You have made your sale, shipped the goods to your U.S. buyer, and the shipment is on its way to the border. Then, without warning, the goods are stopped at the port of entry, and the customs broker requests an IRS number. At this point, you are likely wondering what an IRS number is and why it is needed. To help you understand, let's dive into this scenario a little deeper.
What Is Internal Revenue Services (IRS) Tax Number And Why Is It Required?
First off, all goods entering the U.S. from overseas are considered Imports and U.S. Customs and Border Protection (CBP) must approve all Imports for entry. CBP requires documentation which includes shipment details such as the identification of the Ultimate Consignee. An Ultimate Consignee is a person, party, or designee that is located in the U.S. and will receive the shipment (which is usually the buyer of the goods). An Internal Revenue Service (IRS) number, is used by CBP to identify the Ultimate Consignee.
There are two types of IRS numbers:
- Employer Identification Number (EIN): Issued to business entities
- Social Security Number (SSN): Issued to individuals
Without an IRS number, CBP does not know who the Ultimate Consignee is and therefore will not accept the shipment into the U.S.
U.S. Customs states the following.
"The appropriate identification number for the Ultimate Consignee is defined as an Internal Revenue Service employer identification number if a social Security number. if the appropriate Ultimate Consignee identification number is not provided at the time of entry or release, entry of the merchandise shall be denied."
(Source: CUSTOMS DIRECTIVE NO. 3550-079A)
Will One IRS Number Cover A Host Of Different Goods Sold To One Consignee?
The IRS/EIN or SSN is specific to the Ultimate Consignee. The IRS issues these numbers directly to the company or individual. Therefore, if someone in the U.S. buys a host of products from you, you would declare the IRS number for that buyer on the entry declaration to U.S. Customs.
If you have more than one buyer, then it is best to make a declaration per transaction and declare the IRS number for each buyer in each transaction.
My Shipment Had An IRS Number, Why Was It Stopped?
If you run into this scenario, and your import documentation included an IRS number, it could be for one of two reasons.
- First, the Ultimate Consignee of the shipment had never purchased goods from a foreign party and therefore is not in U.S. Customs database.
- Another likely culprit for this delay could be a deactivated account. Deactivation happens when more than a year has passed since the Ultimate Consignee last received an import.
If the IRS number is not on file or has been deactivated by U.S. Customs, then it will need to be added to their database by filing a Customs Form 5106.
What Is A Customs Form 5106?
A Customs Form 5106 is used by U.S. Customs to input the name, physical address, and IRS number of the Ultimate Consignee into their database. The Customs Form 5106 must be on file for all consignees at the time of entry.
Is A 5106 Required For Every Shipment I Send To The U.S.?
U.S. Customs states that "An importer identification number shall remain on file until one year from the date on which it is last used on Customs Form 7501 or request for services." This means that as long as the Ultimate Consignee continues to receive goods on a regular basis, this form will only have to be completed once. If their 5106 importer record is not used for over a year, then they will have to reactivate their number.
How Can I Determine If The U.S. Has A Customs Form 5106 On File For The Consignee/Buyer?
Your customs broker can query the Ultimate Consignee information with U.S. Customs and advise you if they have an active 5106 on file. This is a simple, and proactive step that can save you a lot of hassle.
How Do I File A Customs Form 5106?
If a 5106 is not on file, you need not worry as your customs broker can supply you with one. You can then ask your buyer to fill it out. One you have received it back from your buyer, you can provide it to your custom broker, who will then submit it to Customs. CBP will then add it to their database.
In summary, if you are selling to U.S. buyers from outside of the U.S. and you are responsible for declaring the goods at the port of entry, you must ensure your buyer has an IRS number. If they do not, work with your customs broker to get one. We are here to help!
Want To Learn More About Importing Into The U.S.?
Get a comprehensive understanding of the process involved with our seminar on How To Import Into The U.S.