How to Import into the US

When does the ISF have to be filed?

• Not later than 24 hours prior to loading of the shipment to the vessel at the foreign port of lading.

Does the effective date of Jan. 26th mean that any shipment which is departing from the origin port on or after Jan. 26th is required to have an ISF, or any shipment arriving in the USA after Jan. 26th?

• The regulation is effective for any shipment loading to vessel at the origin port on or after Jan. 26th.

Do I have to present my complete set of shipping documents to you for ISF filing at that time?

• No; the minimum required data elements can be provided, along with a commercial invoice (which should be available at the time of filing), on a simple cover sheet and faxed/emailed to the filing agent. Additionally, FgL’s ABI software provider is developing a spreadsheet for this purpose, which can be emailed to FgL for filing. Other brokers will likely have similar options available.

What should the importer provide in order to accomplish the ISF filing?

• The minimum required data elements can be provided, along with a commercial invoice (which should be available at the time of filing), on a simple cover sheet and faxed/emailed to the filing agent. Additionally, FgL’s ABI software provider is developing a spreadsheet for this purpose, which can be emailed to FgL for filing. Other brokers will likely have similar options available.

Is the party actually receiving the freight the only one responsible for this filing?

• NO! CBP has defined the responsible party as the “ISF Importer”. See the Assessment [PENDING] page for more on this.

Doesn’t Customs realize that this is not possible?

• No. CBP does, however, recognize that this entails, or may entail, changes in some business practices. For this reason, there is a 12 month phased in compliance period.

So who files this?

• A party meeting the requirements to file electronically can file on behalf of the ISF importer, or the ISF importer may self-file, provided they have the technological capability. This means being either ABI or AMS participants. The filer (aka agent) does NOT have to be a licensed US Customs broker ; it can be a freight forwarder or other interested party meeting the technological capabilities. A power of attorney is required in all cases where an agent is performing the actual filing.

Is this going to cost?

• Yes! See the Assessment [PENDING] page.

If Freightgator files the ISF, what’s the fee?

• See the Assessment [PENDING] page.

So do we need new powers of attorney for existing clients?

• No.

What impact does the ISF have on Customs clearance?

• None, provided that it has been done. For importers without a continuous bond in place, evidence of the filing will be required by FgL, if not done by FgL, so as to minimize the risk of punitive damages against the broker’s bond.

What is the impact on freight forwarders?

• The only significant impact is that the AMS filing party will receive a DO NOT LOAD message if there is no ISF matched against the AMS bill of lading prior to the 24 hour cutoff. Depending on the processes ultimately created by all parties involved, there could be missed sailings due to missing ISF’s against shipments in a consolidation container.

After the shipment arrives in the USA, does it clear Customs again, or is this ISF in lieu of clearance?

• The ISF is a security filing only, and is not the same as a clearance or release. Although the entry summary data can be filed in conjunction with the ISF, the customary entry/release procedures are unchanged.

How long does the ISF process take?

• As of this writing, any estimate is speculative. The actual, total time will depend on several factors, such as when the data is received, and its’ accuracy and completeness. In theory, the minimum turnaround time would be about 5 minutes, accounting for data entry and ABI transmission to CBP.

If the importer does not have a continuous bond, will a single entry bond suffice for ISF purposes?

• No. The importer must have a continuous entry bond in force, or the new ISF bond which CBP has authorized. However, at this time, no information is available from FgL’s sureties as to the availability & pricing of this bond. Alternately, the ISF filer may use its’ own bond (i.e. the broker’s bond). See Fees for information on pricing. NOTE: CBP has suspended the bond requirements for the duration of the flexible enforcement period, being Jan. 26th, 2009 through Jan. 25th, 2010.

Is freight which is merely transiting the USA (imported but then exported under inbond conditions (IE, T&E)) required to have a security filing?

• Yes; the primary difference between IE/T&E cargo and regular imports is that only five data elements are required. Please see the CBP presentation for a glimpse of this information.

If CBP is not issuing Do Not Load messages for failure to file timely, and is also not assessing penalties, what incentive does an importer have to file?

• CBP will be issuing “report cards” to filers & importers as the flexible enforcement period progresses. These reports will demonstrate, in an enforced compliance phase, whether or not parties are negligible in compliance improvement, and thus, whether or not penalties will be enforced during the initial enforcement phases.

