The Basics of Importing:Customs Documents and

ProceduresScott Alan Case, LCB

Vice President, Sales and Marketing

The Camelot Company

November 18, 2011

Customs Entry Processes and Procedures

• Show the process involved in moving goods to the U.S.A. and clearing Customs

• Detail the parties involved• Explain the mechanism of a Customs

clearance• Customs programs for importers• Advanced Manifest Rules

The Importing Process

The Importer

• The party who purchases goods for importation into a country and/or who stands responsible for the processing and correctness of the customs entry and payment of customs duty, if any.

Importer of Record vs. Ultimate Consignee

• Importer of record is responsible for the duties, taxes and fees associated with the import transaction.

• The ultimate consignee is the recipient of the goods and must be named.

• Why do we need this? September 11th

The Shipping Process

The Exporter

• In general, a person or company who sells or ships/delivers goods to a buyer or recipient in another country.

The Shipping Process

The Freight Forwarder

• A person or company which arranges for the transportation of goods as agent on behalf of a shipper.

The Shipping Process

The Customs Broker

• A person or firm who acts as an agent of an importer (and sometimes an exporter) for purposes of arranging customs clearance, payment (or refund) of duty, and/or in-bond transit or export of imported goods.

Customs and Border Protection

• Branch of government under the control of the Department of Homeland Security responsible for collecting, protecting and defending the revenue of the United States government and securing our borders while facilitating legitimate trade.

Customs Task:

• In addition to collecting, protecting and defending the revenue of the United States government, Customs also collects STATISTICS.

• As the gatekeeper for imports, Customs collects the trade statistics which the government uses in negotiations with foreign countries and to set tariff rates and quotas for imported merchandise.

Customs Task:

• Customs also must balance the importance of keeping trade flowing with keeping out illegal drugs and contraband, protecting trademarks and copyrights and preventing smuggling.

Customs therefore plays the roles of:

• Police officer• Historian• Gatekeeper

The Shipping Process

Power of Attorney

• A power of attorney is the document which allows a Customs broker to sign Customs forms on an importer’s behalf. These documents include entries, entry summaries, add slips, etc.

• A power of attorney can be formal or informal, but it does require the signature of an officer of the corporation who is authorized to legally bind the corporation.

• Brokers required to validate POA’s by Customs nowadays, expect more requests for supporting documentation.

Documents for Customs clearance:

Transport document (bill of lading, air waybill, truck pro)

Invoice Packing list Special documents if applicable

Invoice requires:

Description of goods that can be understood by an examining Customs officer

Quantity of goods shipped Cost per unit Total value Assists (if any)

Packing List requires:

How are the goods packed What is where Helps Customs in the event of an

examination to find what they want to look at

Participating Government Agencies

Fish & Wildlife (www.fws.gov) Food & Drug Administration (www.fda.gov) Department of Transportation (www.dot.gov) Environmental Protection Agency (www.epa.gov) Agriculture Department (www.aphis.gov) Consumer Product Safety Commission

(www.cpsc.gov)

Bond

• A guarantee for payment of duties and taxes, usually underwritten by a surety. There are two types of bonds. A continuous bond is good for one calendar year from the date of filing. A single transaction bond is for a single entry.

Surety

• An insurance company who will assume liability for non-payment of duties or penalties in the event an importer defaults to Customs or another government agency.

• It’s a parachute for Customs!

Continuous bond

• A continuous bond is good for one calendar year from the date of acceptance by Customs. This bond is written for ten percent of the anticipated Customs duties which will be paid in one calendar year, with a minimum amount of $50,000. This bond can also be used at any port of entry in the United States by a Customs broker holding a valid power of attorney.

• Is your bond sufficient?

Single entry bond

• A single entry bond is written on a per shipment basis and the amount of the bond varies based on the type of entry. – The bond for general merchandise is written for the

value of the goods, plus the duty. – For quota merchandise and merchandise subject to

other government agency approval, the bond is written for three times the value of the merchandise.

