Ensuring Import Compliance
Companies moving products into the United States must not only develop expertise about U.S. Customs and Border Protection (CBP) regulations, but also make a continual effort to stay up to date on changes to the rules. Paul Rasmussen, CEO of Zepol, a Minnesota-based provider of international trade tools, offers these tips for ensuring customs compliance for your import shipments.
1. Get to know ACE. Scheduled for completion by December 2016, CBP's Automated Commercial Environment (ACE) will be the primary system through which the trade community reports imports and exports, and the government determines admissibility. Start using ACE features now to stay ahead of the game.
2. Understand the Harmonized Tariff Schedule (HTS). An HTS code is a 10-digit product code CBP assigns to every good based on its name, use, and materials used in its construction. These codes determine the tariff and duty rates for traded products.
3. Know your products inside and out—literally. Your product's composition can affect its HTS classification. For example, CBP might classify a rhinestone headband as "an article of glass rhinestones," with a duty rate of 6.6 percent, rather than "an accessory," which carries a 14.6-percent duty rate.
4. Choose the correct HTS code. Don't try to beat the system. Assigning an inappropriate classification code because its tariff and duty rates are lower could incur penalties of up to 48 percent of the goods' value.
5. Update your HTS classifications periodically. Some importers stick with a safe and accurate HTS classification long-term, but it pays to keep up with duty rate revisions. You could miss out on a lower duty or even a free trade agreement. And CBP modifies classification of products, so the code you chose two years ago may not be valid, or even exist, today.
6. Monitor quota levels. Determine whether your product is subject to an absolute quota, which limits the volume of a specific product that can be imported, or tariff-rate quota, which limits how much of the product can be imported at a lower duty rate. If there is a quota restriction, see how much of your product has already been imported for the quota's time period. Monitoring this level, and the fill rate, will help you plan future import volumes and save money.
7. Stay current on the rules. CBP publishes its classification rulings and clarifications based on importers' questions and petitions. Check these, as well as International Trade Administration letters and rulings, monthly.
8. Double-check your customs broker's classifications. Using customs brokers is a great option, but letting them classify your product without review is a bad idea. If a broker decides your product falls into one category, but the CBP decides it belongs in another, your company—not your broker—is liable for the misclassification.
9. Consider using a Foreign Trade Zone (FTZ). If your product isn't staying in the United States, or you are not officially importing now, you may benefit from using an FTZ—a specified trading area for storing products without clearing Customs and paying duties. You could store the goods and wait for quota levels to reopen, or even finish assembling the product, then pay the finished goods duty, which may be lower than the unfinished goods duty.
10. Consult with an expert. A trade law expert can provide invaluable advice and education.