While every shipment from outside the county must go through the customs clearance process, many international shippers still don’t understand exactly how it works. This part of getting cargo from point A to point B is probably the most delicate piece of the entire process.
Most companies do their customs clearance through a freight forwarder. The freight forwarder provides the service through the hiring of a licensed customs broker. The broker’s job is to prepare the required import documents and submit them to the Customs and Border Protection (CBP) office. During this process, the broker represents the company who owns the imported goods and provides advice, pays duties on the shipment, and makes sure the goods are released from customs.
So, there are 3 parties so far: the importer, the freight forwarder, and the customs broker. The forth party in this interaction is CBP (Customs and Border Protection) – a federal law enforcement agency. The duties of CBP are many. CBP exists with the objective of protecting the nation's revenue by assessing and collecting the duties, taxes, and fees connected to international traffic and trade. They also work on detecting fraudulent activities meant to avoid the payment of those fees, and to evade illegal traffic of arms, munitions, and acts of terrorism at ports of entry of the USA. Port officers also inspect cargo to protect the USA from potential carriers of animal and plant pests or diseases that could cause serious damage to America's crops, livestock, pets, and the environment
For a detailed listing of ports of entry, please refer to: http://www.cbp.gov/xp/cgov/toolbox/ports/.
It is part of CBP’s duties to ensure that your shipment is legal, and that all the fees and duties on it are paid.
Process for customs clearance
To describe the clearance process, we’ve distilled the most basic and important information found in the 211-page publication Importing Into the U.S. by the CBP. The publication is an extensive document that can be downloaded from the CBP website. For a more detailed explanation on the importing process and import requirements, please refer to the CBP website.
About the customs brokers: Customs brokers are the only persons who are authorized by the tariff laws of the United States to act as agents for importers in the transaction of their customs business. Customs brokers are private individuals or firms licensed by CBP to prepare and file the necessary customs entries, arrange for the payment of duties found due, take steps to effect the release of the goods in CBP custody, and otherwise represent their principals in customs matters. The fees charged for these services may vary according to the customs broker and the extent of services performed.
When a shipment reaches the United States, the importer (or customs broker) will file entry documents for the goods with the port director at the goods' port of entry. CBP Form 3461, also known as Customs Release form, needs to be filed to speed up the release of the goods.
Once the customs signs off on the shipment and releases it, the freight forwarder will have 10 days to file the Customs Entry, CBP Form 7501. They may also be transported in-bond to another port of entry and entered there under the same conditions as at the port of arrival. Imported goods are not legally entered until after the shipment has arrived within the port of entry, delivery of the merchandise has been authorized by CBP, and estimated duties have been paid.
For special commodities: The CBP enforces laws for many federal agencies, so in addition to contacting CBP, importers may contact officials at other agencies when questions arise about specific items. For example, questions about products regulated by the Food and Drug Administration should be forwarded to the nearest FDA district office, or to the Import Division, FDA Headquarters. The same is true for alcohol, tobacco, firearms, wildlife products (furs, skins, shells), motor vehicles, and other products and merchandise regulated by the different federal agencies.
In order to enter the US, shipments must have several documents such as:
- Purchase Order from Buyer
- Commercial Invoice of supplier
- Bill of Lading or Airway bill
- Packing List
- Certificate of Origin
- Any other specific documentation required by the importer
Surety: Goods’ entry must be accompanied by evidence that a bond has been posted with CBP to cover any potential duties, taxes, and charges that may accrue. Depending on how often the importer ships to the US, the importer can choose to acquire a bond on a yearly basis or every time he or she imports cargo. Some brokers may allow importers to use their bond to provide the required coverage, which saves the importer the cost of having to acquire his own bond.
Following presentation of the entry, the shipment can either be examined or examination may be waived. If no legal or regulations violations occur, the shipment is then released. Entry summary documentation is filed and estimated duties are deposited within 10 working days of the entry of the merchandise at a designated customhouse.
Option for Immediate Delivery: Carriers looking to speed things along often participate in the Automated Manifest System. These carries can receive conditional release authorizations after leaving the origin country and up to five days before landing in the United States. If the application is approved, the shipment will be released quickly after it arrives.
If your freight forwarder works with Automated Manifest System carriers, you could benefit greatly when you have an urgent import.
