"It is about doing the right thing" - Choose the correct tariff code

After finishing the show Breaking Bad, I started to follow its derivative show Better Call Saul. Saul Goodman, formerly named as Jimmy McGill, is a small named attorney hustling to make a name for himself. He is "morally flexible", sometimes he will use tricks to benefit himself as long as it is legal. However, when facing some critical moments, he's said, "it is not about doing it quickly. It is about doing the right thing." I really recommend this show.

Back to today's topic, the principle of "doing the right thing" for the customs broker, is to provide as accurate and complete information as you can to U.S. Customs. Although making an entry with 50 lines seems a lot of work, if that is the way it's supposed to be, you have to do it anyway. If you happen to make short cuts and group all the items into 5 lines, the tactics might backfire at the end if and when the shipment gets examined. On the other side, the importer is the ultimate responsible party to provide accurate classifications as this is a "reasonable care" requirement of U.S. Customs Compliance. If you would like to save duties by misusing tariff codes, such non-compliance conduct can result in a substantial cost, both in back duties and penalties for the importer.

I have a real example here:

So this importer sells a large range of cleaning machines (like commercial level vacuums and cleaning machines) and its components and accessories. So he simply provides the broker one tariff code 84519000 for all its invoiced items. By definition from HTSUS book,

84519000

Drying chambers for the drying machines of subheading 8451.21 or 8451.29, and other parts of drying machines incorporating drying chambers

However, if we examine the commercial invoice and packing list, there are "accessories bags", "deep clean pads", " handy brushes", "battery" etc. These articles, although can be used in conjunction with a cleaning machine, but should not be classified as parts of any article. If the battery leaves the cleaning machine in question, it is still a battery. Apparently, the importer tried to play around the rules by claiming that battery, bag and all this and that item are just parts of the drying machines. This importer knows the bags has 17.6% duty while parts of machinery only have 3.5% duty. It makes a huge difference in the duty amount but it is not right to do so.

If you have doubt, please make sure you check with your broker whether it is okay to classify the goods to be part of the parent item or not. Actually there are classes of goods that can never be considered to be parts of a parent item. These are considered to be "Parts of General Use" defined in Note 2 to Section XV, HTSUS. These articles include springs, nails, screws, pipe fittings, etc. Under no circumstances can they be considered to be parts of any article, but must be classified under their own headings

One size CANNOT fit all.

In any case, if you feel that you don’t understand the meaning of a particular heading or subheading, there are several tools for you to utilize

The Customs Ruling Online Search System

https://rulings.cbp.gov/home

The Customs Ruling Online Search System (CROSS) is a very user-friendly system that allows you to search by keywords. You can either enter descriptive names for your article or if you want to see what customs has classified under a particular HTSUS number, put that number in and see rulings that have been issued classifying products under that number.

The Harmonized Tariff Schedule of the United States

https://www.usitc.gov/tata/hts/index.htm

This is the official and most updated listing of 10-digit product classifications for products imported into the United States.

You will find the six General Rules for the Interpretation of the Harmonized System (GRI’s), found on page one of the EN. These rules are also found at the beginning of the HTSUS. However, the EN has detailed explanatory notes on all the rules, so it is considerably more useful.

Remember if in doubt, contact your local American Lamprecht Transport Customs Broker.

U.S. Goods Return

One of my favorite stores is Costco because they have an incredibly great and free return policy. No questions asked, no BS, just take the product back for a refund within the allowed period. That easy and free return policy encourages me to spend more money with Costco than any other supermarket. Returning goods is mostly hassle free when it's being done through your local grocery store or shopping mall. Now let us talk how returning goods work when doing importation business with U.S. Customs Board of Protection. Returning goods back to the origin country where they are made after importing into the US is not so easy once they have been cleared to enter the Country. As an importer, it is important that all steps are followed and you do your homework to be sure all goes smooth and that the compliance guidelines are followed.

Here is a scenario: A Canadian company bought goods from a U.S. company several months ago. They received their shipment and the goods were refused by the buyer because they did not meet their product specifications. All the packages and products remain the same. The goods can be returned to the U.S manufacture. Is this duty-free U.S. Goods return? The answer is yes.

