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When the goods arrive from their foreign destination, your first task as an importer is to shepherd the new arrivals through customs. So how is this done? Usually through a customs broker. In fact, unless you have an import license (for which you have to take a government-administered test), you typically can’t take your own merchandise through customs.
Still, it’s important for you to know how your merchandise gets imported. The more you know, the better you’ll be able to help your customs broker–and yourself. There are four basic steps to taking your goods through customs:
- Entry. Deciding where and how you’ll enter your merchandise
- Examination and valuation. Determining the legality and tariff or duty value of your goods
- Classification. Determining the percentage of tax that will be charged on the value of your merchandise
- Payment and liquidation. Paying the tariff or duties
Let’s take this one item at a time.
According to U.S. Customs, goods brought into the country are in a sort of import limbo–not considered legally entered–until after the following actions have been taken:
- Shipment has arrived within the port of entry.
- Delivery of merchandise has been authorized.
- Customs duty has been paid.
When your merchandise arrives at the U.S. port of entry (the dock, airport or border), the carrier submits the bill of lading or air waybill to the on-site customs office. The shipper notifies your customs broker–and the clock starts ticking. Your broker has 15 days to provide the necessary documents to get your goods out of hock.
Here’s a list of the entry documents your customs broker will need:
- Entry manifest (also known as Customs Form 7533) or Application and Special Permit for Immediate Delivery (aka Customs Form 3461)
- Bill of lading or air waybill (also known as the evidence of right to make entry)
- Commercial invoice or pro forma invoice if the commercial one can’t be produced
- Packing lists
- Certificate of origin, if necessary
- Customs bond (which is posted by your broker and assures customs that it will get the duties, taxes, and any penalties out of you one way or another)
After customs has gone through all these documents, accepted the bond and decided that everything’s legal and up to snuff, the merchandise is “out on bail,” pending the last two phases of the customs game. The first of these is the entry summary documentation. Now your broker has ten days to deposit the estimated duties and file the necessary documentation, namely:
- Entry summary (also known as Customs Form 7501)
- Any other invoices and documents necessary for the assessment of duties, collection of statistics, or other determination that you’ve met import requirements
After you’ve decided to enter your merchandise, customs personnel will inspect your shipment to make sure it can legally enter the country and to determine its tariff or duty value. They’re checking to verify the following:
- The merchandise is marked with the country of origin.
- Any required markings or labels are clearly displayed.
- The merchandise is correctly invoiced.
- The merchandise quantity matches the quantity on the invoice.
- The shipment contains no prohibited articles.
- The shipment contains no illegal drugs.
They’re also checking the dutiable status and value of your goods. The value is the price you’ve actually paid for the merchandise, plus any added amounts, if not included in the price. These added amounts include the following:
- Packing costs incurred by the importer
- The value of any assists (An assist can be a tool, die, mold, engineering drawing, or artwork, that is, something that assists in the assembly and sale of the product.)
- Any selling commission incurred by the importer
- A royalty or license fee required from the importer as part of the sale
- The proceeds accruing to the exporter of any subsequent resale, disposal, or use of the imported goods
The Customs Service classifies goods according to tariff schedules. Different types of goods are assigned different percentages on which they’re taxed. The amount of duty varies dramatically depending on exactly what the products are and what specifically they’re made of. During the classification step, the customs people will decide exactly which category your merchandise falls into.
After your merchandise has been classified, you pay the customs person. As with many assignments under government aegis, this isn’t always a simple, cut-and-dried operation.
It can be, of course. Your entry summary and documentation can be accepted as submitted without any changes. In this case, you simply hand over a check for the amount of duty, or tariff, owed, and your merchandise or entry is entered as liquidated. This means, you and customs have figuratively shaken hands and closed the books.
In other cases, however, customs may send you notification that the classification isn’t correct and cannot be liquidated as entered after all. If the revised classification results in a tariff change in your favor, they’ll send you a refund. However, they can also decide on a change in their own favor, in which case you need to send them money.
If you don’t agree with the change, you have 90 days to file a protest, which then goes on to review or, in some cases, to court. The entry is not considered liquidated until the final ruling.