Tariffs 101: The Basics of Importing into the US

Importing goods into the U.S. involves navigating tariffs, compliance, and paperwork. If you’re new to the process, understanding the basics can save you time, money, and potential headaches. In this guide, we’ll walk through the essentials: setting up as an importer, understanding tariffs, key import documentation, and the role of a customs broker. 

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Getting Started as an Importer

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Before you can start importing, you’ll need to take a few important steps:

1. Obtain an Employer Identification Number (EIN)‍

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Your EIN is your business’s tax ID, issued by the IRS. It serves as your identifier with U.S. Customs and Border Protection (CBP) and is required for import transactions.

2. Work with a Licensed Customs Broker‍

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A customs broker helps importers navigate trade compliance, classify goods, calculate duties, and file required paperwork with CBP. While brokers handle the logistics and filings, the importer of record (you) is ultimately responsible for the accuracy of the information provided. Any errors in the paperwork, such as incorrect HTS codes or misdeclared values, can result in fines or penalties.

Understanding Tariffs

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Tariffs are taxes on imported goods, assessed by CBP at the time of entry. The tariff amount depends on several factors:

    • Product classification: Determined by the HTS code (explained below).

    • Country of origin: Where the product was made or significantly transformed.

    • Eligibility for preferential duty programs: Special programs that may reduce or eliminate tariffs.

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In addition to standard tariffs, some goods may also incur additional duties, such as:

    • Section 232 duties: Imposed on steel, aluminum, and certain other products for national security reasons.

    • Section 301 duties: Tariffs applied to goods from specific countries, such as those targeting imports from China.

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Proper classification and planning can help you manage these costs effectively.

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Harmonized Tariff Schedule (HTS) Codes

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The Harmonized Tariff Schedule (HTS) is a system used to classify goods for customs purposes. Every product is assigned a unique10-digit HTS code, which determines:

    • The standard tariff rate

    • Whether additional duties apply (e.g., Section 232 or 301)

    • Eligibility for preferential duty programs

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Steps to Determine an HTS Code:

1. Identify your product’s material, function, and use.

2. Search the HTSUS database.

3. Confirm the classification with your customs broker. Misclassification can lead to fines or delayed shipments, but you are responsible for ensuring the code is accurate.

Country of Origin (COO)

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The country of origin (COO) is the country where a product was made or last underwent substantial transformation. COO is critical because it:

    • Affects the tariff rate applied

    • Determines eligibility for preferential duty programs

    • Identifies goods subject to trade restrictions or sanctions

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If raw materials are sourced from one country but the product is manufactured in another, the COO typically corresponds to the country of manufacture. Correctly identifying COO is essential to avoid compliance issues.

Preferential Duty Programs

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Preferential duty programs can reduce or eliminate tariffs on qualifying goods. These programs include:

    • Free Trade Agreements (FTAs): Agreements like the USMCA (United States-Mexico-Canada Agreement) allow duty-free trade for goods meeting specific rules of origin.

    • Generalized System of Preferences (GSP): A program that offers tariff reductions on goods from developing countries.

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Eligibility for these programs often requires additional documentation, such as certificates of origin. While your customs broker can guide you, you are responsible for ensuring all information is accurate and supported by proper records.

Communicating with CBP: Import Documentation

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When goods arrive at the U.S. border, certain documents must be submitted to CBP to calculate duties and ensure compliance. These include:

1. Commercial Invoice: Details the value, quantity, and description of the goods.

2. Packing List: Provides a breakdown of the shipment’s contents.

3. Bill of Lading or Air Waybill: Transportation documents showing ownership and movement of goods.

4. Entry Summary (CBP Form 7501): Filed by your customs broker, this form communicates:

        • HTS  codes

       • Country  of origin

        • Declared value for tariff calculations

While the customs broker files these documents on your behalf, the importer of record is responsible for their accuracy and any resulting compliance issues.

Checklist for New Importers

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To summarize, here’s what you need to get started:

1. Obtain an EIN for your business.

2. Hire a licensed customs broker to assist with filings and compliance.

3. Determine the correct HTS codes for your products.

4. Verify the country of origin for each product.

5. Check if your goods qualify for preferential duty programs.

6. Understand whether your goods may be subject to additional duties (e.g., Section 232 or 301).

7. Ensure all required paperwork is accurate and complete:

        • Commercial Invoice

.        • Packing List

        • Bill of Lading/Air Waybill

        • Entry Summary (CBP Form 7501)

When to Seek Expert Help

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While this guide provides a basic overview, importing can be complex. Customs brokers and trade experts can help you:

    • Avoid misclassification of goods

    • Understand additional duties and restrictions

    • Identify opportunities to reduce costs through preferential duty programs

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The Kendrick Trade Advantage

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At Kendrick Trade, we simplify trade compliance for businesses of all sizes. Our tools automate key steps like free trade agreement qualification, helping you stay compliant while saving time and money. Whether you’re new to importing or a seasoned professional, we’re here to help you navigate the complexities of international trade.

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Ready to streamline your importing process? Let’s connect and explore how Kendrick Trade can help you succeed.