Customs duties in the United States

Last updated

The United States imposes tariffs (customs duties) on imports of goods. The duty is levied at the time of import and is paid by the importer of record. Customs duties vary by country of origin and product. Goods from many countries are exempt from duty under various trade agreements. Certain types of goods are exempt from duty regardless of source. Customs rules differ from other import restrictions. Failure to properly comply with customs rules can result in seizure of goods and criminal penalties against involved parties. The United States Customs and Border Protection (CBP) enforces customs rules.

Contents

Import of goods

Goods may be imported to the United States subject to import restrictions. Importers of goods may be subject to tax and/or customs duty (“tariff”) on the imported value of the goods. “Imported goods are not legally entered until after the shipment has arrived within the port of entry, delivery of the merchandise has been authorized by CBP, and estimated duties have been paid.” [1] Importation and declaration and payment of customs duties is done by the importer of record, which may be the owner of the goods, the purchaser, or a licensed customs broker. Goods may be stored in a bonded warehouse or a Foreign-Trade Zone in the United States for up to five years without payment of duties.

Goods must be declared for entry into the U.S. within 15 days of arrival or prior to leaving a bonded warehouse or foreign trade zone. The importer of record declares the transaction value of the goods and country of origin, along with other information. The declarations must include an invoice and packing list (or equivalent) listing all goods. CBP then assesses duty, which must be paid by the importer of record before goods can be released. Many importers participate in a voluntary self-assessment program with CBP. Special rules apply to goods imported by mail.

All goods imported into the United States are subject to inspection by CBP.

Some goods may be temporarily imported to the United States under a system similar to the ATA Carnet system. Examples include laptop computers used by persons traveling in the U.S. and samples used by salesmen.

Origin

Rates of tax on transaction values vary by country of origin. Goods must be individually labeled to indicate country of origin, with exceptions for specific types of goods. Rules of origin are used to determine the country of origin. Goods are considered to originate in the country with the highest rate of duties for the particular goods unless the goods meet certain minimum content requirements. These minimum content requirements may vary under certain trade agreements or special arrangements. [2] Reduced rates of duty apply under these agreements and arrangements for certain classes or subclasses of goods in certain circumstances. [3] Extensive modifications to normal duties and classifications apply to goods originating in Canada or Mexico under the United States–Mexico–Canada Agreement (USMCA).

Classification

All goods that are not exempt are subject to duty computed according to the Harmonized Tariff Schedule for the United States. The Harmonized Tariff Schedule provides the applicable tariff rates and statistical categories for all merchandise imported into the United States. [4] This lengthy schedule provides rates of duty for each class of goods. Most goods are classified based on the nature of the goods, though some classifications are based on use.

Duty rate

Customs duty rates may be expressed as a percentage of value or dollars and cents per unit. Rates based on value vary from zero to 35% in the 2023 schedule. [5] Rates may be based on relevant units for the particular type of goods (per ton, per kilogram, per square meter, etc.). Some duties are based in part on value and in part on quantity. Until recently, the United States applied a customs tariff that was among the lowest in the world: 3% on average. [6] [7] However, with increased tariffs on Chinese goods, as of May 2019, the US has the highest tariff rate among all developed nations with a trade-weighted tariff rate of 4.2%. [8]

Where goods subject to different rates of duty are commingled, the entire shipment may be taxed at the highest applicable duty rate. [9]

Exemptions

Many categories of goods are subject to zero customs duty. Such goods must still be declared. Some goods and goods from some countries are exempt from duty. These reductions of duty are based on classification and origin.

Procedures

Imported goods are generally accompanied by a bill of lading or air waybill describing the goods. For purposes of customs duty assessment, they must also be accompanied by an invoice documenting the transaction value. The goods on the bill of lading and invoice are classified and duty is computed by the importer or CBP. The amount of this duty is payable immediately, and must be paid before the goods can be imported. Most assessments of goods are now done by the importer and documentation filed with CBP electronically.

After duties have been paid, CBP approves the goods for import. They can then be removed from the port of entry, bonded warehouse, or Foreign-Trade Zone.

After duty has been paid on particular goods, the importer can seek a refund of duties if the goods are exported without substantial modification. The process of claiming a refund is known as duty drawback.

Penalties

Certain civil penalties apply for failures to follow CBP rules and pay duty. In addition, goods of persons subject to such penalties may be seized and sold by CBP. In addition, criminal penalties may apply for certain offenses. Criminal penalties may be as high as twice the value of the goods plus twenty years in jail. [10]

Foreign-Trade Zones

Foreign-trade Zones are secure areas physically in the United States but legally outside the customs territory of the United States. Goods in a Foreign-Trade Zone are not considered imported to the United States until they leave the zone. Foreign goods may be used to manufacture other goods within the zone for export without payment of customs duties. [11] Zones are limited in scope and operation based on approval of the Foreign-Trade Zones Board. Zones are generally near ports of entry, and may be within the warehouse of an importer.

