Importing Goods to the USA

 

It can be extremely profitable to sell imported goods within the United States. There is always high demand for new or improved products in any category, from food to furniture. There are a great number of different national communities in the U.S., and those nationals often crave goods from their countries of origin and are willing to pay lucrative premiums for them. The American market is famous for free trade and vast opportunities, giving entrepreneurs the chance to offer something unique to the customers. The U.S. import laws are designed to facilitate the importation process. U.S. Customs quotes are some of the lowest in the world (the average is 3 percent), an importer is not required to have a license or permit to engage in such business (other agencies may require a permit, license, or other certification, depending on the products to be imported; will be discussed below), and the U.S. has entered into special trade agreements with different countries to further promote international trade and business relationships.

 

The U.S. Customs and Border Protection of the Department of Homeland Security (CBP), along with a number of other government agencies, regulate goods imported into the United States. The U.S. Customs territory includes fifty states, the District of Columbia, and Puerto Rico. There are over 325 ports of entry located throughout the United States including seaports, airports, and land border crossings.

When contemplating the import of certain merchandise, first and foremost, entrepreneurs must find out whether those products can be lawfully imported into the USA. Then, they should familiarize themselves with applicable legal requirements of the U.S. Customs and Import Laws, whether licenses and permits are required to import and sell those products, and how to prepare the import documentation so it complies with the U.S. law (there is a U.S. legislation relating to particular types of products, what they can and cannot contain, their labeling, etc.). Business owners need to have complete information regarding importation procedures in order to calculate the expenses, time consumption, and overall profitability of the venture.  Moreover, failure to comply can subject the importer, seller, and other involved parties to fines, penalties, and even seizures of the goods.

 

With few exceptions, all merchandise coming into the United States must be declared with the Bureau of Customs and Border Protection, must clear Customs, and an importer must pay a Customs duty unless the goods are specifically exempted from this duty by law before the imported merchandise can be used within the U.S. territory. I will review each step of the importation process in detail below.

 

Arrival of the Goods

 

A shipment with the goods arrives at the port of entry. The Customs Service does not notify the interested parties of the arrival of their shipment. The importers are responsible for making inquiries themselves about the status of the shipment to ensure that the entry can be filed in a timely manner. Usually, the sender or the carrier of the shipment is asked to notify the receiving party when the goods arrive. Before the declaration of entry and Customs clearance, the goods are held at a bonded warehouse or foreign trade zone. Goods must be declared for entry into the U.S. within fifteen days of arrival or prior to leaving a bonded warehouse or foreign trade zone. The importer of record is responsible for starting the process of entry and submitting all necessary documentation. The importer of record can be the owner of the goods, the purchaser, or the agent. Customs entry papers may be presented before the merchandise arrives.

 

Imported goods that were not declared to the CBP in a timely manner are sent to a general order warehouse to be held as unclaimed. The importer is responsible for storage charges during the period the unclaimed merchandise is held at the warehouse. If no one claims it within six months, the merchandise is sold at auction.

 

Entry of the Goods

 

Imported goods are considered to legally enter the country when three events occur:

 

1.      A shipment has arrived within the port of entry,

2.      Delivery of the merchandise has been authorized by CBP, and

3.      Estimated duties have been paid.

 

The CBP enforces the completeness and accuracy of import documentation and imposes various penalties for noncompliance, some of which may cause the loss of the entire shipment. Documentation requirements can be extensive in certain cases, but usually the following documents are necessary, referred to as a customs entry package:

 

·         A bill of lading, airway bill, or carrier’s certificate;

·         A commercial invoice from the seller, which shows the value and description of the merchandise;

·         Entry manifest (Customs Form 7533) or entry/immediate delivery (Customs Form 3461); and

·         Packaging lists, certificate of origin, special certificates, if appropriate, and other documents necessary to determine whether the merchandise may be admitted according to the U.S. legal standards.

