U.S. Customs, or, How to Get Screwed and Pay for the Privilege

Thinking about having goods made overseas? You may want to consider the cost of shipping and customs before you set price points for your merchandise. I budgeted my costs based on a quote from my customs agent, and still came up about $500 short. Here’s a basic list of what you’ll need:

Freight: getting your cargo where it needs to go. If you have small or perishable items, you can use air freight. For bigger stuff, like a whole container’s worth of meat-shaped plush toys, you can use ocean or rail freight, depending on whether the country you’re importing from is connected to you by land or sea.

A customs broker: this guy gets your stuff off the dock and onto a truck. Unfortunately, many of these folks operate like bad movers — they claim zero responsibility for what happens to your stuff and sometimes hold it for ransom. The Dept. of Homeland Security requirement that a customs broker be “of good moral character” is clearly not enforced. Finding a trustworthy customs broker is like finding the holy grail. If you’re in the market for one of these guys, here are some charges to get in a quote:

  • “Door-to-door” freight: this is really dock-to-door freight, since most manufacturers will charge F.O.B. (freight on board) prices for your products, meaning that what you pay for manufacturing includes what it costs to box up your merchandise and get it onto a boat/plane/etc. I was quoted $1,717 for ocean freight from Hong Kong to Oakland, with door delivery in San Francisco. This was for a full 20 ft. container. Transporting less than a container load (LCL) was quoted at $125/cubic meter of cargo. This is because there is a lot more labor involved in separating, moving and accounting for your merchandise when it is mixed up with other people’s stuff. A full container load (FCL) doesn’t need to be opened at all between the overseas factory and your warehouse in the States. When my warehouse turned out to be in Fairfield rather than San Francisco (an extra 30 minutes away from the dock, but in another “zone”), my delivery cost went up $200. If gas prices rise between your quotation and shipment, expect to pay for that as well (an additional $50 in my case).
  • Customer Power of Attorney: allows your broker to conduct Customs business on your behalf (i.e. pay for your inspections to move your cargo through quicker, take your container off the dock, etc. I was quoted $0.35-$0.55 per $100 of merchandise value for this.
  • Insurance: this was included in my freight quote, but you NEED to make sure you have it. Containers fall off those barges on choppy seas all the time, and the last thing you want is to have your entire business end up at the bottom of the ocean.

Money for U.S. Customs fees: here’s the list:

  • Merchandise Processing Fee: 0.21% of Commercial Invoice., Min. USD25 and Max. USD485. $25 for me.
  • Harbor Maintenance Fee: 0.125% of Commercial Invoice. $8.85 for me.
  • Single Transaction Bond: a one-time $50 fee per import. If you import more than 10 times a year, you can use a $500/year bond instead.
  • Customs Clearance: $115.
  • C-TPAT security fee: protects the docks against terrorists. $7.50 per shipment.
  • Document turn-over fee: $55
  • Inspection: this is my personal favorite. Not all containers get inspected, but if you’re a new importer, yours will be. If they inspect by x-ray, you pay an additional $160. If they decide to do a FULL inspection, however, in which they open and rifle through every single box, they will charge you for the labor, which is more like $400-$500.

In the end, just getting my merchandise to the Fairfield warehouse cost almost a third of what it cost to manufacture it. That means I had to figure in a 33% mark-up in my prices, not including the cost of warehousing. If I could have had my plush toys made in the U.S., I would have, and it makes me seriously re-consider what my next product line will be.

**Tip: if you arrange for your freight early enough, you can sometimes “lock in” a rate for local delivery from the dock to your warehouse that won’t go up when your cargo arrives. Get this in writing.

US Customs FAQ on Duty Rates

your shipment of fail has arrived

Image courtesy of the Fail Blog at http://failblog.wordpress.com/2008/01/29/shipments-in

Quality, service and low prices: pick two.

(I saw that sign once in a print shop, but I think it’s infinitely applicable to all businesses.)

A couple of months ago, my Internet service provider, Covad, got bought out by a bigger company.  As happened with Cingular when they got bought out by AT&T, the service went downhill.  Not only did our connection speed get slower but their tech support is now based in the Philippines and consists solely of people with thick accents named “Hank” and “Jim” who read scripts out of binders.

Yesterday our Internet crapped out.  After some diagnostic testing, I concluded that either our modem had finally died or Covad’s service was down.  To eliminate the latter possibility I called tech support and spoke to “Owen.”  Now, I understand why so many companies outsource their tech support.  My friend Steve put it best last night when he said, “I used to be tech support for an architectural software program. I didn’t really know how to use the program but I was able to solve 95% of my customers’ problems just by looking them up in the help menu.”  Similarly, I’m sure 95% of tech support issues with Covad can be solved just by telling customers to restart their modems, routers and/or computers.  My problem is that I used to be a school network administrator, so I’m in the 5% who have already tried everything in the binder before I call.  All I wanted was definitive answer about whether Covad’s service in San Francisco was up or down.  Owen made me go through all the binder steps with him anyway.  Three times.  He then performed several “tests” for which he had to hang up and call me back.  Owen assured me the service was up and running, but we had heard this the last time our connection was down.  That time, it turned out the switch for just our area of the city wasn’t working.  So I asked Owen where he was and he said “I’m based out of San Francisco.”

“Great!” I exclaimed.  “You must be using Covad for your Internet service.  Is it working in your office?”

This made him mutter something about working for the San Francisco office, but actually being in the Philippines, so I asked him for the number of his San Francisco office to see if their service was working.  Owen said he couldn’t do that, because he didn’t actually have their number; he contacted them solely though some kind of internal system.  Now, I’ve never heard of a way to make “internal” calls across the Pacific Ocean, but I didn’t want to argue with the guy anymore.  It’s not Owen’s fault that Covad is such a shitty company now.  So I simply clarified the facts.

“You don’t actually know if service is working my neighborhood, because you’re in the Philippines, and there’s no way for me to contact the office that is actually located here in California?”

“Yes,” said Owen, with a heavy sigh.

In the end, I was left with three choices: wait an indefinite period to see if the service came back (free!), wait 3-5 business days for Covad to UPS me a new modem ($100) or have a technician come out to the house with a new modem tomorrow ($190).  Since I run a web-based business out of my home, I went with the latter.  At least then I would know definitively what the problem was and that it would be fixed within 24 hours.

Then I got a bright idea: I went to Best Buy.  It took a good 10-15 minutes to find a staff person who knew the difference between a cable modem and a DSL modem, but I eventually made contact with the sixty-something manager of Best Buy’s “Geek Squad.” He told me to try AT&T’s DSL modem, since Covad leases their lines from AT&T anyway, and what do you know, it worked!  Okay, it took about an hour of finagling to get it to work with Covad and my router, but I’m back up and running having only spent $70 as opposed to $190.

It took half an hour on the phone this morning to get Covad to cancel my service appointment and then another half hour to convince them not to charge me for it anyway (Owen had not alerted me to their 24-hour cancellation policy).  My next step will be to cancel my service with Covad altogether, but it often takes a couple of days to switch from one provider to another, so it will have to wait until the next time we go out of town.  I’ve heard good things about Sonic.net, another AT&T reseller (who isn’t?), and when I called them I got Mike in Santa Rosa.  Anyone else have any recommendations?  I’d be eager to hear.