Does the AMS bill of lading have to be filed before the ISF?

• NO! The ISF can be filed at any time, irrespective of the AMS status. The ISF filer is notified of the bill’s AMS status at the time of filing (either on file or not); if the bill is not on file, ABI will hold the ISF for 30 days.

Chinese trade practice typically has manufacturers exporting through licensed exporters, who in effect become the shipper/selling party. In this case, the actual manufacturer may not be known. How does this affect the ISF requirement to supply the information for the manufacturer?

• The current regulation allows for the use of the party currently required by existing rules for standard entry procedures. In short, this means that we can use the shipper/selling party as the manufacturer for ISF purposes.

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.

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.

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 better than the alternative!

Download Customs Form 7501 (.pdf)

US Customs Form 7501 is one of two essential forms required for an import transaction. Form 7501 details origin and importer information, but its main purpose is to act as a receipt for US Customs. Blocks 27 through 40 are used for an imported item’s Harmonized Tariff Classification, the amount and quantity imported, and the value of the goods. With this information, US Customs can confirm the total amount dutiable and request payment from the importer.

Save on import brokerage fees by downloading the US Harmonized Tariff Schedule and determining your product’s classification before you import.

The Harmonized Tariff Schedule is broken into two major parts: notes and classification.

The notes portion of the HTS comprises approximately one fourth to one fifth of the Tariff Schedule. It contains rules of classification, details on region-specific trade programs (NAFTA and the CBERA), recognized countries and abbreviations, and a list of recent changes to name a few. For purposes of this article we will focus primarily on the rules of classifications.

Reading the HTS: Chapters

The Harmonized Tariff Schedule is broken into 22 different sections which are further divided into chapters. A good rule to remember is that the tariff is categorized with the most highly processed and refined goods last. That means that raw products such as live animals, lumber, and agricultural products will be found near the front of the tariff while electronics, works of art, medical devices, etc. will be found at the back.

Reading the HTS: Notes

Each chapter of the HTS contains notes on classifying products within that chapter. It is very important to thoroughly review these chapter notes before continuing with the classification process. Often times, these notes will list specific articles that can or can not be classified within that chapter. The notes can contain lists of acceptable definitions, clarifications to chapter headings, and other important information

Reading the HTS: Headings and Subheadings

A Harmonized Tariff Classification is a 10 digit number used to identify a specific product. Here’s a sample from Chapter 82 of the HTS (TOOLS, IMPLEMENTS, CUTLERY, SPOONS AND FORKS, OF BASE METAL; PARTS THEREOF OF BASE METAL)

8201.10.00.00 is a handtool of a kind used in agriculture, horticulture or forestry; and more specifically and spade or shovel.

The first two digits (82) of this classification are a reference to the appropriate chapter. The first four digits combined (8201) comprise the article’s heading within that chapter, while the last six digits (10.00.00) break that heading down into subheadings.

In our example, this product is broken down in the following manner:

Chapter 82:TOOLS, IMPLEMENTS, CUTLERY, SPOONS AND FORKS, OF BASE METAL; PARTS THEREOF OF BASE METAL

Heading 8201: Handtools of the following kinds and base metal parts thereof: spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry

Subheading 8201.10.00.00: Spades and shovels, and parts thereof

Reading the HTS: Unit of Quantity

This is the US Customs acceptable measure of quantity for a product. This measurement must be reflected on your commercial invoice.

Reading the HTS: Rates of Duty.

The Rates of Duty Column determines the amount of duty you will have to pay on an imported product. Typically these rates of duty are expressed in a quantity/cost rate (e.g. $0.04/kg) or as a percentage of the value of the good (e.g. 2.5% of the value).

Notice that the Rate of Duty Column is divided into three interior columns. These columns are interpreted as follows:

General (aka Column 1): The typical rate of duty from the majority of the world’s countries.
Special: Special duty rates assigned to specific countries or import scenarios.
Column 2: The special rate of duty assigned to trade restricted countries. Cuba, North Korea, etc.

Save on import brokerage fees by downloading the US Harmonized Tariff Schedule and determining your product’s classification before you import.