 

To facilitate the customs clearance, the CBP and the import community have createdthe Customs Automated Commercial System (ACS), which receives and processes entry documentation and provides cargo disposition information electronically. Cargo carriers, Customs brokers, and importers may use the system. It reduces clearance time from days to hours or even minutes. 

 

If the imported goods initially arrive to one port of entry and the importer intends to transfer them to another port, for example, the one closer to his or her warehouse or place of distribution, the goods may be sent in-bond from the first port of arrival to another Customs port. Arrangements for in-bond shipments should be made before the goods leave the country of export. The importer of record is not required to file the entry package, pay the duties and processing fees, or deal with other Customs formalities until the goods arrive at the port of final destination.

 

When the entry is filed, the importer indicates the tariff classification and pays any estimated duty and processing fee if not exempt by law. Posting of a surety bond containing various provisions, including an obligation to pay any increased duty that may be later found to be due, may also be required.

 

Duty Rates

 

The United States imposes tariffs or Customs duties on the imports of goods. The duty is levied at the time of import and is paid by the importer of record before he or she can withdraw the goods from the Customs. Customs duties vary, depending on product classification, country of origin, and valuation.

 

Classification: All imported goods are categorized according to the Harmonized Tariff Schedule of the United States (HTSUS), issued by the International Trade Commission. Classification refers to how the imported goods are described in HTSUS (e.g. vegetables, textiles, auto parts) and will determine the duty rate, admissibility into the U.S., anti-dumping duties, and whether the product is eligible for special duty quotas. Classification determination is a complicated process and may require a significant amount of information related to the imported goods. HTSUS does not always describe the goods in the same manner as they are described at their countries of origin. The importer is responsible for properly classifying merchandise according to the HTSUS standards before entry to the U.S.

 

Country of Origin: Rates of tax on transaction values vary by country of origin. Importers are required to make accurate declarations as to the country of origin for all merchandise. Sometimes the country of origin is easily determined, but it can be more complicated in others. For example, when the parts of the products were manufactured in one country and assembled in another, U.S. Customs will apply the higher rate between the two countries of origin, unless the work done on the product and other connections to that country were minimal.

 

All foreign goods must be individually marked to indicate country of origin, though a limited number of goods are exempt from this requirement. This mark on the product must be made in such way that the ultimate consumer of the product will clearly understand the product’s country of origin.

 

Goods from Canada, Mexico, Israel, some Third World countries, and certain other countries may be eligible for reduced duties. Most countries qualify for normal duties as a most favored nation. Goods from countries not considered most favored nations are subject to increased duties.

It bears mentioning that the North American Free Trade Agreement (NAFTA) was adopted in 1994 by the governments of the U.S., Canada, and Mexico. It eliminates tariffs on most goods originating in these member countries.

 

Valuation: U.S. regulations for valuing imported goods implement the WTO Valuation Agreement. Customs determines the ratable value of merchandise. Generally, the transaction value of the merchandise serves as the basis of appraisement. Transaction value is the price the buyer actually pays to the seller for the goods being imported. The rate of duty that the CBP assesses on a particular shipment of imported goods is not binding for future shipments of the same or similar merchandise. Where there is uncertainty, the CBP has a binding ruling program, whereby importers can request a written ruling as to the proper classification and applicable rates of duty.

    

NAFTA was mentioned earlier in relation to goods from Canada and Mexico, but goods from many other countries may be exempt from duty under the trade agreements between those countries and the United States. Certain types of goods are exempt from duty, regardless of the source. Even if the imported goods are exempt from Customs duty, they must still be declared and examined for compliance with other laws (product specifications, safety, labeling, etc.).

 

When goods are not exempt from duties, they are properly classified and appraised according to U.S. valuation procedures. After that, various methods of duty calculations may be applied. Most often, ad valorem rates are used, which are calculated as a percentage of the value of the goods (such as 4 percent). Some articles, however, are dutiable at a specific rate of duty that applies different quotas to apiece, gallon, pound, and other measures. Others are charged at a compound rate of duty, a combination of both ad valorem and specific rates.