Entry For Warehouse
If for some reason the importer would like to postpone the release of their shipment, the cargo can be placed in a CBP bonded warehouse under a warehouse entry. The shipment can stay in the warehouse for five years from the importation date. During those years, the goods can be exported out of the country without paying the duty. Oppositely, they can also be released for consumption once the duty is paid (you will have to pay the rate assessed at the time of release). Goods that are destroyed by CBP are not assessed any duty.
Examination Of Goods And Entry Documents
Goods and documents must be examined to determine:
- How much the cargo is worth and the shipment’s dutiable status
- If the goods need to be specially marked (for example, with the country of origin) and if so, whether they are marked as required
- Whether the shipment contains prohibited articles
- Whether the goods are correctly invoiced
- Whether or not the amount of goods matches the invoice
- Whether the shipment contains illegal narcotics
Before the goods can be released, the port director will set aside parts of the shipment for examination by CBP officers in a way that does not damage the items. Certain items must be examined in order to ensure that they meet legal safety standards. For example, food and beverages that are unsafe to eat would not pass the examination due to standards set by the Food and Drug Administration.
Textiles and clothing are trade sensitive and considered a high-risk product for non-compliance with US standards and duties collection. Therefore, CBP pays special attention to this kind of shipment. Upon examination of a textile shipment, CBP may seize merchandise that isn’t listed on the invoice. At the very least there may be fines for omitting items from the invoice. The CBP officers will also impose a duty allowance if the shipment is found deficient. If goods entering the country are determined to have no commercial value because they are damaged, they’ll be marked as “nonimportation” and no duties will be assessed.
It is important that goods are packed and invoiced in a way that speeds up the examination – not only for your own benefit to speed up receiving the shipment but also because if invoiced incorrectly a CBP officer might have to do a full examination instead of just looking at the set-aside portion of the shipment. The invoice should clearly show how each package is marked and numbered, and specify how much of each item is in the clearly marked and numbered packages. If items of differing value are in one shipment and the CBP officer can’t determine how much of what is in each package without physically going through the shipment, you may be assessed the duties that are for the most valuable products – unless the shipper or their agent helps separate the items under CBP supervision.
Rates Of Duty and Classifications
The United States’ Harmonized Tariff Schedule sets the classification of all imported goods. Items will either be classified as subject to duty or duty-free. The rates of duty can differ for imports based on the county of origin.
The two most important aspects that affect duty status are classification and appraisal (if an item is subject to duty based on value). At the port of entry, special CBP officers or officials acting under the port director will review classifications, valuations, and other mandatory information in order to make sure goods are correctly classified and properly appraised for value. They’ll also make sure the merchandise actually matches what was identified in the shipment.
In many cases, the entry summary and documentation will be accepted without having to make any changes. In this situation, the shipment is marked as entered and liquidated. For most purposes, this is the point at which CBP’s determination of the rate and amount of duty is finalized. CBP will post a notice on a public bulletin board at the 82 customhouse once liquidation is complete.
CBP may also determine that an entry cannot be liquidated as entered. There are many reasons for this – such as incorrect tariff classifications. If the change benefits the importer because the assessed tariff was too high, the importer will get a refund once the entry is liquidated. The opposite can also happen and the importer may have to pay the difference. Once cleared for liquidation, duties and fees must be paid in order to release the cargo.
Because classification is so important to the process of customs clearance, it is vital to have a trustworthy, licensed customs broker. Freight forwarders usually work with the customs brokers that are reputable and experienced with classification responsibilities.
To ensure quick customs clearance, exporters abroad should:
- Provide your freight forwarder or customs broker as soon and as accurate as possible with the required information.
- Carefully prepare invoices in a clear manner, keeping enough space between lines and data in neat columns.
- Prepare invoices with detailed information as you would find on a packing list.
- Pay attention to marking and numbering each package for easy identification. Marked and numbered packages must correspond to your invoice.
- On your invoice, include detailed descriptions for the items contained in each package.
- Display the country of origin conspicuously, unless your goods are specifically exempt from this requirement. Display all markings clearly.
- Follow provisions of any law that could apply to your goods, such as those relating to consumables, drugs, radioactive materials, cosmetics, etc.
- Closely follow the invoicing, labeling, packing, and other instructions that US importer has sent.
- Work with your forwarder, customs broker and/or CBP to develop packing standards for your commodities.
- Ensure security protocols at your facility and during transportation of goods. Do not give narcotics smugglers the opportunity to introduce narcotics into your shipment.
- Consider shipping on a carrier participating in the Automated Manifest System (AMS).
- If you use a licensed customs broker for your transaction, consider using a firm that participates in the Automated Broker Interface (ABI).