What is reasonable care ? Why should every importer know this concept?
One common misconception among U.S importers is that they feel don't have to worry about what’s on their commercial invoice and other import documentation. These importers will often neglect to provide their customs broker with a truly complete product description or accurate country of origin because they don’t think they have to sweat the details.
" If I know everything, why would I need to pay you to help me clear the shipment? Isn't that you supposed to be the industry expert? " Importer ABC said so
That is partially right. Customs broker, import specialist or entry writer are considered industrial experts who shall perform their duty in a reasonable degree to review the document and provide correct data to U.S customs however it does not mean that we would bypass importer and make entry decisions. A lot of importers may not realize how many responsibilities on their shoulders, referenced as " Reasonable Care". I would prefer to cite a real case to explain it.
The case, United States v. Farhan Khan, Slip Op. 17-85, was decided on July 13, 2017, and involved an appeal of a penalty case issued by CBP against the importer for misclassification of imported products
The products in question were wine bottle bags, cool can, and wine bottle wraps. At the time of entry, Priority One CHB broker recommended 3 classifications to Farhan Khan with an explanation for each. The importer ultimately uses the one with the lowest duty 4202.92.1000 with a 3.4% rate of duty. During the post-entry summary review period, U.S customs send a CF28 form to request the commodity information and then eventually decide bottle bags shall be under HTS 4202.92.90 with a duty rate of 17.6%. The difference here constitutes 8228.20 USD difference un[aid duty. Now the importer Farhan Khan is not happy about it. Mr. Farhan Khan insists that reasonable care was exercised because the company relied on the broker’s recommended classification. So what does the judge say?
" Given the three conflicting classifications recommended by the broker, the Defendant had a duty to undertake some further investigation regarding the proper classification, whether it meant consulting the CROSS database of customs rulings, obtaining a second opinion, or consulting a customs attorney or other customs expert. There were also publicly-available customs rulings that, had Defendant consulted, would have alerted him to a potential problem with his classification prompting further investigation. Defendant could not reasonably have relied upon the recommendation of its customs broker under these circumstances. Without even questioning the broker’s changing advice, seeking any form of guidance from CBP, consulting publicly available rulings that may have raised questions about the classification, the Defendant cannot have exercised reasonable care in classifying the entries prior to importation.”
Therefore, in today's global trade environment, besides seeking competitive rates and delivering just in time, creating a custom compliance program for your importing activity is just as important as these two. Below are some area that importers shall exercise some form of caution with
Proper English version commercial invoice
Country of origin, verification, marking and labeling
Tariff classification and duty rate
Commercial goods value based on the incoterms between sellers and buyers
Quantity
Free Trade Agreements
Other government agency requirement
Social compliance in place with all foreign importers
Record keeping ( 5 years from date of entry)
Review ACE Entry data and 7501 summary
....
As you can see, reasonable care requires a lot of attention from the importer. It is not enough to just hire a broker and assume that everything is being taken care of automatically. It is still very important to have a responsible brokerage firm to help you with the importation paperwork. A good one will definitely save you tremendous time and energy. The point is, the importer should also have an internal system and controls in place to make sure your compliance procedure is met " Reasonable Care" requirement
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