Why Duty Calculators Are Not Created Equal

Duty Calc blog

Technology is wonderful.  No one will deny that.  It allows us to shift black-and-white tedious work to a program, so we can focus on what is truly complicated and worthy of our delightful human brain.

Let’s talk about freight calculators for a moment.  We move cargo from point A to point B (like human airfare and travel) at rates that has some variability due to peak seasons and ancillary charges. Freight is a result that can be somewhat easily computed by plugging in point A, point B and details of what is being shipped. (For now, I won’t belabor the complications of fixed rates vs. spot rates for freight calculators!)   Got it.  In theory, I’m great with freight.

With duty, I am so NOT.

To the left and to the right, I see duty calculators popping up on the web suggesting to the novice importer that the calculation is as easy as plugging in the commodity, country of origin, and value.

There is nothing further from the truth.

First, let me share with you that there are General Rules of Interpretation (GRI) of the Harmonized Tariff Schedule of the U.S. (HTSUS, the bible of duty classifications), chapter notes, and head notes that govern how a product should be classified.  Not to mention that a) there are rulings from the ITC, from the Commerce Department and from US Customs that direct classification; and b) other government agencies (like FDA, USDA, TSCA, DOT, etc.) have specific requirements as well.

Here are just a few examples of common misclassification mistakes:

  • A child’s Christmas costume: would it be properly classified as a festive article since, after all, it is for a holiday—or as a textile, since that is the constitution of the article?  If it were truly a festive article, this product could enter the country duty-free.  If it were construed to be a garment, depending on the composition, the merchandise would be subject to duties up to 20%!
  • How about sunglasses? Shades seem simple enough.  They are typically subject to duties at 2% ad valorem from most countries.  But, did you know that they are considered a medical device and are regulated by the FDA?  Did you also know that if you do not provide specific documentation to FDA and declare specific registration and affirmation of compliance codes, your sunglasses will likely be detained?
  • And what about the INFAMOUS duty rate for candles out of China? Ask any duty calculator, and it will tell you that candles enter our country duty-free. This is true!  What they will NOT tell you, is that the lion’s share of candles out of China are subject to antidumping/countervailing (ADD/CVD) duties—a long-term liability that could cost you 108.3% of the value of goods (in today’s world, at the time of entry) and is subject to a variable antidumping rate until the underlying entry liquidates—which could be a decade from now.

Consider carrying that liability!  Oh, and you will likely also need to post collateral with the underwriter of your Customs bond to protect them in case the 108.3% rate deviates between now and the date of liquidation.

Take the latter information and cross-pollinate it with our current political environment.   We are now living in an era of big-industry protection. That means that our country will be very much focusing on countries that subsidize their industrial output or otherwise hinder U.S. business.  More specifically, that translates into many, many more investigations and many, many more ADD/CVD cases.  In FY 2015, CBP conducted 28,783 entry summary reviews and identified $29 million in additional AD/CV duties—and 62 new AD/CVD investigations representing the highest number initiated in 16 years.

More alarming, there are currently 328 open AD/CVD cases impacting 149 different commodities, covering 39 countries.

Take all of that information and cross-pollinate it with our new reality.  Customs now has a solid new platform of visibility called Automated Commercial Environment (ACE). They also have established commodity specialists and developed commodity Centers of Excellence and Expertise (CEE).  These entities have much more access to information—and are extraordinarily informed about commodities– much, much more informed than any duty calculator can ever capture.  This is especially true because the compliance and enforcement environment is highly fluid and ever-changing.  Very simply speaking, the buyer MUST beware and be aware.

So what is an importer to do?  The reality is, Customs regulatory issues are for licensed and educated Customs brokers, not an automated program.  However, knowing a licensed broker is behind an automated tool can make all the difference.

Shapiro’s Classification Advisory Portal is your one-stop for compliant, scope classification.  Our skilled compliance team uses over 150 years combined experience to research, analyze and classify each request.  Pre-classification is a great way to forecast landed costs, reduce unnecessary research, and streamline the entry process.

Class advisory

For more information and access to Shapiro’s Classification Advisory Portal, Contact Us today!

-- Marjorie Shapiro
President/CEO