Archive for the ‘US Customs’ Category


 

Why Do I Need an IRS Number When Importing Into the U.S.?

{This post was last updated on August 9, 2017}

You have made your sale, shipped the goods to the U.S. buyer, and the shipment is on its way to the border. And then, without warning, the goods get stopped at the port of entry, and the customs broker for this shipment requests an IRS number. At this point, you are likely wondering what an IRS number is and why it’s needed. To help you understand, let’s dive into this scenario a little deeper.

What is Internal Revenue Services (IRS) Tax Number and Why is it Required?

First off, all goods entering the U.S. from overseas are considered Imports and U.S. Customs and Border Protection (CBP) must approve all Imports for entry. CBP requires documentation which includes shipment details such as the identification of the Ultimate Consignee. An Ultimate Consignee is a person, party, or designee that is located in the U.S. and will receive the shipment (which is usually the buyer of the goods). An Internal Revenue Service (IRS) number, is used by CBP to identify the Ultimate Consignee.

There are two types of IRS numbers:

  1. Employer Identification Number (EIN): Issued to business entities
  2. Social Security Number (SSN): Issued to individuals

 

Without an IRS number, CBP does not know who the Ultimate Consignee is and therefore will not accept the shipment into the U.S.

U.S. Customs states the following.

 

(Source: CUSTOMS DIRECTIVE NO. 3550-079A )

 

Will One IRS Number Cover a Host of Different Goods Sold to One Consignee?

The IRS/EIN or SSN is specific to the Ultimate Consignee as the IRS issues these numbers directly to the company or individual. Therefore, if someone in the U.S. buys a host of products from you, you would declare the IRS number for that buyer on the entry declaration to U.S. Customs.

If you have more than one buyer, then it is best to make a declaration per transaction and declare the IRS number for each buyer in each transaction.

My Shipment DID Have an IRS Number. Why Was it Stopped?

If you run into this scenario, and your import documentation included an IRS number, it could be for one of two reasons. First, the Ultimate Consignee of the shipment had never purchased goods from a foreign party and therefore is not in U.S. Customs database.

Another likely culprit for this delay could be a deactivated account. Deactivation happens when more than a year has passed since the Ultimate Consignee last received an import.  

If the IRS number is not on file or has been deactivated by U.S. Customs, then it will need to be added to their database by filing a Customs Form 5106.

What is a Customs Form 5106?

A Customs Form 5106 is used by U.S. Customs to input the name, physical address, and IRS number of the Ultimate Consignee into their database.  The Customs Form 5106 must be on file for all consignees at the time of entry.

Is a 5106 Required for Every Shipment I Send to the U.S.?

U.S. Customs states that “An importer identification number shall remain on file until one year from the date on which it is last used on Customs Form 7501 or request for services.” This means that as long as the Ultimate Consignee continues to receive goods on a regular basis, this form will only have to be completed once.  If their 5106 importer record is not used for over a year, then they will have to reactivate their number.

How Can I Determine if the U.S. has a Customs Form 5106 on File for the Consignee/Buyer?

Your customs broker can query the Ultimate Consignee information with U.S. Customs and advise you if they have an active 5106 on file.   This is a simple, and proactive step that can save you a lot of hassle.

How Do I File a Customs Form 5106?

If a 5106 is not on file,  you need not worry as your customs broker can supply you with one. You can then ask your buyer to fill it out. One you have received it back from your buyer, you can provide it to your custom broker, who will then submit it to Customs. CBP will then add it to their database.

In summary, if you are selling to U.S. buyers from outside of the U.S. and you are responsible for declaring the goods at the port of entry, you must ensure your buyer has an IRS number. If they do not, work with your customs broker to get one. We are here to help!

 

 

What to learn more about importing into the U.S.?

Get a comprehensive understanding of the process involved with our webinar on U.S. Importing for Beginners [Part 1] (just so you know…it’s free!). Take your learning a step further by attending the U.S. Importing for Beginners [Part 2] webinar and delve into the details previously touched upon in part one of the series.

 

Do you have questions or comments regarding importing to the U.S.? Please leave them in our comments section below and I will be happy to provide an answer.

 

 

 

 

 

How U.S. Customs Determines Your Import Compliance Through Reasonable Care

Image: Best PracticeIf you are importing into the U.S., you will likely undergo a review by U.S. Customs and Border Protection. This review could be in the form of a regulatory audit, either a quick response audit, or focused assessment. During this time, Customs will review your transactions and procedures to determine your import compliance and see if you have exercised Reasonable Care, also known as, “Have you done enough to ensure import compliance?”

What is Reasonable Care

Because U.S. Customs expects that importers be knowledgeable and proactive in the conduct of their regulatory responsibilities, during  their review they will determine the degree in which you have tried to meet these regulations. This is referred to as Reasonable Care.

