What is Import clearance?
Import clearance is the process of getting permission from customs authorities to bring goods into a country from abroad. Import clearance involves paperwork, declaring the goods, paying any taxes or duties owed, and possibly inspection of the goods. Once everything is in order, the goods can be released and delivered to the importer.
Think of import clearance as the green light your goods need to enter a new country. It's a thorough check-up to ensure they comply with all the rules and regulations. Importing goods is like bringing them on a trip to a new country. Clearance is their customs check, making sure they follow the rules and pay any fees before entering.
Some Important Terminologies during Import Clearance:
CBP (Customs and Border Protection): It is the USA’s primary border control organization, charged with regulating and facilitating international trade, collecting import duties, as well as enforcing U.S. regulations, including trade, customs, and immigration. CBP is one of the largest law enforcement agencies in the United States.
CBP (U.S. Customs and Border Protection) forms are documents used by CBP to gather information about goods being imported into the United States. These forms help CBP officers assess duties, taxes, and other fees, as well as ensure compliance with U.S. laws and regulations.
HTS (Harmonized Tariff Schedule): The HTS is a standardized system used globally to classify traded products. It assigns a specific code to each product based on its composition, function, and other attributes. For importing goods into the U.S., importers use the HTS to determine the applicable tariffs, duties, and restrictions for their products.
Similar to how we have HSN codes in India, they are similar in that they both involve classification systems for goods. They serve the purpose of categorizing goods for taxation, customs, and trade purposes in their respective countries. However, they are designed to meet the specific needs and requirements of each country's taxation and trade regulations.
The first few digits of the HTS code typically represent the chapter or section of the classification system. In the United States, the HTS code is structured with 2-digit chapters, which are then subdivided into more specific 4, 6, or 8-digit codes.
PGA (Participating Government Agencies): various U.S. government departments and agencies have specific regulatory authority over certain types of imported goods. These agencies ensure that imported products comply with safety, health, environmental, and other regulatory standards. Examples would be Food and Drug Administration (FDA), Environmental Protection Agency (EPA), Consumer Product Safety Commission (CPSC), etc.
IOR (Importer On Record): The importer of record is the one who takes on the legal and financial responsibility for the imported goods. They are the point of contact for customs officials and are responsible for ensuring that all import regulations are met.
It's essentially the legal entity responsible for ensuring goods comply with the importing country's laws and regulations. Think of them as the "responsible adult" for the import process. They handle stuff like paperwork, duties, and taxes, and ultimately hold the legal responsibility for everything. So, if you're importing something, the IOR makes sure it happens smoothly and within the rules.
You can act as an Importer of Record (IOR) in two ways:
For shipments below $2500: No customs bond is required, so you can handle the import process yourself. Making you the IOR.
For shipments above $2500: You need a customs bond to become an IOR. If you don't have one, you can:
Obtain your bond: This involves upfront costs and ongoing maintenance.
Use a third-party IOR service: They will act as your IOR, handle customs clearance, and likely charge a fee for their services.
Essentially, the $2500 threshold determines whether you need a bond, and how you can act as the IOR depending on your bond status.
Customs Bond: A customs bond is like a financial security deposit you make when importing goods. It guarantees that you'll pay all the import duties, taxes, and fees owed to the government. Think of it as a safety net for the government in case you don't fulfill your obligations. It helps facilitate smooth trade by allowing you to clear your goods quickly while protecting the government from any potential losses. Typically, customs bonds are required for shipments valued over $2,500 or for certain regulated goods like food items.
POA (Power of Attorney): It is a legal document that allows an importer to authorize a customs broker or other designated representative to act on their behalf in customs matters. A signed POA is necessary to clear your goods through US Customs.
CAN (Customs Assigned Number): A customs-assigned number, often called a CAN, acts as a unique identifier for importers who don't have a US Social Security Number (SSN) or Employer Identification Number (EIN). This applies mainly to foreign businesses or individuals importing into the US. It functions similarly to an SSN or EIN, allowing you to track your import history, pay duties, and complete necessary paperwork. You can choose to keep using the CAIN even if you later acquire an SSN.
Duty Summary: A duty summary, also known as Customs Form 7501, is a crucial document in US import clearance. It acts as a formal declaration of your imported goods, detailing their classification, value, and applicable duties and taxes. Here's a breakdown:
Classification: You identify your goods using Harmonized Tariff Schedule (HTS) codes, which determine the duty rate. As mentioned above.
Value: Declare the transaction value (usually invoice price + freight & insurance) of your goods.
Duties & Taxes: The summary calculates the amount of duty, merchandise processing fee, and any applicable internal taxes based on the classification and value.
ABI Notes (Automated Broker Interface): The Automated Broker Interface (ABI) is a system that allows importing goods into the United States using electronic data. The data is transmitted between customs brokers and importers, and it covers all aspects of the importing process including product information, shipping details, and payment information.
One USG: A “One USG” message indicates that the merchandise has arrived, that all data required for entry has been submitted to the U.S. Government, that all PGAs that regulate the merchandise have issued a may proceed, and that CBP has conditionally released the merchandise from its custody.