How
to Import from Ecuador
Overview
Importing
Procedures
Andean
Trade Preference Act
Free-Trade
Zones
Overview
Importing
goods and services from foreign suppliers is now commonplace.
Companies generally import for the following reasons: 1)They
can obtain materials and products for less than they can
domestically; 2)The foreign goods are of a higher quality;
and/or 3)The foreign goods are not available domestically.
The
procedures for importing from Ecuador depend largely upon
the country to which imports are directed. Since the U.S.
is the primary market for Ecuadorian exports and the largest
supplier of Ecuadorian imports - in 2000, the U.S. purchased
USD 2.21 billion of Ecuadorian exports and Ecuador imported
USD 1.03 billion of goods and services from the U.S. - we
will use importing to the U.S. as our example. While U.S.
import procedures and requirements should provide a good
model for judging situations in other countries, companies
planning to import to non-U.S. countries should investigate
the procedures and regulations in their particular market.
Importing
Procedures
Purchase
of Goods:
The
purchase of goods is the first step to importing them. The
purchase itself is straightforward, although finding an
appropriate supplier may be slightly more difficult. Nevertheless,
the advent of web-based technologies has made locating Ecuadorian
suppliers much easier than ever before. Web sites like ours
are meant to help importers find the Ecuadorian suppliers
they are looking for in a fast and efficient manner.
Coming
soon - EcuadorExports Virtual Marketplace. In a short amount
of time, importers will be able to locate suppliers, as
well as purchase products, directly on EcuadorExports. Look
for these services below the Trading Floor menu, which will
offer catalog searches of exporter products, a request for
quote system, and live auctions.
Monitoring
the Movement of Goods:
Once
the importer has purchased the goods, he or she must monitor
the incoming shipment, from the point of embarkation, until
delivery. Often, inexperienced importers expect that purchased
goods will arrive, without a hitch. This rarely happens,
however, and importers should not rely solely upon carriers
and other outside companies. Instead, importers should be
actively involved in the importing process, from start to
finish.
Freight
companies, customs brokers, and customs officials participate
in bringing shipments from foreign countries to the U.S.
This process and the role of the various players are outlined
below.
International
freight Forwarder (Agencia de Carga): Notifies the importer
two days before the shipment arrives at the port of entry;
and releases freight to the terminal operator.
Customs
broker: Obtains customs releases and other clearances
at the port of entry; and verifies that the shipment is
complete.
U.S.
customs official: Collects duty; and verifies that the
shipment complies with customs regulations.
Terminal
operator: Contacts domestic carrier; verifies that the
delivery order is accurate; and releases the goods to the
domestic carrier.
Domestic
freight carrier: Receives the shipment; and delivers
shipment to the importer.
Because
so many people are involved in the movement of goods, it
is not uncommon for coordination problems to exits. Therefore,
the day a shipment arrives, it is advisable to send a company
representative to the port of entry to oversee the processing
of the imported goods.
Customs:
Customs
agents assume control of a shipment, when it arrives at
a U.S. port of entry. Any shipment worth more than $1000
must go through the formal entry process. This process includes
the following four steps:
1)
Completion and filing of entry documents (see below).
2) The classification and inspection of the merchandise.
3) A declaration of value.
4) A determination of duty and payment.
Usually
this process requires approximately five days. Once the
amount of duty has been assessed, a customs official will
notify the importer. The importer should then instruct his
or her customs broker to pay the duty, so as to obtain the
release of goods. If the shipment is not retrieved within
five days, customs transfers it to a warehouse, where the
importer is charged for storage. (If the merchandise remains
in storage for one year, customs may auction the goods to
pay for storage costs.)
Entry
Documents:
U.S.
Customs uses 22 entries to classify shipments to its ports
of entry. The most common are:
Consumption
entry: This is the most common. It is used for goods
brought directly into the importer's stock and which are
intended for domestic resale.
Immediate
transportation entry: Allows goods to be forwarded immediately
from the port of entry to another destination for customs
clearance.
Warehouse
entry: Is used for goods that will be stored at bonded
Customs warehouses.
Warehouse
withdrawal for consumption entry: This is used when
goods are taken out of the bonded Customs warehouses.
Immediate
exportation entry: Used when goods are to be transshipped
to a third country.
Baggage
declaration and entry form: Filed by U.S. citizens returning
from abroad.
Customs
requires certain documents, before it will release a shipment
from its custody. Specifically, they demand the following:
1)
An entry form; typically one of the six listed above, completed
by the importer or its customs broker.
2) A commercial invoice from the exporter.
3) A bill of lading from the exporter or the freight forwarder.
