[Webinar] The Process of Liquidation and Entering Goods into the United States
Trade Risk Guaranty hosts an educational webinar covering the process of liquidation and the overall process of importing goods into the United States.
The process of liquidation can be a very confusing topic for new importers since it is an easy term to confuse with very different aspects of the business world. When it comes to the process of importing goods into the United States, liquidation is a very specific part of the process.
In the following webinar, Trade Risk Guaranty walks you through the following topics: Customs and Border Protection’s entry process, the process of liquidation, and the advantages of liquidation reporting.
For more information on the process of entering goods into the United States, check out our previous blog post: “Importing in the United States: An Introduction“.
Watch the Full Webinar about the Process of Liquidation and Entering Goods into the United States
— Trade Risk Guaranty (@TRG_Bond) August 4, 2017
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Read the Full Transcript from the Webinar
Liquidation Process Webinar Introduction
00:22 – This webinar is being presented by Trade Risk Guaranty Brokerage Services LLC, or as we commonly referred to as TRG. We are located in the heart of downtown Bozeman, Montana. To those unfamiliar with Bozeman, Montana it’s nestled right above Yellowstone National Park in southwestern Montana. If you’re in town don’t be shy! Stop on by the second floor of the historic ‘R’ Bar building.
00:45 – Our direct-to-importer business model is unique to the Customs bond and cargo insurance markets. We’ve grown our business over the last 25 years to encompass over 10,000 clients from all avenues of international trade.
01:02 – As an important disclaimer; the information presented in this webinar is for information purposes only and is not intended and does not constitute legal advice.
01:09 – We will be recording this webinar it will be available on YouTube for future reference. If you have any questions during the presentation submit it via the questions section of the webinar interface. The questions will be reviewed and answered by myself or our team of licensed Customs brokers shortly after the webinar. If you have any additional questions outside the webinar or if you would like to be a part of the community of trade professionals join our Facebook group ‘International Trade Professionals – TRG’. We regularly check the group for questions and encourage our members to start conversations amongst themselves if they have a common problem.
01:48 – During the course of today’s webinar, I will walk you through the timeline of Customs’ entry process which will lead us up to the often overlooked, and commonly misunderstood, process of liquidation. Finally we will address how you can utilize liquidation reporting to strengthen your Customs compliance and ultimately protect your business.
What is the Customs Entry Process?
02:48 – Now that we’ve squared away what an entry is let’s take a peek at an overview, a timeline if you will, of Customs’ entry process. The stages of entry process are as follows; before United States arrival, goods arrived at the port, declaration of the entry, filing the cargo release, filing the entry summary, and the payment of estimated duties.
03:15 – Before Goods arrive in the U.S. there are a few items you will need to have squared away with Customs first. You’re going to have to have a government mandated U.S. Customs bond in place. Customs bonds can be purchased from a company like TRG or, in many cases, by a Customs broker or freight forwarder on your behalf.
03:33 – The second item on the list is to have your ISF, also known as Importer Security Filing, filed 24 hours before your goods leave the foreign port. Alongside this filing you will need an ISF bond. However, if you have a continuous Customs bond, the need for an ISF bond will already be satisfied.
03:50 – Third, you need to make arrangements at the port you wish to bring your goods into. Great! Everything on the list has been squared away and your goods arrive at the port.
04:02 – By port I mean a port of entry. Which is defined as areas where port specific operations happen that include clearing cargo, collecting duties, processing passengers, etc. What I’m getting at is that ports don’t need to be on the coast. In fact, a port of entry could just as easily be an International Airport as some bring goods in via a plane.
04:23 – Now that your goods have arrived at the port, you need to declare how these will be entered. Goods can be entered in three ways; for consumption, for warehouse at the port of arrival, or they may be transported in bond to another port of entry to be entered there. About 95% of the goods entered in the United States are entered for consumption as this includes all commodities entered for commercial, business, or personal purposes.
04:49 – At this point, there are a few different deadlines for the various items that must be filed with Customs. However, the majority of importers choose to handle them all the same time and file for immediate release. This means they will submit their cargo release, entry summary, and their estimated duties simultaneously so the goods can be released immediately on clearing Customs. If an importer chooses not to file for immediate release, there are specific deadlines for each one of these items.
05:16 – First up your cargo release. Filing your cargo release must occur within 15 days of the goods arriving at port. This document does exactly what it says and releases the goods from Customs custody. It also signals that the importer has the right to make entry. Until the cargo release has been filed the goods will be stored at the terminal. However, additional fees for storage begin to accrue after 2 to 5 days.
05:40 – Once the cargo release has been submitted and the goods have been released, you’ll have 10 days to file your entry summary, also known as CBP form 7501. This is a key document in the importing process as it includes importers’ declarations as to the classification, origin, and value of the imported merchandise.
06:01 – Finally you need to pay the estimated duties due for the goods. These duties are paid along with the filing of your entry summary so that the two are filed together.
06:10 – I’d like to take a quick minute to cover a very important topic. A major misconception of a vast majority of importers is that the final phase of the Customs’ entry process is when they pay duties. I can’t stress this enough, this phase is actually an estimation of the duties. Even though money is transferring hands, you’re only really paying a deposit on what the duties could be. You will not know the final amount due until the time of liquidation which is close to a year after the goods arrive at port.
06:39 – So remember, just because you paid duties on your goods, the importation process has not been completed.
What is the Process of Liquidation?
07:19 – By definition, liquidation is the final assessment of money owed to Customs based on the current knowledge of duty rates and the value of the imported goods. For the majority of imports it is the final phase of importing.
