Customs Tips for Importers
Los Angeles customs attorney Erik Smithweiss once had a client who misclassified two boot styles being imported into the United States.
Soon, U.S. customs officials were sending a summons to inspect everything the company had imported from that vendor during the last five years.
With the world becoming more global, imported goods are getting increasingly scrutinized. “I have never seen a higher level of customs enforcement than I see today,” said Smithweiss, a partner in Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, a New York–based law firm with offices in downtown Los Angeles.
With customs inspections on the rise, Smithweiss imparted a few bits of importing advice recently at a seminar in Long Beach, Calif., titled “Customs Compliance Management and Current Trends in Enforcement.”
Some of the most common errors that send up red flags are misidentifying a product’s classification or a product’s value. “Tariff classification is the first thing the commodity specialist will take a look at. They always check it,” Smithweiss said.
Incorrect classifications affect duties, import statistics, textile quotas, tariff-rate quotas, collection of antidumping and countervailing duties, and eligibility for duty-free status under free-trade agreements. Smithweiss said he has seen a lot of goods seized for evasion of antidumping and countervailing duties.
Another error, whether it is intentional or unintentional, is misstating country of origin. “A lot of people were declaring Hong Kong, not China, as the country of origin. A lot of it was innocence or sloppiness, but importers got assessed penalties,” Smithweiss said. “I have a client right now with goods that were not properly marked for origin, and the import specialist wants the goods seized.”
Because textiles account for more than 40 percent of the duties collected by U.S. customs, it is a top priority for inspectors, who examine a product’s origin and its classification. For free-trade agreements, such as the Dominican Republic–Central American Free Trade Agreement and the North American Free Trade Agreement, customs makes sure everything is classified correctly and examines the origins of various inputs, such as fabric and trim, to make sure they adhere to the agreements’ rules. “You have a lot of extra due diligence with freetrade agreements,” Smithweiss said.
Other red flags might be a change in the product’s value or uncertainty about the product’s value until it arrives. In that case, importers need to report value adjustments to customs officials. “If you do not know the amount of the adjustment, I would recommend that you add an estimate to a commercial invoice or worksheet,” Smithweiss said.
You may also want to tell customs about the imminent value change by putting it on the bottom of a 7501 form with a note such as “Values are subject to adjustment.”
Items that may change a product’s value include royalties, license fees or various assists, such as design, product development and engineering.
But doing this too often can make customs officials feel as if there is a lack of internal controls. “I’ve had clients put under investigation because they made periodic disclosures consistently,” Smithweiss said.
Another bit of sage advice was to avoid putting anything in an e-mail you don’t want customs officials to read.
During a customs investigation, officials can request to look at all e-mails. —Deborah Belgum
