As delightful as it was to know Leslie and crew, I’m happily headed home to hearth (and warmth) today, writing from the Vancouver airport which abounds in hospitality, free wi-fi and free luggage carts. Yeah free wi-fi and free luggage carts! For your reading pleasure today, we have a guest entry from Douglas Swope (Marguerite’s partner in work and life) who will be explaining how they went about importing their custom designed fabric from Bali. That isn’t something I’ve known much about so while I can’t speak for you, I’m grateful for Doug’s cheat sheet. Thanks Doug!
Almost 100 percent of the fabric Ivy Reed uses comes from Bali, Indonesia. Last fall it became apparent our domestic supplier would not be able to fill our orders with fabric in stock. The supplier only imports 4 times a year, and out-of-stock orders could take four months or more to fill. We needed to find a way to receive fabric in a timely manner. We arranged to place orders with our supplier, who forwards the order to the manufacturer, who then ships our fabric to our closest port of entry, Harrisburg, Pa. We expect it to take no more than 35 days from placing an order to arriving at customs (remember our fabric is being custom dyed, so much enter the factory’s production schedule). It is our responsibility to clear the fabric through customs.
Most imports enter the country through the services of import brokers who assume responsibility for clearing a shipment through customs. Import broker fees I spoke with for this service vary between $350 and $450. We expect the typical value of shipments to be $1,600, so the broker’s fees were prohibitive. We anticipate importing the same product from the same country and manufacturer for the foreseeable future so it made sense to learn how to do it for ourselves.
Using an import broker provides one important advantage not available to unlicensed importers. Unlicensed importers must personally appear at customs to claim a shipment. When a shipment clears customs through a licensed importer, Fed Ex, UPS, or anyone else, can claim the shipment, and save the time and expense of personally claiming the shipment.
The following details the procedures we used to clear customs without an import broker.
US customs is part of Customs and Border Protection, or CBP, which is an agency of the Department of Homeland Security. It is of interest to note the primary concerns of customs: collecting import duties (import duties are second only to income tax as a source of federal revenue), compiling import statistics, assuring controlled substances (pharmaceuticals, food, other) meet standards, and intercepting illegal items. Customs regulations are designed to accomplish these goals. Customs must not only facilitate the legitimate process of importing goods, but, by policy, accommodate inexperienced importers with the customs clearing process. From the agency’s “Importing into the United States, A Guide for Commercial Importers”, page 17, “U.S. CBP officers and employees are not authorized to act as agents for importers or forwarders of imported merchandise, although they may give all reasonable advice and assistance to inexperienced importers.” Customs agents can be more helpful if inexperienced importers familiarize themselves with the basics of import requirements.
All the relevant information is available on line. A first useful link is here. On the left hand side, under trade, is a link titled “Basic Importing and Exporting”, which leads to a page with “Importing into the United States”, where the previously mentioned “Importing into the United States, A Guide for Commercial Importers” is available for download. This 205 page document is invaluable, particularly chapters 2 through 5 dealing with the entry of goods.
Entry of Goods
Customs will notify the importer after the goods have arrived at the port of entry. The importer has 10 days to file the entry documents with the port director and take possession of the shipment before storage costs are assessed. Goods are legally entered after the shipment has arrived, delivery of goods is authorized by CBP (customs boarder patrol), and estimated duties paid.
For air freight entry documents typically consist of an Air Waybill (AWB), an invoice/packing list, and the country of origin documentation (COO), all provided by the manufacturer and/or shipper and attached to the shipment. The AWB, which identifies the consignee (importer), serves as evidence of right to make entry. The invoice/packing documents list the shipment content and value, which, based on the duty rate, determines the amount of duty owed. Incidentally, the value upon which import duty is calculated also includes the local shipping charges; the cost of transporting the shipment from the manufacturer to the local “port of export”. It is typically a small amount. In our shipment, those local charges were identified as “handling”, and billed at $4.80, and never assessed. The country of origin document indentifies the country from which the product is exported. The country of origin is the last country in which the product was “substantially altered”. The rayon fabric we import is manufactured in India. The manufacturer in Bali batiks and/or dyes the rayon. The original rayon is considered “substantially altered” by this process and so the country of origin is Indonesia. Copies of the AWB, invoice/packing list, and COO are typically sent directly to the consignee at the time of shipment by email or fax. Upon arrival at the port of entry by the final carrier, the consignee is contacted by phone and additional copies of the same entry documents are again forwarded to the consignee. These documents must be presented as part of the entry process.
