You’re a retail fashion business, and you’ve decided to import some clothes and accessories to stock your store. What do you need to know and have ready in order to get your merchandise through Customs, into the US, and onto your shelves? While the US importation regulation system is far too complicated and item-specific to cover completely in a single blog post, the following points, this post, and this post are useful general guidelines for any retail textile and apparel importation.
Before You Place That Order – Initial Importer Issues
Before you place an order with your foreign supplier or fill out a Customs form, it’s important to know about restrictions and regulations on importing certain goods and on imports from certain countries. Customs and Border Patrol (CBP) and importation regulations exist to protect US-based manufacturing, to stop the importation of illegal or contraband goods, and enforce the myriad trade agreements in place between the US and other countries. Textiles and related fashion goods constitute a large percentage of all goods imported into the US, and their importation is highly regulated. There are other regulations particular to the importation of fur, leather, and wool, as discussed in this post, and there are certain goods that cannot be imported into the US at all, such as products from endangered species (so no importing jaguar jackets or ivory bangles).
In addition to knowing what can and can’t be imported and specific regulations on animal-based goods, a US importer should be aware of the importing country’s trade status with the US before ordering goods. You currently cannot import any goods from Cuba, Burma, Iran, parts of the Sudan, or North Korea into the US, no matter how sartorially on point. Trade status, whether favored or restricted, is part of the US’s relationship with other countries; some are more favored than others, and that is reflected in how much volume of a product can be imported – a “quota” – as well as the percentage at which the duty, or import fee, on the goods is calculated. You could pay more or less in importation duties depending on which country you import your goods from. For example, the North American Free Trade Agreement (NAFTA) is intended to encourage US importation of goods made in Canada and Mexico by giving goods from those countries more favorable (aka lower) importation rates.
All goods imported into the US must be marked with the country of origin in such a way as to let the ultimate consumer – your retail shopper in this case – know where the good was made. Additionally, under the Textile Products Identification Act (15 U.S.C.70), textiles must show the fiber content, percentage of each fiber in the item, and the manufacturer’s name. In addition to the general labeling requirements under this Act, there may be additional customs regulations for the particular textile you are importing. For example, there’s a separate subsection of the law specifically governing labeling requirements for socks, down to the allowable placement of sizing and fiber content information. Make sure your foreign manufacturer is labeling your goods in compliance with these requirements, as unlabeled or improperly-labeled goods won’t pass Customs.
It should go without saying that you should not try to import counterfeit goods into the US. Shipments are inspected by CBP at the port of entry – particularly textile imports – and goods that violate intellectual property rights are regularly seized and destroyed – and that’s in addition to the other legal ramifications a counterfeit importer faces). If you are importing “grey goods” – genuine, trademark-bearing goods diverted from their originally intended market – have clear documentation to show that the goods are genuine and that their sale to you was legitimate. If you are importing trademarked grey goods you might want to retain an attorney from the beginning of the purchase negotiations, to ensure that you have the necessary documentation from the seller and the country of export. If, conversely, you are importing goods bearing your trademark or copyright, and you want CBP to be on the lookout for counterfeits of your IP, you can register your registered mark or copyright with CBP for a fee.
After you purchase – Getting Your Goods into the US
Many first-time importers hire a licensed Customs Broker to ensure that the process and products will pass through Customs smoothly, and won’t be held up incurring fines and fees, or being seized and destroyed. Whether you work with a Customs Broker, an attorney, or do the importation yourself, you should have your documents and all information about the products and the shipping in hand at the start of the process in order to avoid unnecessary delays, fees, fines, and legal headache.
In order to be able to complete the required paperwork, calculate the duty rate, and get useful advice from a Customs Broker, CBP agent, or attorney you should know: 1) the country of origin of the merchandise and the manufacturer; 2) the fiber content and percentages of the merchandise; 3) the intended use of the item; and 4) pricing/payment information, in order to properly determine the value of the shipment. This information will be needed in and inform all parts of importing your goods into the US.
