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U.S. Customs, or, How to Get Screwed and Pay for the Privilege April 24, 2008

Filed under: outsourcing,Starting Up,taxes,Uncategorized — bizmiss @ 12:13 pm
Tags: , , , , ,

Thinking about having goods made overseas? You may want to consider the cost of shipping and customs before you set price points for your merchandise. I budgeted my costs based on a quote from my customs agent, and still came up about $500 short. Here’s a basic list of what you’ll need:

Freight: getting your cargo where it needs to go. If you have small or perishable items, you can use air freight. For bigger stuff, like a whole container’s worth of meat-shaped plush toys, you can use ocean or rail freight, depending on whether the country you’re importing from is connected to you by land or sea.

A customs broker: this guy gets your stuff off the dock and onto a truck. Unfortunately, many of these folks operate like bad movers–they claim zero responsibility for what happens to your stuff and sometimes hold it for ransom. The Dept. of Homeland Security requirement that a customs broker be “of good moral character” is clearly not enforced. Finding a trustworthy customs broker is like finding the holy grail. If you’re in the market for one of these guys, here are some charges to get in a quote:

  • “Door-to-door” freight: this is really dock-to-door freight, since most manufacturers will charge F.O.B. (freight on board) prices for your products, meaning that what you pay for manufacturing includes what it costs to box up your merchandise and get it onto a boat/plane/etc. I was quoted $1,717 for ocean freight from Hong Kong to Oakland, with door delivery in San Francisco. This was for a full 20 ft. container. Transporting less than a container load (LCL) was quoted at $125/cubic meter of cargo. This is because there is a lot more labor involved in separating, moving and accounting for your merchandise when it is mixed up with other people’s stuff. A full container load (FCL) doesn’t need to be opened at all between the overseas factory and your warehouse in the States. When my warehouse turned out to be in Fairfield rather than San Francisco (an extra 30 minutes away from the dock, but in another “zone”), my delivery cost went up $200. If gas prices rise between your quotation and shipment, expect to pay for that as well (an additional $50 in my case).
  • Customer Power of Attorney: allows your broker to conduct Customs business on your behalf (i.e. pay for your inspections to move your cargo through quicker, take your container off the dock, etc. I was quoted $0.35-$0.55 per $100 of merchandise value for this.
  • Insurance: this was included in my freight quote, but you NEED to make sure you have it. Containers fall off those barges on choppy seas all the time, and the last thing you want is to have your entire business end up at the bottom of the ocean.

Money for U.S. Customs fees: here’s the list:

  • Merchandise Processing Fee: 0.21% of Commercial Invoice., Min. USD25 and Max. USD485. $25 for me.
  • Harbor Maintenance Fee: 0.125% of Commercial Invoice. $8.85 for me.
  • Single Transaction Bond: a one-time $50 fee per import. If you import more than 10 times a year, you can use a $500/year bond instead.
  • Customs Clearance: $115.
  • C-TPAT security fee: protects the docks against terrorists. $7.50 per shipment.
  • Document turn-over fee: $55
  • Inspection: this is my personal favorite. Not all containers get inspected, but if you’re a new importer, yours will be. If they inspect by x-ray, you pay an additional $160. If they decide to do a FULL inspection, however, in which they open and rifle through every single box, they will charge you for the labor, which is more like $400-$500.

In the end, just getting my merchandise to the Fairfield warehouse cost almost a third of what it cost to manufacture it. That means I had to figure in a 33% mark-up in my prices, not including the cost of warehousing. If I could have had my plush toys made in the U.S., I would have, and it makes me seriously re-consider what my next product line will be.

**Tip: if you arrange for your freight early enough, you can sometimes “lock in” a rate for local delivery from the dock to your warehouse that won’t go up when your cargo arrives. Get this in writing.

US Customs FAQ on Duty Rates

your shipment of fail has arrived

Image courtesy of the Fail Blog at http://failblog.wordpress.com/2008/01/29/shipments-in

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7 Responses to “U.S. Customs, or, How to Get Screwed and Pay for the Privilege”

  1. Maurice Deslauriers Says:

    Ms. Fleischer,

    In reading your above blog, I noticed how you combined the responsibilities of a customhouse broker with a freight forwarder. While many customhouse brokers offer both services, each is separate from the other.

    Your beginning sentence of, “A customs broker: this guy gets your stuff off the dock and onto a truck” is not only simplistic, but incorrect as well.

