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Import 101 - Chapter 2/7: Country of Origin & Regulations

In the previous post, we suggested some key questions that should be considered when you plan to import goods to the US. The most important takeaway is this: whatever you are going to import, it has to be something you are passionate about. Why would you bother with importing something if you aren’t passionate about it in the first place?

Have you decided what you are going to import? If yes, even if you are not sure – this post and the next one will provide you with some more food for thought.

Country of Origin:

Once decided on the merchandise you are going to import, think about from which country you will source it from. Consider its labor cost, manufacturing cost, and its exchange rate with the US. As a small or medium business, it is likely that the merchandise you are importing is manufactured products compared to raw material or natural resource; there are more countries where such products are available for you to choose from as well.

Many countries have trade agreements with the US (e.g. Israel, Jordan, Singapore, and Chile), or they are members of duty free, or reduced-duty programs such as the Generalized System of Preferences (GSP), the General Agreement on Tariffs and Trade (GATT), the North America Free Trade Agreement, the African Growth and Opportunity Act, etc. This means it may be to your benefit (you’ll pay less) to import from one of these places. It all depends on which program the countries fall under. It never hurts to do a little extra research in hopes of finding the best country to source your product from! You can find names of more than 100 countries that are eligible for these programs in the Tariff Schedule website (HTS) – which is the primary resource to determine tariff classifications for goods imported into the US.

On the opposite side of the scale, there are some countries that are under embargo. Any trade activities with these countries are strictly controlled and monitored by the US government. Higher duties may be imposed on excessive importing from certain countries, unless you have approval from Department of the treasury. Imports from Iran, Myanmar, Sudan, and Syria are prohibited and will be immediately seized by US Customs and Border Protection (CBP). Similarly, imports from North Korea must be approved by the Office of Foreign Assets Control. If you’re not sure whether or not you should steer clear of a country, take some time to research the relationship.

Compliance with Regulations:

Your transaction should be in compliance with all the regulations in the country where the purchase takes place, as well as US regulations. Most countries have strict controls on their exports; i.e. with specialized products, you will either need to provide the supplier necessary documents so that they can obtain an export license; or you will need to check whether your supplier has the appropriate export visas for the items they are selling you (we mentioned this in our previous post).

In the US, liability falls on the importer - aka YOU. If there is a duty, penalty, charge, etc., it is the responsibility of the importer. Under the Customs Modernization Act, the importer is required to use “reasonable care” in determining the value, classification and admissibility of the merchandise. It won’t be enough to claim ignorance if something goes awry. Keep yourself up to date: review the full checklist for compliance here.

Connoisseurs of international trade, and even those with just a passing interest, have heard a lot about the Trans-Pacific Partnership (TPP) agreement which was signed by all participating countries in October of 2015. This partnership is a game changer for international trade.

In short, the TPP is a trade agreement among 12 Pacific Rim nations including Canada, the United States, Mexico, Peru, Chile, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia, and New Zealand. The TPP has been under negotiation for nearly seven years, and it was finally signed on October 5th, 2015. Some people consider it the most significant and most economically impactful trade deal in history.

The 12 nations in this agreement now control more than a quarter of all global trade – or approximately $10 trillion. Once the TPP takes effect, this figure could climb as high as 50%. If you plan to import merchandise to the US, there is a good chance that your products could originate from one of these countries. It’s likely that the TPP will soon have a great impact on the importing process.

The change is on its way, and most people will recognize it as a very good thing. Around 18,000 tariffs will be eliminated, customs procedures will be streamlined, and the world economy will be boosted by $233B. But because the TPP agreement it so young, you’ll want to keep your eye on its implementation throughout the next few months in order to learn more about its benefits, terms, and conditions.

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