The final entry document is form 7501, Customs and Border Protection entry summary form. This is the form with which the first time importer will need the most help. This document lists the Harmonized Tariff Schedule (HTS) number for each product type included in a shipment clearing customs (box number 29 on the form). Form 7501 is available here (pdf).
The HTS has a category for essentially every type of product produced on the planet. It is based upon the international Harmonized Commodity Description and Coding System and administered by the World Customs Organization in Brussels. The United States HTS consists of a 10 digit system designed to provide statistical reporting capability as well as identify the duty rate. The HTS number for the rayon fabric we import is 5516.12.0010.
This will give you details on the rayon fabric as specified in the HTS (pdf).
The first 8 digits, 5516.12.00, appear under the first column, Heading/Subheading, about ¾ down the document. The first two numbers, 55, identify the applicable chapter of the HTS, Man-made staple fibers. The second two numbers, 16, further define the item as “woven fabrics of artificial staple fibers: Containing 85% or more by weight of artificial staple fibers”. The next four numbers, 12.00, establish that the product is also dyed (batiked is not a subcategory). The final pair of the 10 digit HTS number, 10, in the second column, “Stat. Suffix”, establishes that this dyed, woven fabric containing 85% or more by weight of artificial staple fibers is of plain weave. The last three columns give the duty rate, depending on the country of origin. Column one has two sub columns, general and special. General gives the duty rate (14.9%) for general cases. Special gives the duty rate for specific countries. Column two lists the duty rate for exports from Cuba and North Korea.
Here is the web page for the United States International Trade Commission, Tariff Information Center. At the bottom of that page is a link to the entire Harmonized Tariff Schedule by chapter.
The first time importer is not expected to provide the appropriate HTS number, and a customs agent, typically an import specialist, will help with completing this form when the shipment is cleared for import. Thereafter, the information on the form will be applicable for any future shipments of the same commodity from the same country. However, the customs agent will need additional information to determine the correct HTS number. It was not sufficient that the rayon being imported was for clothing. Rayon can be made from “staple” or “filaments”. Filament rayon is in chapter 54, not 55. Likewise, after determining that the rayon was of Man-Made Staple Fibers, chapter 55, subcategories include synthetic Filament tow (5501), Artificial filament tow (5502), Synthetic staple fibers, not carded, combed or otherwise processed for spinning (5503), etc. Start the conversation with the import specialist well in advance of the arrival of the shipment.
Registering as an importer
Prior to the entry of goods, an importer must register as an importer of record. This is a simple document that establishes who the importer is, and is available here (pdf)
The AWB will identify the consignee, or importer, and this person or business must be registered as an importer of record. In completing the form, an individual acting as an importer must provide his or her social security number. A business must supply their employer identification number (EIN) provided by IRS, as well as proof of the EIN number. A copy of the document provided by IRS when issuing the EIN number served as proof. A copy of the importer of record will be sent to the importer.
Other Customs Information
The information above covers the basic elements of a simple case to clear goods through customs. There are other considerations such as a surety bond, an insurance policy customs requires valued at 3 times the duty rate (not the cost of the policy, only the face value of the policy) to guarantee the correct duty rate was paid. For shipments valued at less than $2,000, no surety bond is required. If the shipment arrives in the US at one location, but travels to another port of entry prior to clearing customs, a form 7512 is required as discussed in the “Importing to the United States…” document. This form is completed by CBP, not the importer. But, for imports as straight forward as importing one type of fabric, the information above should be sufficient to start a conversation with the customs agents for your shipment.
This link will lead to a list of all the United States’ ports of entry. Locate the port of entry you expect to use; there will be a phone number. That is the number to call to speak with the customs agents who will ultimately clear your shipment for import and the ones to whom you can ask specific questions.
Shipping is a separate topic. DHL and FedEx can ship, but were more expensive than the shipping company we used, Pacific Cargo Express, recommended by our fabric supplier. The overseas manufacturer may be able to recommend a shipper. The shipper’s role is limited to picking the shipment up from the manufacturer, arranging transportation to the final point of entry, and forwarding the necessary “entry of goods” documentation to the importer.
I hope this was helpful. If you have any further questions, post here or send me a message (Douglas Swope) in the forum.