Import Tax and Customs Duty: 10 Mistakes You Want to Avoid
Trade Talk Blog
The prospect of importing goods can be discouraging. How will my imported goods get here? When will they arrive? Where’s the best place to ship from, and how much should I pay for delivery? As an importer, these are all questions you might have. However, with some research and guidance from experienced industry professionals, navigating the world of global logistics doesn’t need to be overwhelming. Whether you are just starting in global commerce or an experienced multinational corporation, there is always the potential for costly tax and duty mistakes when navigating unfamiliar regulations.
As an importer into the United States, managing your tax and duty liability can be tricky. One small oversight or misunderstanding of the rules can result in hefty penalties and financial losses you want to avoid. That’s why staying informed on the best practices and managing your duty and taxes is key to understanding how to keep costs under control — it’s just as important as knowing your supplier, trade partners, cargo availability, regulations, and more! In this post, we’ll dive into 10 common duty and tax mistakes made when both importing goods and importing vehicles into the U.S. so that you can ensure your import process happens without a hitch.
1. Failing to account for taxation inconsistencies between countries
To calculate the total landed cost for international shipments, you must account for several factors, including the original value of the goods, shipping costs, shipping insurance, customs duty, import taxes, and of course, VAT, GST, or other local taxes. Every country applies its import and export tariff, tax, and duty rates, and you will have to consider them separately to avoid tax and duty mistakes. Local taxes can significantly increase your total landed cost, and it is necessary to account for them before shipping your goods. By doing so, you will have access to a nearly accurate total landed cost and avoid most additional payments required during the import process.
2. Using old tax information
Using old tax information can result in your shipment being refused, so ensure you regularly update import tax information for all your destinations. Duty rates and duty-free products change regularly, even to the same shipping destination. If you import various goods, you know how difficult it can be to get the correct duty rates and customs for all your products. It is even more difficult to create a system that updates rates for different countries, leading to tax and duty mistakes. Because of changes in oil prices and currency valuation, many governments rely on import tax as a source of revenue, which means that imported goods are thoroughly evaluated.
3. Misvaluing goods
Make sure that all of your international shipping goods are correctly valued to avoid problems with customs. While many importers attempt to value their shipments as correctly as possible, some companies choose to undervalue or incorrectly declare items as a means to pay a lower duty rate or even receive a duty-free entry. As a result, U.S. customs have developed tactics to target certain shipments for evaluation. Whether an unintended processing error or not, misvaluing goods will lead to customs delays, fines, and penalties.
4. Missing important import and export paperwork
International shipments require a lot of paperwork, and you can easily fall behind on submitting the correct documents to the appropriate governing body. You will need to properly fill in all relevant documents and safely store them where you can retrieve them when needed. Failing to do so may lead to a delay in shipment processing.
Remember to keep digital and print copies of documents with a straightforward filing system. Keeping them handy will result in a faster and more cost-efficient auditing process. Sometimes, a customs audit will require you to present documentation for international transactions years after your shipment has arrived.
5. Missing the country of origin
This may seem obvious, but don’t forget to label the country of origin for your imported goods. You will need to put down the address and country of origin of the items and where you purchased them if it differs from the country of origin. This easily avoidable mistake could lead to delays in receiving your shipment, so keep an eye out for this important information.
6. Improperly researching regulated products
Regulated products are subject to additional import tax and customs duty, so you will have to do proper and thorough research before shipping off your goods. Regulated products differ from country to country, and sometimes the duty, fees, and import taxes will add up to more than the imported item itself. Due diligence is necessary when it comes to regulated products. You will need to check that your goods are allowed into the shipping destination and find the exact import tax and duty rates to avoid issues with U.S. customs.
7. Using the wrong tariff codes
Tariff codes are tricky, especially when it comes to assigning a code for every product you import to every country you ship to. The first digits of tariff codes refer to the product being shipped and are generally internationally consistent, following a Harmonized System. The last digits, however, change according to country and should always match the destination country to which the product is being shipped. Failure to do so will result in customs delays, additional costs, and sometimes even returned shipments. Professional tariff code classification and tax determination can be a good option if you want an expert to classify your products and calculate all customs duty and import tax.
8. Paying CBP duty and fees late
The Importer of Record is responsible for paying customs duty and fees. A customs broker can pay the duty on behalf of the importer and include it in the bill of services. However, if the payment is not made on time, the importer receives a Notice of Penalty and a Late Payment fine. Late payment can also result in placing the importer on the U.S. Customs Sanctions List, which stops them from importing into the country in the future.
If you pay the duty after receiving CBP notification, you will also pay an administrative fee of $100 and an interest rate of 0.1% per day for each day the duty was delayed.
9. Filing late, incomplete, or inaccurate ISF information
In 2008, the CBP approved regulations that require the Importer of Record to provide information about the goods being imported 24 hours before being loaded on the ship. This is usually 48 hours before the ship departs. If the Import Security Filing (ISF) information is not provided on time, is inaccurate, or incomplete, the CBP can sanction the Importer of Record with $5,000 in fines per violation and up to $10,000 per House Bill of Lading (HBL). An HBL is issued by a freight forwarder when goods are received from the shipper and is an agreement to deliver the goods to a specific destination.
10. Not hiring a customs broker
Hiring a professional broker is the easiest way to leave the worries of complicated import and export paperwork behind and focus on other sides of your business. Even the most experienced importers can easily make mistakes when it comes to customs duty and import taxes. A customs broker is the most guaranteed way to avoid import tax and customs duty mistakes that can result in delays and excessive fines. A customs broker will help your shipment enter U.S. land and ensure you receive it easily and without delays. Brokers will handle the entire import process and connect you to the CBP if you have any problems or questions about your shipment.
Conclusion
If you’re importing goods into the United States, there are a few things you want to avoid to stay on the good side of Customs and Border Protection. From not having the right paperwork to misvaluing your products and using the wrong tariff codes, these 10 import tax and customs duty mistakes can cause serious delays — or even lead to seizures of your merchandise. Keep them in mind as you prepare your next shipment so that everything goes smoothly at the port of entry.
How GHY Can Help You Avoid Import Tax and Customs Duty Mistakes
At GHY, we understand how complicated the process of international shipping can be. We are here to help you simplify this process and avoid costly mistakes. Our team of experienced concierges provide comprehensive services that ensure your shipments meet all U.S. entry requirements. With our expertise, you can rest assured that your goods will arrive on time, without any costly delays or fees due to incorrect paperwork or failure to comply with applicable regulations.
Our goal is to ensure that your goods are imported quickly, efficiently, and, most importantly, safely! You can save time and money by taking advantage of our services while avoiding common import tax and duty mistakes. With GHY at your side, you can rest assured that you’ll receive the best service possible at a competitive rate. Book a meeting with one of our Trade Experts today and we’ll help you import your goods into the United States as smoothly as possible!
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