Example of Reasonable Care

There are some very specific areas that form an importer’s foundation of compliance.  While all as laid out in the U.S.Customs and Border Protection Informed Compliance Manual entitled Reasonable Care, we have briefly outlined a `short list`of specific areas below.

Areas in which importers must exercise reasonable care:

All Transactions

  • Use of external or internal experts
  • Review of all customs documentation, inclusive of entry declarations, for accuracy
  • Practice consistency in same or similar transactions across ports and modes of transport
  • Search for errors and make the appropriate adjustments or Prior Disclosures

Merchandise Description and Harmonized Tariff Classification

  • Having procedures in place to ensure that you are fully knowledgeable of the products you are importing including composition, country of origin, end use etc.
  • Describing the merchandise to Customs according to regulations in a detailed manner
  • Ensuring that you are providing the correct tariff classification of the goods
  • Verification of whether your goods are eligible for specific duty-free status

Valuation

  • Create procedures to ensure accuracy of your declared transaction value, per Customs regulations
  • Ensure that you are declaring the correct values to Customs for any transactions between “related” parties
  • Declare assists, commissions, royalties, etc.

Country of Origin / Marking / Quota

  • Create reliable procedures to ensure correct declaration of the country of origin on your entry
  • Mark all imported articles with the country of origin/manufacture
  • Establish documentation processes to determine and ensure that all necessary documentation at time of entry

Intellectual Property Rights

  • Ensure that you have the legal right to import trademark or copyright protected merchandise

Miscellaneous Questions

  • Ensure to file all Participating Government Agency filings, while using the correct type of entry

It is especially important to document all of the above actions, reviews and approvals thoroughly.

Example of a Lack of Reasonable Care

Now that we understand what Reasonable Car is and what ares of international trade it relates to, let us now look at an example of what not to do. Unfortunately, after an audit has revealed non-compliance, we occasionally hear comments such as “I thought I did everything I was supposed to,” or “My broker never told me to do that.”

In a recent ruling by the U.S. Court of International Trade, a company was found negligent in this area. The importer was unsure of the Tariff Classification for the goods they wanted to import into the U.S. While they did contact a Customs Broker, who provided them with three different classifications in 20 minutes, they took not further action to ensure the information they received was correct. The importer chose to use the classification with the lower rate of duty and conducted no further due diligence.

Mistakes like these can be seemingly ‘harmless’ however, can result in being deemed non-compliant.  In this case it was considered negligence not to use the many resources available to help with tariff classification.

Reasonable Care Resources

And now for the good news! There are so many resources available to you to help you towards your import compliance goals. And what is especially important is that knowledge of, access to and use of are considered part of exercising reasonable care.

  • Experienced third parties: lawyers, accountants, customs brokers and trade consultants
  • Government Resources: CROSS database of CBP rulings, H.S. Tariff schedule, informed compliance publications

Create Internal Processes

Another resource is to create an efficient and compliant import process which starts with everyone involved understanding their role and responsibilities. It is especially crucial that importers:

  • Understand their risks and responsibilities
  • Meet Reasonable Care standards with established processes, and
  • Ensure to monitor and enforce standards therefore safeguarding your continued privilege to import

It is important to note that without having the proper knowledge of the responsibilities of an importer, and ensuring that you are both in compliance and have evidence of your actions, you may be at a higher risk for:

  • Penalties
  • Liquidated damages
  • Various customs audits
  • Increased costs of doing international business
  • Supply-chain disruptions and delays
  • Losing your import privileges

On the other hand, being knowledgeable about the expectations and acting with the expected due diligence, while not guaranteeing that you are not subject to an audit, does assure that you are taking full advantage of allowable reductions in duty.

Why conduct an internal import compliance customs audit?

A thorough internal audit will help identify areas of risk while also helping to lay the foundation for your customs compliance plan.

In conclusion, we encourage you to conduct regular internal audits on your Customs transactions to ensure import compliance. Furthermore, use the Customs guidelines in developing your internal controls and standard operating procedures. 

Do you have questions about conducting an internal customs compliance audit? Leave a comment below.

What You Need to Know About the Section 321 De Minimis Value Entry

 

Section 321 De Minimis Value Entry

 

A de minimis shipment commonly referred to as Section 321, allows for goods valued at $800 USD or less, to enter duty-free into the U.S. Under this legislation they are also permitted to enter without formal entry. Therefore, this regulation is a great option for importers to save money and time.

Law previous to February 24, 2016, only allowed for a de minimis value of $200 or less.

Some goods may not qualify under Section 321 under the following circumstances.

