The customs clearance process is vital to the successful execution of any cross-border trade transaction. While established businesses have dedicated departments and professionals to handle this complex process, small businesses and startups may find it difficult to deal with customs clearance.
Although the process for procuring import and export customs clearance is almost similar, importing involves an assessment of the merchandise, as well as, the payment of duties and import taxes. In this blog, we will focus on the customs clearance process while importing in the US.
Customs clearance is the process of preparing and submitting a specific set of documents required to obtain permission from relevant authorities to facilitate the import of goods. It is mandatory to avail import clearance before any consignment enters the country.
The following two steps can be taken to get import clearance:-
In the US, the Customs and Border Protection (CBP) facilitates the import clearance process.
In most cases, the customs clearance process is simple, and straightforward. Here are some steps you need to keep in mind when importing products in the US. These guidelines will ensure that your shipment arrives safely and legally without the CBP levying storage fees and other penalties :-
Making arrangements at a CBP port of entry:- The laws and regulations related to the import of goods/products are imposed at the CBP port of entry. Before you ship the goods to the US, you must make arrangements at the CBP port of entry where the consignment will arrive.
Declaring the entry of goods:- Goods may enter for warehouse at the port of arrival, or they may be transported in-bond to another port of entry under the same conditions as at the port of arrival. Arrangements and transporting the merchandise in-bond to an in-land port will be made by the Importer.
Filing cargo release:- The importer (owner/purchaser or a licensed customs broker assigned by the owner/purchaser) has 15 days to file for cargo release once the products arrive at the CBP port of entry and are declared. Goods are stored at a terminal till the time the cargo release is filed. There is a window of around two to five days, after which the storage service is chargeable. If the goods need to be delivered immediately, the importer must file the cargo release, pay the estimated duties, and fill the entry summary form along with the goods entry declaration form.
Filing entry summary form:- The CBP has a document called CBP form 7501 ‘Entry Summary’, which includes the importer’s declaration with regard to the classification, origin, and value of the imported merchandise. It is a crucial document that must be filed within 10 days of the cargo’s release from the CBP custody.
Paying duties:- You will also need to pay the estimated duties on imported goods. The important factor to keep in mind is that the final amount is subject to change upon liquidation (19 CFR 159). A refund is issued if excess payment is made than what is due.
Ensuring complete entry documentation:- You need to ensure that your entry documentation is legally filed and complete.
Here is a quick checklist to ensure the same:-
a) The shipment has arrived at the port of entry
b) The CBP has authorized the delivery of the merchandise
c) The estimated duties have been paid
De minimis level:- Before you ship products to the US, you must know the de minimis level. You are not required to undergo customs clearance for imports up to a certain value in dollar terms. In the US, this value is fixed at US$ 800. This is called the de minis level.
Harmonized Tariff Schedule (HTS) Code:- The HTS is a 10-digit description code allotted to every product. You must know the HTS code of the item you are importing to ease the customs clearance process. There are specific tools available to help you locate the HTS code for your items.
When importing goods, you need the following vital documents:-
We will explain each of these documents.
1) A commercial invoice provides itemized detail of each product ordered and the costs involved.
2) The packing list includes all the details about the contents of the shipment, information about the seller, buyer, and supplier. The packing list also has invoice numbers, and other details such as the shipment date, mode of transport, information about the carrier, type of packaging, quantity, net/gross weight of the goods, and seal/container numbers.
3) The certificate of origin mentions the country of origin of the product. It helps the authorities decide if the goods are eligible for import or if any special duties have to be levied or to ascertain if the products qualify for preferential treatment.
4) An LC is a letter from the bank stating that the seller will receive the amount due to him/her and on time. This is because if the buyer cannot pay due to some reasons, then the bank is obliged to make the payment and protect the seller.
5) A BOL is a legal document from the carrier to the shipper containing details about the type and quality of the goods and their destination. It works as a contract between the shipper and the freight carrier and is generally used when the goods are shipped by sea. When goods are shipped via air, this document is called an airway bill.
