The Informality of Importing

John Goodrich | November 10, 2013 | Customs, Import Basics
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When boarding a plane recently I noticed a guy dressed in cutoff shorts and flip flops and mentally noted how times had changed. With a "que sera, sera" mindset, I withheld judgment. That is until the guy stuck his overly ripe, flip-flop clad feet under my airplane seat. I don't care how informal our culture has become; wearing flip-flops on a plane is just wrong! And so it is with importing. There are times when it is appropriate to be formal and there are times one may be informal, at least in the type of entry that the importer files.

Plane_taking_off_with_skyline_in_backWhen boarding a plane recently I noticed a guy dressed in cutoff shorts and flip flops and mentally noted how times had changed. I am old enough to remember when flying in an airplane was an event for which one dressed up. With a "que sera, sera" mindset, I withheld judgment. That is until the guy stuck his overly ripe, flip-flop clad feet under my airplane seat. (Cough! Sputter!! Gasp!!!) I don't care how informal our culture has become; wearing flip-flops on a plane is just wrong! 

Now my friends and family will tell you I am a bit of a snob, and you might be inclined to agree. I don't dispute that, but I would prefer to say I have a discerning sense of style. I prefer to dress nicely and live well. I am not uncomfortable in formal clothing such as a suit and tie or, if the event calls for it, a tuxedo. So when I learned that importing involved making formal entries, well, I was all in! 
I've learned that dressing appropriately for an event is important. Showing up in a suit and tie at a family picnic can be a bit off-putting and can make the wearer uncomfortable. Likewise dressing in flip-flops and a cutoff shorts for a wedding is also not appropriate, unless that wedding is on a beach. That goes ditto for airplanes! 
And so it is with importing. There are times it is appropriate to be formal and there are times one may be informal, at least in the type of entry that the importer files. 
What am I talking about?
U.S. Customs and Border Protection (CBP) makes a distinction between the types of entries importers may file. Standard commercial entries exceeding $2,500 in value are referred to as formal consumption entries. This is noted by the code 01 within field 3 of the entry document (CBP form 3461) and field 2 of the entry summary document (CBP form 7501.) 
Importers filing formal entries do not need to wear tuxedos or gowns. Rather they are subject to bonding requirements, and the entry remains open for approximately one year until it is liquidated. Formal entries are also subject to the full merchandise processing fee of 0.3464% with a minimum of $25 and a maximum of $485. 
Informal entries are administratively simpler and are used primarily for shipments of $2,500 or less. Unlike the formal entry the importer does not have to post a bond. CBP also approves the declaration upon entry and liquidates it. Technically an entry form 3461 is not required, and the entry summary form 7501 can perform as both entry and entry summary. An informal entry is denoted by the code of 11 in the entry type filed. From a practical perspective informal entries are subject to a $2 merchandise processing fee if filed electronically, and customs brokers usually charge less for filing them. 
So with a $2 merchandise processing fee and lower brokerage charges, who wouldn't want to wear flip-flops, I mean file an informal entry? 
There are some restrictions on the use of informal entry procedures. The full details of goods eligible for informal entry are found beginning with 19 CFR §143.21. The regulations allow for informal entry in the following situations: 
(a) Shipments of merchandise not exceeding $2,500 in value (except for articles valued in excess of $250 classified in Chapter 99, Subchapters III and IV, HTSUS). 
(b) Any installment, not exceeding $2,500 in value, of a shipment arriving at different times. 
(c) A portion of one consignment, when it does not exceed $2,500 or $250 if classified as per (a) above. 
(d) Household or personal effects or tools of trade entitled to free entry under Chapter 98. 
(e) Household effects used abroad and personal effects whether or not entitled to free entry. 
(f) Books and other articles classifiable under subheadings 4903.00.00, 4904.00.00, 4905.91.00, 4905.99.00, 9701.10.00, 9701.90.00, 9810.00.05, imported by a library or other institution described in subheadings 9810.00.05 and 9810.00.30. 
(g) Theatrical scenery, properties, and effects, motion-picture films, commercial travelers' samples and professional books, implements, instruments, and tools of trade, occupation, or employment, as set forth in 19 CFR §10.68. 
(h) Products of the United States classified under heading 9801, when the aggregate value of the shipment does not exceed $10,000 and the products are imported 
• For repair or alteration prior to re-exportation, or 
• After having been rejected or returned by a foreign buyer to the US for credit. 
It is this last provision that has caused some confusion for some importers and customs brokers. Not all U.S. goods subject to treatment under classification 9801 are eligible for entry under informal procedures. Informal entry is only allowed under the two situations detailed above. CBP may require additional documentation certifying that these two provisions apply. 
Likewise, because an entry includes items detailed above does not mean the entire entry may be filed informally. If the value of the entire shipment exceeds $2,500 a formal entry will be required. 
In other words, while flip-flops may be appropriate, sometimes a suit and tie is required.
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