Per 19 CFR 10.1, the HTSUS code 9801.00.10 is a special classification used for the duty-free importation of “Products of the United States when returned [to the USA] after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.” The last two digits of 9801.00.10 classification vary.  They are based on the length of exportation or importation of the article or on the original HTSUS classification of the article

So, based on the scenario above, what if they Canadian company accepted the goods and a few months later they wanted to return them back to the US? They re-processed the goods and re-manufactured them into a more advanced product since they've had them. Would these same goods qualify as a US goods return? The answer is no.

CBP Form 311

When clearing returning U.S. goods through Customs and Border Protection (CBP), the importer should file the CBP form 311- declaration of Free Entry of American Goods Returned and hand back to your customs broker. Please make sure that your manufacture has never applied the manufacture drawback on the item. The official form can be found here

Manufacture's Affidavit

For formal entries valued more than 2500 USD, manufacture's affidavit is also needed to further prove the ownership of the goods. U.S. Customs requires the affidavit to be on the U.S. manufacturer's letterhead and it must be signed by a C-Level corporate officer from the U.S. manufacturers facility. A properly worded manufacture's affidavit that is complained of 19 CFR 10.1 can be requested from your local customs broker.

Foreign shipper's declaration of US Goods return

This is completed by foreign shipper who ships the goods to the United States. CBP requires a declaration by the foreign shipper indicating that the products were not advanced in value or condition while outside the U.S. The form also needs to be signed by a C-level corporate officer from the foreign shipper company.

Proof of U.S Export

Another document will be deemed sufficient proof of export from the U.S. for U.S.-manufactured goods or foreign-origin goods provided that the information contained therein proves an export: a copy of the entry into the foreign country, U.S. export invoice or bill of lading/airway bill, or Electronic Export Information or Automated Export System filing the exemption.

If you are ready to ship a U.S goods return product, we would highly suggest starting to prepare the needed docs before you ship out. It takes some time to get the corporate officers signature. And you certainly do not want your shipment to experience delays.

American Lamprecht Advisory: IMO 2020

We want to keep you updated of the new regulations impacting our entire industry as of 1st JAN, 2020.

What is It?

The International Maritime Organization (IMO) has ruled that from 1st JAN 2020, that they will put a cap on Sulphur emissions for the marine sector in international waters. The marine sector will have to reduce Sulphur emissions by over 80% by switching to lower Sulphur fuels or by installing scrubbers. The current maximum limit for fuel oil Sulphur of 3.5 weight percent (wt%) will fall to 0.5 wt%. That is the largest one-time regulation in transportation fuel ever undertaken.

Why is everyone talking about fuel?

The marine sector consumes about 3.8 million barrels of fuel per day, responsible for half of the global fuel oil demand. The cost difference between IMO compliant and non-complaint fuels is significant. Ship operators that now need to change to a different fuel type, will now compete for fuel directly with truckers, railroads and airlines.

Who will be affected by IMO 2020?

It is expected to be a disruptor for the entire maritime industry. However, the level of impact is expected to vary from region to region, based on ship size, fuel cost and carrier readiness. The impact should start to be felt from Q4 of 2019 onwards. It is expected to last for a few years, as the shipping sectors adapt to the new rule.

What does IMO 2020 mean for our mutual business?

Growing demand for the new fuel type is likely to result in increased prices. The ocean carriers are unable to absorb the increased cost, so it’s expected that such costs will be passed on to the cargo owners. Based on that, either ocean freight rates will increase, or a surcharge will be implemented to recover such cost increases.

Will there be uniformity in the fee structure?

We are expecting to see a highly diversified way of carriers passing this cost along to the maritime industry. Therefore we are also expecting that there will be differences in amounts that Shipco will be forced to pass along to our customers. For FCL it will be a similar structure of how we are charged by carriers. For LCL shipments, we will review our average utilization and break the fee down to a CBM or TON additional that then is added to the invoice.

For additional information, please feel free to contact your local American Lamprecht Team.