All
of these documents must provide a description of the shipment,
the value of the merchandise, and the amount of duty to
be paid. The importer or its broker must pay the duty or
post bond guaranteeing payment, before customs will release
the shipment.
Duties:
U.S.
Customs charges three types of import duties:
1)
Specific duties assessed on a unit of merchandise or goods,
such as $10 per pound.
2) Ad valorum duties assessed as a flat percentage of the
transaction, such as 10 percent of the total value of the
shipment.
3) Compound duties that combine specific and ad valorum
duties, such as $5 per pound plus 10 percent of the total
value of the shipment.
The
Tariff Schedules of the United States, an enormous document,
contains the duties assessed by U.S. Customs on nearly every
imaginable type of merchandise. In the event that an import
does not appear in this document, officials at the port
of entry determine the type of duty and the applicable rate.
Duty-free
goods and merchandise are those that are not taxed, when
they enter the U.S. Duty-free status is typically assigned
to items that are not to be sold in the U.S., such as materials
imported specifically to be modified or further processed
in the U.S. (and to be exported later), samples used to
sell a product, items intended for review or experimentation,
etc. The personal belongings of individuals are also considered
duty-free.
Drawbacks:
"Drawback"
is a term used to describe refunds of duties previously
paid on imported goods. Drawbacks apply to importers, who
export their products, or exporters of articles that are
manufactured with previously imported goods. Companies are
eligible to receive drawbacks if:
1)
The imported goods are used in the production of final products
in the U.S., and these products are then exported.
2) The importer rejects the goods because they are not what
it ordered.
3) The importer returns the goods to the exporter within
three years in the same condition as when they arrived.
4) The imported goods are banned. These goods will either
be returned to the exporter or destroyed by Customs.
5) The goods are exported from a Customs warehouse or if
the goods are temporarily removed from a Customs warehouse
for repair, re-supply, or maintenance.
Obtaining
drawbacks from Customs is complicated, and, therefore, companies
eligible for drawbacks usually hire a drawback specialist.
U.S.
Import Restrictions and Barriers:
The
U.S. Customs Service bars the entry of or severely restricts
goods that are considered detrimental to U.S. citizens.
This list is long - some prominent examples are alcoholic
beverages, arms and explosives, currency, narcotics, endangered
species, and toxic substances. Customs may confiscate such
goods or they may simply require that the goods be further
processed (e.g., labeled, modified, etc.), before they are
released.
In
addition to restricting goods because they are harmful,
Customs also restricts imports to protect domestic companies.
These types of trade barriers include quotas and antidumping
regulations.
There
are two types of import quotas: tariff-rate and absolute.
The U.S. government uses tariff-rate quotas to control the
pricing of domestic products. For example, if domestic producers
are pricing products at rates higher than the government
wants, it lowers tariff-rate quotas to allow imports to
enter at favorable duty rates. The government often uses
tariff-rate quotas to keep the price of essential goods,
such as milk, lower.
Absolute
quotas, by contrast, are used to control the quantity of
goods that are imported during a specified period of time.
Customs employs absolute quotas to manage the imported quantity
of certain goods, such as cotton and steel rods. Unfortunately,
if one is importing goods subject to an absolute quota,
there is no way to know if the shipment will be restricted,
until after it arrives. If a shipment does, in fact, arrive
after the quota has been filled, an "over-quota"
duty will be assessed.
In
addition to quotas, the U.S. government also makes use of
antidumping regulations to protect American producers. Antidumping
legislation restricts the importation of goods that create
an unfair environment for U.S. producers. Generally, Customs
considers imported goods to be "dumped" when they
are sold for less than the cost of production. Customs charges
additional duties on dumped imports to level the playing
field for U.S. producers.
Andean
Trade Preference Act
The
U.S. considers Ecuador, along with Bolivia, Colombia, and
Peru, to be a preferential trading partner. The Andean Trade
Preference Act encourages exports from Andean nations to
the U.S., by removing most trade barriers. The Act allows
for the duty-free export of certain products, such as flowers,
to the U.S. The chief benefit to U.S. importers is the opportunity
to acquire goods at prices substantially below those found
in the U.S. (The primary benefit to Ecuadorian exporters,
meanwhile, is virtually unrestricted access to one of the
world's largest markets.) In 2002, the U.S. renewed the
Andean Trade Preference Act for five additional years.
Free-Trade
Zones
Most
trading nations, including the U.S and Ecuador, now have
one or more free-trade zones. Free-trade zones permit companies
to ship goods into a country and then export them to their
ultimate destination, without paying a duty (A duty, however,
is still paid when the goods reach their ultimate destination).
The nearly 150 free-trade zones in the U.S. and the four
free-trade zones in Ecuador are generally used for assembly,
distribution, manufacturing, and transshipping of goods.
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