07:32 – The final assessment is determined based on the rate of duty that correlates with the HTSUS code used to classify the commodity.
07:39 – So when does liquidation actually occur? Typically Customs will liquidate the entry within 314 days from the time of goods being entered in the US. If the goods haven’t been liquidated after a year, Customs will automatically liquidate them at the estimated duty rate. Meaning there is no change from what you’ve already paid. All that said there are exceptions to this timeline which we’ll cover a little bit later.
08:01 – You’re probably curious at this point as to what Customs is assessing or why the amount of Duty would change at the time of liquidation. In a lot of cases, the final duty amount at the time of liquidation doesn’t necessarily change and often an entry liquidates with the initial estimated duty amount. However, there are a few reasons Customs might demand more money be paid on an entry.
08:22 – One reason would be if the importer or Customs broker misclassifies the good at the time of entry. In this case, Customs determines that a different HTSUS code should have been used to classify that commodity and the updated HTSUS code has a higher duty rate tied to it.
08:38 – Another reason for a change can be as a result of a recent Customs ruling on your imported commodity that has changed its rate of duty. Even a ruling on similar commodity can influence a rate change. Alternatively, court cases and changes in Customs practice can influence a final duty rate determination.
08:56 – In the event the final duty owed is different than the estimated duty paid, there are two events that can occur. Either more duties are due and Customs issues a supplemental duty bill or too much was paid at the time of entry and Customs issues you a refund.
09:12 – If you disagree with either of these outcomes you do have 180 days from the liquidation date to protest the amount. In either event, this is a good time to stress having a current and accurate address on file for Customs to reach you at. Especially if a supplemental duty bill is issued as these are timely requests and avoiding or missing a payment can lead to very serious consequences, resulting in the termination of your bond and possible legal intervention.
09:40 – Occasionally, and for very specific circumstances the liquidation of your entry could be suspended or extended. When this occurs Customs is saying that it needs more time than the allotted 314 days to determine the final duty amount.
09:53 – Essentially this places the final determination of your entry into limbo for at least another year. In some cases, we have seen entries go for as long as 7 years before being liquidated.
10:03 – As a result of these entries being in a state of limbo the entry itself poses an unknown amount of additional danger to both importer and surety alike. Especially because when these entries do liquidate Customs may impose additional tariffs on certain commodities contained within the entry that are subjected to anti-dumping or countervailing regulations.
10:22 – Misclassification or valuation issues and, in some instances, the additional tariffs makes it a hundred percent of the value for the particular commodities contained within the entry compounding on this risk is that the multiple years of suspended or extended entries can be stuck in limbo while waiting for Customs to liquidate.
10:40 – Really what this all boils down to is that in a worst-case scenario multiple years of suspended or extended entries can end up liquidating at a significantly higher rate of duty resulting in a massive amount of money owed to Customs and can easily disrupt even a thriving importers business.
Using Liquidation Reporting
11:10 – The layout of the report may vary from each service provider, but typically you can access data formatted similar to an excel sheet that supplies columns of data to keep you on track with your entries.
11:20 – Depending on who you had your Customs bond with will typically determine if liquidation reporting is available to you. If you are a current Customs bond client, TRG offers liquidation reporting for free through our Eagle Eye system. If you’re curious about our Eagle Eye reporting system, we have a previous webinar demonstrating its capabilities or you can contact me directly via my contact info at the end of the webinar.
11:41 – Otherwise, it might be possible that your Customs broker offers some form of liquidation reporting which they will be able to provide to you directly.
11:48 – In the event liquidation reporting isn’t available to you from your Customs bond source, you can still utilize liquidation reporting via Customs’ Automated Commercial Environment, also known as ACE. You can sign up for ACE for free directly at Customs’ website. There are many advantages to keeping track of your liquidated entries through liquidation reporting, but the most valuable is staying up to date on the most accurate information concerning your entries.
12:12 – Knowing which entries have liquidated and which remain unliquidated can help you assess how much open liability your company currently has in regards to importing. You can also make more informed decisions concerning your importing practices in order to stay compliant with Customs.
Liquidation Process Webinar Conclusion
12:45 – I wanted to take a minute to go over what Trade Risk Guaranty is. We’re an international trade insurance agency. We work directly with importers and exporters and we’ve been doing this for 25 years. We’ve got over 13,000 clients that we work with every day specifically discussing their complex topics and helping them navigate through this world of Customs. An additional resource for them with their Customs broker and freight forwarder.
13:06 – So our model does help save time and money and our multi-year billing cycles are significantly less, usually on the Customs bond, than what the average would be. Typically, people are paying somewhere between $475 and $525 for their Customs bond and we are down to $225 year with our multi-year pricing on a $50,000 bond.
13:25 – You continue to work with any broker or forwarder of your choice and then our in-house claims assistance from licensed Customs brokers are going to help you navigate any issues that come along the way.
13:34 – Thank you for attending our webinar if you have any questions please don’t hesitate to reach out to me directly by my email Nick.Esposito@traderiskguaranty.com or via our Facebook group International Trade Professionals – TRG. The added advantage of reaching out to the Facebook group is you’ll access not only our experts on staff, but also experts in the international trade community.
13:56 – Additionally, check out our blog traderiskguaranty.com/TRGpeak it’s got a treasure trove of excellent articles and information. Don’t forget you can find us on Facebook, Twitter, and Linkedin. Again, thanks for attending the webinar and don’t forget to check your inboxes for an invitation to part 2.
Meredith Lambert • July 31, 2017
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