Tariffs on All Remaining Imports from China to Begin Sept 1 along with the exemptions with no grace period

President Trump has announced that beginning Sept. 1 he will impose a 10 percent additional tariff on virtually all of the remaining $300 billion worth of goods imported from China that are not already subject to Section 301 tariffs (List 4 goods).

Initial indications are that the 10 percent tariff, which would be in addition to any other applicable tariffs, will be applied on the entire list (See attached “USTR 301 Proposed List 4”) of 3,805 full and partial subheadings announced in May. The Office of the U.S. Trade Representative said at that time that this list covers all apparel, footwear, and manufactured textile products, among others, but excludes pharmaceuticals, certain pharmaceutical inputs, select medical goods, rare earth materials, and critical minerals. A Federal Register notice providing additional clarifying details is expected shortly.

Based on experience with List 3 goods, it is not expected that requests to exclude specific products from List 4 will be accepted while the tariff rate remains at 10 percent. If this rate is increased to 25 percent, which could happen if the administration deems it necessary to gain additional leverage in the ongoing U.S.-China trade talks, an exclusion process could be established.

The Office of the U.S. Trade Representative has issued a notice stating that the additional 10 percent tariff on List 4 imports from China will not be imposed on certain products that were removed for health, safety, national security, and other factors. A list of these products is available here. (See attached “USTR 301 Products Removed from List 4)
Additionally, the tariff will be delayed until Dec. 15 for products on List 4B. Those products are in the following tariff groups: cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.
For products on List 4A, the tariff will go into effect Sept. 1. USTR also intends to conduct an exclusion process for products subject to the tariff.
- USTR List 4A (effective Sept. 1, 2019)  (see attached “List 4A Effective Sept 1, 2019”)
- USTR List 4B (effective Dec. 15, 2019)  (see attached “List 4B Effective Dec 15, 2019”)

The following additional details concerning the Section 301 additional 10 percent tariff that will be imposed on List 4 goods imported from China have been made available by the Office of the U.S. Trade Representative.
- The tariff on List 4A goods (see attached “List 4A Effective Sept 1, 2019”) will be applicable to products entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on Sept. 1. Such goods must be entered under HTSUS 9903.88.15.
- List 4A includes HTSUS numbers for which China’s share of U.S. imports from the world is less than 75 percent.
- The tariff on List 4B goods (see attached “List 4B Effective Dec 15, 2019”) will be applicable to products entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on Dec. 15. Such goods must be entered under HTSUS 9903.88.16.
- List 4B includes HTSUS numbers for which China’s share of U.S. imports from the world is 75 percent or greater.
- 25 HTSUS numbers (See attached “USTR 301 Products Removed from List 4) proposed for inclusion on List 4 have been removed based on health, safety, national security, and other factors.
- Any List 4A or 4B product eligible for admission under domestic status that is subject to the 10 percent tariff and admitted into a U.S. foreign-trade zone on or after the effective date of that tariff may only be admitted as privileged foreign status.
- The 10 percent tariff does not apply to List 4A or List 4B goods for which entry is properly claimed under a provision of HTSUS Chapter 98, except for goods entered under HTSUS 9802.00.40, 9802.00.50, 9802.00.60, and 9802.00.80. For HTSUS 9802.00.40, 9802.00.50, and 9802.00.60, this tariff applies to the value of repairs, alterations, or processing performed abroad. For HTSUS 9802.00.80, the tariff applies to the value of the article less the cost or value of such products of the U.S.

Made in Vietnam or Made in China?

To get around the punitive tariff treatment, Vietnamese officials say China is intentionally mislabeling its products as "made in Vietnam".

"Dozens" of products have been identified, Hoang Thi Thuy, a Vietnamese Customs Department official, stated in Media, and goods like textiles, fishery products, agricultural products, steel, aluminum, and processed wooden products were most vulnerable to the fraud. "It will sabotage Vietnamese brands and products and it will also affect consumers. We could even get tariff retribution from other countries, and if that happens, it will hurt our economy," Foreign Minister Pham Binh Minh told the Vietnamese National Assembly last week.

