Customs clearance of Vietnamese goods in the US
How much will cost the customs clearance?
Before all import procedures, you must be able to precisely estimate the freight and customs cost in the US. USA and Vietnam, as all the other members of the World Trade Organization, are using the Harmonized Commodity Description and Coding System. Thanks to this system, articles that you need to buy have the same ID code worldwide. This ID, also called the “HS Code” is composed of 6 numbers.
How to sort out the import taxes on Vietnamese goods with the HS code?
For instance, pineapple is designated with the HS code 08043010, the picture below is describing its signification:
If you don’t know what the HS code of your goods is, the website of the US International Trade Commission is providing a great tool to determine it. Let’s take the example of a pineapple again. If you’re typing pineapple in the search bar, you will find the corresponding HS Code:
You can also determine the import taxes on the same page. Because Vietnam doesn’t have any FTA with the US yet, taxes for bulk pineapples produced in Vietnam are as high as 0.51 cents per kg. For pineapple, import taxes are specific tariffs, because they are based on the quantity you’re importing, and not on the total value of your import.
For all other goods, do the same process, determine the HS Code on the USITC website, and read the applicable rates as described.
VAT, GST and sales tax in the US
There are no GST or VAT in the US. Instead, each state has its own Sales tax, which means it is varying from a state to another.
The sales tax is only perceived by the seller when he sells his goods. Contrary to the VAT and GST the sales tax is only imposed on retail, which means that you will not have to pay it to customs for an import of Vietnamese goods. Also, the purchase of goods for subsequent transformation or for reselling is exempted of sales tax. What you have to understand is that only the final consumer will have to pay this tax, which is applied depending on the type of goods and the state of purchase. All intermediaries aren’t dutiable for this tax.
Also, a broad number of necessary products like machineries for agriculture, medicine… are generally exempted of sales tax in most of the states.
The map below is showing the average sales tax rates for each state:
You can determine precisely which rates are imposed on the goods your aiming to sell on the chapter “By jurisdiction” of the Wikipedia page, Sales taxes in the US.
The excise tax in the US
The Excise tax in the US is mostly levied on 5 categories of products; Highways (fuels), Tobacco, aviation (flight tickets), alcohol and health:
Highway taxes – Taxes on gasoline 18.4 c/gal and on diesel 24.4 c/gal are composing more than 90% of this category, other goods imposed are other fuels, trucks, trailers and tires.
Tobacco – Depending on the product, the tax is calculated per 1000 cigars or cigarettes or per pound. For cigarettes, the tax equals 1$ per pack of cigarettes.
Alcohol – Different rates are applied depending on the type of alcoholic beverage. Usually tax rates are of 13.50$/proof gal. Wine rates are varying between 1.07$/gal for wines with 14% or less of alcohol, to 3.40$/gal for sparkling wines. Generally, beer is taxed at 0.58$/gal.
Aviation – The majority of the aviation taxes are coming from passenger airfares. It is great to know for importers that no excise taxes are applied on international cargoes, which means that air freight between Vietnam and the US is not subject to this kind of taxes.
Health – Was aiming to fund the Affordable Care Act, or “Obamacare”. But it doesn’t concern international trades.
How to be exempted of import taxes in the US?
In the US, depending on the product type and the country of importation, you can benefit from a total or partial exemption of import taxes. It is concerning:
- Most important and used products like food products
- The countries of the Generalized System of Preference (GSP), like Vietnam.
- All countries having a FTA with the United States, you can consult the list on the USTR website.
The Generalized System of Preference (GSP)
The United States, like all the members of the World Trade Organization (WTO), are encouraging the developing countries in their social and economic development. It comes out with the GSP, which is a decrease or elimination of tariffs on goods produced in developing countries.
Most products made in Vietnam can benefit of the GSP, but certain categories of products which are too competitive, like textiles, cannot benefit from this global policy.
The condition for you to benefit of the GSP, is to provide a Certificate of Origin of your goods to the USCBP. Indeed, no other documents is proving officially that your goods where made in Vietnam.
Is FNM Vietnam charging the customs representation?
No, our customs commissioner services will not be charged to you. To prove it, you will receive all the documents produced by the US Customs, during the customs clearance of your goods. Only the import taxes and other taxes will be obviously at your charge.
How is the customs clearance going in the US?
The arrival and the customs clearance of your goods, step by step
Here are the steps you will follow to import goods into the US:
- First, you should do the Arrangement with the CBP at the port or airport of entry. This arrangement must be done before your goods arrive in the US territory. You will have to pay duties and also send all the documents (possibly electronically) at this office.
