For 100 years, tariffs were the major source for revenue for the United States,¹ generating enough money to pay for the Louisiana Purchase. U.S. Customs has evolved from a tariff office to a policing body that includes setting duties, investigations, seizures, etc., of imported products. And yes, it has developed a fine-tuned valuation methodology.

        Contesting the Tariff

The federal government has the power, granted by the Constitution, to impose duties. This only applies to foreign imported items, not goods traded between states or U.S. Territories. User fees are allowed to help off-set government expenses in handling imports.² All duties are uniform, regardless of where the item enters. Duties can be discriminatory as to country of origin, but duties are overridden by treaties.

Merchandise is any chattel, not necessarily items for resale. Goods rendered worthless by a casualty loss sustained during their trip to the United States will not have a duty imposed on them.³ Basically, tariffs are imposed with the intent to protect American industries. There is an antidumping rule - thus, if merchandise is to be sold at below its U.S. market value, it is the difference between the foreign market value⁴ (the export price) and the U.S. value that establishes the duty.⁵ If a foreign government is subsidizing merchandise, then the same rule and methodology will apply.

U.S. Customs has inhouse appraisers. Tariff disputes are not a common valuation assignment for independent gemologist-appraisers. But, nevertheless, there are prospects for qualified gemologist-appraisers. Anyone facing a tariff (duty) can dispute the amount. However, instead of researching U.S. market activity, value determinations are based on foreign markets, that is the country-of-origin for the items. And the effective date will match the date of shipment.

"When the duty upon any imports shall be subject to be levied upon the true market value of such imports in the principal markets of the country from whence the importation has been made, or at the port of exportation, the duty shall be estimated and collected upon the value on the day of actual shipment, whenever a bill of lading shall be presented showing the date of shipment, and which shall be certified by a certificate of the United States consul or legally authorized deputy."⁶

        Jewelry Passports

U.S. Customs provides a form⁷ for travelers to declare items, providing proof that the item with which they return is the same item with which they left.⁸ The form does not include photographs, lacks room for detailed descriptions, etc. A skimpy description can cause problems matching the item to the form. A detailed report, such as a quality analysis or an appraisal, will solve the problem.

Sounds simple but there are some extra steps that the astute appraiser must take. Render a very detailed description. Mention all marks, repairs, repairs needed, serial numbers, etc. And add photographs of anything that will make identification by a layperson easy. Serialize the appraisal for that unique number that can be added to the form's description area. Avoid stating pennyweights and instead provide grams since the likelihood of U.S. Customs having a pennyweight scale is probably nil.

Get permission from your client to be able to discuss their report to anyone who claims to be from U.S. Customs. That way, if a customs agent calls, you can discuss the report without requesting your client's permission.⁹ In the Supplemental Information Letter (SIL)¹⁰ state that you have such permission in the section where confidentiality is outlined.

By the way, even if jewelry previously has been taken out of the country and returned, a new form is needed for the next exit-and-entry.¹¹ Thus, it is very important to be clear as to the dates included in the report. The date of inspection needs to be stated as the date of inspection. If you include a date of rendering the report, state that as the date of report execution.

        Caught Sneaking

The most often encountered task for gemologist-appraisers are reports involving merchandise seized as contraband. Merchandise is defined in the federal code as:

"The word 'merchandise' means goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited . . . "¹²

Even if an item is legal to import, merely not declaring it can result in seizure and classification as contraband. Of course, if the item is illegal to import, it will be categorized as contraband.

An appraiser may be retained by the accused or U.S. Customs. You are not an advocate thus the report must report the same results regardless of who is your client. The value conclusion will be used to determine part of the penalty.

Again, name the various dates. The effective date is to match the date of seizure.¹³ As a minimum, you will most likely have a date for the seizure, date of inspection, and date of rendering the report. And there may be different dates if more than one seizure occurred. With multiple seizure dates, use the Broad Evidence Rule.¹⁴

Where do you research for the value? The port of seizure is the vicinity for market research. If that market has no market activity information, then you can expand the market until data can be had. You must name the port and if you expanded the area, state that in the report.

" . . .If there is no market for the seized property at the place of appraisement, such value in the principal market nearest to the place of appraisement shall be reported."¹⁵

What is the value definition? Value is not fair market value but "domestic value."

"The appropriate customs officer shall determine the domestic value, at the time and place of appraisement, of any vessel, vehicle, aircraft, merchandise, or baggage seized under the customs laws."¹⁶

" . . . The term 'domestic value' as used therein shall mean the price at which such or similar property is freely offered for sale at the time and place of appraisement, in the same quantity or quantities as seized, and in the ordinary course of trade, If there is no market for the seized property at the place of appraisement, such value in the principal market nearest to the place of appraisement shall be reported."¹⁷

        It Ain't the Real McCoy

Some contraband is phony. What is the domestic value of counterfeit goods?¹⁸ The fine will not be more than the manufacturer's suggested retail price if the goods were genuine.¹⁹ A case involving counterfeit jewelry destined for resale embraced the domestic value as the price an importer would charge a wholesale purchaser.²⁰ Basically, for the first seizure of counterfeit merchandise, the fine shall not be more than the domestic value as if it were genuine based on the suggested retail price.²¹

        And There's More

Generally, a civil penalty will use the domestic value.²² But, if gross negligence is the case, the U.S. Customs can impose the domestic value or four times the duties, taxes and fees that would have been owed the U.S. government.²³

        Do Not Value Mathdology Rules

You cannot research the selling prices of items produced in the U.S. You cannot use the highest or lowest prices but instead need to rely on prevailing prices. Do not research goods' prices imported from or for exportation to a foreign country other than the country-of-origin for the seized items. And lastly, do not use arbitrary or fictious values.²⁴

        Dual Duties

Now you have a basic idea what appraising for the U.S. Customs involves. There are tariff type duties in addition to your duties as a professional. At all costs, beware that the affected third party that will rely on your valuation can and may challenge your valuation. Keep meticulous working notes, ask questions to ascertain the proper effective date, port of seizure, and other information necessary to render a proper and defendable report. This is an assignment where you must show off your valuation patina.

Written by Bill Hoefer