Customs authorities are generally less interested in exports than imports, and China’s customs is unlikely to have an issue with your shipment. But it can get complicated for shipments imported into the US. This guide covers customs filing and clearance for US imports as broken down by the three major players involved, namely the customs agency, your customs broker, and you.
Customs Agency Responsibilities
Several documents need to be lodged (filed) with Customs before your shipment arrives at port. Customs also require an earlier lodgment (ISF filing), for ocean freight only, which must be completed 24 hours before the ship leaves the port of origin. Customs uses ISF filing information to sort shipments between those for speedy clearance and those warranting further investigation.
Unless there’s a customs clearance issue or delay, ocean freight is generally cleared within two days of the ship landing in port (but can be up to four days before estimated arrival). Air freight is generally cleared within one or two days of arrival.
Here’s how a customs official will process your shipment:
- Inspect the paperwork,
- Determine if duties apply,
- Request duty payment,
- Following confirmation of payment, release the shipment for pickup.
Some products can fit into more than one HS product description. You may not agree with the customs official decision, especially if it exposes you to higher customs duties, but they are the final arbiter.
If the shipment hasn’t been picked up 15 days it goes into storage, and you will face storage costs. If it remains unclaimed, it will be auctioned off.
An inspection is conducted at Customs discretion, but this is more likely to occur when:
- The shipment contains food, drugs or animal goods.
- The shipment contains anything that might be construed as a threat to national health, safety, and security.
- Your record with them is blemished.
- You are starting out and have little or no record with them.
You might just get caught up in a random inspection, too, or, more frustratingly, another random encounter that affects your shipment’s clearance is if another shipment in your container is singled out for inspection.
An inspection can take several forms. Non-intrusive inspections are fairly quick, but an intensive exam could take more than a week.
Your forwarder can’t on-charge (add to your invoice) the following Customs charges, so you will be billed separately for:
- Customs Duty. Determined by the product, country of entry, and de minimis level.
- Merchandise Processing Fee (MPF). This is a mandatory fee ($25 minimum, $485 maximum).
- Harbor Maintenance Fee (HMF). This small mandatory fee applies to ocean freight only.
- Customs Fines And Penalties. Customs may impose a heavy fine on late ISF filing. Non-intrusive inspections cost around $275 at major ports, but an intensive examination costs around $800, not including third-party transport and storage costs.
Customs Broker Responsibilities
As discussed in the Freight Forwarders guide, you may engage a customs broker directly, or leave that to your forwarder.
Your customs broker prepares, checks, and lodges ahead of time, all of the documents required for filing.
Customs brokers may liaise with Customs throughout the entry and clearance process. Once the shipment is ready for clearing, there will be a limited window (varying by terminal and carrier) to arrange payment and clear the shipment from port.
Although Customs allows ten business days after filing for payment, customs brokers usually expect the importer to pay them before they pay Customs. To make sure that happens in time, customs brokers often give importers a three-day window to arrange payment to them.
Customs Broker/Forwarder Charges
- Customs Clearance Fee. The standard rate customs brokers charge for managing clearance is around $50 for China’s Customs, and several times more than that for US customs. This fee is also known as customs brokerage fee or customs entry fee.
- ISF Filing Fee. Some customs brokers will separate out costs associated with ISF filing, but it is often incorporated into their customs clearance fee.
- Telex Electronic Cargo Release Fee/EDI Fee. This charge to is cover the cost of sending forms and messages to ports, customs, etc. It’s a dubious charge because email has replaced telexes, and neither email nor EDI has a variable cost. If this charge appears on your invoice, you should challenge it.
Before The Shipment
Here’s a recap of your customs-related responsibilities :
- Check for import restrictions (Safety Standards & Labeling and Importer & Customs Responsibilities guides).
- Estimate customs duty (Customs Duties guide).
- Provide standard documents at shipment booking (Request For Freight Quote and Shipping Process guides).
- Where applicable, provide other docs, like the COO, MSDS, and fumigation certificate (Shipping Basics guide).
During The Shipment
- Take out a customs bond. This is how US Customs ensures that they get any money owing on your shipment. Depending on how many shipments valued over $2,500 you are looking to make in a year, your customs broker will advise whether you should take out a Continuous bond or a Single Entry bond. If you take out the latter, you will also need to take out an ISF bond for ocean freight. Bonds are the one Customs charge that can be on-charged (added to your customs broker or forwarder’s invoice).
- Be honest with customs and advance cargo reporting requirements. Data automation has given regulators better visibility, and offenders face stiff penalties. The liable party usually ends up being the shipper (in other words, you).
- Check all documents for accuracy before forwarding to your customs broker.
- Pay customs clearance. Although customs brokers normally pay customs on behalf of their clients. Customs encourages importers to set up set up direct ACH (automated clearing house) payments. It helps speed up clearance, and for you, it removes the risk of being penalized for late clearance. If you start importing regularly you should consider ACH payment.
Another good reason for regular importers to consider ACH payments is cost. Paying on your credit card with a 3% transaction fee each time, or $40 for a wire transfer (for commercial banking, add more dollars for personal banking) quickly adds up. Do the math, and see how much it’s costing you not to switch.
There is clearly a lot more to customs clearance with freight than with international couriering. That’s because many shipments fall below the de minimis threshold, and for those that don’t, the large international couriers also do the customs brokering. Incidentally, by doing that they become carrier, forwarder, and customs broker, all in one. Customs permits international couriers to on-charge the customs costs to you, so they simply put your parcel through on DDP (Delivery Duty Paid) incoterm.