• Single entry bonds for ISF + entry can get expensive.

Cargo Insurance

• Do you have it? You might not get full recovery without it. Rates vary by mode of transport and commodity.

• Why you need it: carriers limit their liability.– Ocean (COGSA): $500/package– Trucker: $0.50/lb, $50/shipment maximum– Airline: 19 Special drawing rights (+/- $20/kg)

• Written for CIF + 10% to insure coverage for freight and goods. Optional duty coverage available.

• If importing high values per conveyance or shipment, check with insurer for vessel or shipment limitations.

Reviewing the invoice

• Broker reviews invoice to check description, values, currency and country of origin.

• Assists?• Special things

Classification

• The classification of imported merchandise is determined using the GRI’s, or General Rules of Interpretation.

1. The table of contents and indices are for guidance only. Classification is determined based on the terms of the headings and chapter notes.

2. An item is what it is first, and a part of something else second.

3. When two or more headings apply, the item is classified as whatever falls last in the tariff. (for example, sets).

Harmonized Tariff

Country of Origin

• Required for Customs• Used for a variety of reasons

– Duty Rate– Potential transshipment– Regulatory control– Admissibility

Manufacturer’s ID

ISO code of country First three letters of first name First three letters of second name First four numbers in street address First three letters in the name of the city A manufacturer’s ID CAN be different from the

country of origin.

Important Data Elements: Importer’s federal ID number Ultimate consignee ID number C-TPAT membership (and level, either certified

or validated) Tariff number Country of origin Manufacturer’s ID Carrier Security data on file (ISF, AMS, other targeting

history)

Entry / Immediate Delivery

The Clearance Process

CBP

Paperless Entry Entry Documents Required

Release Examine

Release Seize / Hold

Entry Summary

Entry summary MUST be paid within 10 working days from the

date of release Entry summary shows calculation of duties,

taxes and fees due to Customs• Failure to pay means penalty—around $100.00 • Surety pays if importer refused…then surety

subrogates• If broker is paid but does not pay Customs,

importer is liable for the duty a SECOND TIME.

Entry summary

Moral of the story? Pay Customs directly, either via ACH (Automated Clearinghouse) or send checks payable to Customs and Border Protection to the broker to attach to entry summaries.

Post-entry

• Liquidation– The final computation of duties and taxes by CBP

where they “agree” and move it to the cabinet.– Happens by statute 314 days from the date of entry.

• Importers should request liquidation reports from their brokers or sureties to make sure entries ARE liquidating.– Great way to see if CBP is snooping around is if your

entries aren’t liquidating automatically.

Post-entry continued

• What if something was done wrong?– Informal and quick way to get duty refunded is

through the filing of a Post-Entry Amendment (PEA) where a refund can be issued prior to liquidation.

– After liquidation, a protest must be filed. If the protest is late by one day, it’s lost.

– If the broker can’t write the check for the overpayment, consult a Customs attorney.

Entry Types:

• Consumption• Quota• Anti-dumping / Countervailing• Temporary Importation (manufacturing or

display / testing)• Carnet• Warehouse• Drawback

Duty Free Opportunities

• Tariff engineering• Selective country

sourcing• Preferential trade

programs

Trade Programs

• NAFTA• GSP (requires minimum 35% of regional value)• Free Trade Agreements (Panama, Korea,

Colombia)• African Growth and Opportunities Act (AGOA)• Regional discussions (Transpacific Partnership)

C-TPAT: Customs Trade Partnership Against Terrorism

• The goal of C-TPAT, as well as other Customs initiatives is to provide greater security and prevent the introduction of unauthorized material (including weapons of mass destruction) into the United States.

