Is Santa Subject to the Entry Process?

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As Santa prepares his sleigh for his whirlwind cruise around the world to all the good little boys and girls, does Santa have to clear Customs every time he enters that bag of toys into the commerce of the United States?  Nearly all merchandise imported into the U.S. undergoes the entry process, unless specifically excepted (for example, a Santa Clause).  If you aren’t Santa what is the entry process like?  

To properly “enter” merchandise, documents containing sufficient information must be filed with U.S. Customs and Border Protection (CBP).  Importers must provide CBP with information such as declared value, tariff classification and rate of duty, as well as other information necessary to enable CBP to properly assess duties, collect accurate statistics and determine whether other applicable requirements of law have been met.

Right to Make Entry

Only certain persons, including businesses and individuals, have the right to enter goods.  The party must have a “financial interest” in the transaction and can be:

  • The actual owner, purchaser or consignee of the goods;
  • A licensed customs broker authorized by the owner;
  • A buying or selling agent;
  • A person who imports under consignment, on a loan or on a lease;
  • A person who imports for exhibition at a trade fair; or
  • A person who imports for repair, alteration or further fabrication.

Owners and purchasers of imported merchandise may file the entry documents themselves, or hire a licensed Customs broker who is familiar with the complex importing process to do so on their behalf.  An owner, purchaser or, in some cases, broker filing the entry is referred to as the “importer of record,” and is the party responsible for payment of all the duties and taxes due on the transaction.

The merchandise may also be entered in a number of different ways:  for consumption, admitted into a bonded warehouse or foreign trade zone, or transported in bond to another port of entry or country.

Entry Process

Formal entry for consumption typically involves the filing of an entry on Customs Form (CF) 3461, as well as other documentation necessary to determine merchandise admissibility (commercial invoices, packing lists, etc.), within 15 calendar days after a vessel, aircraft or vehicle lands, after receipt under a permit to transfer, or after arrival at the port of destination (for merchandise transported in-bond).  A follow-up entry summary on a CF 7501, with estimated duties attached, must be filed within 10 working days after the time of entry.

Alternatively, an importer can file only a CF 7501 entry summary with estimated duties attached, prior to the release of merchandise.  In this case, the CF 7501 serves as both the entry and the entry summary, but effectively deprives the importer of the 10 working day duty deferral period available when a CF 3461 is used.  This type of entry is referred to as a “live entry,” and can be filed either at the option of the importer or if required by CBP in circumstances where:

  • The importer has repeatedly failed to file timely entry summaries;
  • The importer has not taken prompt action to settle a claim for liquidated damages;
  • The importer has repeatedly delivered incomplete or erroneous entry summary documentation;
  • The importer is substantially or habitually delinquent in the payment of CBP bills; or
  • The merchandise is of a special class.

If an importer fails to timely file a CF 3461 entry (or a CF 7501 for a live entry) the merchandise may be sent to a bonded warehouse that is eligible to receive and store “general order” merchandise.  Merchandise can remain in general order storage for up to six months before being sold at public auction.  If an importer fails to file a CF 7501 entry summary within 10 working days after the time of entry, CBP will make a demand for liquidated damages against the importer’s basic importation bond.

In general, the applicable rates of duty are those in effect at the time of entry.[1]  As a result, importers may be able to receive a more favorable rate of duty by effecting the time of entry.  The recognized time of entry when a CF 3461 is filed is:

  • The time of release;
  • The time the CF 3461 is filed, if requested by the importer on the CF 3461 at the time of filing and the merchandise has already arrived within the port limits; or
  • The time the merchandise arrives within the port limits, if the entry documentation is submitted before arrival and the importer makes a request on the entry documentation at the time of submission.

For live entries, merchandise withdrawn from a warehouse for consumption, and merchandise released under the immediate delivery procedure, the time of entry is the time the CF 7501 entry summary is filed in proper form with estimated duties attached.  The time of entry for quota class merchandise is the time of presentation of the entry summary or withdrawal for consumption in proper form with estimated duties attached (or without estimated duties attached if the entry/entry summary information and a valid scheduled statement date have been successfully received by CBP using the Automated Broker Interface (ABI)).

Bonds

In order for merchandise to be released from CBP custody, a single entry or continuous bond on a CF 301 must be on file for the importer.  A single entry bond covers one entry transaction, whereas a continuous bond covers all entry transactions that take place over a one-year period.  A basic importation bond is a contract whereby a surety, acting as guarantor, has an obligation to pay CBP should the importer, acting as the bond principal, default in the performance of any of the bond conditions, which includes agreement to:

  • Pay duties, taxes and other charges;
  • Make or complete entry;
  • Produce documents or evidence;
  • Redeliver merchandise;
  • Rectify any non-compliance with provisions of admission;
  • Hold merchandise for examination;
  • Reimburse or exonerate the U.S.;
  • Use and handle duty-free merchandise in accordance with the law;
  • Comply with CBP Regulations applicable to CBP security areas at airports;
  • Comply with electronic entry and/or advanced cargo information filing      requirements;
  • Ensure and establish the issuance of softwood lumber export permits and collection of export fees.

