US Customs Procedures Explained: What Importers Must Know

Trying to get your head around US customs regulations and procedures? Not sure what a Customs bond is, or when you should submit the Bill of Lading? Getting your cargo through customs is the final step importing process, and the stakes are high. Without complying with the established customs procedures and regulations, you may face very serious complications – including costly delays and refused entry of the shipment.

In order to straighten things out for our American readers, we got in touch with a real professional – Kathy Rinetti, Customs Manager of Flexport.com, based in San Francisco. In this article, Kathy explains what US importers must know about freight documents, customs bonds, port fees – and why you need a Customs broker. 

Kathy, please tell us a bit about yourself and your work prior to joining Flexport.com.

I bring over 20 years of international trade experience with emphasis on compliance and customs clearance. Prior to joining Flexport, I helped define the U.S. Customs classification logic for two leading international trade software companies. At Flexport I focus on combining compliance with customer service to make importing a painless process.

Flexport helps importers navigate shipping and importing using an innovative software solution. Clients are notified when documents are needed and of their shipments’ statuses every step of the way.

We can help you manufacture products in China, Vietnam & India?

• 1. Product design and material selection
• 2. Finding suppliers in Asia
• 3. Product samples and payments
• 4. Quality control, lab testing & shipping

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What documents must US importers prepare before the cargo arrives in the port of loading?

The documents that are required for entry depend on the shipment’s mode of transportation. For ocean shipments, importers will need:

• Commercial Invoice (provided by supplier or manufacturer)
• Bill of Lading (provided by the supplier or freight forwarder; learn more here)
• Importer Security Filing information (provided by the supplier)
• Arrival notice (provided by the freight forwarder)

For air shipments, importers will need:

• Commercial Invoice (provided by supplier or manufacturer)
• Airway Bill (provided freight forwarder)

Another document that isn’t mandatory but can be helpful is a packing list of the goods.

Also, prior to importing, importers will need to have a Customs bond on file prior to their shipment’s departure if their goods are valued over $2,500. If the value is less than that, then they can import under an informal entry and without a Customs bond, but this process would require them to manually submit paperwork. They can also import under a formal entry (with a Customs bond) even if their shipment value is less than $2,500.

You can obtain a Customs bond through most Customs brokerages, which typically have the ability to purchase bonds on your behalf through surety companies. There are two types – single entry and continuous entry Customs bonds. Single entry bonds are for a one-time use and continuous entry bonds cover all your shipments over the course of a year.

To get one, your Customs broker will request you to provide verification of your tax ID number and identity, in addition to having you sign a Power of Attorney to formally allow them to purchase a bond on your behalf.

How, and when, shall the importer submit these documents?

The importer should submit these documents to the customs broker of his or her choice. The time requirement differs between air and ocean. For air shipments, customs clearances can be filed at “wheels up,” prior to US arrival and after the plane has already taken off. For ocean shipments, customs entries can be filed up to five days prior to US arrival.

For either mode of transportation, documentation should be submitted to the broker as early as possible so that all preparations and clearances can be made in a timely fashion.

Once the broker has what is needed, the broker will then handle all notifications, filings, and submissions to the carrier and to Customs. They will also coordinate with the importer’s freight forwarder, who is responsible for the movement of the goods and arranging warehouse storage if applicable, to get the shipments released and ready for pickup or delivery to the final address.

Should the importer submit the documents directly to the US customs or let the freight forwarder handle this part?

Customs brokers are the ones who file entries and submit documents to Customs on behalf of the importer. Freight forwarders sometimes will have a broker on-site, but if not, they can usually refer broker partners to help with the entry.

In order for a broker to help an importer, the importer has to sign a power of attorney, authorizing the broker to clear the shipment on the importer’s behalf.

If the importer’s shipment is valued less than $2,500, he can file an informal entry directly with U.S. Customs (by hand, in person). However, since this is usually highly inconvenient, we recommend these goods still be cleared under a formal entry for a faster, smoother, and more efficient process.

The Bill of Lading, along with other freight documents, is usually issued by the Chinese suppliers. How can American importers ensure that the freight documents are accurate and match all requirements set by the US customs?

The Customs broker is key to this process. They will review all documentation prior to making the entry, and they will work with the importer to obtain any additional information necessary.

Do US importers need to obtain any license, or other document, before importing items?

A bond is required for all imports for Import Security Filings (ISF) and entries. The bond can be obtained from their customs broker. Continuous bonds cover general merchandise imports and ISFs for one year. The bond currently takes five days to be activated by Customs. The importer should apply for the bond prior to their goods’ departure.

Additional information may be required by Other Government Agencies (OGAs) depending on the product. Importers should check US requirements prior to exportation of goods. OGAs include, but are not limited to:

• FDA – Food & Drug Administration
• FCC – Federal Communications Commissions
• FWS – Fish & Wildlife Services
• DOT – Department of Transportation
• ATF – Alcohol, Tobacco and Firearms
• USDA – US Department of Agriculture
• CPSC – Consumer Product Safety Commission

The import duties are calculated based on the customs value. What costs are included in the customs value?

In most cases the value is the cost of the goods from the commercial invoice. This must be an accurate reflection of the cost of the goods and is reported along with the shipment during customs clearance, or the importer could face huge financial losses if Customs audits them and finds discrepancies.

Oftentimes, importers may overlook customs assists in their valuations. Customs assists are required to be added into the cost of the goods, because they added some sort of tangible value to the production of the goods. The assists’ values may not necessarily be on the commercial invoice, but they must be declared nonetheless.

Notice that sometimes commercial invoices include the cost of the freight as a separate line item. The value of the goods does not include the cost of shipping the goods.

If a US importer purchases tooling, such as injection molds, that remain in China, shall this cost still be included in the customs value?

Yes, the costs are dutiable. These are called Customs assists. The cost of tooling can be split over several shipments. It must be clearly noted on documentation.

Apart from customs duties, what other taxes and fees should US importers be aware of?

Merchandise Processing Fees apply to all air and ocean shipments and are based on value of goods. This fee is 0.3464% with a $25 minimum and a $485 maximum. Harbor Maintenance Fees are applicable on all ocean shipments. This fee is 0.125% of the value of the goods, with no minimum or maximum.

There are still quite a few other charges that could come up during the importing process. Some of the most common costs are listed here.

Is it viable for importers, based on the East Coast, to ship cargo to a the west coast and then have the cargo transported by truck or rail to the final destination?

Yes, it is viable but it is usually more cost effective to use the port closest to the final destination. In other words, importers on the East Coast will probably benefit from having shipments move directly to the port nearest them (on the East Coast) as opposed to trucking goods across the country. In general, however, importers can compare costs and transit times when requesting freight quotes and then determine which services best fit their needs.

We often receive requests from Non-US businesses looking to import from China, into the United States. However, as these businesses are non-US based, they have no Tax ID. Is it still possible for Non-US companies to import into the United States?

A foreign based company can apply for a Customs assigned number which will allow them to obtain a Customs bond and import into the U.S. Customs requires that a foreign importer designate an agent in the U.S. to act as their representative, whether it be a Customs broker or a U.S. based partner.

This number can be obtained by filling out a Customs Form 5106 and submitting it to Customs, or by having a Customs broker do it electronically on their behalf.

Once the company has a Customs assigned number, they will be able to obtain a Customs bond and import into the U.S. under that bond.

About Flexport

Backed by investors like Google Ventures and Bloomberg Beta, Flexport is a new kind of freight forwarder/customs broker that makes it easy to move your products around the world. Flexport coordinates every aspect of your shipment from supplier to final destination and forces air/ocean/trucking partners to compete on price to win your business.