Legal Requirements for Starting an Import Business

Legal Requirements for Starting an Import BusinessStarting an import business is relatively simple. The biggest hassle is complying with the US Customs and Border Protection rules and procedures. This helps you avoid fines, and other problems.

To open an import business, the only legal requisites are having an importer of record number, which is usually just the business’s tax-identification number, and a surety bond to protect the US government if you can’t pay your duties, taxes and other fees. Surety bonds are required for all formal entries where the shipment has a value of more than $2,000. You can use them on smaller shipments as well. You can purchase them through a surety company or a customs broker. A single-entry bond, often cost $30 or more and covers one entry. A continuous bond is usually a few hundred dollars or more, and covers all your import shipments for a year or longer. Usually, with more than five entries a year, you’ll be better off with a continuous bond.

Once you actually start buying and shipping goods from foreign countries is where importers sometimes run into trouble. Most imports need to be marked properly from their country of origin, and must meet government requirements. Some imports are more difficult than others. Assembled goods, for instance, where components come from several countries can be complicated. Food imports must also abide by rules set by the FDA as well as Customs requirements. It’s always a good idea to read the rules in advance. You can find a great deal of information on import requirements on the U.S. Customs Web site, www.cbp.gov, by clicking “Import” on the home page, and then selecting “Informed Compliance.”

Declaring the items when they’ve arrived at the US port of entry can pose other difficulties. You must use the Harmonized Tariff Schedule to classify all items. This is a long list of codes that determine the duties you owe. You must report the duty value of each item correctly. This is usually the price you paid the foreign seller, though there can be adjustments.

If you make an error, either knowingly or not, you can face penalties based on the deemed level of culpability. Customs penalties are usually two times the value of duties underpaid when the importer is negligent. In fraud cases, it can be up to the full value of the imported goods. Even if the penalties are small, they can add up if an importer gets too many. If an importer reports an error before Customs begins the investigation, penalties are reduced. Don’t be intimated by the rules. If you hire experts to help and try to keep with the rules for your industry, you shouldn’t have a problem.

Many importers hire a licensed customs broker. They fill out and file the necessary documents with Customs agents for you. They generally charge a flat $80 to $120 or so per entry, although some use different methods. Look for a broker who’s experienced in your usual port of entry with your type of product and its origin countries. You’ll want to compare the prices to purchasing transport and brokerage separately. Major couriers like UPS and FedEx offer customs brokerage services.

You might also think about consulting a customs lawyer, or having one lined up in case you run into problems. A lawyer can also help if you get hit with a penalty you want to dispute.


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