Default on any of these agreements may lead to an assessment of liquidated damages against the principal and surety for breach of the bond conditions.

Basic importation bonds may be secured through approved surety companies, with cash or through certain U.S. government obligations.  Customs brokers may also permit use of their bond to provide the required coverage.

Immediate Delivery

An importer may chose to request a special permit for immediate delivery of their merchandise by designating a CF 3461 as a special permit instead of as an entry under the following circumstances:

  • Land shipments from Canada and Mexico;
  • Shipments of fresh fruit and vegetables from Canada and Mexico which are transported to the importer’s warehouse at the port of arrival for examination, resulting in entry being made only on those portions with commercial value;
  • Shipments of certain quota class merchandise;
  • Shipments of trade fair articles;
  • U.S. government shipments;
  • Split shipments for which an incremental release election has been made;
  • Other shipments authorized by CBP, such as those that occur at the end of the      calendar year, when importers may elect a time of entry in the following year when duty rates have decreased through use of special permit procedures.

Examination and Release

After an entry is filed, CBP has 5 working days to examine the merchandise and decide whether to release, seize or detain merchandise (so long as no other agency determines admissibility).  If the port director issues a permit to release, the merchandise will be released.  Merchandise not released within the 5-day period is considered detained.

CBP must issue a detention notice within 5 working days after deciding to detain the merchandise or failing to release the merchandise within the 5-day period.  CBP then has 30 days from the date of presentation for examination to decide whether to release, seize or deny entry to the goods.  If entry is denied or no decision is made within 30 days, the merchandise is deemed excluded, and may be exported.

CBP may conditionally release merchandise before all required evidence is produced, quantity and value are determined, or the right of admission into the U.S. is determined.  However, CBP may demand redelivery of the merchandise if the merchandise:

  • Fails to comply with the laws or regulations governing admission into the U.S.;
  • Must be examined, inspected, or appraised; or
  • Must be marked with the country of origin as required by law or regulation.

A demand for redelivery will be made on a CF 4647 within 30 days of the release date or 30 days of the end of the conditional release period, whichever is later.  A conditional release period may be established in one of two ways:

  1. By regulation (such as 19 CFR 141.113(b), which allows for 180 days to determine the country of origin of textiles); or
  2. By notifying the importer of record of the conditional release period within 30 days after release (such as through issuance of a CF 28 “Request for Information” requesting a sample).

A failure to comply with a request for redelivery will result in a demand for liquidated damages.  (Remember, that if liquidated damages are made, you will certainly want to keep track of those dates!  See Timing is Everything:  Keeping Track of Liquidation, dated August 21, 2012.

Importers involved in the importation of certain goods, such as art and antiques, should be aware that such goods may receive enhanced scrutiny.  CBP, in combination with its sister agency, Immigration and Customs Enforcement (ICE), has increased its efforts to interdict, seize and return art or other artifacts that try to enter the U.S. without proper documentation, authorization or provenance.

So, it’s a good thing that Santa is excepted from the entry process.  There might be a lot of unhappy kids out there on Christmas Day!


[1] There are 3 exceptions: (1) Warehoused merchandise: dutiable at the rates in effect at the time of withdrawal for consumption; (2) Merchandise entered for immediate transportation: dutiable at the rates in effect when the immediate transportation entry was accepted at the port of original importation; and (3) Overcarried merchandise (merchandise entered for consumption but removed from customs custody before release and then returned within 90 days): dutiable at the rates in effect at the time of the original entry
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About Adonica Wada

Adonica Wada is a partner with the law firm of Simon Gluck & Kane LLP. She is an international trade attorney focusing on import- and export-related matters.
This entry was posted in Customs, Import, Uncategorized and tagged . Bookmark the permalink.

3 Responses to Is Santa Subject to the Entry Process?

  1. Demetrius D. Jones, Vice President, Crane Worldwide Trade Services says:

    Adonica – this is one of the best articles I have read on how the entire process works. It’s in simple terms and straight to the point. Kudos to you on explaining a detailed process in an understandable manner!

  2. Aurelia Mitchell Durant says:

    Excellent information on the entry process, simplified in a way business owners can understand!


    Aurelia Mitchell Durant is the Legal Analyst and Expert in International Business Law and International Intellectual Property Law at AMD Law: http://www.amdlawgroup.com. AMD Law is a boutique law firm specializing and international business law, international intellectual property law and corporate compliance consulting. Aurelia Mitchell Durant is also the President and General Counsel for KDBM International: http://www.kdbminternational.com. KDBM International is an international business/international trade management consulting firm. She can be found on Facebook, on microblogs, and on Twitter as @AttorneyAurelia.

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