The ruling can be different depending on the path that the ball takes from the bat to the catcher.
One of the biggest sources of confusion when discussing foul tips is that people generically refer to any ball that barely nicks the bat and goes backwards as a "foul tip". But a foul tip has a very specific definition and very strict requirements. Most of the batted balls that people call "foul tips" aren't really foul tips at all!
Such a batted ball might come off the bat in two possible ways- either sharply, directly, in a straight line, with no perceptible arc or with an arcing path.
Assuming that the ball does go "sharply and directly" (ie: with no perceptible arc to it's path) straight back to the catcher...
1) If the batted ball FIRST touches the catcher's hands or mitt, then is subsequently caught, this is a foul tip. A foul tip is treated the same as a swing and miss by the batter. It is a strike and the ball remains live. The batter is out only if it is strike three.
The subsequent catch has to meet the same definition of any other valid catch of a batted ball. That is, it can't touch the batter, the umpire or the ground. If it does, then it immediately becomes just a foul ball and is treated like any other foul ball.
As long as the ball FIRST touches the hands/mitt, then it may rebound, or be juggled, or be trapped against the catcher's body before eventually being secured.
2) If the ball goes straight back, sharply and directly, with no perceptible arc, but then first touches anything other than the catcher's hands or mitt, then it is just a plain old foul ball.
I was watching the USA/Canada game yesterday but didn't see the play mentioned. If what was described above is truly exactly what happened, then I would have to say the umpires blew that one. If the ball went straight, sharply and directly, to the catcher's lap, then it should have been a foul ball.
Are you sure the ball didn't come off the bat with an arcing path? Because, if it did, then a different rule comes into play...
3) If the ball comes off the bat with an arcing path (ie: NOT sharply, directly, in a straight line) then it CANNOT be a foul tip. It is now treated exactly the same as a batted fly ball anywhere else on the playing field. If legally caught (and there is no requirement for it to first touch the hands/mitt here), then the batter is out- same as on any other caught fly ball.
The only other note...I'm not sure where the above definition of a foul tip came from, but most rule sets have removed the whole thing about the ball being "higher than the batter's head". For most, there is no height restriction or requirement attached to these rules.
