Here is a reminder of a big “what not to do.” Hopefully, this blog can help you avoid cumbersome mistakes and costly liability. Companies and individuals assume that their broker is an expert and is correctly following the law. (This blog is about exporting but this is relevant because many exporters are also importers. In fact, an exporter just had this problem when it was using a duty-free “temporary import under bond” HTS number.) What many companies do not realize is that brokers are almost never liable for providing wrong information to Customs and Border Protection (CBP). Really. If the HTS code is wrong…you are responsible and required to check the documents. If the duty is wrong…you are responsible for the payments and penalties. If you are claiming a special program like NAFTA and you get the calculation wrong or chose the wrong applicable tariff shift…you are responsible. It doesn’t matter if the broker picked it for you. If there are safety standards or reporting requirements that have not been met…you are responsible for the costs when the shipment gets seized.
And not only are you the person that CBP will call when there is a problem, but you can’t look to the broker to reimburse you. Brokers have very limited liability. You are the importer. You are legally required to ensure that the broker has done everything correctly. This means that you have to understand the customs laws and regulations. You have to be educated on the programs you want to use for duty deferral or duty reduction. You have to keep all your documentation to support your determination and program choices. So, even when your broker does make a mistake, you are responsible. Since examples speak louder than lectures, here are a couple examples that happen a lot:
A company importing products from abroad allowed its customs broker to classify the product under the HTS without ever verifying that the classification was correct. Many importers assume that because brokers do this all the time they are classification experts. Not true. Unfortunately for this company, the broker got it wrong. He classified the item with an incorrect HTS number that was duty-free. CBP noticed and proposed a penalty of almost $200,000 on top of the $70,000 the company owed in unpaid duties. Moreover, many brokers are not experts at filing protests to correct such errors. The point is that you, the importer, must be proactive. There is no alternative. You must pay attention and be involved. Learn what you need to do or hire counsel.
In another case, a shipment was seized because the foreign manufacturer, not the importer, failed to provide required manufacturing information to the USG. The customs broker didn’t know the industry standards. The importer knew nothing about the manufacturer requirements, yet he was the one on the hook for the liability. Luckily, the importer petitioned CBP (with the help of a lawyer) and was eventually allowed to send the non-compliant goods back to where they came from, but only after paying thousands of dollars in fines and storage fees.
The moral is – save yourself the headaches and liability. Ensure you have your classifications correct and your duties consistent with the law. You are responsible for what you import. You cannot rely on the broker if you have a problem. Audits are a really useful tool.