You must file an “Entry Summary” document with the CBP, as well as possibly other forms depending on your specific type of textile import. You can file this and other required forms ahead of the shipment arriving – or after, though you won’t be able to take delivery of the shipment until the paperwork has been processed – through the CBP’s Automated Broker Interface.
You must keep business records in compliance with the Customs Modernization Act (the “Mod Act”). The Mod Act makes importers responsible for determining the proper value, classification, duty rates, and any other government agency requirements. The Mod Act lists the documents required for most entries: the bill of lading; packing list; bond information; vessel, vehicle, or air manifest (depending on the method of transportation your order took to arrive in the US); and information such as exporter and importer contact information, date of arrival, and port of entry.
Additionally, if your goods are arriving by sea, you must meet the Importer Security Filing and Additional Carrier Requirements (commonly known as the “10+2”), by submitting the Importer Security Filing no later than 24 hours before the cargo is loaded onboard the vessel, listing much the same information required by the Mod Act – seller and buyer information, manufacturer, country of origin, etc.
Textile importers specifically must comply with the Uruguay Round Implementation Act (19 USC 1592a). The Act authorizes the Secretary of the Treasurer to list foreign producers, manufacturers, suppliers, sellers, exporters, or other foreign persons who have used false, fraudulent or counterfeit documentation, labeling, or prohibited transshipment practices in importing textiles and apparel. The Act requires any importer connected directly or indirectly with a person on that list to show that it took reasonable care to ensure that the importations are accompanied by accurate documentation, packaging and labeling regarding the products’ origin. An importer should consider the questions listed here (item number 7) to ensure that the documentation, packaging and labeling are accurate regarding country-of-origin considerations. Failing to meet this showing could result in your goods being delayed, or seized.
This might seem like a silly consideration, as you’ll probably have your order shipped to the port closest to your business. However, in light of the recent labor and contract disputes at west coast ports causing shipments to be turned away at one port only to pile up at another, it is advisable to call your local port – or several – to determine whether there are special considerations for importing goods at that port. A CBP import specialist assigned to textiles can assist you with your importation, but you should be able to provide full and complete information about the goods and their value, as discussed above. Additionally, when you have determined which port of entry your goods will enter through, consider how you will get them from dockside to your store. You can ask a CBP agent at your port of choice for advice on delivery logistics, but it will be up to you to retrieve your goods from the port of entry in a timely manner and in compliance with the port’s particular requirements.
Every item imported into the US is subject to a duty, or percentage fee based on the value of the imported item. Items are classified by the CBP in the Harmonized Tariff Schedule. Experts spend years learning how to classify items properly. The type of garment (as defined by the CBP), the fiber content, and country or countries of origin and manufacture will all effect the classification and thus duty rate on an item.
On average, textiles are assessed a 16% import duty on their total value. You will have to post a bond along with your Entry Summary sufficient to cover your estimated duty, as well as the fees and taxes. You must provide a classification and duty rate on your paperwork. However, the information and advice systems are only as complete as the information you provide about the textiles, their construction, fiber content, and country of origin, and the CBP ultimately determines the correct classification and duty rate of your imported goods. You can approximate the duty rate on an item by using the US International Trade Commission-Tariff Database tools, and read previous CBP rulings on similar products through the Customs Rulings Online Search System. You can also receive guidance by calling the CBP port you will be importing the items through and talking with a textiles specialist. Or you can request a written, binding ruling from the CBP determining the proper classification and duty rate of your imported items.
For questions regarding this blog, please contact Rachel@lawontherunway.com
This was a guest post written by Elif Sonmez. Elif is a San Francisco attorney. She is interested in civil litigation and helping artists run their businesses. Before she became an attorney, she worked nationally as the Head of Props and Wardrobe for the John F. Kennedy Center for the Performing Arts’ KCTYA On Tour program.