How to Import into the US

Question

Do I have to pay import duty on items that have been exported from the United States that are being returned?

Answer

If you have an item that was previously resident in the United States, but for some reason was exported and is now being returned, be sure to inform US Customs about its status. Items previously exported are often considered duty free! This means that although you might have to pay a small entry fee, your goods will not be assessed taxes as a percentage of their value.

The logic behind this duty free status is simple - US Customs wants importers to pay an import tax at least once on items not made in the United States. That means that in general you can claim a duty free status under chapter 98 of the US Harmonized Tariff Schedule on items that were either made in the USA, or had already been imported previously.

When might this apply?

This scenario might come into play if:

• one of your products was exported, used in a foreign country, and is now being returned;
• you’re exporting something for repair;
• your item was exported as an exhibit for a trade show or similar;
• your item is a “tool of trade” used abroad temporarily.

Gotcha’s to avoid:

• Just because your entry is duty free does not mean you can avoid filing import paperwork. You might also be subject to processing fees.
• If your item was “advanced in value” while overseas, you will probably owe duty on the value of the improvement. Example: you exported a car made in the US and had a French radio installed. When the car returns, you will owe duty on the value of the radio but not the car.
• Depending on the product, there may be a three year window between the exportation and duty free re importation of your item.

If you’re one of the small minority of businesses that exports military and ITAR controlled products overseas, you’re not going to find much to help you on our site - sorry.

You can download the International Traffic in Arms Regulations (ITAR) from our site, but there’s not a lot of discussion on how to use it or when it’s important.

You can, however, check out our sister site ExportRules.com. They specialize in ITAR Compliance, export training and information for exporters of military goods.

If you’re a real compliance die-hard, check out their Sample Export Compliance Manual. It’s one of the best products I’ve seen for the development of military export compliance programs.

Import tax or import tariffs (also known as import duties) in the United States generally refer to the taxes and fees charged by US Customs when importers bring goods into the country. They are assessed by government employees with US Customs at the port of entry, and are paid by the importer of record.

All goods entering the United States are subject to the same import procedure and the same tariff (tax) assessment, although every product has its own duty rate and some have a duty rate of zero!

Import taxes are the second largest source of revenue for the United States behind the Internal Revenue Service.

In addition to being revenue source, import taxes are used to control domestic market conditions and as a political tool. US Customs and the US International Trade Commission will raise and lower import taxes on particular goods to give domestic producers an edge over foreign imports. To exert political pressure, certain countries may be assigned a higher duty rate on their exports or may be embargoed (locked out) to prevent trade.

The primary criteria for import tariffs and taxes are:

• Country of origin
• Commodity type
• Intended use

and are determined using the US Harmonized Tariff Schedule, a yearly publication listing duty rates for a wide variety of import commodities. The USHTS also includes procedures and guidelines for determining import tax rates.

This question came in response to the post entitled What is a Foreign Trade Zone?

Sandra asks

This customs thing is very confusing to me, but I keep reading more and more to try to understand.I am going to be very up front. I like to sell mirror image designer handbags like LOTS of other people do.I just do’t understand how they get shipments thru customs without getting caught. But this letter may explain some of it. Can anyone put imports in a FTZ warehouse? How does that work?

My response

If you’re trying to sell knock-off purses that infringe on someone else’s trademark, then your shipments are probably going to get seized by Customs. One of the duties of the CBP is to protect against counterfeit goods and an FTZ is not a way around that. An FTZ is more of a quarantined holding area for special case shipments. The goods are allowed into the special US warehouse where you can work with them to some degree, but the are not allowed into the commerce of the United States (aka sold in the US) until they pass through the Customs process.

I can’t tell you 100% where the bags you see people selling are coming from, but I imagine that they either slip by Customs, are smuggled in, or are different enough from the trademark holder that they are allowed in.