    If you had taken the time to simply read the link you appeared to have just “stuck” in there with your comments, you would have read this, from U.S. Customs, “Brokers must have expertise in the entry procedures, admissibility requirements, classification, valuation, and the rates of duty and applicable taxes and fees for imported merchandise.” I don’t see any mention of “getting it to a truck” mentioned, do you?

    And you go on to state, “Unfortunately, many of these folks operate like bad movers–they claim zero responsibility for what happens to your stuff and sometimes hold it for ransom.” Again, you are erroneously stating that a customhouse broker actually has the power to take your product and “hold it for ransom”. This is patently untrue and not only slams these licensed individuals, but the Customs’ Service your taxes (and mine) pay to ensure proper security upon entry into the USA.

    You now continue to, what must now be called a “rant” and state (and I am quoting directly, so the spelling error is yours and you were “quoting” a direct source), “The Dept. of Homeland Security requirement that a customs broker be “of good more character” is clearly not enforced. Finding a trustworthy customs broker is like finding the holy grail.”

    I find it utterly amazing that an “importer” such as yourself has not only scant knowledge of how goods enter this country but uses this “misinformation”, compounds each error upon another in a single paragraph as your introduction, and use it as your opening to what can only be well-meaning, but mistaken advice. I would respectfully submit to you that you are doing not only your reader, but yourself, a disservice by not getting the “facts” before writing and then submitting this type of erroneous information.

    I implore you to get your facts straight before taking advantage of your first amendment rights and bashing a single section of what must have been a “first” importation, by putting the time into finding out what you are writing about, not simply adding “links” to make your story credible. As a teacher you should know better.

    I am sorry that your importation did not go as you wished. Please know that a good customhouse broker would have questions of his/her own to ask you before even accepting your business, and in so doing would have advised you of what “may” happen, including an inspector mistaking the name of your company for one that might also be noticed by the Department of Agriculture (i.e. “Sweet Meats”). Your unfortunate importation should not pose the grounds by which all customhouse brokers are judged, and no, we are not the Holy Grail, yet we do care for the people and companies who are doing the best they can in an honest and forthright manner.

    Before you write next time, please take the time to research and seriously consider your subject.

    Thank you.

    Sincerely,

  2. Bob Says:

    The US Customs is a scam. They charge you for their services. This would be like the fire dept. charging you for a second truck or a hook up fee to the fire hydrant. Their job is to check your stuff and they charge you in addition to their tax burden.

    They basically have killed my business. I will no longer import because I cannot control these costs. I never know what my true costs will be until after I have recived my product.

    Nice work guys not only did you destroy my business you destroyed my interest in doing more.

    Great for the economy, morons. I would rather NOT do business than deal with this kind of uncertainty. How is that for economic growth.

  3. Webmaster Says:

    Your Post is Very nice and the information given here is very helpful.
    Nice Post!!!!!!!!!!!
    Thanks,
    Webmaster
    http://www.importexportus.com/index.htm

  4. Dan Says:

    This blog is full of bad information. I have been a licensed Customhouse Broker for 12 years – take it from me. Maurice is the only one with the correct information. For Bob – finding out your landed cost is easy, and I am not sure why you find it that difficult. You obviously don’t know what the hell you are doing. The author of the blog is flat out wrong. I could go point by point; however, I have better things to do. By the way, it wasn’t the “Power of Attorney” your broker charged you for – it was the “Customs Bond”. I love the Internet, any idiot can post incorrect information.

    • bizmiss Says:

      Dan, you’re absolutely right that this post was needlessly snarky. One should never post in anger. Please see the following post for my corrections and my thanks to Maurice. If you have any corrections I didn’t catch, I would really appreciate if you submitted them.

      Like Bob, I didn’t know “what the hell I was doing,” and no customs agent other than Maurice (you included, sir) wanted to take the time to explain things. Like a few disreputable auto shops I’ve been to, most of the agents I spoke to seemed more eager to exploit my naivete than to correct it. That’s why this post had so much misinformation in it.

  5. santosh Says:

    Many freight forwarders can give you prices from origin to destination including costs of customs clearance at both ends.
    I am an importer myself and have imports from india,china,bangladesh, i know my prices of freight for lcl,fcl and air freight very well. U need to do some homework.
    write to me if u have any problems in indentifying fregiht forwarders, i can suggest. If u have lcl shipments, ensure you work directly with an ocean consolidator or else u end with your goods being handled by seveal freight forwarders. the only missing cost link is the exam cost and its about usd 10 per cbm for vacis exam and usd 25 per cbm approx for intensive on an approximate basis. Minimum usd 50.

  6. Racing Fan Says:

    Thanks comment posters for clearing this blog up with correct info.


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