General Rules of Interpretation

The General Rules of Interpretation (GRI’s) outline the method used to determine a product’s classification. They also address special scenarios wherein a final classification may be difficult to determine. The General Rules of Interpretation below have been taken verbatim from the HTS (current as of 11/1/04). Classification of goods in the tariff schedule shall be governed by the following principles:

1. The table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions:

2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.

3. When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.

5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and entered with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of rule 5(a) above, packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.

Final Note

This article is intended to provide a general understanding of the structure of the Harmonized Tariff Schedule and the method used to determine a product’s classification. By nature of an introductory article, it does not cover special and extenuating circumstances that often arise when determining a product’s final classification. The authors of this article recommend that you consult with a licensed Customs broker or member of the US Customs Service should there be any question as to the classification of your product. As the importer of record for your product, it is your responsibility to ensure that the classification presented to Customs for the import of your shipment is the most accurate and legitimate classification. It is important to understand the process of classifying your product because as the importer of record you can be held ultimately responsible for mistakes made in classification

Importers are expected to pay an import tax on virtually every item they import, but few know how much they owe until their shipments arrive in the US.

Many importers are overcharged by US Customs at the border because they did not purchase a copy of the US Harmonized Tariff Schedule and properly classify their imports.

Import taxes are based on the type of item you are importing and where it’s coming from.

How do I know how much I will owe for my imports?

Import taxes for every item imaginable can be determined using the United States Harmonized Tariff Schedule (HTSUS, USHTS, or HTS for short).

This exceptionally large book breaks down into categories virtually every product and commodity imported into the United States. Each line item contains a ten digit classification number, a product description, and a duty rate. Find your item and apply its rate to calculate what you will owe.

Do I have to classify my item?

Every item that comes into the US must be classified with the Harmonized Tariff Schedule. If you don’t classify your item, US Customs will charge you a fee to do it for you.

Before you let Customs classify your product, remember that import tariffs are the second largest source of revenue next to the IRS.

What are Import Taxes?

Import tax (also known as an import duty or import tariff) is collected by US Customs on every import that comes into the US.

Import taxes are a source of income for the US Government and are a way to restrict or facilitate the import of certain commodities.

There are three primary purposes behind the USHTS:

1. The US Harmonized Tariff Schedule is used to assess import duties and taxes on imports. The US Customs Service is the second largest source of revenue for the US Government, second only to the Internal Revenue Service.

2. The HTS is used to track import and export statistics for the US Department of Census. Each month hundreds of billions of dollars in goods and services are imported and exported from the United States. The Tariff Schedule is designed so that the Federal Government can effectively track the import and export of individual product groups into and out of the United States.

3. Lastly, the USHTS is a tool to enforce the United States political agenda. By raising and lowering duty rates and import restrictions from specific countries or around the world, the United States can exercise a certain amount of economic influence.

You can use the Tariff Schedule to calculate duties and taxes on imports. All imported products must be classified with the HTS before they will be allowed into the United States.

Question

What is OGA?

Answer

The term OGA refers to Other Government Agency. Part of the mission of US Customs is to regulate and apply duty to incoming shipments which will enter the commerce of the United States.

All imports are subject to the import requirements of US Customs, but some products face additional regulations from various other government agencies. It is the responsibility of US Customs to enforce the regulations imposed by other agencies at the port of entry. Examples of other government agencies include:

• FDA – the Food and Drug Administration which regulates food, drugs, and consumer/commercial products which may have an impact on the health of the user.
• BIS – the Bureau of Industry and Security which regulates the import and export of “dual-use” goods that have both civilian and military applications.
• EPA – the Environmental Protection Agency which regulates imports that may have an impact on the environment.
• DOT – the Department of Transportation which regulates the import of motor vehicles and other forms of transportation.
• PMDTC – the Office of Political Military Defense Trade Controls which regulates the import and export of products and technology that may impact the national security of the United States.

Question

What is AMS?

Answer

Automated Manifest System (AMS) The Automated Manifest System (AMS) is a multi-modular cargo inventory control and release notification system.

AMS interfaces directly with Customs Cargo Selectivity and In-Bond systems, and indirectly with ABI, allowing faster identification and release of low risk shipments. AMS speeds the flow of cargo and entry processing and provides participants with electronic authorization to move cargo release prior to arrival.

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.