Abady Law Firm, P.C. – Customs and Import/Export Attorney Blog
Learn the Basics of Customs and International Trade Policy and Procedure
CLASSIFICATION is the process by which goods are categorized for determining payment of duty as well as for statistical purposes. The United States is apart of the Harmonized System of Classification which functions under an International and a Domestic (Country Specific) level. On the international level all those who are parties to the Harmonized system will classify the product the same. However, at the domestic level each country has its own detailed descriptions and rates of duty one has to pay.
There are many laws and rules regarding interpreting the Harmonized Tariff Schedule of the United States (HTSUS). For every product there is a place for classifying it and if your good comes from outer space there are ways to squeeze your item some place in the tariff. I would hate to describe to you the tedious nature of columns, headings, and subheadings involved in tariff (if you do e-mail me). Thus, it is important to have a customs broker handling these transactions and counsel assisting on difficult matters if they should arise. Incorrectly classifying a product can result in improper duty liability, failure to meet the free trade opportunities if applicable, or major penalties. Be Cautious and choose your customs agents wisely.
Happy Importing 🙂
You may call us at 347-512-9007 for more information on your international trade and customs issues.
The duty, taxes, and Customs’ fees due on an imported article are its percentage of its DUTIABLE VALUE. The dutiable value is determined by the process of appraisement. Generally, appraisement is calculated by determining the transaction value of the goods, i.e. the price actually paid or payable for the goods when sold for export into the United States. Usually, the the price paid or payable is based on the F.O.B price at the port of export and shipping it onto the carrier.
Improper valuation of goods affects the duty liability. If the value of the goods is in excess of its proper value, the importer will pay a greater amount than necessary. Conversely, under declaring the value of goods may result in costly penalties. Our firm assists importers in appraising the value of goods as well as preparing and submitting binding rulings to Customs for calculating the correct value of goods.
The following costs are included in the price actually paid or payable:
1. Selling Commissions – Any commission paid to the seller’s agent (anyone who is related to , controlled, by, works for, or on behalf of the manufacturer or seller).
2. Assists – Anything that the buyer provides to the manufacturer and/or seller directly or indirectly either free of charge or for less than the arms length price for which he would have charged the buyer.
3. Royalties or License fees – Fees that the buyer must pay directly or indirectly as a condition of sale for export to the United States.
4. Packing Costs – Any costs incurred by the buyer for labor and materials to make them ready for exportation.
5. Proceeds of subsequent sale – Generally, if subsequent to the importation an importer pays or is required to pay more for the imported goods than was declared at the time of entry, those additional payments are part of the price paid for the goods.
Happy Importing 🙂
Providing documentation to U.S. Customs and Border Protection (“CBP”) dictates the basis for all CBP decisions. Without complete and accurate information results in delay and added expenses. What are the documents usually involved in international trade?
1. Provides the documents evidencing the commercial transaction.
2. Government agencies such as CBP, Food and Drug Administration, Consumer Product Safety Commission use the invoice to determine importing compliance.
3. Special information may be required accompanying the invoice. For example, Footwear requires the following:
Footwear, classifiable in headings 6401 through 6405 of the HTSUS-
(1) Manufacturer’s style number.
(2) Importer’s style and/or stock number.
(3) Percent by area of external surface area of upper (excluding
reinforcements and accessories) which is:
Composition Leather b.__________%
Rubber and/or plastics. c. __________%
Textile materials d.__________%
Other (give separate percent for each type of material) e.__________%
Certificates of Origin:
The certificates of origin are declarations as to where the imported goods are originating from.
1. Important for establishing preferential treatment for rates of duty if they come from a certain country e.g., Israel, Canada, and Mexico.
2. For certain programs if the certificate of origin is missing the goods may be seized.
Documents of Transportation and Title:
Bills of Lading (Water and Ground Shipping) and Air Waybills (Air Shipping) are the documents under which goods are transported.
1. They are contracts! Thus, they list the terms and liabilities for goods that are damaged during shipment.
2. They evidence the right to delivery or possession of goods.
3. They evidence the right to make a CBP entry into the U.S.
Export Licenses provide that government authorizations to export certain types of products to a specific country. Highly technological goods such as electronics or military products generally require a validated license.
Air, Sea, Truck, and Rail are the four modes of transporting your merchandise from location to location.
These transportation services are either provided directly by the carrier (e.g. the shipping line) or by what is known as a non-carrier operating third party. A non-carrier generally contracts space on the ship, plane, etc and then resells the space with other services. For air shipments these entities are called CONSOLIDATORS and for Ships they are called NON-VESSEL OPERATING COMMON CARRIERS (NVOCC).
When should an importer use a Consolidator or an NVOCC?
These services provide a practical and economical way for importers who ship less than a full shipping unit (i.e. igloo for air, container for sea, trailer for truck) to gain a cheaper rate.
Air Freight – Air freight carriers are not regulated thus the rates that they charge differ from person to person and/or from date to date. Airlines have a tariff (list or schedule) and are far less flexible then consolidators.
Vessel, Truck, and Rail Freight – All these services are regulated and all freight rates must be published in their tariff. Any negotiations for a cheaper rate must be filed with the agency in charge. If the importer is charged less than what was published the importer will still be liable to pay the freight damages (but may still be able to maintain a civil action against the carrier for breach of contract).
Check all available modes of transportation for the best rates and make sure that all legally related publishing requirements are met….Happy Importing!
Credit: Free photos from acobox.com
There are those importers who find themselves under the belief that duty rates are beyond their control. However, one of the ways an importer can use his or her whit and intelligence is known as “Tariff Engineering.”