Section 321 Restrictions

  • Goods needing inspection as a condition of release, regardless of value
  • Merchandise subject to Anti-Dumping / Countervailing duty (ADD/CVD)
  • Products regulated by the following Partner Government Agencies (PGAs),:
    • *Food and Drug Administration (FDA)
    • Food Safety Inspection Service (FSIS)
    • National Highway Transport and Safety Administration (NHTSA)
    • Consumer Product Safety Commission (CPSA)
    • United States Department of Agriculture (USDA)

*As of July 2017, the FDA has provided exemptions for this restriction for the following goods:

  • Cosmetics
  • Dinnerware
  • Radiation-emitting non-medical devices
  • Biological samples for laboratory testing
  • Food (excluding ackees, puffer fish, raw clams, raw oysters, raw mussels, and foods packed in airtight containers stored at room temperature)

 

Although the Section 321 option reduces the amount of paperwork required for low-value shipments, it creates a potential compliance pitfall.

Section 321 Daily Restriction

Especially relevant to importers is the daily restriction. As mentioned by authors Teresa M. Polino, Orisia K. Gammell and Julia L. Diaz in the Arent Fox LLP article Did You Know: The 2015 Trade Enforcement Act Can Save Importers Money?, “this increase applies to shipments of articles imported by one person (e.g., a company) on one day, other than in the case of articles sent as gifts from a person in foreign countries or in the case of articles accompanying and for the personal or household use of a person arriving in the U.S.”

 

As a result of this daily restriction, importers can only take advantage of the Section 321 benefit on one single transaction per day.

How to Declare Section 321

Goods valued at $800 USD or less can enter duty-free, without formal entry or eManifest into the U.S. Keep in mind that if entering with a shipment that does require an eManifest, the following steps will indicate to U.S. Customs and Border Protection (CBP) that a Section 321 is on board.

  1. Within the ACE eManifest select the shipment type ‘section 321.’
  2. Enter a shipment control number for the goods
  3. Include goods details including shipper, consignee, value, commodity, and country of origin.
  4. Submit the eManifest to U.S.CBP

 

In addition, the carrier will need to provide the section 321 goods details and paperwork to the border officer upon request.

Since it is not a formal entry, there will be no entry number provided by U.S. CBP for section 321 shipments.

Best Practices

In conclusion, ensure that your carrier is not making multiple Section 321 claims. Carriers may elect to make the Section 321 claim to expedite the clearance process. However, they may be unaware of whether the importer reached their daily allowance or not. To avoid  penalties as a result of multiple transactions per day, we recommended that importers regulate shipment filings in the following ways:

  • Identify the particular shipment the Section 321 claim will be used each day
  • Request creation of formal entries on all other entries
  • Use the services of one customs broker to ensure filing of import/export transactions are consistent
  • Build strong communication lines with the logistics team including carriers, freight forwarders, and customs brokers

 

Have questions or comments regarding this provision and how you can ensure that you are taking advantage of Section 321 within the compliance guidelines? Ask us comments section below.

 

5 Most Common Mistakes to Avoid When Importing into the U.S.

Image: 5 Most Common Mistakes to Avoid When Importing into the U.S.

In 2010, during one of our first U.S. Customs Compliance seminars, U.S. Customs and Border Protection (CBP) identified the 5 most common mistakes to avoid when importing into the U.S., and interestingly enough, these are STILL the most common mistakes today.

Whether you are a U.S. manufacturer sourcing from China, purchasing completed goods for immediate sale, or acting as the non-resident importer (NRI) into the U.S., understanding these common mistakes and how to avoid them could save you a lot of time and money.

Mistake #1: Not Determining Your Customs Tariff Codes Correctly

The Harmonized Tariff Schedule determines the correct duty rate for your imported products. It is the foundation for your import compliance. Using the wrong code can mean you are underpaying or overpaying customs duties and taxes.

There are many ways to determine your customs tariff codes, some more reliable than others:

Regardless of your method of determination, treat tariff classification like you would a medical condition. Rather than relying on a self-diagnosis obtained from the internet, some things are best left to the trained professionals!

Mistake #2: Misunderstanding Rules of Origin

There are standard rules of origin for all goods. When importing goods into a nation with which the U.S. has a trade agreement, such as the North American Free Trade Agreement (NAFTA), they may be eligible for reduced or eliminated duty. Something to note, however, the use of an FTA may result in additional rules of origin to qualify for preferential treatment.

NAFTA certificates list the originating nation of the goods and act as proof of the claim. You, as the importer of record (IOR), are responsible for the completeness and accuracy of the NAFTA certificate.

Ensure you are filling out NAFTA certificates correctly by taking our Free Trade Agreements and Rules of Origin seminar or NAFTA for Beginners webinar series.

Mistake #3: Incorrect and Incomplete Country of Origin Marking

Legibly and permanently mark you imported goods with their country of origin. The country of origin may not be the same as country of purchase. Reference the U.S. Customs Regulation (19 CFR 134) to ensure compliance regarding markings and “J” list exemptions.

