Trade compliance is the unglamorous but essential foundation of successful international sourcing. Errors in customs classification, missing certifications, or incorrect documentation can result in shipment holds, fines, and in the worst cases, seizure and destruction of goods. At Fusion Global Supply, our compliance team, led by Maggie, ensures that every shipment we manage arrives at its destination with the correct documentation, proper classification, and full regulatory compliance.
HS Code Classification: Getting It Right
The Harmonised System (HS) code is a six-digit international product classification code that determines the duty rate applied to your goods. The first six digits are standardised globally; countries add additional digits for more specific classification (10 digits in the US, 8 in the EU).
Incorrect HS code classification is one of the most common compliance errors, and it can go in either direction:
- Under-classification: Assigning a lower-duty code to reduce costs. This constitutes customs fraud and can result in back-duties, penalties, and criminal liability.
- Over-classification: Assigning a higher-duty code than necessary, resulting in overpayment of duties. While not illegal, it unnecessarily increases your landed cost.
For complex products, particularly electronics, machinery, and chemical products, professional HS code classification by a licensed customs broker is strongly recommended.
US Section 301 Tariffs on Chinese Goods
Since 2018, the United States has imposed additional tariffs on a broad range of Chinese imports under Section 301 of the Trade Act of 1974. These tariffs are layered on top of standard Most Favoured Nation (MFN) duty rates and range from 7.5% to 25% depending on the product category and the tariff "list" (List 1 through List 4B).
Key points for US importers:
- Section 301 tariffs apply to the country of origin, not the country of export. Goods manufactured in China but shipped via a third country are still subject to Section 301 tariffs.
- Some exclusions are available for specific products — check the USTR exclusion database regularly as exclusions are periodically renewed or expired.
- The "first sale" valuation method can reduce the dutiable value of goods in multi-tier supply chains.
- Section 321 de minimis exemption ($800 per day per importer) applies to small shipments but has been subject to increasing scrutiny and proposed reforms.
Product Certifications and Standards
Many product categories require mandatory certifications before they can be legally sold in their destination market. Common requirements:
- CE Marking (EU): Required for electronics, machinery, toys, medical devices, and many other categories. Involves conformity assessment against relevant EU directives.
- FCC (USA): Required for electronic devices that emit radio frequency energy. Applies to virtually all wireless devices, computers, and many household electronics.
- UL/ETL (USA): Safety certifications for electrical products. Not legally mandatory in all states but required by most major retailers.
- RoHS: Restricts hazardous substances in electrical and electronic equipment. Required in the EU and increasingly in other markets.
- REACH: EU regulation on chemicals — requires registration of substances of very high concern (SVHCs) in products.
- CPSC (USA): Consumer Product Safety Commission requirements for children's products, including lead content limits and flammability standards.
Essential Import Documentation
Every international shipment requires a set of documents for customs clearance. Missing or incorrect documents cause delays and additional costs:
- Commercial Invoice: Must accurately describe the goods, state the correct HS code, and reflect the true transaction value.
- Packing List: Detailed breakdown of carton contents, weights, and dimensions.
- Bill of Lading / Air Waybill: The contract of carriage between shipper and carrier.
- Certificate of Origin: Required for preferential duty rates under trade agreements. For China, a Form E certificate is used for ASEAN trade.
- Phytosanitary Certificate: Required for wood packaging materials (pallets, crates) to certify ISPM 15 compliance.
- Test Reports / Certifications: Required for regulated product categories.
Customs Valuation: The Transaction Value Method
Customs duties are calculated on the customs value of goods, which under the WTO Customs Valuation Agreement is primarily the transaction value — the price actually paid or payable for the goods. Additions to transaction value include royalties, assists (materials supplied free of charge to the manufacturer), and certain selling commissions. Deductions include international freight and insurance costs when using CIF pricing.
Fusion Global Supply's compliance team provides pre-shipment documentation review, HS code classification support, and liaison with licensed customs brokers in key destination markets. Contact Maggie's team to discuss your compliance requirements.