Figuring Out the Complexities of Importing .............................................
Importing and exporting are vastly different processes. Importing goods
is mainly about figuring out how to speed your items through customs,
whereas exporting is much more about making sure your company complies
with regulations, such as embargoes and restricted party lists. In this chap-
ter, we start by looking at importing, which is broken down into a number
of steps.
Classifying an item: What is it? .........................................................
One of the most difficult, expensive, and time-consuming elements of import-
ing goods begins before the item even arrives at the border. The importer
must classify the good, or assign it a 10-digit code called a Harmonized Tariff
Schedule. Customs authorities use the number to determine the tariffs and
duties an importer pays. Specifically, the first six numbers of the code are
the same for a particular item in every country (that’s the harmony in the
Harmonized Tariff Schedule). The last four numbers vary from country to
country, but describe the item more specifically and provide information for
the statistical purposes of tracking trade.
Classifying an item is difficult because the importer must take into considera-
tion all of the things that make up the item. For example, a simple item such
as a t-shirt can be classified in many ways depending on where it’s manufac-
tured, as well as its material, color, stitching, and packaging. For more com-
plicated items, the complexity quickly escalates and, for the most part, can’t
be determined without the blueprints of the product itself.
Because the process is so complicated, most companies outsource the classi-
fication process to law firms that specialize in the area. Unfortunately, this
option is expensive and slow.
Classifying a product is also important when determining where to source
goods from. The import duties and taxes can have a major impact on the cost
of a good. For example, it might cost $8 to manufacture a good in China, but
$10 in Vietnam. The tariff on the item is $5 from China, but only $2 from
Vietnam. Even though it is cheaper to manufacture the good in China, it
would actually be cheaper to source it from Vietnam.
148 Part II: Diving into GRC