Insular areas

Related Research Articles

<span class="mw-page-title-main">Free trade area</span> Regional trade agreement

A free trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and to increase trade of goods and services with each other. If natural persons are also free to move between the countries, in addition to a free trade agreement, it would also be considered an open border. It can be considered the second stage of economic integration.

<span class="mw-page-title-main">Taxation in the United States</span> United States tax codes

The United States has separate federal, state, and local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as various fees. In 2020, taxes collected by federal, state, and local governments amounted to 25.5% of GDP, below the OECD average of 33.5% of GDP.

A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade.

<span class="mw-page-title-main">Customs</span> Government agency which regulates the flow of goods and collects duties

Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs has been considered as the fiscal subject that charges customs duties and other taxes on import and export. In recent decades, the views on the functions of customs have considerably expanded and now covers three basic issues: taxation, security, and trade facilitation.

<span class="mw-page-title-main">Non-tariff barriers to trade</span> Type of trade barriers

Non-tariff barriers to trade are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. Such barriers are subject to controversy and debate, as they may comply with international rules on trade yet serve protectionist purposes.

<span class="mw-page-title-main">U.S. Customs and Border Protection</span> American federal law enforcement agency

United States Customs and Border Protection (CBP) is the largest federal law enforcement agency of the United States Department of Homeland Security. It is the country'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. It has a workforce of more than 45,600 federal agents and officers. It is headquartered in Washington, D.C.

The Australia – United States Free Trade Agreement (AUSFTA) is a preferential trade agreement between Australia and the United States modelled on the North American Free Trade Agreement (NAFTA). The AUSFTA was signed on 18 May 2004 and came into effect on 1 January 2005.

The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products. It came into effect in 1988 and has since been developed and maintained by the World Customs Organization (WCO), an independent intergovernmental organization based in Brussels, Belgium.

A common external tariff(CET) must be introduced when a group of countries forms a customs union. The same customs duties, import quotas, preferences or other non-tariff barriers to trade apply to all goods entering the area, regardless of which country within the area they are entering. It is designed to end re-exportation; but it may also inhibit imports from countries outside the customs union and thereby diminish consumer choice and support protectionism of industries based within the customs union. The common external tariff is a mild form of economic union but may lead to further types of economic integration. In addition to having the same customs duties, the countries may have other common trade policies, such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country, within the area, they are entering.

A free-trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states. There are two types of trade agreements: bilateral and multilateral. Bilateral trade agreements occur when two countries agree to loosen trade restrictions between the two of them, generally to expand business opportunities. Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.

<span class="mw-page-title-main">Market access</span> Ability to sell goods and services across borders

In international trade, market access refers to a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or requirements, whereas under ideal free trade conditions goods and services can circulate across borders without any barriers to trade. Expanding market access is therefore often a more achievable goal of trade negotiations than achieving free trade.

Custom brokers or Customs House Brokerages are working positions that may be employed by or affiliated with freight forwarders, independent businesses, or shipping lines, importers, exporters, trade authorities, and customs brokerage firms.

<span class="mw-page-title-main">Certificate of origin</span> International trade document

A Certificate of Origin or Declaration of Origin is a document widely used in international trade transactions which attests that the product listed therein has met certain criteria to be considered as originating in a particular country. A certificate of origin / declaration of origin is generally prepared and completed by the exporter or the manufacturer, and may be subject to official certification by an authorized third party. It is often submitted to a customs authority of the importing country to justify the product's eligibility for entry and/or its entitlement to preferential treatment. Guidelines for issuance of Certificates of Origin by chambers of commerce globally are issued by the International Chamber of Commerce.

Council Regulation (EEC) No 2658/87 of 23 July 1987, creates the goods nomenclature called the Combined Nomenclature, or in abbreviated form 'CN', established to meet, at one and the same time, the requirements both of the Common Customs Tariff and of the external trade statistics of the European Union. It is closely related to the Harmonized Tariff Schedule of the United States.

<span class="mw-page-title-main">ATA Carnet</span> International customs document

The ATA Carnet, often referred to as the "Passport for goods", is an international customs document that permits the tax-free and duty-free temporary export and import of nonperishable goods for up to one year. It consists of unified customs declaration forms which are prepared ready to use at every border crossing point. It is a globally accepted guarantee for customs duties and taxes which can replace the security deposit required by each customs authority. It can be used in multiple countries in multiple trips up to its one-year validity. The acronym ATA is a combination of French and English terms "Admission Temporaire/Temporary Admission". The ATA carnet is now the document most widely used by the business community for international operations involving temporary admission of goods.

<span class="mw-page-title-main">Rules of origin</span> Rules to attribute a country of origin to a product

Rules of origin are the rules to attribute a country of origin to a product in order to determine its "economic nationality". The need to establish rules of origin stems from the fact that the implementation of trade policy measures, such as tariffs, quotas, trade remedies, in various cases, depends on the country of origin of the product at hand.

