S03 EP09: What Is HTS Code? How Much Duty Do I Need To Pay For My Amazon FBA Product?

S03 EP09: What Is HTS Code? How Much Duty Do I Need To Pay For My Amazon FBA Product?

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If you are an Amazon FBA seller, you need to know your HTS code and your exact duty rate. This is not just for legal reasons but also for your Amazon business profitability. This video will explain what you need to know about HTS code and your duty responsibility.

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Full Transcript:

What’s up, guys? If you just started an international import business, congratulations. Let me ask you a question though. Do you know the consequences if you short-pay tax and duty to the US Custom? This, unfortunately, happened to a friend of mine. He just started the Amazon FBA business. He got a letter from CBP, Customs Border Protection, notified him that he was short paying tax and duty, his shipment was held for inspection, it was delayed forever. Don’t let this happen to you. In this video, I’m going to share with you four things you must know about harmonized code, that little code determines the correct tax and duty you should be paying to the US Custom. Don’t mess with them. Let’s get started.

Must know, number one. What is it?

Short answer. Give me 10. The 10 digits code in the US is called Harmonized Tariff Schedule, HTS. Harmonized tariff schedule is part of a harmonized system, HS, that is managed by the World Customs Organization. You have heard about the HTS code. You have heard about the HS code, which one is correct. These two can be used interchangeably, but they can be different. Let me explain. So within the ten digits of the code, the first six digits are the same among nations that participate within the harmonized system. The last four digits though are country-specific, according to their tax and duty and tariff laws.

Must know, number two. Who’s responsible for providing the accurate HTS code to the US Custom?

Let’s use my friend Casey’s example. He just started the Amazon FBA business. He arranged his shipment through a freight forwarder. The freight forwarder asked him, “What is your product HTS code?” He was like, “What? I don’t know anything about HTS code.” So he asked his supplier since the supplier manufactures the product, they know the specific material used in the product. So the HTS code coming from the supplier should be the most accurate. So my friend passed on the HTS code to the freight forwarders custom broker, and the customs broker cleared his shipment twice until the third time it got caught by the US Custom. And therefore my friend got a letter for a penalty.

So, let’s think about this. The freight forwarders custom broker, they’re licensed. They have to pass exams in order to practice. Who’s responsible for the mistake, then, my friend, the customs broker, or the supplier? The answer is the importer of record. Since my friend is the importer of record, he’s importing, he’s paying for the tax and duty, he’s responsible for the mistake. The supplier knows about the material, they can provide you with the HTS code. The customs broker, they’re licensed, can assist you in finding the correct HTS code. And you, the importer of record, are ultimately responsible for the accuracy of your classification.

Must know, number three. What are the consequences if you have been using incorrect HTS code? It depends on the nature of the violation. In my friend’s case, if he knew that the HTS code provided by his supplier was going to give him the lower duty rate, he just committed fraud. Since he didn’t know, it was gross negligence. The US custom can choose to give you a pre penalty notice, or they can impose the penalty immediately. And then the companies who have these violations may find themselves subject to more frequent customer inspections and longer processing times because their violations were recorded in the Customs system.

The must know, number four is how to establish the correct HTS code. Obviously, this is the most important. The method is, ask, ask, verify. The first ask is to ask your supplier. They manufacture the product. They use the material in the product that is going to be sold to you. The HTS code they recommend should be accurate. And the second ask is to ask your freight forwarder. Their custom brokers are licensed brokers, so they should know how to classify your product. You don’t have to get the HTS code you got from your supplier, just give them the product description and the material used in the product. Ideally, the two HTS code from your supplier and from your freight forwarder, if they match and their close, you get a good chance that the HTS code is accurate, but still, you should still do the verification and do your homework. Go on to hts.usitc.gov. I will put a link below, and do your own research to verify the HTS code that is the right fit for your product.

In my video on How to Ship a Product from China to the United States, the complete tutorial on the second part, I specifically demonstrated how to research HTS code on your own. Trust me, guys. It is important. It is not complicated. Do your due diligence. You will feel more comfortable that your product HTS code is accurate. Why take risks?

Exactly. Why take the risk? If you have been importing, why don’t you take a minute and do a quick audit on the harmonized code you have been using to make sure they’re accurate. No importers wanting to mess with you US Custom. I hope this video helped you understand the harmonized code a lot better. If you like the content, please don’t forget to subscribe and like. And turn on the notification bell, so when I release the next video, you will be the first one to get it. I’ll see you soon.

Check out the link, the Sourcing Warrior Mastermind link, undertake Sourcing Warrior’s quiz to find out your sourcing IQ. Make it fun, learn something, have a great day. I’ll see you in the next episode.

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