United States: Selling

Customs Procedures

Import Procedures

U.S. Customs and Border Protection (CBP) import requirements apply to anyone bringing foreign items into the United States. While CBP does not require an importer to have a license or permit to import goods from a foreign country, any item crossing the border into the United States is subject to customs clearance and customs duties unless specifically exempted. To obtain customs clearance from CBP, importers and their goods must take the necessary entry, examination, valuation, classification and clearance measures.
Among the documents needed to import there are:

• Entry Manifest or Application and Special Permit for Immediate Delivery or other form of merchandise release required by the port director,
• Evidence of right to make entry,
• Commercial invoice or a pro forma invoice when the commercial invoice cannot be produced,
• Packing lists,
• Other documents necessary to determine merchandise admissibility.

Import procedures are subject to a specific process. For more information, consult Tips for New Importers on CBP's Website.
Further information on import and customs clearance procedure is available on the website of U.S. Customs and Border Protection.

Specific Import Procedures

FDA is the federal agency responsible for ensuring that foods are safe, wholesome and sanitary; human and veterinary drugs, biological products, and medical devices are safe and effective; cosmetics are safe; and electronic products that emit radiation are safe.

Importing Samples

The main options to import your commercial samples into the US:

• Duty Free Consumption Entries: goods may possibly enter the US with regular consumption entry stipulations, but free of any duties. This applies to small amounts of consumption samples, including: alcohol samples, tobacco samples, and samples not valued over 1$.
• Temporary Importation Under Bond (TIB): Samples entering under this procedure may enter into the US duty free by “posting a bond”, This bond is submitted by the importer, agreeing to export or destroy the sample within a specific time period
• Carnets: For the import, export and re-export of commercial samples an ATA (Temporary Admission) book can be used. It must be written on the product that it is a free sample and that it may not be sold.

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)

USD 800

Average Customs Duty (Excluding Agricultural Products)

Until recently, the U.S. applied a customs tariff that is among the lowest in the world (on average, 3.5%). Yet following an increase in tariffs on Chinese goods, as of May 2019, the United States has one of the highest tariff rate of all developed countries, with a trade-weighted tariff rate of 4.2%.

Products Having a Higher Customs Tariff

Dairy products, Sugars and confectionery, Beverages & tobacco, Clothing.

Preferential Rates

The duties for Canada and Mexico, bound by the USMCA agreement, are non-existent, or very reduced and in any case, lower than the general rate. There is also a preferential rate for countries included in the Generalized System of Preference, which is to say most of the developing countries.

Customs Classification

The U.S. applies the harmonised customs system (harmonised tariff schedule). Tariffs and classification depend on the origin of the products.

Method of Calculation of Duties

Customs duties are calculated Ad valorem on the CIF value.

Method of Payment of Customs Duties

They have to be paid by any electronic technology or charge cards that are authorized by the Commissioner of Customs.

Import Taxes (Excluding Consumer Taxes)

Import tax (also known as an import duty or import tariff) is collected by US Customs on every import that comes into the US. Import taxes are a source of income for the US Government and are a way to restrict or facilitate the import of certain commodities.User fees depend on the type of entry and mode of transportation. Federal excise tax is imposed on imports of alcoholic beverages and tobacco. Merchandise processing fee is charged on formal and informal entries.

Labeling and Packaging Rules

Packaging

• Pack the product in strong, sealed, moisture-absorbing containers
• Evenly distribute the product’s weight
• Provide adequate protection and bracing inside the container
• Use oceangoing containers or pallets for packing to ensure friendly handling

Languages Permitted on Packaging and Labeling

English is required. Other languages are optional.

Unit of Measurement

Metric units of measurement and weight.

Mark of Origin "Made In"

It is mandatory.

Labeling Requirements

All imported products must be indelibly labelled with its country of origin. Depending on the item, specific requirements apply. Food items must list all ingredients in order from most to least prevalent and must list nutritional information. Textiles and apparel must list fibre content and fabric care instructions. For more information consult the Food and Drug Administration, the Federal Trade Commission and the Department of Agriculture (USDA).

Specific Regulations

For certain foodstuffs (food, alcohol, drugs, medical devices) and textile products, electrical appliances and consumer goods.

