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Understanding Customs Clearance Procedures

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Category: Supply Chain, Customs, Import, Customs Broker

Understanding Customs Clearance Procedures

March 16, 2021 Posted by Tanya Krieger

Do I need a Customs Broker Customs brokers are licensed by the Department of Homeland Security, Bureau of Customs Border Protection (CBP) to perform customs business, under Customs Power of Attorney, for importers. A freight forwarder license does not permit a company to perform customs business for an importer. At Norman Krieger, Inc. we are licensed both as customs brokers and freight forwarders. Licensed customs brokers not only perform customs business on behalf of importers, they also facilitate the legal movement of goods into the United States. Similar to a tax specialist, a skilled customs broker may help lower duties and taxes in a legal and compliant manner. While CBP permits importers to perform their own customs business without engaging a licensed customs broker, importers that do so will be viewed much more strictly by CBP concerning compliance and the imposition of penalties. Importers performing their own customs business lose the resources and skills of the customs broker that would otherwise help them facilitate shipments, reduce cost, and remain compliant. Customs Clearance Entry and Duties All shipments entering the United States require a Customs Entry. An Entry contains information including:

1. Country of Origin

2. Description of imported goods

3. Customs Classification number (HS Code)

4. Cost, insurance and freight (CIF) value

5. Approximate amount of duties

The type of Entry depends on the value of the goods. Depending on the value of the goods being imported, every shipment will have either a formal, informal, or fall below the de minimis threshold.

Formal entries apply to import commercial shipments valued at $2,500 or more.

Informal entries apply to the import of commercial or personal items valued at less than $2,500.

Section 321, or de minimis shipments, are exempt from duty but cannot exceed $800 per day to one consignee.

Importers are required to prepare an Importer Security Filing (ISF) on all ocean cargo coming into the U.S. prior to cargo being loaded on the vessel at port of origin. Anti-Dumping & Countervailing Duties (AD/CVD), apply to imported products that are considered to be unfairly subsidized or priced below fair market value. Such shipments require a pre-payment of an estimate of a penalty that is determined at a later date. Customs Clearance Best Practices Before conducting customs business for an importer, a customs broker is required to have a properly completed and signed valid Customs Power of Attorney from the importer. Each Entry requires that the importer post a bond to guarantee payment to CBP for not only the estimated amount of duty and taxes but also that the declaration is accurate and to cover any other unforeseen penalties. Such a bond can be either in the form of cash or a bond issued by a bonding company. Because the amount of such bonds is very high, virtually all importers choose to pay for and submit a bond issued by a bonding company. Licensed customs brokers seamlessly obtain and submit such bonds for importers at time of Entry.

A Single Transaction Bond covers a single shipment. For importers who import more frequently a lower cost alternative is available—the Continuous Bond.

A Continuous Bond covers an importer’s shipments for a calendar year. The face value of this bond, and the premium, are dictated by CBP rules. It is possible that CBP may require importers with continuous bonds to increase the face value of such bonds, and their premium, if shipments exceed the planned coverage. At the end of the bond cycle the bonding company will advise any changes in conditions or premiums but continuous bonds do not expire—they remain enforce until revoked by the importer.