                         

After duties have been paid, the CBP approves the goods for import. They can then be removed from the port of entry, bonded warehouse, or free-trade zone.

 

If the duty has been paid on the particular goods and an importer then exports those goods to another country without doing substantial modifications to them, the importer can seek a refund of duties. The method of requesting a refund is known as duty drawback.

 

Status of Entry

 

Duties do not have to be paid if the goods are not to be used or distributed on the territory of the United States but are held in a bond warehouse or free-trade zone. The importer of record has to pay storage fees to the warehouse owner nevertheless.

 

Foreign-trade zones are areas physically located in the United States but legally outside the Customs territory of the United States. Such zones are generally near ports of entry and are limited in scope and operation based on approval of the Foreign-Trade Zones Board. Goods in a foreign-trade zone are not considered imported to the United States until they leave that zone. Foreign goods may be used to manufacture other goods within the zone for further export without payment of Customs duties or holding the merchandise in such zones can postpone the duty payments and custom formalities until the importer actually needs those goods for business. Goods may be stored in a bonded warehouse or a foreign-trade zone in the United States for up to five years without payment of duties.

 

Restricted Merchandise

 

Federal government agencies regulate the import and export of numerous products. These include but are not limited to:

 

  • Alcoholic beverages
  • Animals and animal products
  • Certain drugs and pharmaceuticals
  • Firearms and ammunition
  • Fruits and nuts
  • Meat and meat products
  • Milk, dairy, and cheese products
  • Plants and plant products
  • Poultry and poultry products
  • Trademarked articles
  • Vegetables

 

Certain items in these categories may be prohibited for import at all.

 

 

If a company exports or imports these regulated types of products, it may be required to register with special U.S. governmental agencies that supervise commercial activities and compliance in that particular industry (e.g. U.S. Food and Drug Administration for food and beverage products), to appoint a U.S. representative, to file certain documents with regard to each shipment, and to retain records for the prescribed period of time. Also, it may be required to obtain specific licenses and permits from the responsible agency. The Bureau of Alcohol, Tobacco, and Firearms, Animal and Plant Health Inspection Service, Agricultural Marketing Service, U.S. Fish and Wildlife Service, and the Food and Drug Administration regulate most of the above items.

 

Prohibited Merchandise

 

The regulations administered by the Office of Foreign Assets Control (FAC) generally prohibit the unlicensed importation of merchandise, except information and informational materials, of Cuban, Iranian, Iraqi, Libyan, or North Korean origin. Goods may not be imported from or through commercial entities owned or controlled by the governments or private citizens of Cuba, Iran, Iraq, Libya, or North Korea, regardless of the location of the entity. Vessels or aircraft under the registry, ownership, or control of the governments of or commercial entities in the above areas may not import merchandise into the United States.

 

Customs Brokers

 

Many entrepreneurs who are in the business of importing goods into the U.S. choose to retain the services of a Customs broker to help them through the process of Customs clearance. Customs brokers are licensed by the U.S. Department of the Treasury, and their primary service is to represent the importer in filing and processing the Customs entry with the CBP. They may also provide guidance with tariff classification, quota compliance, and anticipation of difficulties in the entry of products.

 

Customs Examination of Goods and Documents

 

Examination of goods and documents is necessary to determine the compliance with the U.S. laws and regulations and the correctness of the submitted information. During the examination, the representatives of the CBP review:

 

·                    The value of the goods for customs purposes and their dutiable status;

·                 The appropriate marking and labeling of the goods (U.S. law has special requirement to the labeling of different types of goods, which must be known and satisfied by the importer in order to sell the goods in the U.S.);

·                   Whether the goods have been correctly invoiced (the U.S. law in general and anti-dumping law particularly require arm’s-length dealings between the parties to the transaction, meaning that one party cannot sell the goods to another at intentionally much lower price than it sells the same goods to others);

·                    Whether the shipment contains prohibited articles;

·                    Whether requirements of other federal agencies have been met, if applicable; and

·                    Whether goods in excess of the invoiced quantities are present or a shortage of goods exists.