<span class="mw-page-title-main">Foreign-trade zones of the United States</span>

In the United States, a foreign-trade zone (FTZ) is a geographical area, in a United States Port of Entry, where commercial merchandise, both domestic and foreign, receives the same Customs treatment it would if it were outside the commerce of the United States. The purpose of such zones is to help American businesses to be competitive in the global economy by reducing tariff burdens on the importation of foreign inputs and on exported finished products. Another definition of an FTZ states that it is an isolated, enclosed and policed area operated as a public utility, furnished with facilities for loading, unloading, handling, storing, manipulating, manufacturing and exhibiting goods and for reshipping them by land, water or air. Merchandise of every description may be held in the zone without being subject to tariffs and other ad valorem taxes. This tariff and tax relief is designed to lower the costs of U.S.-based operations engaged in international trade and thereby create and retain the employment and capital investment opportunities that result from those operations.

The Importer Security Filing (ISF) also referred to as 10+2, is a customs import requirement of the United States Customs and Border Protection (CBP) ; which requires containerized cargo information, for security purposes, to be transmitted to the agency at least 24 hours (19 CFR section 149.2 before goods are loaded onto an ocean vessel headed to the U.S. for shipment into the U.S. 10+2 is pursuant to section 203 of the SAFE Port Act, and requires importers to provide 10 data elements to CBP, as well as 2 more data documents from the carrier.

Entry visibility is an aspect of supply chain visibility, allowing a company to manage the proper use of trade compliance data for the importation of goods from the time they leave a foreign supplier until the time those goods reach their destination. Entry visibility aims to ensure that all regulatory, compliance, and documentation requirements are met in a timely fashion along the way. When importing into the U.S., every individual transaction must be compliant with The Customs Modernization Act, and the Importer Security Filing (10+2). Under the Mod Act, importers are required to maintain and produce timely records at the time of entry. Furthermore, the Mod Act includes a "Reasonable Care" clause, which states that importers and brokers need a comprehensive audit process to ensure they have met all compliance requirements and provided the correct information on all entry filings.

A customs declaration is a form that lists the details of goods that are being imported or exported when a citizen or visitor enters a customs territory. Most countries require travellers to complete a customs declaration form when bringing notified goods across international borders. Posting items via international mail also requires the sending party to complete a customs declaration form.

References

  1. ↑ U.S. Customs and Border Protection booklet Importing into the United States (“CBP Booklet”), page 11 Archived 2011-10-14 at the Wayback Machine .
  2. ↑ As of January 1, 2011, there were 113 countries eligible for reduced duties under the Generalized System of Preferences, 18 under the Caribbean Basin Initiative, 38 under the African Growth and Opportunity Act, Canada and Mexico under multiple sets of rules, and several other countries under country specific rules. Numerous countries are covered under more than one set of special rules for at least some goods. See Harmonized Tariff Schedule cited below.
  3. ↑ The requirements for special treatment may be very specific as to the nature of the product and particular country of origin.
  4. ↑ "Official Harmonized Tariff Schedule" . Retrieved 9 August 2016.
  5. ↑ A higher rate of duty (up to 81%) applies to goods from Cuba or North Korea.
  6. ↑ "United States Information, Income Tax United States, Agriculture United States, United States Import, United States Export & United States Employment Information". fita.org. Federation of International Trade Associations. Archived from the original on June 16, 2020. Retrieved June 15, 2020.
  7. ↑ "World Tariff Profiles 2019" (PDF). wto.org. World Trade Organization. Archived (PDF) from the original on April 12, 2020. Retrieved June 15, 2020.
  8. ↑ Swanson, Ana (May 15, 2019). "Trump's Tariffs, Once Seen as Leverage, May Be Here to Stay". NY Times . Archived from the original on April 30, 2020. Retrieved June 15, 2020.
  9. ↑ CBP Booklet, page 24.
  10. ↑ "Importing into the United States - A Guide for Commercial Importers" (PDF). cbp.gov. U.S. Customs and Border Protection. 2006. Archived (PDF) from the original on April 14, 2020. Retrieved June 15, 2020. Federal laws relating to criminal activities commonly known as money laundering (e.g., 18 U.S.C. 1956) created criminal and civil provisions that, along with fines and imprisonment, enable the government to prosecute persons for, and seize and forfeit property involved in or traceable to, such violations. Criminal penalties include fines of not more than $500,000 or twice the value of the property, funds, or monetary instruments involved in the violation, whichever is greater, or imprisonment for not more than twenty years, or both. There is also a civil penalty of not more than $10,000 or the value of the property, funds or monetary instruments involved in the violation, whichever is greater.
  11. ↑ CBP Booklet, page 151.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.