Import duties

(First of three parts)

Intrigued by the round marble table with its intricate designs, my wife, Flory, and I sat on the marble stools surrounding it and twirled the attached lazy Susan. We decided to buy the table and stools and have them shipped from China to Seattle. It was November, in the year 2000.

A few weeks later, we received a notice from US Customs that the table could be picked up. We didn’t have to pay duty. My son, Paul, and a friend volunteered to move the table and stools to our home. As they left for the airport, Paul remarked, “Please tell me exactly where you want this heavy table placed. You only get one chance. Once we put it down, we are not going to move it anymore.”

After five years, a big crack developed in the center of the table. My son-in-law, Shorty, moved it to his home and repaired the crack. The table lived for many years thereafter.

At the time, I didn’t question the fact that we were not required to pay duty. However, after having cruised extensively, I found out that people would bring back to the US the most unusual items, each of which would be subject to duty in a different way, depending on many factors, among others the country where the item was bought. I decided to research the subject of import duties, the result of which is this 3-part article.

The information that I present has been paraphrased from the US Customs & Border Protection (CBP) website www.cbp.gov/travel/us-citizens. In addition, I have used other websites, which are mentioned in the text.

The report is limited to the importation of personal items, which indicates that I have excluded goods imported for commercial purposes. In addition, I have omitted tobacco products.

When considering a purchase overseas

As you start reading this article, you might wonder which foreign goods you can import. According to the CBP, when you buy goods (used or new) from any foreign sources, you become the importer, and you are responsible for assuring that the goods comply with a variety of both state and federal government import regulations. 

To find the qualifications of any goods that you buy or order overseas, go to the CBP checklist at Travel Smart (www.cbp.gov/travel/us-citizens/know-before-you-go).

In addition, keep the following questions in mind before you buy something from a foreign source. 

• Can the goods be legally imported? Are there restrictions on or special forms required for your purchase’s importation? 

• Will you be responsible for shipping costs? If so, you should discuss with the seller how your purchase will be shipped. 

• If the seller does not arrange for postal or door-to-door delivery, you will either need to hire a Customs broker or go to the port of entry and clear them, yourself. 

• In filling out the Customs section of the shipping documents, can you trust the seller to provide accurate information about the item being shipped? Giving inaccurate information about the nature of the item and its value is illegal. Moreover, since you are the importer, you could face legal action and fines for this violation! 

• Depending upon the country of origin, quota restrictions could hold the goods up in CBP for a long time, and storage charges in such cases can be expensive.

What you must declare on Customs form 6059B

Every traveler who enters the US by plane or ship must fill out CBP Declaration Form 6059B. If you are bringing in any of the following, they must be declared on this form (visit www.cbp.gov/travel/us-citizens/know-before-you-go/declare):

• Items you purchased and are carrying with you upon return to the United States.

• Items you inherited.

• Items you bought in duty-free shops, on the ship or on the plane.

• Repairs or alterations to any items you took abroad and then brought back, even if the repairs/alterations were performed free of charge. (You will be declaring the cost of the repairs.)

• Items you brought home for someone else.

• Also, if you acquired items in the US Virgin Islands, American Samoa or Guam or in a Caribbean Basin Economic Recovery Act country (for a list of these countries, see the section on the $800 exemption) and asked the merchant to send them to you, you must still declare them when you go through Customs. You must state on the CBP declaration, in US currency, how much you actually paid for each item. The price must include all taxes. If you don’t know for sure, estimate. If you did not buy the item, yourself — for example, if it is a gift — estimate what its fair retail value was in the country where you received it. 

Remember, even if you used the item you bought on your trip, it’s still dutiable. You must declare the item at the price you paid or, if it was a gift, at its fair market value.

A new CBP Form 6059B has recently been enacted. It differs from the old one in that one combined family declaration, also called a joint declaration, now can be presented to the CBP officer upon arrival.

To be considered members of a family and to group exemptions from Customs duty and Internal Revenue tax, the travelers must have lived together in one household at their last permanent residence and intend to live together in one household in the US. Regulations allow US residents to combine the personal duty exemptions of each family member. 

On my Sept. 9, 2014, return to Seattle from overseas, Customs had me check off an electronic version of form 6059B after deplaning. This took more time than it would have taken to fill out one of the old paper versions on the plane. The electronic version, which I could hardly read, as it was too far away from me, required my getting help from an assistant to make the check marks. 

Registering items before you leave the US

To prove that you owned an item before you left the US…

a) you can use documents that fully describe the item, such as a sales receipt, insurance policy or jeweler’s appraisal, or

b) you can register certain items with CBP before you depart, as long as the items have serial numbers or other unique, permanent markings. Take the items to the nearest CBP office and request a Certificate of Registration for Personal Effects Taken Abroad (CBP Form 4457). 

A CBP officer must see the item you are registering. You can also register items with CBP at the international airport from which you’re departing. Keep the certificate for future trips.

