International trading comes with numerous regulations. In this 3
Minute Explainer, we look at the basics of import management.
Governments around the world need to track goods coming into their
countries. Tracking import activity allows customs authorities to:
Determine whether or not a good is admissible
Assess duties and taxes
Collect trade statistics
Monitor controlled goods, such as narcotics, chemical weapons or
even endangered species
As a result, there are many regulations controlling the inbound
movement of goods. Poor processes can result in shipments getting
“stuck in Customs”, fines and penalties, or in some cases, shipments
being destroyed. Let’s take a look at the basics of import management.
Getting the Classification Correct
Companies engaged in global trade must properly classify their goods
with the correct commodity codes. Import and export management begins
with the classification of goods.
Almost all traded goods are classified with a six-digit code, called
a subheading. These subheadings come from the Harmonized Commodity
Description and Coding System — or Harmonized System (HS) — an
internationally recognized tariff classification system.
Almost every country in the world uses the HS. It gives customs
authorities a common way of classifying goods to track imports and
exports. No matter where a good is from, or where it is going, its
six-digit subheading will be the same.
However, the importing country may require more information than the
six-digit subheading. Countries can add extra digits to subheadings
for more granular information. For example, both the European Union
and the United States use ten-digit commodity codes.
Getting the classification correct is therefore crucial. If you
classify your goods incorrectly, you could be over- or underpaying
duties. You could also be missing out on lower or zero duties under a FTA.
Companies may never misclassify goods in order to pay less duties or
bypass other government regulations. To do this is to commit fraud.
Understanding Admissibility Requirements
Certain goods may be subject to admissibility requirements. For
example, certain goods may require certificates from government
agencies before they can be imported. Other goods may be subject to
anti-dumping and countervailing duties.
Classifying goods early on in the import process gives you advanced
visibility to these issues. Therefore, you can proactively address any
admissibility requirements before your goods arrive at a port of
entry. If you have not met all admissibility criteria, your goods are
likely to be held up in customs. This could also result in unexpected fees.
Where you buy your goods from can be almost as important as what the
goods are. Goods from certain countries may be subject to higher
tariffs. Conversely, goods from other countries may be eligible for
duty free entry under a free trade agreement.
Therefore, it is important to perform a competitive analysis between
potential suppliers and source countries beforehand.
The Customs Entry
Companies must provide authorities with a customs entry. Ideally, an
enterprise should do an internal pre-entry to check their data before
filing this with customs authorities. Companies can either file their
own customs entries or use a broker to do this on their behalf.
Importer Security Filing — 10+2
Companies importing goods into the United States via ocean carrier
must provide an Import Security Filing (ISF). The ISF is commonly
known as 10+2. This must be filed with Customs and Border Protection
(CBP) 24 hours before the goods are loaded onto the carrier. The
importer must supply these ten data elements:
Manufacturer (or supplier) name and address
Seller (or owner) name and address
Buyer (or owner) name and address
Ship-to name and address
Container stuffing location
Consolidator (stuffer) name and address
Importer of record number/foreign trade zone applicant ID
Country of origin
HS subheading to six digits
The ocean carrier supplies the final two data elements:
Vessel stow plan
Container status messages
management solutions help organizations to adhere to these laws.
Import management solutions can also help companies to reduce costs
and optimize their trade operations. As a result, companies using
best-in-class processes gain a competitive advantage.
Import management solutions can help companies to:
Achieve a consistent classification process for ongoing compliance
Gain advance visibility to goods that have special admissibility requirements
Perform competitive analysis between suppliers
Automatically screen suppliers and other supply chain partners
Determine eligibility for preferential duties under a free trade agreement
Comply with free trade agreement regulations
Automate supporting documentation production, including customs documentation
Enable electronic filing of customs documentation
Track import metrics and enable recordkeeping
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IMPORT CLASSIFICATION: 5 LESSONS LEARNED
MINUTE EXPLAINER: ALL ABOUT FOREIGN-TRADE ZONES (FTZS)
MANAGEMENT: THE IMPORTANCE OF CORRECT CLASSIFICATION