
At the time of importation, Ford’s Transit Connect vans with a modified, cost-reduced rear seat added before shipment from Turkey are principally designed for the transport of persons, CIT said. Even though the rear seats are removed and the vehicles are converted into cargo vans at the port after customs clearance, they still qualify for the 2.5 percent duty rate applicable to passenger vehicles from Europe, not the 25 percent duty rate for trucks in place when the vans were imported, it said.