Definition of the personal exemption

You may import a certain value of goods to the US without having to pay duty; this is called the “personal exemption.” Depending on the countries you have visited, your exemption will be $200, $800 or $1,600. This applies if…

• The items are for your personal or household use or are gifts. They must accompany you. Items to be sent later may not be included in your $800 duty-free exemption. (Exceptions apply for goods sent from Guam or the US Virgin Islands.)

• They are declared to CBP.

• You are returning from an overseas stay of at least 48 hours. This time limit does not apply if you are returning from Mexico or from the US Virgin Islands. (See also the section on the $200 exemption.)

• You have not used all or part of your exemption allowance in the past 30 days.

• The items are not prohibited or restricted as discussed in the section on Prohibited & Restricted Items. Note the embargo prohibitions on products of Cuba.

Requirements for the $200 exemption

If you cannot claim other exemptions because you have been out of the US more than once in a 30-day period or you have not been out of the country for at least 48 hours, you may still bring back $200 worth of items free of duty and tax.

If the total value is more than $200, the entire amount is dutiable. You may include with the $200 exemption your choice of the following: 5 fluid ounces of alcoholic beverages or 5 fluid ounces of perfume containing alcohol.

Family members may not combine their individual $200 exemptions.

Also, duty on items you mail home to yourself will be waived if the value is $200 or less. 

Requirements for the $800 exemption

If you are arriving from anywhere other than the US Virgin Islands, American Samoa or Guam, you may bring back $800 worth of items duty-free, as long as you bring them with you.

For Caribbean Basin or Andean countries, your exemption is also $800. These countries include Antigua, Aruba, Bahamas, Barbados, Barbuda, Belize, British Virgin Islands, Bolivia, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, Peru, Saint Kitts & Nevis, Saint Lucia, Saint Vincent & the Grenadines and Trinidad & Tobago.

You may include two liters of alcoholic beverages with this $800 exemption, as long as one of the liters was produced in one of the countries listed above. 

Requirements for the $1,600 exemption

If you return directly or indirectly from a US insular possession (US Virgin Islands, American Samoa or Guam), you are allowed a duty-free exemption of $1,600.  

If you travel to a US insular possession and to one or more of the Caribbean Basin or Andean countries listed above, let’s say on a Caribbean cruise, you may bring back $1,600 worth of items without paying duty, but only $800 worth of these items may come from the Caribbean Basin or Andean country or countries. Any amount beyond $800 will be dutiable unless you acquired it in one of the insular possessions.

Similarly, you may include five liters of alcoholic beverages in your duty-free exemption, but one of them must be a product of an insular possession. Four may be products of other countries.

Frequent travelers can apply their personal exemption only once every 30 days.

Duty-free or reduced rates

Duty-free or reduced rates apply to items from the following developing countries or are duty-free under a trade program called the Generalized System of Preferences (GSP). (The GSP Guidebook provides basic information on the program.) The countries are Andean countries, Caribbean countries, sub-Saharan African countries, Israel, Jordan, Chile, Singapore, Mexico and Canada.

Visit the website of the Office of United States Trade Representative at www.ustr.gov for additional GSP information. 

If you are bringing in products that originate in a country eligible for a special trade program, you may automatically bring the goods into the US duty-free. However, you should have proof of the goods’ country of origin. For example, the goods should have marks stating that they were made in the country they were produced or manufactured in, and the country of origin should be indicated on the invoice or receipt.

Increased duty rates

Under what is known as its “301” authority, the United States may impose a much-higher-than-normal duty rate on products from certain countries.

Currently, the US has imposed a 100% rate of duty on certain products of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and Ukraine.

If you should bring more of any of these products back with you than what falls within your exemption or flat rate of duty (see below), you will pay as much in duty as you paid for the products.

While most of the products listed are not the type of goods that travelers would purchase in sufficient quantities to exceed their exemption, diamonds from Ukraine are subject to the 100% duty and might easily exceed the exemption amount.

Determining Customs duty

The Customs duty rate is a percentage, which is determined by the total purchased value of the article(s) paid in a foreign country. The Harmonized Tariff System (HTS) provides duty rates for virtually every existing item. CBP uses the Harmonized Tariff Schedule of the United States Annotated (HTSUS), which is a reference manual that provides the applicable tariff rates and statistical categories for all merchandise imported into the US. 

To find duty rates in this manual, go to http://hts.usitc.gov. Determine the 10-digit HTS code for the goods. After the HTS code is determined, reference the duty rate in the “General Rates” sub-column. Look for a special trade program.

Paying duty

Duty-free articles sold in a Customs duty-free shop are duty-free only for the country in which that shop is located. 

As the term implies, duty-free shops sell products without duty. For example, by buying goods in a duty-free shop in Paris, you avoid paying the duty that France slaps on imported goods (like Swedish vodka) and that French stores ordinarily include as part of a product’s list price. You also frequently avoid the valued-added tax (VAT).

However, if the goods acquired in a duty-free shop exceed your personal exemption/allowance, the amount in excess will be included in the calculation of your duty.

