Countries impose heavy customs duties to protect their domestic market and generate additional revenue (often as foreign currency). Customs duties are also quite helpful for keeping tabs on the kind of products moving across the borders so no malpractices are involved.
If you are importing any product in the US for trade, you must file and make entries with the US Customs and Border Protection (CBP). But the process of imports itself is quite complex. There are so many regulations and compliance rules to deal with that it is easy to lose track of all the paperwork and documentation.
Furthermore, international trade laws are constantly evolving, so it can be hard to keep up even if you are an experienced businessperson or shipper. Here is a complete guide for you to understand US customs declaration and clearance.
Importance of Customs Declaration and Clearance in International Trade
Anyone involved in international trade would know how complicated the US customs declaration process can be. But no matter how daunting the task, you still need a proper declaration and clearance of goods.
Your imports must adhere to customs laws and procedures for streamlined business activity when importing products in the US.
When everything is streamlined, delays, penalties, or other trade hassles can also be easily avoided.
These procedures, or SOPS, regulate the flow of goods across the borders. These are designed in line with the country’s economic interests, so anyone bringing in products from other countries needs to adhere to the laws concerning international trade.
The customs declaration process is a crucial or core part of these procedures. It requires all importers to declare the type, value, and quantity of imported goods.
Failure to do so can lead to unnecessary delays, penalties, and even the banning of imports and the seizure of goods by law enforcement.
Customs Declaration Process
A customs declaration is a formal statement about the goods being imported. Custom declaration laws define how goods are classified and regulated. It includes all the details about their value, origin, and classification.
The primary purpose of customs declarations is to ensure the goods are assessed accurately for the purpose of taxation and duties. Accurate assessment is also necessary for trade regulations and keeps a smooth flow of goods across the US border.
In trade business, customs regulation gives the customs authority the needful information to evaluate the safety and legality of the goods. Established Custom Declaration Laws define how goods are classified and regulated.
They are also there to calculate the taxes and other applicable duties. You must thoroughly understand these procedures to ensure you comply with the rules and avoid any legal ambiguities and delays.
Following these procedures will also give you a competitive edge as you will know what to expect and will be better able to streamline your processes. With the complete requirements and documentation, there will be no penalties, delays, or supply chain issues.
Required Documents for Customs Declaration
Here is the list of the required documents for the customs declaration process:
- Commercial Invoice: The invoice lists all the imported goods and their value and quantity being imported.
- Bill of Lading/Airway Bill: The bill of lading is a legal document issued for the carrier. It is like an acknowledgment of cargo receipt for the shipment.
- Packing List: The packing list details all the contents of the packaging and the weight of the shipment. It’s basically for the customs official to verify the cargo.
- Import Licenses (if applicable): Import licenses are also required, if applicable, for the imported products. (Some products require specific licenses or permits to enter the US borders.)
Classification of Goods
Next, we have the classification of goods. This classification is done via a code or the Harmonized Tariff Schedule (HTS) codes.
The code facilitates trade by standardizing the goods into specific classifications so you can find the rate of applicable duty. However, you need an accurate description of the product for classification.
There on, the customs officer will calculate the total customs duty and taxes based on the country of origin HS code, the price of and types of goods, the weight, and freight value
Different products are assigned different HTS codes, simplifying the process, saving time, and allowing custom authorities to easily calculate the duty and applicable fees.
For example, if you are importing products from China, the goods will be subject to duties, which range from 7.5% to 25%.
Filing the Customs Declaration
All importers must file the customs declaration before bringing the goods across the US borders. This declaration must be filed in court or online as electronic filing.
Electronic filings are done via the Automated Commercial Environment (ACE), the central system for electronic filings. It streamlines the customs process and improves efficiency, reducing timelines and wastage.
However, a key element to remember is that all the documentation must be complete and accurate. Any incorrect classification or late filing can lead to penalties and unnecessary delays.
Customs Clearance Procedure
Let’s go through the customs clearance process step-by-step.
Step #1: Entry of Goods
The proper process for entering goods into a State depends on the kind of port and product being shipped.
There are two types of entries:
Formal Entry vs. Informal Entry
A formal entry is required for goods worth over $2,500. However, goods costing less than $2,500 require no formalities or very little documentation.
Therefore, all importers must notify customs simultaneously about the arrival of goods and submit all the necessary documents for processing.
Step #2: Customs Inspection
The US Customs follows a risk-based approach where the shipment for inspection is selected based on QA factors. These may include the type of product, its origin, the company, and the manufacturer or importer’s compliance history.
There are two basic types of examinations or inspections:
Intrusive Vs. Nonintrusive Inspection
The intrusive type involves a thorough physical inspection and exam that involves opening and unpacking the goods. An X-ray or scanner does the nonintrusive type without physically opening and unloading the shipment.
