Importing Pitfalls: What to Consider Before Importing a New Product
Launching a new product is fun, exciting, and hopefully profitable. In the excitement of finding a new niche or product however, it can be easy to miss out on some of the finer details that can add up to huge headaches in the long run. Most sellers always consider arranging their shipping, but often forget about U.S. customs clearance. Before production begins, and definitely before your new products leave the factory, here are a few things to consider:
These are on all seasoned importers’ radars, but often get overlooked when researching new products to sell. A tariff is a tax on goods being imported from another country. Rates vary from product to product, and are based on multiple data points, such as the finished state of the product, materials used, etc. Duty rates are percentages, and are based on the commercial invoice value of the goods. For example, the duty rate on yoga mats is 4%. If you purchase 10,000 yoga mats for $2 each, your commercial invoice value is $20,000. Multiply that by the duty rate (4%), and you’ll pay $800 in import duties.
It is important to find out the duty rate of a product during the research phase, as duties will directly impact your margins. While most duties are relatively low, some products can have duties of 25% or higher.
Manufacturers will typically know the HTS (harmonized tariff system) code for the products they manufacture, and that can be used to look up the duty rate. However, if the product could potentially fall into two categories, manufacturers are notorious for selecting the category with the lower rate. When it comes time to clear customs, a customs agent may exam and reclassify your goods at the higher rate. Getting a product classification from a licensed customs broker is always a good idea the first time you import a product.
In addition to the base duty rate, some products are subject to anti-dumping and countervailing duties. These duties are enforced against either companies (anti-dumping) or countries (countervailing) to avoid products being sold at a loss into the United States. The additional duties on products subject to AD/CVD can be 100% or more. Some example of products are pencils, paper clips, and steel shelving, among others. A full list can be found here
Other Government Agencies
In addition to U.S. Customs and Border Protection, some products are subject to other government agencies as well. CBP may issue a customs release once the goods arrive, but will still hold goods until all agencies with authority over a product give the go ahead. While there are many agencies that can hold goods, the two we most frequently work with are the Food and Drug Administration (FDA) and the Consumer Product Safety Commission (CPSC).
The FDA regulates all food, drugs, medical devices, etc. that are imported into the United States. Many products are subject to FDA approval that you may not think would be regulated. We have had customers importing first aid kits get held up by FDA due to gauze, or alcohol wipes. Even some body/costume paints require approval. A general rule of thumb is, if it goes on or in a body, the FDA regulates it. If you try and import a product that is FDA regulated, your manufacturer will need to register with the FDA (they likely already have, unless it is their first time exporting to the United States) and your company will need to register as an approved importer. FBAforward’s customs department can help get you registered before your products are imported.
The CPSC can regulate all consumer products, but in our experience, most items that get flagged are toys. The CPSC will do a few tests on toys, dropping and breaking them to see how small the parts are, verifying the age range on the packaging is correct, ensuring the manufacturer is registered appropriately, and that your company’s contact information is readily available to the consumer. Our customs department can also assist in making sure you are compliant with all regulations prior to export.
The last potential hurdle in the process is a customs exam. Even if all your paperwork is filed timely and correctly, the CBP may still flag your shipment for a random exam. Exams are used to ensure the packing list matches the contents of the shipment, the products are classified correctly, carton and unit counts are correct, etc. CBP may choose to do a brief x-ray exam, where they run the shipment through a large x-ray machine to verify the contents, or they can do an intensive exam. During intensive exams the customs officer will usually move the shipment to another location, unload all boxes, and open and inspect the individual units. These exams can take days or even weeks, depending on how large the shipment is and how backed up the customs officers are. During the exam extra charges are usually incurred in the form of exam fees and storage charges. Awful, but unavoidable.
I like to compare the customs exams to going through airport security. Sometimes you get randomly selected for a pat down at airport security. It is for the safety of everyone, and in our best interest to allow them to happen. The only difference is, TSA doesn’t also charge you for your random pat down.
Importing products is no easy task. There are lots of things you can plan for, and some you can’t. Our customs department can help with the process though, so you don’t have to worry about anything. We have established relationships with CBP and many of the other government agencies, which helps us expedite shipments through the import process.
This is a guest post written by FBAforward. FBAforward is a technology-driven logistics support firm that caters to Amazon FBA merchants. It was founded with a value-oriented and superior objective:To offer Amazon sellers a simplified logistics process so they can focus on more important aspects of their business. FBAforward’s team of Amazon experts handles everything, from arranging the entire shipping and customs process to inspecting, prepping, and forwarding shipments to Amazon’s fulfillment centers. For more information, visit fbaforward.com