- After the arrangement, you will have to declare your goods once they enter in the port or airport. You will have to declare the purpose, for consumption, re-export…
- Once the cargo arrived, you or the customs broker have to send the Cargo release to the CBP within 15 days. Ideally, do it in the following days of the arrival to avoid all added storage fees. It will liberate the goods from custody, where your shipment is stored before being released, and enable you to begin the US part of your freight.
- Within 10 days from the cargo release from custody, send to the CBP office the CBP Form 7501 (entry summary). This document is detailing the category, value and origin of the goods you imported. Also, you should pay the duties asked to customs in the same time limit. You will first pay an estimation of the duties, as described in the first step. After the liquidation process, which means that the exact amount of duties will be determined, you will have to pay the remaining amount, or you will be refund if you paid too much the first time.
Also, please note that your goods will still remain in custody until you completed all these steps. It means that you must verify every time that the documentation is correctly provided, and that there are no missing documents.
Official Name: General Department of Vietnam Customs
Website: Vietnamese Customs
Official Name: US Customs and Border Protection
Website: US Customs
What are the necessary freight documents to transfer my goods in the US?
Bill of lading or Airway bill
The Bill of Lading is equivalent to a passport and a boarding card for your shipment. Depending on the method used to transfer your goods, it can be an Airway Bill (for Air Freight) or a Bill of Lading (for Ocean Freight). It is also a document testifying of the legality of the transfer, because it is emitted once the carrier received payment for its services. This document is important for all international transfer of commercial goods.
The following pictures are detailing what information are provided on a Bill of Lading:
The original invoice
It will be used by the USCBP to ensure that the goods received are corresponding to the goods you declared.
The packing list
The packing list is summing up all the items included in your shipment. You should attach the MSDS data sheet and the international code, if you’re importing hazardous or chemical products in the US.
Certificate of Origin
This document is very important if you’re wishing that your import can be treated under the GSP regime. Indeed, it is the only legal proof that your goods were made in Vietnam. Like the Bill of Lading, the Certificate of Origin is a very important document for all international import. The document must be signed by the manufacturer and delivered by a government agency of Vietnam.
Here is what it looks like (for China here):
Forbidden or restricted products in the US
Products needing an import license
In the US a lot of goods’ categories such as food products, drugs, plant, animal, trademarked articles such as name-brand shoes, handbags, sportswear apparel, toys, etc. are requiring an import license delivered by the concerned authority to enter the US territory. All the goods requiring an import license are compiled in the Chapter 39 of the Importing in the United States guide.
Products forbidden or restricted to import in the US
These following articles are requiring an import license or are simply forbidden to enter in the US:
Absinthe (subject to permit delivered by the Food and Drug Administration and the Department of the Treasury's Alcohol and Tobacco Tax and Trade Bureau)
Automobiles (subject to approbation of the Environmental Protection Agency and the Department of Transportation)
Cultural Artifacts and Cultural Property (subject to an export permit from the country of origin)
Defense Articles or Items with Military or Proliferation Applications (cannot be permanently imported, contact the Bureau of Industry and Security or the Directorate of Defense Trade Controls to learn more)
Firearms (heavily restricted, importations are requiring approval from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), or the Directorate of Defense Trade Controls)
Dog and Cat Fur (forbidden)
Drug Paraphernalia (forbidden)
Fish and Wildlife (some are forbidden, others require permits from the Fish & Wildlife Service)
Biologicals (subject to permit delivered by the Department of Agriculture and the Centers for Disease Control and Prevention)
Game and Hunting Trophies (some are forbidden, others require permits from the Fish & Wildlife Service and the CBP)
Gold (may be subject to regulation of the Office of Foreign Assets Control)
Merchandise from Embargoed Countries (forbidden)
FTA between Vietnam and the US
The US leaving the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) during the negotiation phase in 2017, there is no Free Trade Agreement (FTA) existing between the two countries.
Trade relations between the US and Vietnam
Despite the Vietnam War and the following embargo period of the US on Vietnam, the two countries have nowadays great relationship. They both have great communities of Vietnamese and Americans in their respective countries, and their diplomatic relations are at an all-time high. Economically, USA is the second trading partner of Vietnam, after China. Also, since the US trade war on China, a lot of American importers are sourcing a bigger part of their imports in Vietnam.
According to the latest statistics of the World Bank (2017), the US is the second export partner and the 5th import partner of Vietnam. On the other hand, Vietnam is the 31st export partner and the 12th import partner of the US. During this year good flows from Vietnam to the US had a value of 48.4 billion USD, while in the opposite way it was of 8 billion USD. The actual commercial balance is largely benefiting to Vietnam.
The US are importing broadcasting equipment, furniture, integrated circuits, knit sweaters, textile footwear, leather footwear, computers, knit women’s suits and non-knit women’s suits from Vietnam.
On the other way, the US are exporting integrated circuits, aluminium bars, raw cotton, soybeans, nuts and starch residue to Vietnam.