Importer Security Filings (ISF) also require bonds but can be covered under a continuous bond. Supplemental bonds may be required for AD/CVD Entries and for entries covering certain specialized products. When importers surrender documents to their customs broker, they will also be asked for any Arrival Notice associated with the shipment. Customs brokers also work with importers to ensure that any buying commissions are accounted for and any Assists are declared. Buying commissions are an area of potential cost reduction as well as an area for potential risk of non-compliance. Assists, where items such as engineering, molds, components, etc. are added to a product that is imported into the United States, are properly accounted for an any duty declared and paid to avoid later severe penalties. Good customs brokers do a lot more than just submit a Customs Entry. Missing or incomplete documentation is a major source of delay and added cost, so it is important to keep on top of your documentation and customs requirements to streamline the process even before goods reach the U.S. This is where our experience and expertise can be very valuable. With our expertise, we can help you stay compliant while entering your goods correctly, therefore, reducing the overall time and costs when sourcing goods. Common Customs Clearance Issues There are many different regulations and documents that importers need in order to move their goods from point A to point B. Due to the complexity, sometimes things are overlooked during the shipping process. Some common customs clearance issues include:
    1. 1. Customs Classification
It’s important to know your HS codes to ensure that you are importing goods with the right classification. If it’s a new type of good, for example, you may need to do some research to find the right designation. CBP can levy penalties if you misclassify your goods. Norman Krieger, Inc. can assist you if you are unsure about which HS codes apply to the goods you are importing. We can help you understand how your goods are classified before importing them into the U.S. and ensure they are correctly classified in documentation before importing them into the U.S. to avoid expensive penalties and delays.
      1. 2. AD/CVD Compliance
Anti-Dumping and Countervailing Duties are instituted by American regulators on goods that are alleged to be subsidized or priced below market value. For example, the US levies tariffs on Chinese government subsidized steel to maintain market stability and prevent distortion. It is important to ensure your goods are AD/CVD compliant as CBP will issue misclassification penalties.
        1. 3. PGA Compliance
Partner government agencies regulate the import of goods that may be of concern to the health and safety of American consumers and require additional licensing on certain imports. These agencies include:

Animal and Plant Health Inspection Service (APHIS)

Bureau of Alcohol, Tobacco, and Firearms (ATF)

Federal Drug Administration (FDA)

Environmental Protection Agency (EPA)

Being compliant with PGA regulations and current with PGA licenses is essential to avoid penalties and the possible requirement that the goods be redelivered back to CBP custody.
          1. 4. Labeling and Packaging Compliance
Labeling

1. Goods must be labelled clearly and in English.

2. You may be required to include specific labeling based on the type of goods, for example PPE-related or medical products require specific labeling. Other products require clear directions for use, licensing information, or ‘best by’ date.

Packaging Shipments of goods in cartons, bags, or drums are typically loaded onto pallets at origin because:

1. It’s less expensive to palletize your shipments at origin when you’re importing into the U.S.

2. It’s easier to handle palletized freight because shipping loose cartons can lead to loss or damage to products.

It is important to note that the United States restricts the types of pallets that may be imported. Only plastic or heat-treated; and ISPM-15 certified wood pallets (because fungus found on wood can negatively impact the American forestry industry) may be imported. Non-compliance will result in the product being shipped back and you will have to assume the costs. It is important to ensure your products are palletized correctly and with compliant materials before shipping.
            1. 5. IPR (intellectual property rights)
If you are importing goods that have logos or trademarks, you must provide commercial licensing documentation showing that your supplier can legally use those logos and trademarks. If your goods aren’t permitted into the U.S. because of IP violations, they will either be seized and destroyed OR you will be required to return the goods. You will assume all of the costs of return or destruction, as well as penalties for non-compliance.
              1. 6. Record Keeping
All documents are required to be maintained for at least 5 years. AD/CVD is often required to be held for far longer. Failure to produce documents on imports may be subject to fines, duties, and penalties, so keep your records on file and organized. Customs Violations, Penalties & Costs The cost of non-compliance increases depending on severity—from negligence and gross negligence to deliberate fraud—and depends on whether the goods are subject to duties or not. Aside from the obvious, penalties, there are additional costs to non-compliance:

1. Delays and storage fees

2. Failure to get your products to market

3. Additional penalties

4. Cost of returning or destroying goods

Avoid Customs Clearance Failures Customs clearance can be complicated and failure to meet all of CBP and PGA requirements can be costly both in terms of delays and in penalties. Norman Krieger, Inc. can ensure you are staying compliant while importing your goods. Contact us today for a quote.

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