Distribution Network

E-commerce

Internet access

The U.S. is among the leading countries in terms of internet technology and penetration. It is estimated that about 89% of the total U.S. population has access to the internet (versus 74% ten years ago). For some demographic groups – such as young adults, college graduates and those from high-income households – internet usage is almost universal (Pew Research Center, 2018). Today, roughly three-quarters of American adults have broadband internet service at home, however the adoption of traditional broadband service has slowed in recent years, also because a growing share of Americans now use smartphones as their primary means of online access at home. In fact, about 95% of Americans now own a device, with the share of those owning smartphones at 77%. Along with smartphones, nearly three quarters of U.S. adults now own desktop or laptop computers, while roughly 50% own tablet computers and around 20% own e-reader devices. The most popular web search engines in the U.S. are led by the market leader Google, which generated 63.4% of all core search queries in 2017, followed by Bing (23.7%) and Oath (formerly known as Yahoo), with a market share of 11.9%.

E-commerce market

Since 2011 the U.S. online retail growth has accelerated and in 2017 the e-commerce represented 13% of total retail sales and 49% of the growth of the retail sector as a whole. Consumers in the US spent US$ 453.4 billion online for retail purchases in 2017, a 16% increase compared with US$ 391 billion in 2016 (data from U.S. Commerce Department). While the top two e-commerce companies - Amazon and eBay - are for the most part online-only retailers, 60% of the biggest e-commerce players are multichannel, with a majority of sales occurring in-store (Walmart, etc.). Other major online stores include Apple, Home Depot, Best Buy and Macy’s. Electronics & media is currently the leading product category in America, followed by toys, hobby & DIY. Americans are increasingly using their smartphones to browse and make purchases: it is estimated that mobile shopping represents 40.3% of total e-commerce traffic (Adobe Analytics).

E-commerce sales and customers

There are currently 203.96 million e-commerce users in the U.S., with an additional 26 million users expected to be shopping online by 2021 (eshopworld). Amazon is responsible for an outsized proportion of total online sales, with a turnover forecasted to reach USD 258 billion in 2018 (equal to 49.1% of all e-commerce retail spend in the country, and 5% of all retail sales (e-Marketer). When Amazon’s sales are combined with e-commerce sales from eBay and Walmart - the next two companies on the list - they represent almost 5% of total retail sales in the US. It is estimated that 95% of Americans shop online at least once a year, with about 30% shopping online weekly. Online shopping is more common in younger generations, with respectively 67% and 56% of Millennials and Generation X that claim to prefer to search and purchase on e-commerce sites rather than in store (the ratio being 41% for “baby boomers” and 28% for seniors). The top three most influential factors in determining where Americans shop are price (87%), shipping cost and speed (80%) and discount offers (71%). Almost a quarter of online shoppers (23%) are influenced by social media recommendations/reviews. Oddly, one in five Americans have accidentally bought something they didn’t want. Credit cards remain the preferred online payment method (56%), while 25% of American shoppers prefer to use PayPal for their transactions. Debit cards and vouchers/promo codes have a lower share (10% and 7% respectively).

Social media

Today around seven-in-ten Americans use social media, compared to 26% in 2008 (Pew Research Center, 2018). While young adults were among the earliest social media adopters, nowadays the share of users aged 50-64 has increased and is estimated to have reached 64%. Facebook is the most-widely used of the major social media platforms across all type of age groups, with 214 million users. Smaller numbers of Americans use social media such as Instagram (77.6 million), Pinterest (75 million), LinkedIn (133 million) and Twitter (67 million). YouTube is also very popular (180 million users), while instant messaging apps like WhatsApp are less common (around 20 million). For many users, social media is part of their daily routine: around 75% of Facebook users – and around 60% of Instagram users – access these platforms at least once a day.

Direct Selling

Evolution of the Sector

According to the World Federation of Direct Selling Associations, 2016 direct retail sales amounted to USD 35,540 million and involved 20,500,000 independent representatives. It is the largest direct selling country in the world, with China a close second. One in six US households are involved in direct selling. The 35-44 age group is the largest in the industry (26%) followed by the 44-54 age group (23.3%) and the 25-34 age group (21.4%). Women accounted for 74% of people involved in 2016.

Euromonitor International expects the best direct selling products - health, beauty, and personal care items - to continue growing. Direct selling companies are inviting customers to register as preferential customers that purchase directly from the company, which helps the former defend their business models are product-based instead of recruitment-based. Their online presence has also grown.

The industry faces increased competition from other self-employment options as Uber and e-commerce, as well as new entrants to the direct selling sector. Mary Kay was the leading direct seller in 2017 followed by Amway, Melaleuca and Herbalife. However, nine companies that have USD 30 million in sales in 2008 are expected to surpass USD 400 million dollars in sales.

