Importers and filers have one main goal, to get the shipments from the point of sale/manufacture to the buyer with as little hassle, and as expeditiously as possible.  To accomplish this goal, the conscientious company must first do their homework.  Next step, a review has been made of banned lists to ensure that the seller is an approved company.  Based on the level of due diligence, at this stage quite possibly an effort has also been made to use only CTPAT carriers to move the goods.  Further insurance for a smooth transaction would dictate that the goods have been classified by in-house personnel,  a customhouse broker, an  import specialist at Customs and Border Protection (CBP), by a very knowledgeable trade consultant or attorney, or maybe even a binding ruling was obtained.  Care must always be incorporated at each step in order to consistently provide information on each shipment to the filer in a timely manner.

All of the above are admirable steps and need to be implemented prior to the first shipment arriving in the U.S., or actually, any country.  Unfortunately, these efforts need to be engaged in an ongoing basis.  The fact is, many companies operate on a tentative foundation of confidence that they have done their due diligence, and fail to accept that there is no certainty in the world of import/export.

What can go wrong?

Anti-dumping (AD) cases can dramatically change the duty due on import of the goods, and that uncertainty goes on for at least two years until a final determination is made by Commerce.  AD has been active on steel bearings for forever it seems, but some products seem to be named without warning.  There are thousands of current cases on items from honey, to woven ribbon, to wooden flooring, and bedroom furniture etc., etc.  Imagine your surprise when goods that have been entering duty free now have an AD duty rate of 500%.  The nightmare that some companies have experienced is when a year or two goes by before CBP discovers their failure to comply with the AD case, and they then issue a bill for the past due amount.  These bills can be in the range of millions of dollars.  CBP may also issue a penalty for negligence, or worse, because it is the responsibility of the importer to correctly classify and pay the applicable duties owed on their goods, which includes any applicable AD cases/ corresponding duties.

What else?  Import/export is a business that is very susceptible to change due to political issues.  The sanctions against Russia recently imposed are an excellent example.

Tariff changes also occur slowly as efforts are made to address  technological changes, with the inevitable outcome that technology far outpaces the tariff updates.  An example is the many uses that have been developed for monitors. They are now used in what appears to be a very broad range of items including televisions,  computers, cash registers,  and huge mega-screens for sporting events.  These innovations have required tariff revisions from full headings to breakouts at the subheading levels.  At times these tariff revisions have complex definitions in order to correctly classify these monitors, and as a result may have a negative duty impact.

Tariff revisions are not the only classification dangers.  Obtaining a binding ruling from CBP is an excellent means to ensure a level of comfort in the classification of the goods, but in addition to a tariff revision you may find that CBP will review their rulings and could issue a revocation such as the one in the July 30th Customs Bulletin on toothbrush sets.  The company that requested the original ruling will receive a letter advising them of the revocation, and they will then have a ninety day grace period to change their classification.  Many companies search rulings already issued and rely on those for the accuracy of their own classifications.  This is not a bad practice but these companies do not have the ninety day grace period to revise their submissions, nor do they receive a letter advising them of the change in classification.

GSP, or Generalized System of Preferences, is another concern.  Whenever it expires the normal duty rate becomes effective again.  It has been the practice for congress to renew it retroactively, and the duties are refunded, but that means they had to be paid in the first place.  An unaware company can be caught by surprise when this occurs.

What is the path to achieving protection from surprise duty advances, audits, or penalties?  The answer is “due diligence”, which translates to companies employing some means to monitor CBP, as well as all of the other agencies that have regulatory power over imports.  This can be done in-house, through the customhouse broker, or by a trade consultant or attorney. This practice should be incorporated into the company Compliance Manual to ensure that it is accomplished and reviewed during any in-house audits.

A small amount of time spent daily, or weekly, to review current issues can save a large amount of time, greatly lessen duty bills, prevent possible penalties, and avoid fees to consultants needed to assist in a resolution.