6) The official customs form is called CBP form 7501 ‘Entry Summary.’ You might feel overwhelmed looking at the complicated entries in this document. However, these are just basic elements of information needed by the customs clearance officials when the goods enter into the US.
The other documents you will have to produce to the customs authorities are as under:-
Copies of permits, certificates, memorandums, etc.
Cargo control documents for goods that require special permits. It is a unique ID provided by the freight forwarder and is affixed on the container to help customs officials track the consignment quickly and conveniently.__
The customs agent is responsible for ensuring smooth and hassle-free completion of the customs clearance process. This individual acts as a liaison between the company and customs authority and keeps the clients updated about the latest information/notifications regarding the consignment. The agent is also responsible for paying any applicable taxes and duties on behalf of the client.
The customs clearing agent plays a critical role in dealing with the customs authorities and ensuring a smooth passage of your goods. Filling out the complex paperwork is not an easy task. So, these agents can help fill the various forms and overcome any hurdles the consignment may run into by using their expertise and experience.
In many instances, a customs bond is necessary while importing from China. If your imports are valued at more than US$ 2500, the CBP mandates the use of a customs bond. It is an insurance policy that covers duties and taxes and ensures payment in all circumstances. A licensed customs broker can make your job easy if you are importing into the US from China. They will ensure that the goods cross the borders smoothly and arrive on time and work with you at every step of the customs clearance process.
If you are a first-time importer, you can follow the below-mentioned guidelines.
Licenses/permits – Do you need them? The CBP does not mandate importers to obtain a license or permit. However, some other agencies involved in the process may demand the same depending on the kind of goods you plan to import.
Work with a trusted and reputed supplier The importing process can be challenging for first-timers. Hence, choosing the right supplier will make things easier for you.
Hire a licensed customs agency By using the services of an experienced and professional customs agent, you won’t have to worry about your goods being stuck at the customs. The broker must be licensed by the CBP.
Peruse the US import regulations You must have an excellent knowledge of the regulations applicable to the type of goods you plan to import into the US. If you import goods that are not in compliance with the CBP rules, you can lose the entire consignment or be forced to pay hefty fines.
Hiring a customs broker having expertise in importing specific goods will help you comply with the CBP regulations.
It is impossible to provide a fixed time frame for customs clearance of your imported goods as there are many layers of probabilities and uncertainties. Assuming all the documents are in order and complete, the release may occur in as little as 24 hours. If there are incomplete documents or unanswered queries, the process may get delayed inordinately.
Your customs agent or the freight forwarder can provide status updates to you regularly as they will be in the loop t every step of the customs clearance process.
You will have to pay the customs clearance fee to your customs agency as a cost towards preparing and submitting the customs entry. Duties and taxes form the second component of your charges. They are calculated as a percentage of the value of the goods plus the cost of transportation. The charges will vary depending on the type of goods imported. If your consignment goes through a customs concentrated exam, you will have to pay additional charges towards the inspection.
If the consignment is sent on a DAP mode, the buyer will pay for the customs charges and all the other costs incurred during the customs clearance process.
When the goods arrive, the carrier must inform the importer so that they can initiate the customs clearance procedure. If you fail to clear the goods, the shipment may be moved to a warehouse, and the storage cost becomes the importer's liability. The goods are destroyed if no entry documentation is presented even after six months of the consignment landing in the country.
If the import shipment is being held up for reasons involving fraud or negligence, the US customs officials will levy heavy fines. The criminal penalty can go up to twice the value of goods. That is why it is essential to ensure that the paperwork is completed correctly. After all, the importer will be held responsible and accountable for the import and not the shipping company.
While there is no legal obligation for companies to hire a customs broker or agent to clear import, it is better to hire the services of an expert for many reasons. Firstly, customs agents know the clearance process inside-out as they deal with the procedure regularly. Secondly, they know how to handle potential hurdles and manage problems thanks to their rapport with the customs authorities. Lastly, using the services of such an experienced person is an excellent way to avoid mistakes and ensuring that delays do not occur or there are no additional costs and fines levied.