The US lacks coherent direct selling legislation. To solve it, the Anti-Pyramid Promotional Scheme Act of 2017 (H.R. 3409) was introduced in Congress to stop pyramid schemes and differentiate them from legitimate direct selling opportunities at a federal level.

Commercial Intermediaries

Trading Companies

 

• Type of Organization

A typical trading companies is more market-orientated and transactions driven. They usually act as an independent distributor creating transactions by linking domestic producers and foreign buyers.
As opposed to represent a specific manufacturer brand in a foreign market, the ETC determines what U.S. products are desired in a specific market and then work with U.S. producers to supply it.

• Main Actors

Wal-Mart Stores; Exxon Mobil; General Motors; Chevron; Hewlett-Packard ; Ford Motor; Home Depot.

Wholesalers

 

• Type of Organization

According to the United Nations Statistics Division, "Wholesale" is the resale (sale without transformation) of new and used goods to retailers, to industrial, commercial, institutional or professional users, or to other wholesalers, or involves acting as an agent or broker in buying merchandise for, or selling merchandise to, such persons or companies

• Main Actors

Cargill; Agricore United; Byrne Dairy; HD Supply Hasson Hardware; Hughes Supply.

Useful Resources

Search engine to find wholesalers

Using a Commercial Agent

The Advantages

The more realistic marketing strategy for a small or medium-sized firm.
Import agents are often appointed as sole agents for the entire country.

Where to Be Vigilant

This approach requires great care in the selection of the representative.
Don’t try to use a list of importers as a basis for “cold calls” on prospective agents. It is important to build a personal relationship.

Elements of Motivation

Exclusivity, a limited term of representation, minimum sales, or qualitative indicators of sales efforts. Frequent communication per fax, mail, phone.

The Average Amount of Commission

From 5 to 10% for regular business transactions, and from 10 to 20% for occasional transactions

Breach of Contract

Article 1 (General Provisions) and Article 2 (Sales)

Finding a Commercial Agent

International Trade Association
Alibaba

Setting Up a Commercial Unit

The Advantages

Although still costly, establishing a presence and an office in the US is necessary when your are considering a long-term sales development. As a long term investment, it costs you less than to use a commercial agent.

Where to Be Vigilant

It should be considered in long-term sales development.

Different Possible Forms of Settlement

 

• A Representative Office

Such an office can obtain market data and other information and provide necessary promotional and service support.

• A Branch Office

A branch office may take and fill orders and carry out a full marketing program, including advertising, recruiting a sales force, and performing promotional activities.

• A Company

Setting up a wholly-owned corporation will involve more time and expense, but it can offer effective means guaranteeing better protection for proprietary information, obtaining credit, and penetrating markets.

Franchising

Evolution of the Sector

In 2019, there were 773,603 franchise establishments in the United States. In 2019, the economic output of franchise establishments in the United States was about 787.5 billion U.S. dollars. Contributing to the economic output of franchise establishments in the United States, were about 8.43 million people who worked for these industry. The largest segment of the franchising industry is fast service restaurants, followed by business services. McDonald's is the most popular but also the most profitable franchise in the United States, with over $96 billion in sales. After McDonald's, it was 7-Eleven, raising $86 billion in sales.

Franchising in the US is regulated both federally and at the state level. The general rule in the US is that:

• Franchisors must comply with both federal and state franchise laws.
• The law that is the most protective of the franchisee prevails.

At the federal level, franchising is governed by the Federal Trade Commission's (FTC) trade regulation rule entitled Disclosure Requirements and Prohibitions Concerning Franchising (16 Code of Federal Regulations (CFR), Part 436 (2007)) (FTC Franchise Rule). Federal registration is not required. The FTC Franchise Rule applies in all 50 states and US territories and protectorates (including the District of Columbia, Puerto Rico, Guam and the US Virgin Islands). The Federal Trade Commission regulates franchising at the federal level.

Some Big Franchises

Mc Donald's, fast food
UPS Store, shipping
7-Eleven Inc., iced coffee
RE/MAX Int'l. Inc., real estate
InterContinental Hotels Group

For Further Information

IFA, International Franchise Association
AAFD, American Association of Franchisees & Dealers

Finding Assistance

Export Trading Companies

Export Trading Company Affairs, US Chamber of commerce

Recommended Resource

Doing Business in the U.S.