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
- Consignee number(s)
- Country of origin
- HS subheading to six digits
The ocean carrier supplies the final two data elements:
- Vessel stow plan
- Container status messages
Simplifying Imports
Import management software helps 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.
- With import management software, companies can:
- 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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