The importing laws in the United States are for the most part narrowly tailored to a specific item. For example, you import an adult bicycle and there is a tariff duty rate for that bicycle. However, this strict construction of items based on a tariff may benefit the importer. That same adult bicycle may have different duty rates based on its wheels diameter!
The laws in the U.S. provide a framework for how to import your goods. During the manufacturing process the importer is recommended to speak with the manufacturer, customs broker, and/or attorney to determine the most cost effective way of manufacturing the product to save on import duties – i.e. Tariff Engineering. The earlier this is done in the production process the more one can predict how Customs will react to the product during importation.
Planning is the key word folks – you do not want to the surprise of owing thousands in duty after the goods left the dock.
Anything that is imported must be properly recorded – maintaining accuracy and validity of all the entry records you create. The government can always pop in unannounced and ask questions on your importations. The questions that arise are usually based on “Red Flags” they find via a database filled with information about factories, goods, people from across the globe.
How long are you required to maintain records? 5 years after importation (drawback claims, 3 years after payment of drawback claim).
What is Customs looking for? Could be anything but the most common areas Customs looks at are classification, valuation of merchandise, compliance with the law, and the importer’s right to import or export merchandise. THE FAILURE TO KEEP RECORDS RESULTS IN PENALTIES UPWARDS OF $100,000.00.
Who can maintain the records? The law does not force the importer itself to maintain the records. The importer may hire an agent to do so however, importer maintains full liability for any errors resulting from the maintenance of the records.
In addition, a system of certification for recordkeepers has been established by the government. It is a voluntary program available to those importers and their agents who take steps to assure that records are properly kept. You may read more about it in detail here http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=1ceedfd75e9813b3f6d88b3fc7e9e8a0&rgn=div8&view=text&node=19:188.8.131.52.184.108.40.206&idno=19
One of the main functions of U.S. Customs and Border Protection is to collect duties. What are “duties”? Duties are a form of tax that an importer has an obligation to pay. Inherent in the payment of duties is liability to which the government defines to be a personal debt due from the importer to the U.S. that can only be discharged by paying the FULL amount. There is no haggling with Customs!
Please be careful because the failure to pay your duties on time may result in an audit, penalties, and other legal consequences leading you to be on Customs bad side.
When is duty due?
A deposit of estimated duties are due during the time of your merchandise entering the U.S. Any additional duty found is due 30 days after liquidation (Liquidation means the final computation or ascertainment of the duties).
Customs duties are often paid by the importers customs broker who is clearing the shipments to be paid over to Customs. However, Customs Brokers are not agents of Customs and therefore payment of duties to your Customs Broker does not relieve you from liability if Customs is not paid.
Two ways to pay Customs: 1) Checks Payable to Customs which are delivered with a Customs entry; 2) Automated Clearing House which permits Customs to withdraw duties from your bank account – allows a 10 day window to pay AFTER entry.
Feel Free to e-mail me with any questions 🙂
Documentation is the first stage of the government’s determination as to whether they will allow your product to cross the border. Further, these documents allow the government to assess duties and taxes on your container shipments. IMPORTERS ARE HELD RESPONSIBLE FOR THE ACCURACY OF DOCUMENTATION PRESENTED TO THE GOVERNMENT, even if the documentation was prepared by someone else (i.e. customs broker or exporter). I cannot stress this enough. If the documentation is misleading, inaccurate, incomplete, or false the transaction is compromised and you will be held responsible. Problems with the documentation can result in higher duties, penalties, exclusion of the goods, and seizure.
Almost everything that your business imports into the U.S. must be declared to Customs. However, not all merchandise that enters the U.S. is subject to duty (tax or fee on imports) and/or importation restrictions.
You must be careful because the failure to declare goods can result in civil penalties, customs seizures, forfeiture of your merchandise, and in some cases CRIMINAL LIABILITY!
A failure to declare goods is not always intentional, it can happen by mistake through normal business practice. Customs does not understand the meaning of a “mistake,” you will be liable; however, a mistake usually provides a business with the likelihood of a mitigation in penalties.
Having trouble with how to declare your goods, it is recommended to contact a customs broker or attorney. You do not want to make a bad impression on those who allow your goods to enter the U.S.!
Credit: Free images from acobox.com
For my first post I thought it would be appropriate to begin with “Importer Responsibility.” The laws of the United States relating to the importation of goods primarily place the responsibility on YOU! the importer, kinda sucks right. Whether the source of a problem is due to a foreign exporter’s conduct, the United States has jurisdiction over you as the importer. As a result, importers must be cautious and not place all of their trust in the foreign exporter to know what to do.
Building on the idea of responsibility, Customs and Border Protection (CBP) (the government enforcement agency protecting our borders) coined the term “shared responsibility” meaning that CBP communicates its requirements to the importer, and the importer must use “Reasonable Care” to assure that CBP is provided with accurate information regarding their imports. The reasonable care standard is subjective to what CBP believes it to mean, basically you must be PERFECT in every way. Thus, it is important to consider any and all help in complying with the Customs Regulations. This can be accomplished through the aid of a customs broker, import/export consultant, accountant, or an attorney.
A checklist of an importer’s responsibilities can be summarized by:
1. Declaring your merchandise that is entering the U.S.
2. Complete and accurate documentation (NO careless mistakes as we prone to in grade school).
3. Compliance with all legal requirements.
4. Pay your duties on time!
5. Maintain accurate records.
Follow the checklist (if you can) and it should be smooth sailing for your merchandise from overseas and into a department store near you.