Marking of the country of origin is super important in the importing It could be easy but it could be very complicated sometimes. For instance, phones and other electronics are tricky to have an origin country. You have a South Korean camera and RAM, a Japanese screen, a Taiwanese SOC, using Chinese PCB and miscellaneous electrical components (resistors, capacitors LED's, diodes, etc). All the components put together in Vietnam with American software on top. What is the country of origin? The thumbs of rule for determining the country of origin in 19 CFR Part 134.1

"If the article in question is not wholly manufactured, produced, or grown within a single country, then we must consider the source or origin of any component or material that is used in the manufacture, production, or assembly of the good, and whether the further work or material added to an article in a subsequent country effected a “substantial transformation” on that part, component or material, so as to render such other country the “country of origin” of the end product. "

***substantial transformation is a processing of foreign input result in an article with a new name, charter or use ***

.

Keep your financial transaction record and Country of Origin certificate

My current company has a coffee trading company importer client who sources coffee beans worldwide, particularly in GSP or Tariff preferred countries. Even importation document fully complained, the U.S custom still selects some shipment to the exam. One time they bring in coffee beans from Nicaragua in Central American and claim Dominican -Republic-Central America ( CAFTA-DR). The U.S custom sends a notice of action to request more information for this entry even it was admitted to the US 3 months ago. To properly trace back the growth in Nicaragua, the U.S Custom looks for affidavits from the growers of the product, as well as any affidavits from any middle-men (if a cartage company was used, etc.). In this case, a proof of payment transaction, such as check copy or wire transfer copy to manufacture, can be sufficient documentation to prove the product origin. Good that the importers keep the financial transaction record well. So the payment proof together with the country of origin certificate, they are well accepted by U.S custom.

The consequence of failure to mark COO

• CBP Officials may demand re-delivery and remarking to CBP custody at importer's cost even the shipment is released and admit to USA.
• Articals not properly marked will be subject to additional 10% of duties of final apprised value.
• CBP will issue liquidated damages to importers if the products cannot be redelivered
• Up to $5000 or 1 year imprisonment for any intentional removal, defacement, destruction or alteration of a marking of the country of origin.
• Increase the chance to exam importer;s subsequent shipment.

Country of origin marking is always one of the top focus in CBP checking list, particularly if the entry is related to Antidumping/Countervailing, quota/ Visa restriction, NAFTA, GSP, tariff preferential agreement, government procurement, etc. If any of these is being claimed, please make sure you have the certified country of origin ( the exporter can apply it from Chamber of Commerce), a properly formatted invoice with the country of origin word stuffing and consolidation parties that make sense to U.S Custom. The more completed information you can pass to your broker, the better chance you will have shipment clear in a timely manner.

Have questions? Let us chat!

By: Coco Yang / Licensed Customs Broker; ALTJFK Offices

HOW TO READ 7501 ENTRY SUMMARY TO FIND OUT HOW MUCH YOU PAY FOR DUTY, TAX AND OTHER FEES

I examine all my customs entries line by line. I question every line item that I am not familiarized before, to make sure I am not fooled by these acronyms.

Today I would like to show you some key elements you should pay attention to your 7501 entry summary for your the importation of each of your goods so you have a clear idea what duties and fees you are paying for.

You will first want to be navigated to the middle section where says 27- 28,29,30,31,32,33,34 ,35, 37,38,39,40. These sections give you a clear break down of the duties, taxes and miscellaneous fees.

Duty Payment

Harmonized Tariff Schedule of United States ( AKA: HTSUS ) number in section 29 is unified 10 digits number that determines your commodity goods duty rate. You can find the respective duty rate and calculated duty dollar amounts in section 33 and 34.

I suggest every importer should do some good research before placing international orders. Inaccurate tariff number misrepresentation can be very risky to your business. Either you overpay the duty payment that you could have avoided on you you short pay the duty payment and then when US Customs audit or liquidate your entry, you end up paying back the difference anyway plus any applicable interests and penalties.

