What Is General Order?
A General Order (GO) refers to a status assigned by U.S. Customs to imported goods that are not promptly cleared or lack proper documentation upon arrival. This designation places merchandise into a specialized bonded warehouse where it is held until the necessary duties, fees, or paperwork are completed. This concept falls under International Finance and Trade Regulation, as it directly impacts the flow of goods and associated financial obligations across borders. The purpose of a General Order is to manage goods that would otherwise clog ports and customs facilities, while also providing a mechanism for the government to eventually collect outstanding charges or dispose of unclaimed property.
History and Origin
The concept of a "General Order" warehouse and the regulations surrounding uncleared goods have evolved with the history of global international trade and the establishment of formal customs procedures. As maritime trade expanded, particularly from the 18th century onward, governments recognized the need for structured processes to manage incoming shipments, collect tariffs, and address abandoned or improperly documented cargo. In the United States, the framework for customs procedures, including provisions for General Order, is rooted in early customs laws designed to regulate imports and protect domestic industries. The official establishment of detailed regulations by government bodies like U.S. Customs and Border Protection (CBP) solidified the process for handling unclaimed or problematic merchandise. For example, CBP maintains specific procedures for dealing with merchandise that remains "unclaimed" after certain periods, leading to its transfer to a General Order warehouse.6
Key Takeaways
- A General Order is a customs designation for imported goods that are not cleared within a specified timeframe (typically 15 days).
- Goods under General Order are moved to a Class 11 bonded warehouse.
- The owner of the merchandise retains the risk of transportation and storage while goods are under General Order.
- If goods remain under General Order for more than six months, they may be subject to government auction or forfeiture.
- The designation ensures the collection of import duties and prevents port congestion.
Interpreting the General Order
The issuance of a General Order on merchandise signifies that an importer has failed to meet their obligations regarding the timely clearance of goods through customs. This can occur for various reasons, including missing import licenses, incorrect declarations, or unpaid duties. From a financial perspective, a General Order represents additional costs for the importer, including storage fees, handling charges, and potential penalties. The longer goods remain under General Order, the higher these accumulated costs become, potentially exceeding the value of the merchandise itself. Understanding this status is crucial for businesses involved in trade finance to manage their supply chains and financial exposures effectively.
Hypothetical Example
Consider "Global Gadgets Inc.," an electronics importer, expecting a shipment of smartphones from Asia. Due to an administrative error, the import documentation for the shipment is incomplete when the vessel arrives at a U.S. port. Customs officials, unable to process the entry, hold the goods. After 15 days without the necessary paperwork being submitted or the goods being cleared, the shipment is placed under General Order.
The smartphones are then transferred to a Class 11 bonded warehouse. Global Gadgets Inc. is informed of the General Order status and now faces additional costs for the storage of their merchandise in the bonded facility. If Global Gadgets Inc. fails to resolve the documentation issues and pay all accrued fees within six months, the U.S. government could seize the smartphones and put them up for auction, resulting in a significant financial loss for the company. This example highlights the financial implications and logistical challenges associated with a General Order.
Practical Applications
General Orders primarily apply within the realm of international trade and supply chain management. Businesses that frequently engage in importing goods must have robust compliance procedures to avoid this costly designation. Financial institutions involved in financing international transactions, such as providing letters of credit or other forms of trade finance, also monitor General Order risks as they can impact the value of collateral or the ability of a borrower to repay. Furthermore, legal and regulatory frameworks, such as those overseen by the Securities and Exchange Commission (SEC) for broker-dealers involved in investment activities, reinforce the importance of adherence to all applicable laws, including customs regulations. For instance, while not directly related to General Orders, the SEC's emphasis on firms acting in the best interest of clients, as highlighted by regulations like Regulation Best Interest, underscores the broader commitment to responsible financial conduct and adherence to regulatory requirements across various financial domains.5
Limitations and Criticisms
While necessary for customs control, the General Order process can lead to significant financial burdens for importers. The escalating costs of storage and handling can erode profit margins or even result in the abandonment of goods if the accumulated fees outweigh their market value. Critics may argue that the process, while structured, can be slow, especially for small businesses lacking the resources or expertise to navigate complex international regulation and resolve customs issues swiftly. Moreover, the ultimate disposition of goods through government auction, as conducted by agencies such as the U.S. Customs and Border Protection, may not always recover the full value of the merchandise, potentially leading to losses for both the importer and the government.
General Order vs. Discretionary Account
The term "General Order" in finance is distinct from a "discretionary account," though both involve a form of delegated authority. A General Order refers to the regulatory status of uncleared imported goods held by customs, involving penalties and potential forfeiture. In contrast, a discretionary account is a type of brokerage account where a client grants written permission to a broker-dealer or registered representative to make investment decisions regarding trades (e.g., choosing the asset, action, or amount) without seeking prior client approval for each specific transaction.2, 3, 4 This contrasts with non-discretionary accounts, where explicit client approval is required for every trade. FINRA Rule 3260, for example, governs the strict conditions under which a fiduciary relationship in a discretionary account can operate, requiring written authorization and ongoing supervision to protect the client's interests.1 The confusion between these terms sometimes arises from a misunderstanding of "order" in a general sense versus a specific regulatory designation or type of financial instruction.
FAQs
What happens if I don't clear my goods from General Order?
If imported goods are not cleared from General Order within six months, they may be deemed abandoned. The U.S. government, typically through CBP, can then seize the merchandise and sell it at a public auction to recover outstanding duties, taxes, and storage fees. Any remaining proceeds, after deductions, might be returned to the owner, but this is often minimal.
How can I prevent my goods from being placed under General Order?
To prevent goods from being placed under General Order, importers must ensure all required documentation is accurate and submitted promptly to customs, and all necessary duties and fees are paid. Engaging with experienced customs brokers and maintaining rigorous internal compliance processes can significantly mitigate this risk.
Are there different types of General Order warehouses?
Yes, goods placed under General Order are specifically moved to a Class 11 bonded warehouse. These facilities are authorized by U.S. Customs and Border Protection to store uncleared or abandoned merchandise.
What are the financial consequences of a General Order?
The financial consequences of a General Order can include significant storage fees, handling charges, and potential penalties. If the goods are ultimately auctioned, the importer may lose the entire value of the merchandise, in addition to any initial costs incurred. This can severely impact a company's profitability and supply chain efficiency.