A foreign trade zone is a warehouse on US soil that acts like limbo for imported goods. If you have something that can’t come into the country, is just stopping off before being shipped to another country, or needs to operate outside of standard Customs procedures, a Foreign Trade Zone (FTZ) might be the way to go.

Example: I worked with a customer one time importing textiles (T-shirts) from China for sale in the US. As many textile importers will tell you, there is an import quota on Chinese textiles that caps the total amount they’re allowed to import into the US each year. Unfortunately, this importer’s agent failed to advise his customer that his category’s quota for the year had been filled. The end result was 50,000 embroidered T-shirts held at the port of Long Beach California that could not be cleared through Customs.

As you can probably guess, the solution I recommended was a Foreign Trade Zone. By warehousing the goods in an FTZ on US soil, the importer was able to avoid shipping his goods back to China (and all the costs that would incur) and was first in line when quota was re-opened the following year.

Not a totally pleasant experience for the importer, but a lot worse than the alternative!

Paying Duty: The importer is ultimately responsible for paying any duty owed on an import. Determining duty can be very complicated, and while shipping services will often give an estimate for what the duty rate on an item might be, only Customs can make a final determination about what is owed. You should not be misled into thinking your purchase price includes duty because the seller cannot say with absolute certainty what the duty will be. As a rule, a purchase price that includes shipping and handling does not include duty or any costs associated with clearing the goods through Customs. First time importers are often surprised by bills they receive for duty, U.S. Customs merchandise processing fee, and something referred to as “customs fees,” which are actually charges for the services of the broker who cleared your goods through Customs.

How you pay duty depends on how your goods were shipped. If your goods were shipped through the International Postal Service, you will need to pay the mail carrier and/or go to your local post office to pay any duty and processing fees owed when your package arrives at that post office. If your goods were sent by a courier service, that service will either bill you for the duty they paid on your behalf or require payment on delivery.

If your goods were sent by freight, there are two possible scenarios for paying duty.

• If no arrangements were made to forward the goods to your door, you will need to either clear them through Customs yourself, in which case you will pay duty directly to Customs at the port where your goods arrived. Alternatively, you will need to arrange for a broker to clear your goods. If you hire a broker, they will bill you for their services and any duty they paid on your behalf.
• If arrangements were made to forward your goods to you, you will be billed for any duty owed, and for the services of the broker who cleared them through Customs.

Reminder: Customs holds the importer - YOU - liable for the payment of duty not the seller.

Question

I am interested in importing single samples of furniture from Bulgaria as showroom pieces. Each piece is valued at 90-150 Euros and I would like to find out the approximate import tax. The pieces are not for resale.

Answer

Importing samples into the United States allows companies to receive example goods from overseas and choose from multiple vendors before committing to larger import quantities. It’s a common practice and an excellent method for determining quality, transit times, and estimating a budget.

When importing a sample shipment, keep the following in mind

Sample goods are classified under chapter 98 of the US Harmonized Tariff Schedule, a chapter designated for specialty import provisions. Most imported samples are classified under HTS number 9811.00.60. Samples classified in this way must not be valued over USD $1 or must be permanently marked, torn, perforated, or otherwise mutilated so that they are not suitable as a saleable item.

Example sample mutilations and markings

• Drilling a one inch hole into the bottom of a tennis shoe would make it unsuitable for sale and would allow it to be imported as a sample.
• Indelibly marking by carving or etching a surface of a piece of wooden furniture where it would be conspicuous and in plain sight with the words “Sample: Not for resale” would meet the marking requirements of classification 9811.00.60.
• Including a permanent tag, sewn in a conspicuous place, with the words “Sample: Not for resale” on cushions and upholstered furniture would meet the sample marking requirements.

Duty

Sample imports classified under HTS classification 9811.00.60 and meeting the above requirements for marking are free of duty from any country of import.

Please note: This article is intended for informational purposes only and is not specific legal advice. As an importer, it is your responsibility to meet all the legal requirements for importing goods.

