I placed an overseas order with Fictiv--what’s next?
First off, congratulations! You’re one step closer to building the next great product. The purpose of this article is to provide you with the information you’ll need to become a master of shipping internationally with Fictiv. We’ll be covering four topics most relevant to you as an importer:
- HTS Codes
- 5106 forms
With Fictiv’s help, coordinating international shipping can be a quick, painless process; once you’re fully informed, gathering the information you’ll need can take as little as ten minutes. However, for those who don’t want to deal with the extra administrative legwork or risk potential customs delays, we have an outstanding network of manufacturing partners located in the US standing by to help you manufacture your parts domestically.
What are Incoterms?
Incoterms, short for International Commercial Terms, are a set of pre-defined terms of sale that outline levels of responsibility and liability for the payment and handling of the goods during shipping. Incoterms are meant to clearly communicate to both the buyer and the seller which steps in the entire shipping process they are liable for. From the moment sold goods leave the seller’s door up until their arrival at the buyer’s final destination, they are subject to the seller’s specified set of Incoterms.
Incoterms are accepted by governments, international regulatory bodies, and trading companies worldwide in order to standardize the most common terms in international trade in an attempt to remove uncertainties arising from differing interpretations of trade terms across countries. Below is a chart that summarizes each of the accepted 11 Incoterms by looking at which party the liability falls on for each step in the shipping process.
What are Fictiv’s Incoterms?
At Fictiv, we use Ex Works (EXW) for our Incoterms. EXW is among the most commonly used Incoterms because of its friendliness towards the seller; of all 11 standard Incoterms, EXW places the least amount of risk upon the seller.
Under EXW, the seller makes their goods available at a named location, and from that point on, the buyer is liable for all risks involved in the pick up and transportation of those goods. Examples of areas of liability include organizing logistics, performing customs clearance, and paying duties. This general liability does not prohibit the seller from performing these tasks in the place of the buyer, it simply says that they are doing so at the buyer’s risk and cost.
What do Fictiv’s Incoterms mean for me?
A helpful way to look at shipping internationally with Fictiv is that by placing an overseas order, you’re not simply buying your parts and having them shipped to you as you would with a pair of headphones on an ecommerce site--in the eyes of U.S. Customs and Border Protection (CBP), you are actually importing your parts, and thereby acting as a cog in the colossal machine that is international trade. However, do not fear! We maintain EXW terms as a safeguard against taking on too much risk, but we have an excellent logistics team to do most of the heavy lifting for you.
For all of our international rapid prototyping orders, we collect shipping fees or shipping account information up front and organize outbound shipment and clearance from China. So in effect, we’re operating with FCA Incoterms for these orders, even though we’re still adhering to EXW Incoterms as a matter of liability. For production-quantity orders (i.e. pallets instead of parcels), we operate more strictly within the Ex Works framework and accordingly request our customers to organize shipments with a freight forwarder. Even in those cases, though, we have international shipping experts on staff within our Operations team who will be at your side every step of the way to advise you on how to best ship your order.
What is an HTS code?
HTS (Harmonized Tariff Schedule) codes are used by all countries globally to classify internationally traded goods in a given shipment. A typical code consists of three groups of two digits which categorize and specifically define the goods, followed by two to four digits which further classify the goods and are unique based on the country of import.
For example, an HTS code of 7411.10.10 can be broken down by groups of two digits: 74 (a copper item) 11 (a copper tube or pipe) 10 (a copper tube or pipe made from refined copper) 10 (a seamless copper tube or pipe made from refined copper being imported into the U.S.)
HTS codes are important for two reasons; first, they determine the tariff/duty rate of the traded goods. Without an HTS code to classify the goods in your shipment, CBP will not be able to determine the tariff fee attached to your parts, potentially leading to indefinite customs delays and even steep fines. For more information on avoiding customs delays, you can check out this article.
The second reason is that they keep a record of international trade statistics used throughout the world. For example, the United States Census uses these codes to determine the value, quantity, weight, and trading partner of every product that the United States imports and exports.
What do HTS codes mean for me?
Given Fictiv’s EXW Incoterms, it is your responsibility as our customer to collect the HTS code for each part in your order. To get the codes, you can use Flexport’s lookup tool here. Your designated customer experience (CX) representative will follow up with you within 48 hours after your order is placed to provide you with guidance on HTS code selection and collect your HTS code and product description information. If you are uncertain whether your code is correct, your CX representative can help recommending the proper HTS codes. However, Fictiv is not responsible for any potential delay, as the final ruling regarding whether your chosen HTS code designation is accurate is made by U.S. Customs and Border Protection.
What is a “duty” and how do I pay it?
The duty, or tax rate, associated with a certain shipment is dictated by the value of the shipped goods and the associated HTS code(s). Duties are paid to CBP upon the import of goods from foreign countries.
If the HTS code lookup yields a percentage duty for one or more of your parts, that means you are responsible for paying that percentage of the overall value of your parts so that you can receive clearance for your shipment. If you don’t see the duties when you look up your HTS codes, you can double check the latest duties for each product category on the USITC website by entering your HTS code.
The carriers Fictiv uses (FedEx, UPS and DHL) are the entities which collect the duties. In order to pay your duty, you can contact the shipping carrier associated with your order and arrange payment via credit card or wire.
What is a 5106 form, and when do I need to fill one out?
The 5106 is the form used to create or update importers' unique identification information within CBP’s internal system. Essentially, the 5106 establishes the submitter as an official importer of record (IOR) in the U.S. If you or your company has never imported goods into the U.S. from overseas, you’ll need to fill out a 5106 form, with information matching the information on the ship-to address on your order, and submit it to email@example.com at least 2 days prior to your order shipment date, or else risk delays and/or fines. This is not a recurring process--once you’ve submitted a 5106 form, you will not need to do so again unless your IOR identification information changes.
When your CX representative reaches out to you about gathering HTS codes, they will provide you with a reminder about the 5106 if you have not already filled one out.