Customs clearance is an integral step in international shipping, involving both export clearance before departure from the origin port and import clearance upon arrival at the destination country. Despite experience levels, many shippers find this process intricate, fraught with potential issues. To preempt delays and additional expenses, we’ve compiled nine crucial tasks for seamless customs clearance preparation.
1. Pick a Customs Broker
Customs brokers are skilled logistics professionals who streamline the customs clearance procedure, guaranteeing adherence to import and export standards, laws, and regulations. They generate customs entries, provide aid with essential paperwork, duties, taxes, and payments, ensuring a comprehensive service for your shipments.
Do I Need to Find a Customs Broker Myself?
This is not always the case. Many freight forwarders such as btshipping either have licensed customs brokers or work with them to provide services to manage the customs clearance process for a specified fee. Before confirming your shipment with a freight forwarder, it is wise to ask whether their package includes brokerage services.
What If I Prefer to Engage My Own Customs Broker?
Even when collaborating with a freight forwarder, the option to enlist an independent third-party customs broker, also known as a customs house agent (CHA), remains available. Should you opt for this route, it’s crucial to verify the selected customs brokerage’s possession of the required CHA license, expertise, and experience before finalizing your decision.
It’s important to bear in mind that you’ll require a customs broker both at the port of origin for export clearance and at the port of arrival for import clearance.
When you engage a third-party CHA, your freight forwarder will transfer the necessary documents to your chosen CHA to handle the clearance process. Nonetheless, if the CHA causes any delays due to customs clearance not being executed punctually, your freight forwarder won’t be held responsible for any additional costs you might incur.
2. Check for Import and Export Restrictions in Specific Countries
Prior to dispatching your goods, it’s incumbent upon you to verify that your freight is eligible for export from the originating country and authorized for entry into the destination country.
What Is Prohibited?
Countries impose restrictions on the export and import of specific goods. It’s advisable to review the official lists of banned items before finalizing your shipment to ensure your cargo isn’t among them.
Nevertheless, it’s possible to export or import certain prohibited items under specific conditions and prerequisites if you secure written authorization. It’s important to note that attempting to trade prohibited goods without the requisite permission or license can lead to cargo confiscation and potential penalties.
What Is Restricted?
Countries also enforce limitations on the export and import of particular goods due to various reasons. It’s essential to be informed about any applicable restrictions before you ship your cargo. Here are a few illustrative examples:
- Age Restrictions: There are age constraints in place. For instance, vehicles older than 40 years and paintings exceeding 100 years might be prohibited for export due to their heritage significance.
- Quantity Limits: Specific items may only be exported or imported within set quantities.
- Packaging Requirements: Your goods must adhere to specific packaging stipulations for import or export.
- Licensing Prerequisites: Import or export of certain products is exclusively permitted for businesses holding the necessary licenses.
Furthermore, certain goods can enter a country without incurring import duties. It’s prudent to consult your customs broker in advance to ascertain if your products fall under this exemption.
3. Verify Your Compliance With Trade Agreements
Trade agreements have a significant impact on international trade, dictating the tariffs and duties applied to imports and exports. While some agreements, such as free trade agreements, can be advantageous, others might limit your prospects.
Free Trade Agreements
Countries engage in negotiations for Free Trade Agreements (FTAs) with other nations to promote smoother trade. FTAs lead to increased market accessibility by decreasing trade barriers, which encompass tariff cuts and other stipulations.
Exporting within the framework of an FTA can be advantageous for your financial performance. Hence, conducting thorough research to ascertain if your products meet the criteria for benefits under any existing FTAs is a prudent step.
Anti-Dumping Duties
These protectionist tariffs are enforced by governments on foreign imports when they perceive the imported goods to be undervalued compared to fair market value. This measure is designed to shield local businesses from foreign enterprises that sell products at prices below their customary rates in their domestic market.
Prior to proceeding, consult your customs broker to determine whether any anti-dumping duties are applicable to the products you intend to import. If such duties do apply, exercise caution when setting the pricing for your goods.
