Dolls R is a toy manufacturer from Goldtown, Richland, with production facilities in Richland, Newland and Farawayland.(1) Dolls R produces a wide range of toys but is best known for a doll named Carlie. In view of Carlie's success in France, Dolls R wants to explore the possibility of marketing Carlie in Utopia. Carlie is a Barbie-like doll with a plastic body, artificial hair and three sets of clothes. The plastic body parts are produced in Newland. The hair and the clothes are produced in Farawayland. Carlie is only assembled and packaged in Richland. It is expected to sell at $10 per doll in Utopia.

The Utopia's Customs Department has informed Dolls R that the customs duty on Carlie will amount to 15 per cent ad valorem and that the value will be determined on the basis of the sales price on the domestic market in Richland. Dolls R challenges both the level of the duty and the manner in which the Customs Department intends to determine the value of the dolls for customs purposes. It also disagrees with the Customs Department that the country of origin of Carlie is Richland and not Newland. Furthermore, Dolls R considers that Carlie is not really a toy but rather a collector's item. Finally, it wonders whether, for the customs classification of Carlie, it makes a difference whether Carlie is imported as a finished product or in parts still to be assembled.

The Utopia Customs Department also informs Dolls R that all imported dolls are subject to an import surcharge of $3 per doll as well as a special customs-handling fee of 2 per cent ad valorem. This fee goes to the Customs Department's Fund for Disfavoured Children.

To boost its sales of Carlie in the Utopia, Dolls R plans to gift buyers of this doll short movies on the wondrous adventures of Carlie. Customers in Richland can watch these movies via smartphones by installing 'Carlie Doll' app. Dolls R is concerned about the rumour that the Utopia Parliarment is considering the introduction of a customs duty on movies imported into the country via the Internet.

The Government of Newland, eager to promote the development of its toy industry, has announced that they will limit the export of plastic body parts of dolls to 10.000 units per year.