Tips on saving duty payment : Duty rate is only based on dutiable invoiced value. In another word, not-dutiable charges including freight charges, insurance cost, booking fee, etc. If you pay the charge to the seller and it is not related to products, you should separate them in the invoice so that your broker can make proper non-dutiable payment deduction. Section 32 B CHGS means non-dutiable charges

Internal Revenue Taxes

If you import tobacco and liquor, you will find applicable Internal Revenue ( AKA I.R) tax rate in section 33 C and Internal Revenue tax dollar amount in section 34

Anti dumping or Countervailing Fee

Certain products such as in-shell pistachio nuts from Iran, Diphosphonic acid from China is subject to Antidumping. If your importing product is subject to AD/CD fee, you should think twice before you import because these fees are quite high. You can find AD/CV fee in section 33 B, AD/CV case number in section 29 B

Merchandise Processing Fee

Merchandise Processing Fee （ AKA: MPF), often neglected by us, is a mandatory fee charged by U.S Board of Protection to process the importation of your goods.

If your commodity worth USD 2500 or more, MPF formal entry fee is 0.3464% of your dutiable invoiced value or minimum 26.67$ whichever is higher OR 0.3464% of your dutiable invoiced value or maximum 508.7$ whichever is lower.

If your commodity worth less than USD 2500, MPF informal entry fee is a set fee and ranges from $2.00, $6.00 or $9.00 per shipment.

You will find MPF fee in the area beneath section 29.

Harbor Maintenance Fee

Harbor Maintenance Fee ( AKA: HMF), often neglected by us too, is a mandatory fee charged by U.S board of Protection for majority Ocean Cargo. It is deposited into Harbor Maintenance Trust fund, from which Congress may appropriate amounts to pay for harbor maintenance and development projects and related expenses. \

Regardless of your entry type, HMF is 0.125% of your dutiable invoiced value.

You will find HMF fee in the area beneath section 29

Other Fee

There are some other miscellaneous fees like cotton fees, sugar fee, beef fee, potato fee, pork fee, mushroom fee, etc. Check with your customs broker for the details. These fees will be listed in the area beneath section 29.

A 7501 entry summary is like a financial statement to outline the duty, taxes and miscellaneous fees that you are paying for. Next time when you get a bill from your broker, don't forget to always ask for your 7501 entry summary!

Domestic Transportation Talk

Diesel Fuel Prices

+0.3%$2.97 / gallon national average.

Jan 27 - Feb 12 - Even though arctic temperatures drove prices up in certain lanes last week, national average rates fell for vans, reefers and flatbeds. Demand, however, has not declined, as total freight volume was higher in January than in December. Last week load-to-truck ratios increased for all three equipment types.

A Troubled Landscape

There has been a definitive shift in liability exposures experienced by property brokers, freight forwarders and direct shippers over the last few years. For example, a domestic load involving serious injury or death used to be settled within the limits of a trucker’s auto policy. Additionally, a lawsuit may have followed against the carrier resulting in a judgment for the injured party. However, recent landmark settlements have involved not only the carrier but the transportation intermediary, customs broker and the shipper as well. Many of these cases have successfully obtained judgments in excess of $5,000,000 from the intermediaries involved. (source: Roanoke Trade)

Use the below information to help determine the best approach to selecting a trucking carrier for LTL, FTL and Drayage:

Verify the Carriers Authority

            Use the FMCSA website to verify the information provided by the carrier.

https://safer.fmcsa.dot.gov/CompanySnapshot.aspx

Each carrier must have a USDOT number and MC number. Request copy of their Authority. Enter number on website and verify that carrier is active and addresses match etc.

Verify Carrier Safety Rating

            Use the FMCSA website to verify safety data.

            https://ai.fmcsa.dot.gov/SMS/

This will give you a basic snapshot of carrier. Safety rating, number of trucks, types of violations, etc. Decide if carrier is good enough for Lamprecht freight and save docs. to show that you reviewed the information.

Verify Insurance

Request certificate of insurance from carrier showing American Lamprecht Transport, Inc. as certificate holder. Carrier should have $1,000,000 Liability minimum and $5,000,000 if HAZMAT. Most carriers only have $100,000 cargo. Some states require a workers comp. $500,000. General Liability is good, but most carriers do not have a policy.

Remember to tell your customers and friends about our Truck Freight Brokerage Service. Send quotes and requests to LGS@Lamprechtusa.com