CUSTOMS CLEARANCE: THE MUST-KNOWS
When the goods move from one country to another, there is one step your international shipment cannot avoid – going through customs clearance. Customs activities are generally performed by dedicated experts, but good preparation can help you avoid unnecessary delays and frustration: the Freight Forwarding Experts share a few best practices you can adopt today to make the process flow smoothly.
Customs clearance and the payment of duties (also referred to as “tariffs”) can be complex to manage. But whether you are the shipper or the consignee, it is likely that you will be responsible for the import or the export customs brokerage of your shipment. Depending on the selected Incoterms®, you may even have to take care of both:TG | Customs | Incoterms clarify who is supposed to take care of clearance at destination as early as possible with your overseas business partner.
Before Anything Else: Identifying Your Goods
The smooth handling of your customs activities starts with a precise description of the goods you are shipping. This is achieved through an internationally standardized commodity code, the Harmonized System (HS) Code, which will ensure that the correct duties and taxes are applied by Customs. Note that HS Codes differ from country to country so it is important to make sure you classify products correctly for both the export and import country.
- Universal 6 digit HS Codes from World Customs OrganizationTG | Customs | World Customs Organization
- In the European Union, refer to TARICTG | Customs | TARIC
- In the United Kingdom, refer to the UK Tariffs CodeTG | Customs | UK Customs Tariffs
- In the USA, refer to the Harmonized Tariff ScheduleTG | Customs | Harmonized Tariffs
- In Mercosur countries (Uruguay, Paraguay, Brazil and Argentina), refer to the Nomenclatura Comun do MercosurTG | Customs | Nomenclatura Comun do Mercosur
The items in your shipment have been correctly identified – but can they leave the country or enter their destination location? Especially for import, some goods may be subject to certain government department regulations and require licenses or other permits depending on their nature–for instance health related products may require licenses from a Health Authority. It is key that you find out the specific requirements for your shipment before importing or exporting.
- Dual-use goods. They are goods that can be used for civilian both and military purposes. These include manufactured products, parts for machinery, software and technology. The national authorities control the export, transit and generally international trade of such items. In some cases, export into certain countries can be prohibited – this is an embargo.
- Agricultural products – In order to protect their agricultural economy, countries have adopted specific measures that limit or prohibit importation – these are quotas.
- Excise goods – some goods will be subject to elevated import duty burden based on their on their imported quantity in addition to their value – these include alcoholic beverages, tobacco, fuel and mineral oils.
Your cargo may also have to undergo certain procedures regardless of its nature. If your goods are only being temporarily exported or imported, for instance during a cross-country move to their final destination, a Transit procedure or an ATA Carnet may be required to prevent customs charges from being applied.
With the right documentation, export clearance can go smoothly. The shipper shares the necessary documentation (see drop-downs below) with their broker, who in turn submits a compliant clearance form to the customs office. The customs office can decide to immediately release the cargo, and shares the shipment’s authorization to export (such as the MRN Number in Europe): you are good to go!
A properly formatted invoice will ease the control of your shipment for the customs department, your overseas business partner and your customs broker. Here is what is should contain:
- The HS code for each article, both for Import and Export countries
- A total amount, without VAT
- The currency in which the transaction occurred
- An invoice number
- The name and address of the shipper (i.e. the seller) and the consignee ( the buyer)
- A VAT Number – it is not mandatory for both shipper and consignee, but displaying both can considerably speed up the process
- For exports from and imports to Europe, an EORI number (Economic Operators' Registration and Identification), in order for your customs broker to be able to perform the necessary activities.
- An indication of the total weight and number of packs that matches all the other shipping documents.
These documents will be necessary both at origin and destination, whether your goods are being cleared for export or import:
- Contact name and number for Consignee and Shipper: your broker will need to contact the consignee or the shipper to arrange the customs clearance.
- Packing list: it should match all the other shipping documents in terms of total weight and number of packs.
- Country of Origin: proof of origin might be requested during export clearance, and is mandatory for import if you want to benefit from lower – or zero-rated – import customs duties.
- Authorisations based on your product – is a license required?
In some instances, the cargo will require further inspection prior to its release – this is often referred to as export control. In this case, you have to clarify the nature and purpose of your goods to the export country’s customs authorities.
The inspection can take place physically or be limited to your shipment’s documentation, whereby customs authorities will apply different levels of control procedures to ascertain that the exportation is compliant with national and international laws and regulations. They may require to inspect the container, its products or have the usage of the products demonstrated for them before allowing exportation.
Here is our pro tip: consult with your customs broker prior to exporting by providing documentation samples and information on your goods’ nature and possible usages. This will enable your customs experts to let you avoid unnecessary delays or penalties.
If you use the services of a customs broker, the import process and controls will be an experience similar to that of the export clearance. It is important to share your delivery plan with your broker, along with all the necessary documentation – they will in turn create a compliant customs declaration. The key documents remain the same as seen above, with a particular attention needed for import licenses and proof of origin.
Based on the documentation shared by your broker, the Customs office either decides to release the goods or to inspect the transaction. In the latter case, your customs broker will coordinate with you the further actions needed.
Paying Customs Duties
Unless exempt, all imported commercial goods are subject to customs duties and taxes based on their HS Code tariff classification. Generally speaking, it is the importer of record who will pay the import duty and tax.
Some goods are also assessed in relation to other taxes. This includes excise duties and anti-dumping duties, which can be applied to goods priced significantly below their value in their import market.
- Does your transaction have a VAT number in both origin and destination countries?
- Direct payment or deferred payment? Ascertain that you are able to pay customs duties, excise duties, VAT either directly or via a deferment account. Your customs broker may also be able to outlay and settle payment on your behalf against a small disbursement fee.
- Do you have the correct Power of Attorneys in place? If you are using a customs broker, you and your trading partners need to take the correct dispositions to allow them to operate on your behalf.
- In Europe, do you have an EORI number? You will need to qualify as registered economic operator if you are exporting from or importing to Europe, or use a customs broker that is an authorized economic operator.
The documentation resulting from the clearance process must be kept for a set period of time that differs per country but can be up to 10 years or longer. For compliance audit purposes. DHL Global Forwarding offers archiving services, so customs authorities’ inquiries will be answered efficiently, without delay or prosecution risk.
Export cleared, import cleared and duties paid? It’s time for your shipment to arrive at destination. Experience a seamless import or export journey with DHL Global Forwarding.