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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 easier than ever before. Web sites like ours are meant to help importers find the Ecuadorian suppliers they are looking for in a rapid 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.

Financing of Purchases:

Individuals and firms duly and legally established abroad may apply to the National Finance Corporation (Coorporacion Fiananciera Nacional) CFN for export loans (to purchase Ecuadorian goods), up to the value of the shipment (not to exceed US$5,000,000.oo). The interest rate is LIBOR + spread established by CFN. Payment installments every 180 days and the term varies:

  • Consumption goods (for commercialization) up to 360 days
  • Intermediate goods up to 2 years
  • Fixed assets up to 5 years
  • Services up to 5 years

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.

 

 

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