Question

A US company wants to outsource software development to India. Will the US company have to pay import duties on the software? If so, what is the tax or range?

Answer

Electronic transmission and data exchange have evolved at an alarming rate in the last ten years. Mulit-million dollar projects are outsourced and completed overseas with the final result often delivered simply by email or FTP. The US International Trade Commission addresses the import of data in a some what archaic manner by exempting electronic tele-communications under General Note 16(b) of the HTSUS. Data imported in a physical form (on CD or diskette), however, is dutiable under the classification of the physical media itself. It is important to realize that value of the data contained in physical media may directly influence the value of the media itself. An importer importing a $0.50 cent compact disc containing a $30,000 software bundle may be liable for paying import duties as a percentage of the $30,000.

Importers considering outsourced software projects should also note that imports and exports of cryptographic hardware and software are regulated by the Bureau of Industry and Security.

Please note: This article is intended for informational purposes only and is not specific legal advice. As

Question

My friend and I would like to purchase fashion jewelry and fashion accessories, such as: belts, earrings, bracelets, necklaces, watches, etc. from countries outside of the U.S. and then sell them on e-bay or our own website. We have a sellers permit in California. Do we need any other kind of license and/or permit if we purchase goods outside of the U.S. and sell them in the U.S.? Also, how do the taxes work on those items?

Answer

Most fashion accessories with the exception of those made from textiles (cloth or clothing items) will be free from any additional licensing or import requirements of other government agencies, so your main obstacle will be US Customs - filing the proper paperwork, paying import duties, etc. This is assuming you are importing items from a country that maintains normal trade relations with the United States. Importing will be very difficult if your product is manufactured in Cuba or North Korea because they do not enjoy normal trade with the US.

Sources

There are large export markets for fashion accessories in both China and India. I would recommend dealing with Chinese markets for non-textile related goods and India for textiles. China currently has some quota restrictions with regard to the import of textiles whereas India does not. It might be also be easier to find an English speaking vendor in India.

Import Taxes and Valuation

When you import any good into the United States, you are required to pay an import duty (also called an import tax). Some goods have a duty rate of free while others can climb to over 20% of the value declared. The average duty rate in the US is between 3-5% of the value. The value of an import is typically considered the current US market rate for that good. For example, if you are going to sell a silver bracelet for $20 in your online store, you would declare its value to US Customs as $20 and pay duty based on that.

Because you plan on importing multiple items, I recommend becoming familiar with the US Harmonized Tariff Schedule. Each item you import must be assigned a ten digit classification number which will determine its rate of duty and eligibility for special trade programs. I’ve included a few sample classifications for your reference below.

Other Notes

Watches

You mention wanting to import watches which can be challenging without the proper research. Instead of having one classification number per item type, watches (even if they are assembled) are imported with multiple classifications per piece (one for the band, the crystal, the movement mechanism, etc.) and declared separately.

Before you commit

Once your vendors are established and you are ready to import, take several precautions before you send payment overseas:

• Ask for samples of the item you intend to import to verify quality.
• Make sure you have considered transportation costs when negotiating your final price.
  • Who will be paying for the goods to leave the country?
  • Who pays for the air/ocean freight to get it to the United States?
  • Who pays for the transportation from the airport/oceanport to your place of business?
  • What about insurance?
• Take a moment to research incoterms and do not be shy about discussing it with your vendor.

Sample classifications:

Please note: This article is intended for informational purposes only and is not specific legal advice. As an importer, it is your responsibility to meet all the legal requirements for importing goods.

Information and materials downloaded from the Internet are not subject to duty. This applies to any goods or merchandise that are electronically transmitted to the purchaser, such as CDs, books, or posters. However, the unauthorized downloading of copyrighted items could subject you to prosecution. Downloading child pornography is also a crime. U.S. Customs Service has the authority to investigate and prosecute persons involved in this and other illegal activities.