Customs Broker Warning: Rerouting Won't Save You from Tariffs (and Why Penalties Are No Joke)
Free logistics consultations at www.shipmaximum.com
A common misconception about country of origin (COO) is that it is the country where the shipment departs. Many people think that if they re-route or reposition their goods into another country first and depart from there, they change the country of origin. Some people have asked if this would, in effect, be a way to work around the newly introduced Tariffs.
However, the country of departure is NOT the country of origin. The country of origin is where a product (article) is manufactured, produced, or grown as defined by US Customs and Border Protection (CBP).
If you move cargo to another country, it must undergo what CBP defines as "substantial transformation". This means that after undergoing a process that changes the product (article) in another country, "a new article with a different name, character, and use is created" as quoted from CBPs definition.
https://www.cbp.gov/trade/rulings/inf...
Simply re-routing cargo through another country, regardless of how long it remains there prior to shipping, does not meet CBPs requirements for changing country of origin.
Although there is a clear definition by customs, one should still not assume that they have completely met “substantial transformation” based on their own standards or assessment. There are a number of case studies documented by CBP that show assessing this standard is complicated and not a straightforward task. Especially for those unfamiliar with custom laws and regulations.
https://rulings.cbp.gov/search?term=s...
What are the fines and penalties if the incorrect country of origin is declared?
This depends on a few things. 1) The importer's intent. Was it a mistake? Or was it willful misdeclaration? 2) To what degree was the mistake, and what was the nature and intent of the misdeclaration?
Custom assesses penalties based upon the degree to which the violation was based on neglect or intentional misconduct. They break this down into a few categories: Negligence, Gross Negligence, and Fraud. Negligence can incur up to a penalty of 20% of the dutiable value of the goods, 40% for gross negligence, and fraud up to 100% of the domestic value of the merchandise.
Just for clarity, the dutiable value would be the cost declared on an importer's commercial invoice, while the domestic value would be the full value of the goods when sold. So the difference in penalty is very significant from negligence to fraud.
https://uscode.house.gov/view.xhtml?r...)
So, can you go to jail for misdeclaring or purposely circumventing duty payments? Yes! As defined by customs and border protection regulations and the US code of law. Making false statements can carry a maximum penalty of 2 years of imprisonment. While violations involving smuggling of goods can carry a prison sentence of up to 20 years.
Do you need to be worried?
No. At least if you are trying your best to comply with the law. Customs considers the circumstances by which any violation occurred as stated above. They also have a provision called “prior disclosure,” in which an importer can come forward before any investigation and bring to attention any mistake they may have made. If there is any violation found based on an importers own disclosure to CBP they will take that into consideration to mitigate penalties.
From our experience, CBP usually will provide written warnings first if violations are not too serious.
How can I be sure I am compliant with import laws?
Contact CBP and use a licensed customs broker or trusted freight forwarder. Customs and Border Protection lists all of their departments that are available to help you with your import questions. They can help you explain regulations, help properly classify your goods with the proper HTS code, and answer other questions about your shipment.
Customs Centers of Expertise Directory:
https://www.cbp.gov/trade/centers-exc...
A licensed customs broker can also help answer questions regarding your imports. A Freight Forwarder can also help you find the information you need on your behalf to save you a lot of time.
Conclusion - Re-routing goods to another country does NOT circumvent duties.
Only transforming them significantly as per CBP guidelines will potentially allow an importer to declare a different country of origin. Do not make assumptions when importing your goods into the USA. Get proper professional and expert help. Lean on CBP directly for answers when in doubt!
#tariffs #freightforwarder #logisticscompany #shipping #import #china #duties