C-TPAT: Customs Trade Partnership Against Terrorism

• Participants– Carriers– Freight Forwarders– Customs Brokers– Importers– Truckers– Foreign Terminal Operators

C-TPAT: Customs Trade Partnership Against Terrorism

• Reasons to Participate–Better visibility with Customs–Quicker releases under the new

Automated Commercial Environment (ACE)

–Fewer incidences of examinations under ACE

– “Get out of jail free card”

Where To Go For Information

www.cbp.gov

Container Security Initiative

• Customs is also working to EXTEND America’s borders overseas to screen cargo at the origin before it has even arrived in the United States. Their goal is the Container Security Initiative (CSI).

• Now deployed at 53 overseas ports covering 86% of US-bound maritime containers.

• 150 CBP officers deployed.

Container Security Initiative

Facts about container imports into the USA:

• In FY 2009, U.S. Customs processed 6.3 million vessel entries, down from 7.3 million in FY 2008.

• The entered value of those goods was $692 billion, down 25% from the prior year.

• FY 2010 projections are for that amount to rebound to $752 billion.

FY 2009 Import Facts

• Total value of imports processed by CBP was a little more than $1.7 trillion, a 25% decrease from the year prior.

• 31% of imported goods were dutiable and represented $29.5 billion in revenue, a 15% decline from FY 2008.

• Customs processed 26 million entries. • China finally surpassed Canada as the top trading

partner of the United States in 2009 and will continue to increase its lead in 2010.

Another Tool:The 24-Hour Rule

• Called such because basic manifest level data must be transmitted to CBP twenty-four hours before a vessel is loaded at a foreign port destined for USA.

• Different time requirements for air, truck and rail.• If CBP issues “no-load” message at origin, CSI

kicks in and CBP officers, in conjunction with local law enforcement, screen the container either using intrusive or non-intrusive means.

And Customs’ Latest Targeting Tool…

X-ray device?

And Customs’ Latest Targeting Tool…

Dogs?

And Customs’ LatestTargeting Tool…

Dionne Warwick and the Psychic Friends Network?

• Data Elements “The ten”– Manufacturer’s name and address– Seller’s name and address– Container stuffing location– Consolidator’s name and address– Buyer’s name and address

Importer Security Filinga.k.a “10 + 2”

• Data Elements “The ten” con’t:– Ship to name and address– Importer of record ID number– Consignee ID number– Tariff number to six digits– Country of origin

Importer Security Filinga.k.a “10 + 2”

• CBP announced Simplified Entry Pilot for air. Ocean and truck to follow in 2012.– C-TPAT membership required.– Reduced number of data elements submitted at time of

entry.– Only certain types of entries will be allowed.

• Air cargo pilot in conjunction with TSA.– Last October’s incidents with packages from Yemen set it in

motion.– TSA working with integrators and airlines to get manifest

data to screen prior to departure from origin.– 10 + 2 for air? NOT happening, but working to get additional

data and expand the pilot to additional countries & participants.

Additional Security Pilots

“Miscellaneous”

• Carrier year in review (2011 and beyond).• Government sharing of import data.• Changes in Customs treatment of importers /

trends from counsel.• Antidumping / countervailing cases.• Living documents are your best defense in an

audit.• Read. Read. Read. Everything.

Customs Entry Processes and Procedures

• Show the process involved in moving goods to the U.S.A. and clearing Customs

• Detail the parties involved• Explain the mechanism of a Customs clearance• Customs programs for importers• Upcoming trade issues.

VACIS

PORT ELIZABETH

GAMMA RAY EMITTER

RAILS

RECEIVER TOWER

CONTROL BOOTH

Vehicle And Container Inspection System

THE WAY YOU SEE THEM

A 40 FOOT CONTAINER ON TRANSPORTER

THE WAY YOU SEE THEM

THE WAY WE SEE SOME OF THEM!

CARGO

CAB

CONTAINER

THE WAY YOU SEE CONTAINERS ON RAIL CARS

SOUTHERN BORDER OF THE U.S.

VACIS IMAGE OF HOPPER CAR

VACIS IMAGES OF VEHICLES CONTAINING CONTRABAND

Thank You

Scott Alan Case(847) 737-6963

s.case@camelotcompany.comTwitter: @camelotcompany