Thus, as an example, if you buy wine in a duty-free shop in France, you would pay €20 per bottle if you take it out of the country, while a Frenchman would pay €26 if he bought a similar bottle in a regular store.

When you enter the US with that €20 bottle, it would be just one of the items that would be totaled to find out if you have to pay duty. If you have other wares that total $800 (assuming an $800 exemption), you would have a total of $800 + $25 (equivalent of €20) = $825, of which $800 is free of duty and the $25 are subject to duty.

The flat rate

The CBP officer will place the items that have the highest rate of duty under your exemption. Then, after subtracting your exemptions and the value of any duty-free items, a flat rate of duty of 3% will be charged on the next $1,000 worth of merchandise. Any dollar amount beyond this $1,000 will be dutiable according to the HTSUS listing.

The flat rate of duty may be used only for items for your own use or for gifts. As with your exemption, you may use the flat-rate provision only once every 30 days. Special flat rates of duty apply to items made and acquired in Canada or Mexico. The flat rate of duty applies only to those purchases that accompany you.

The flat-duty rate also will be charged on items that are dutiable but that cannot be included in your personal exemption, even if you have not exceeded the exemption.

The best example of this is liquor. If you return from Europe with $200 worth of items, including two liters of liquor, one liter will be duty-free under your exemption. The other will be dutiable at 3% plus any Internal Revenue Service tax.

Determining duty rates for a particular item 

Whether or not you are eligible for an exemption and what it will be depends on your residency status, the country you are coming from, how long you were there, what you purchased or received, the country the goods were made in, and the price paid for the goods. 

Here are some examples.

Jewelry worth less than $200 is not dutiable because it falls under the $200 exemption. 

A carpet bought in Turkey and worth $700 would fall under your $800 exemption if the Customs officer agrees that the carpet you are importing is identical to the one listed in the HTSUS book. However, the Customs officer may decide that your carpet has a different benchmark and is worth $1,300, which is $500 over your exemption, in which case you would pay a flat rate of 3% of $500 = $15. 

On a $3,000 coat imported from India that would be listed in the HTSUS book under the description “coats and capes of wool, fine animal hair,” there is no duty, as textiles from India are free from duty. 

The same coat imported from China, after subtracting the $800 exemption, would cost $489.93 in duty. It also might be considered a formal entry, as its value is above $2,000, necessitating extensive paperwork or the services of a Customs broker (to be discussed next month in part two of this series).

A watch bought in India with mechanical display worth $500 over your exemption would require your paying a duty of $32.12.

Personal imports of diamonds, pearls, rubies, etc., from countries with normal trade relation status are duty-free as long as they are not permanently mounted. When these items are mounted with some sort of metal, they are classified as jewelry and are subject to duty. (See the HTSUS, chapter 71.)

For sterling-silver tableware valued at $1,900, you deduct $800 for your exemption. That would leave a balance of $1,100 subject to duty. $1,000 of this is taxed at the flat rate of duty, usually 3%, and the remaining $100 is taxed at 3.3%, according to the HTSUS book. On the other hand, if the tableware comes from one of a number of specific countries, as listed in the HTSUS book, the entire $1,100 may be duty-free.

Note that original paintings and antiques over 100 years old are not subject to duty.

Although, in principle, articles can be classified in only one place, classification often requires interpretation and judgment. The CBP has authority to make classification decisions and may disagree with a reasonable classification offered by the importer. Published Customs rulings (http://rulings.cbp.gov) are often useful to see how Customs looks at the issues. 

 

Internet purchases from abroad

For info about Customs duties on Internet purchases from abroad, go to www.cbp.gov/trade/basic-import-export/internet-purchases.

How to pay Customs duty

If you owe Customs duty, you must pay it before the conclusion of your CBP processing. You may pay it in any of the following ways:

• US currency.

• Personal check, in the exact amount, drawn on a US bank and made payable to “US Customs & Border Protection.” You must pre­sent identification, such as a passport or US driver’s license. CBP does not accept checks bearing second-party endorsement.

• Government check, money order or travelers’ check if the amount does not exceed the duty owed by more than $50.

In some locations, you may pay duty with either a MasterCard or Visa credit card.

Household and personal effects — Customs duty guidance 

Household effects are duty-free. These include such items as furniture, carpets, paintings, tableware, stereos and linens as well as tools of the trade, such as professional books, implements, instruments and similar household furnishings.

Your personal belongings can be sent back to the US duty free if they are of US origin and if they have not been altered or repaired while abroad.

Personal belongings like worn clothing can be mailed home and will receive duty-free entry if you write the words “American Goods Returned” on the outside of the package.

You may import household effects you acquired abroad duty-free if…

• You used them abroad for no less than one year.

• They are not intended for any other person or for sale.

For Customs purposes, clothing, jewelry, photography equipment, portable radios and vehicles are considered personal effects and cannot be brought in duty-free as household effects. However, duty is usually waived on personal effects more than one year of age. All vehicles are dutiable.

Next month, I will report on duties on items sent back to the US and on finding a Customs broker.    ✦