 

When examination or appraisal of the goods by Customs reveals differences from the entered descriptions by the importer, or when the Customs finds that a different rate of duty than the one indicated by the importer applies, an increase in duties may be assessed.

 

Once all the information has been obtained, including the report of the Customs import specialist as to the Customs value of the goods and the laboratory report, if required, a final determination of the applicable duty is made. This is known as liquidation of the entry. At this time, any overpayment of the duty is returned or underpayments billed.

 

Protest

 

If an importer disagrees with the CBP valuation of the goods, the imposed duties, or other conclusions of Customs, he or she may, within ninety days after the date of liquidation or other decision, protest the decision and request an administrative review. Notice of the denial or acceptance of a protest, in whole or in part, will be mailed to the importer or to his or her agent. If the importer’s protest has been denied, the importer may then litigate the agency decision. If an importer wishes judicial review, he or she will be required to file a summons in the Court of International Trade.

 

Mail Shipments

 

A formal entry is required for any commercial mail shipment exceeding $2,000 in value. Formal entry is also required, regardless of value, for commercial shipments of textiles from all countries and all made-to-measure suits from Hong Kong. The parcel is forwarded to the Customs office nearest the addressee. Customs notifies the addressee of the parcel’s arrival and the location of the Customs office where Customs formalities may be arranged. Customs clearance will require filing an entry in the same manner as for shipments arriving by vessel or airfreight.

 

Penalties

 

Certain civil and criminal penalties apply for failures to follow CBP rules and pay duty. The penalties may be as high as twice the value of the goods, plus twenty years in jail for certain intentional offenses. In addition, goods of persons subject to such penalties may be seized and sold by the CBP at auction.

 

Antidumping Law

 

Another area of law that an importer must know about is the U.S. Antidumping law. Dumping is an unfair trade practice, when a business sells goods in the United States at a price lower than what it charges for a comparable product in another market or when the company sells its goods at a price below the cost of production for those goods and the imports cause material injury or threat of material injury to a U.S. industry. Sometimes a seller engages in such practice intentionally to expand market share and reduce competition. Big companies may afford to sustain temporary losses in order to gain bigger profits later. Dumping also can occur inadvertently due to a seller’s lack of awareness of the way the law defines what activities are considered dumping. The U.S. Department of Commerce (DOC) conducts antidumping investigations when suspicions arise. To determine whether or not a company is dumping the U.S. market, the DOC compares the prices and costs to produce similar products in the countries that are economically and otherwise comparable to the one where the goods were made and calculates an actual cost of production. It then compares the prices of the goods at issue with the average sale prices in the comparable countries, as well as in the country where the goods are coming from. If the goods are imported in the U.S. at the much lower rates, the dumping may be taking place.

 

Antidumping laws are strictly enforced in the United States. If the DOC finds that dumping has occurred and the U.S. International Trade Commission (ITC) finds that the imports have caused material injury or threat of material injury to a U.S. industry, the DOC will issue an antidumping order, imposing additional duties on goods subject to that order. Antidumping orders can stay in place for five to thirty years.

 

Defending oneself in an antidumping investigation can be costly and time consuming. Moreover, because the U.S. government will typically require some continued monitoring of a dumping business’s activities, the burden and expense may continue for many years. Some general planning and understanding of U.S. antidumping laws can help you avoid these problems.

 

As was said at the very beginning of this chapter, U.S. import/export laws are designed to promote international trade and market expansion. At the same time, the protection of the consumers and the national economy cannot be compromised. The importation requirements for goods and accompanying documents may be lengthy and complicated, but as in many other types of businesses, once the applicable laws and regulations are studied, the process is thoroughly understood, the accurate initial package of documents is prepared, and the continuous procedures of monitoring and supervision are set in place, the business can be conducted successfully and smoothly, without fear of repercussions for technical errors or lack of information. There are too many good things in the world not to take advantage of them and to limit us just to the products of our country of residence. Let’s strive for variety and opportunities to choose!

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