In recent years, trade between the European Union and the United States grew substantially. Navigating the US market is not the simplest, and here you can find the basics of exporting to the US.
US-EU trade
The United States is the largest economy in the world, as well as the biggest importer. Recently China overtook the EU as the US’s top trading partner due to the COVID-19 pandemic. Still, the partnership between the US and EU has been steadily expanding.
In 2019, the EU exported 452 billion worth of goods to the US – up 6 percent from 2018 and up 93 percent from 2009. The US’s largest trading partners in Europe are Germany, Ireland, France, Italy, and the Netherlands.
Currently, many business owners decide to register their companies in Delaware, Nevada, and Wyoming.
Among the US market’s advantages are:
- high purchasing power
- absorbent and large market
- demand for European goods among immigrants in the US.
There are also some disadvantages:
- the long-distance, which affects transportation costs
- strong competition
- complicated tax system.
Exporting to the US from the EU – prospects
The EU is the second-largest trading partner of the US after China. In 2020, the trade value reached 658 billion dollars. Most foreign goods are exported to California, Texas, Illinois, Michigan, New York, and New Jersey.
Pharmaceuticals are one of the most imported products; next are vehicles and vehicles parts, machinery, electronics, airships, and airship components.
The EU profited from the US-China trade war as it exported more than before. US residents are also interested in investing in European companies because it creates new prospects for exporters.
What should you export to the US?
The US market is one of the most innovative in the world. It strives for technological development and imports goods as an investment rather than consumption.
Here is the US imports ranking:
- Investment goods (hardware, telecommunications equipment, and semiconductors, railway equipment, medical equipment, and airships).
- Consumption goods (pharmaceuticals, mobile phones, home appliances, toys, clothing).
- Industrial raw materials (petroleum, metals, chemicals, plastics).
- Vehicles, parts, engines.
- Food.
The US import most goods from China, then Mexico, Canada, Japan, and Germany.
Here are the most imported products from the European Union:
- pharmaceuticals
- machinery
- vehicles and parts
- aircraft and its equipment
- optical and medical instruments
- telecommunications equipment.
Exporting to the US – law regulations
Other than customs duties required when trading with most non-EU countries, there are many other export limitations. The regulations aim to lower the international trade deficit. When planning to export to the US, you should research the existing laws and tax system.
Taxes in the US
The US tax system is incredibly complicated. It includes federal regulations (for the whole country) and state regulations (different for each of the 50 states). The exporter has to follow them, and in some cases, he must cover:
- federal tax (unless the company has a branch in the US)
- state tax (only when a tax bond, called the Nexus, occurs first; it includes owning a warehouse in the US, hiring workers there, or crossing a specific size limit or sale value).
If there is a tax bond between your company and a specific state, you also have to pay the sales tax. However, it is not required in Alaska, Montana, Delaware, Oregon, and New Hampshire.
Other requirements
Moreover, someone who sells products in the US must obtain a FEIN (Federal Employer Identification Number).
You also need to remember about fulfilling quality and safety expectations for the products. It is especially important for sanitary and phytosanitary products, which makes shipping fresh foods more difficult. If you plan to export pharmaceuticals, food, or medical products, you need to register with the FDA (Food and Drug Administration).
FCC and Exporting electronics to the US
There are different requirements for electronic and telecommunications devices. These type of products needs to have an FCC declaration of conformity. The FCC marking indicates that the product is safe, for example, in terms of electromagnetic field emission. The name comes from the American regulatory unit, Federal Communications Commission.
Customs duty and HTS codes
Reports of products exported from the EU to the US are done through an online AES/ECS2 system. Moreover, every exporter must obtain an EORI number.
The US customs tariff system is more complicated than the European TARIC. It is based on HTS (Harmonized Tariff Schedule) codes, which classify products into individual groups. There are now over 20 000 codes, and the exporter has to choose the product’s correct category. You can see the current tariff on the government website in PDF format.
Although the US market is quite open in terms of customs tariffs, some product categories have higher customs taxes to avoid foreign products’ overflow. These are, for example, additional customs duties for washing machines, solar panels, steel, aluminum, and some agri-food products.
There are some unique situations when products exported to the US are exempted from customs taxes:
- selling a product not worth more than 800 dollars to an individual customer
- selling through Amazon FBA not surpassing the one-time value of 800 dollars.
Shipping from the EU to the US
One of the biggest challenges in exporting to the US is shipping and product distribution. Since there is an ocean between two areas, sea and airfreight are the only options.
One of the most popular and cheapest shipping methods is sea freight. The transit time is 9 to 30 days, depending on the route. The most important US ports are in New York, Baltimore, Savannah, Seattle, Boston, Oakland, Jacksonville, Los Angeles, Norfolk, New Orleans, and Philadelphia. Remember about submitting cargo information in the ISF 10+2 document.
Airfreight is recommended in cases of urgent shipments or small products with a high value. You can send your cargo by LOT or Lufthansa Cargo airlines, which will take a couple of days. It is good to make sure your forwarder reported your shipment in the AMS system.
Think about how you will distribute your product in the US – in some cases, hiring a shipping company will be sufficient, but in others, it is better to rent a warehouse in the destination country.
You can find more details about shipping between Europe and the US in our previous articles. If you want to compare transport costs by different shipping companies, you can count on shiphub.co.
To sum up, because of the complexity of requirements, size, as well as intense competition, it is advised to thoroughly analyze the US market and have a strategy of introducing new products.