Pay close attention when reusing boxes. All previous markings must be eliminated to ensure that the correct country of origin markings are the only ones visible.

Mistake #4: Misunderstanding U.S. Customs Valuation

Delare the proper value of the imported goods to customs. Ensure you also calculate any deductions or additions. Support these adjustments with proper documentation at the time of entry.

Determine your goods value by attending our Customs Valuation seminar or commissioning our Trade Advisors.

Mistake #5: Using a U.S. Goods Returned Declaration for Non-American Goods

If you are importing goods back into the U.S., you can declare them as U.S. Goods Returned (USGR) to eliminate the duty… unless it turns out that they are not U.S. goods!

Declaration of Free Entry of Returned American Products requires you to provide appropriate documentation that goods were manufactured in the U.S. Maintaining a close relationship with your U.S. vendors may be helpful when it comes time to request an affidavit of manufacture to avoid paying duties on U.S.-made goods.

Final Suggestions by CBP

  1. If you are in doubt of whether or not your good is NAFTA eligible, do not claim it as such, and ensure that your customs broker does the same.
  2. If, after the fact, you find that you have made a mistake or a ‘false statement,’ notify CBP as soon as possible to ensure that you do not get penalized.
  3. Talk to your customs broker about the steps needed to disclose the scope of a discovered discrepancy. Some discrepancies can be corrected very quickly while others require more effort.

CBP does not want to be an impediment to doing business with the U.S. Avoid these 5 most common mistakes when importing into the U.S. and enjoy import success.

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2017 Designation Maintenance Begins in our Professional Development Courses!

T if for Trade Compliance Education

A new year means a new start for most everything and this includes a reset to the maintenance requirements of your professional designations set forth by the credential’s governing body. We are well into the year now and our Professional Development Courses for fall 2017 are about to launch.

Whether you are a Canadian or U.S. Certified Customs Specialist (CCS), a Certified Trade Compliance Specialist (CTCS), a Certified Export Specialist (CES), a designate with the Law Society of British Columbia (LSBC) or accounting professional, taking any of Pacific Customs Brokers’ seminars and webinars will earn you maintenance points, credits and hours towards a variety professional designations.

Review and plan your maintenance for the second half of 2017 by clicking on the course’s name below:

(Fall registration opens at midnight on July 15, 2017)

  CSCB NEI LSBC
Webinar CCS CTCS CCS CES  
CDN Importing for Beginners Part 1
CDN Importing for Beginners Part 2
US Importing for Beginners Part 1 1
US Importing for Beginners Part 2 1
FDA Regulated Goods 2 2 1
CFIA Regulated Goods 2 2
NAFTA for Beginners Part 1 1 1
NAFTA for Beginners Part 2 1
 
Seminar
Shipping Perishables – NEW! 5 5 3 3
CDN Trade Compliance Part 1 5 5
CDN Trade Compliance Part 2 5 5 3
Exporting from Canada 5 5 3 3
US Trade Compliance Part 1 5 5 3
US Trade Compliance Part 2 5 5 3 3
HS Tariff Classification 5 6 4
Free Trade Agreements and Rules of Origin 5 5 5
Customs Valuation 5 3.5
CFIA 5 5
FDA 5 5 3
CTPAT 3 3 2 2

 

If you have never attended one of our Professional Development Courses before, the following information might help you decide on attending the next one.

Professional Development Courses – Webinars

Our webinars are designed to meet the demands of the global trade community. These live webinars are a convenient way for trade professionals to stay ahead of new regulations with international trade and gain additional knowledge in key areas. The benefits of attending an online course include:

  • Cost-effectiveness – More affordable than industry standards and some even offered complimentary
  • Global accessibility – Travel is removed from the equation for companies with multiple locations or branches
  • Convenience – Attend from the comfort of your desk
  • Concise training – In a fast-paced industry, efficiency becomes just as important as staying compliant
  • Industry recognized sessions – Earn points towards maintenance of your industry designations

Professional Development Courses – Seminars and Workshops

At these in-person sessions, you will learn the best practices on being compliant as an importer and/or exporter helping you expedite your commercial shipments rather than triggering costly delays. Our experts share their knowledge on international and cross-border shipping to keep you current with customs and participating government agency regulations.  The benefits of attending an in-person seminar or workshop include:

  • All day access – Get our experts to answer your questions one-on-one
  • Case studies and real-life examples – Examine other attendees’ trade compliance issues
  • Cost-effectiveness – More affordable than industry standards
  • Range of topics – Choose from a wide variety of seminar topics
  • Certificate of Completion – Receive a certificate for each course you attend
  • Handouts – Take home your own set of course material
  • Industry recognized sessions – Earn points towards maintenance of your industry designations
  • Networking – Connect with other like-minded professionals

For future reference, download your own 2017 Fall Trade Compliance Program today!