Question: I'm planning on importing wooden handicrafts from Central America, and I would like to know what the legal requirements are to open a small import business. --- Susan Sonderegger, Miami Beach, Fla.
Answer: Starting an import business is pretty painless. The real headache is often complying with the myriad U.S. Customs and Border Protection procedures and rules so you're not slapped with needless fines that can gobble up your profits, and in some cases even put small importers out of business.
The only legal requisites to opening an import business are having an importer of record number, which is usually just the business's tax-identification number, and a surety bond to protect the U.S. government if you can't pay your duties, taxes and other fees. Surety bonds are required for all so-called formal entries where the shipment is valued at more than $2,000, but many importers use them on smaller shipments as well. They can be purchased through a surety company or a customs broker. There are single-entry bonds, which often cost $30 or more and cover one entry. Otherwise, you can buy a continuous bond for a few hundred dollars or more that covers all your import shipments for a year or longer. Generally speaking, with more than five entries a year, you'll be better off with a continuous bond, says Neil Mooney, a customs lawyer in Tallahassee, Fla.
But it's once you start buying and shipping goods from foreign countries where importers often run into trouble.
Most imports must be properly marked from their country of origin, and meet various government requirements. Some imports are more of a problem than others. Assembled goods, for instance, where components come from several countries can be tricky to value. Food imports must also abide by rules set by the Food and Drug Administration as well as Customs requirements. With wooden handicrafts from Central America, it probably won't be too difficult to meet Customs requirements, though it's always a good idea to read the rules in advance.
A wealth of useful information on import specifications is available on the U.S. Customs Web site, www.cbp.gov, by clicking "Import" on the home page, and then selecting "Informed Compliance."
Declaring the items once you get them to the U.S. port of entry can pose other problems. All items must be classified using the Harmonized Tariff Schedule, a long list of codes that determine the duties you owe. And you must correctly report the duty value of each item -- usually the price you paid the foreign seller, though there can be adjustments. (Many imports from Central America are duty-free, but you still must declare the correct value and provide the necessary paperwork.)
Importers who make errors, knowingly or not, can face penalties based on their deemed level of culpability, says Robert J. Pisani, a customs lawyer in Washington, D.C. Customs penalties generally range from two times the value of duties underpaid when the importer is negligent, up to the full value of the imported goods in fraud cases. But even if the penalties are small, they can add up if an importer has too many "careless errors," Mr. Pisani says. Penalties are reduced if an importer reports an error before Customs begins an investigation.
Don't let all these rules scare you away, though. If you hire experts to help and try to keep abreast of the rules for your industry, you shouldn't have a problem.
Many importers, big and small, hire a licensed customs broker, who fills out and files the necessary documents with Customs agents on your behalf. Many brokers charge a flat $80 to $120 or so per entry, though some use different methods. Look for a broker in your usual port of entry who's experienced with your type of product and its origin countries. Major couriers like UPS and FedEx offer customs brokerage services, though you'll want to compare the prices to purchasing transport and brokerage separately.
You might also consider consulting a customs lawyer, or at least having one lined up in case you run into problems along the way. A lawyer can also be handy if you get hit with a penalty you want to dispute.
As published in The Wall Street Journal, July 18, 2006