Step #3: Payment of Duties and Taxes
Of course, when shipping goods from another country, you have to pay certain duties and taxes. These are calculated based on the declared value and classification of the goods.
Other fees, such as harbor maintenance and merchandise processing, depend on the port of entry and the type of goods being shipped. Additionally, other fees may apply depending on the classification of your shipped products.
The duty usually falls on the shoulders of the importing individual or company as specified in the sales agreement per the Shipping INCOTERMS
Step #4: Release of Goods
Once the customs have verified that the goods and duties have been paid, the shipment is free for release.
This means that the importer can now access the goods as long as the documentation is complete and there are no issues with the inspection.
In case of delays due to incomplete documentation or inspection issues, the importer and exporter must ensure that all the paperwork is completed and corrected as needed.
They should also ensure responsive timelines or answer customs inquiries as soon as possible.
Special Considerations
Goods like certain agricultural products, firearms, or pharmaceuticals that are prohibited or require specific permits fall under ‘special consideration.’ All importers should be aware of these products and the restrictions that apply to them before attempting to import them.
This is necessary to avoid legal issues and the wastage of time and resources.
FTAs or Free Trade Agreements like NAFTA and USMCA also affect the amount of duty on imported goods.
The trade agreements are there to protect and often benefit the local manufacturers. If your imported goods meet the specific criteria and qualify for these product lists, you should know the additional duties or laws that apply.
Apart from these customs duties, there are also other aspects you need to know about when importing.
Carnet System
The carnet system allows a temporary import of goods without duties. The system usually applies to trade shows and exhibitions.
However, detailed documentation is required to return or export all the goods within an agreed-upon time frame.
Other duties, such as anti-dumping and countervailing, are also designed to protect the US economy from unfair trade practices.
Anti-dumping Duties
Anti-dumping duties are imposed on imported goods that are selling at a lower price than their regular or market price.
Dumping refers to the phenomenon of introducing imported goods into the local market at lower prices than their actual worth. This is very damaging to the local economy.
When the markets are dumped with products at lower cost, the demand for the locally produced ones obviously goes down.
Countervailing Duties
Countervailing duties are for those goods that are subject to government subsidies. A countervailing duty applies when someone attempts to sell a product at artificially low prices in the international market. This, too, can affect competition and the domestic industry.
However, these duties are only applied in special circumstances. They can only be applied after a thorough investigation by the US Department of Commerce and the International Trade Commission is complete.
Only once it is determined that goods have been dumped and unfair subsidies have been applied are these applicable.
Role of Customs Brokers
Custom brokers or licensed professionals are there to help businesses in imports. Whether it’s about dealing with the complex customs process in its entirety or ensuring compliance and minimizing delays, the customs brokers can help you out.
Custom brokers handle all the paperwork, calculate the duty, and manage the customs clearing process from beginning to end when the goods are handed over to the importer.
They also connect you with the best freight forwarders, like Gorto Freight, and make your job easy so you can focus on the other aspects of the business.
Gorto Freight offers end-to-end logistics services with tailored solutions to meet each individual client’s needs.
So those who are just entering the trade business and do not have prior knowledge of the customs laws and duties can sit back, relax, and let their brokers deal with everything.
However, you must ensure that you only work with an experienced and licensed professional with prior experience. Check for referrals and testimonials to save time and hassle, and always pick a custom broker willing to cooperate and open to communication.
Consequences of Non-Compliance
If there is any kind of non-compliance, the consequences can range from fines and penalties to seizure and forfeiture of goods.
At times, the importer has to forfeit the shipment to the government.
However, in such a case, you can file a petition for relief, and knowing the right broker or legal professional can definitely make things easier.
Best Practices for Smooth Customs Clearance
Here are some tips to ensure your custom clearance process goes smoothly without any ambiguities or problems.
Preparing accurate documentation
Ensure your documents are complete. Cross-check them before submitting them, check for mistakes, and rectify them before the final submission.
Maintaining good communication with customs authorities
Always stay connected and promptly respond to all inquiries to speed up the clearance process. Communicate well and openly with the customs authorities.
Use Electronic Filing
Compared to manual filing, use technology to your advantage. You can significantly reduce errors and delays with tools like ACE, which are available for electronic filing.
Wrap Up
The US custom declaration process is not very complicated as long as you understand the procedures and ensure the documentation is complete and in line with the regulations.
If you follow the right streamlined process and incorporate the help of customs brokers or other professionals, you can maneuver smoothly through the international seas.
This is why we have professionals like Gorto Freight, a company that provides complete shipping assistance, from acquiring goods to delivery to the final importing partner.
Contact us for all your shipping transit needs.