Countervailing Duties
Countervailing Duties (CVDs), also referred to as anti-subsidy duties, are tariffs applicable to imported goods. Their purpose is to counterbalance subsidies granted to exporters by their respective governments in the exporting nation. The World Trade Organization (WTO) enforces these tariffs to rectify the perceived unfairness of export subsidies.
Prior to exporting, consult your customs broker to determine whether any CVDs will be levied on your goods upon their arrival in the importing country. Advance knowledge is essential, as these duties can adversely impact your financial performance.
4. Verify Any Trademarks and Copyrights
Safeguarding your intellectual property (IP) during the export process and ensuring compliance with others’ IP rights when importing into a foreign nation is paramount.
While exporting, the protective umbrella of patents, trademarks, registrations, and copyright safeguards from your home country might not extend fully to the destination country. These protections might hold little significance, or none at all, in the new setting. It’s equally undesirable to encounter entry seizures of your goods in the importing country due to perceived resemblances to local products.
Our recommendation is to proactively conduct thorough research to preemptively identify existing trademarks and copyrights. This proactive approach allows you to comprehend how intellectual property matters are addressed within the importing country.
5. Research Your Supplier and Buyer
Ensuring the integrity of the supply chain involves a critical step: careful screening of all entities in the supply chain, including suppliers and buyers, against restricted party lists. Also known as denied party lists, these lists are made up of organizations, companies, or individuals that the government has flagged as entities that are unfit to do business.
There may be a number of reasons for placing someone on a restricted party list. For example, they might be:
Affiliation with a recognized terrorist organization or its affiliates.
related to drug trafficking.
History of involvement in corrupt business practices.
Failure to comply with these restrictions can have serious repercussions for shippers, including penalties, suspension of export licenses, and even imprisonment. Fortunately, many freight forwarders, such as btshipping, include restricted party screening as an integral part of their service.
6. Prepare All Required Documents
Initiating customs procedures requires submitting the necessary documents to your customs broker. The following documents are generally required by most customs authorities:
- commercial invoice
- packing list
- Certificate of Origin
- Letter of credit or other payment terms (depending on agreed Incoterms and contract terms)
- For air shipments, an air waybill is required, while for ocean shipments a bill of lading (provided by your freight forwarder of choice) is required.
Occasionally, other documents such as licenses, licenses or certificates may need to be filled out. If this occurs, your customs broker will notify you and provide further guidance.
7. Comply With Packing Requirements
Ensuring your products’ safe and damage-free arrival hinges on appropriate packaging. Yet, it’s equally vital to be attentive to specific packing prerequisites relevant to particular goods (e.g., aerosols, sprays, medicines) in either the country of origin or destination.
Occasionally, authorities might mandate a customs inspection or an intensive examination of your cargo. Inadequate packaging can lead to delays and supplementary customs expenses.
Regarding packing materials, it’s imperative to consider import restrictions and quarantine stipulations of your target country. When utilizing wooden packaging, affix theISPM 15 mark as proof of its pest-preventive treatment.
Certain countries, Australia for instance, necessitate a packing declaration as part of essential customs clearance paperwork. This declaration furnishes information about container cleanliness and discloses the use of timber and straw as packing materials.
8. Be Aware of the Different Types of Invoices
In the process of assembling your shipping documentation, it’s crucial to discern the distinctions among various invoice types. This comprehension ensures that you provide your customs broker with the accurate invoice required.
Commercial Invoice
The commercial invoice, a legally binding document issued by the seller to the buyer, stands as evidence of the transaction between them. This invoice is pivotal for customs brokers to determine and evaluate applicable duties and taxes. Notable particulars to include on the commercial invoice are:
- Invoice number and issuance date
- Details such as prices, quantities, descriptions, and HS codes of the sold products
- Information about the seller and buyer, including their respective tax identification numbers
- Agreed Incoterms for the transaction
Pro Forma Invoice
A pro forma invoice is an initial invoice dispatched by suppliers to buyers once an order has been confirmed. This invoice is issued before the goods are shipped or delivered. While the pro forma invoice constitutes a binding agreement between parties, certain particulars might still be open to modification. The key distinction between the commercial invoice and pro forma invoice lies in the definitive nature of the commercial invoice.
In some instances, certain countries permit pro forma invoices to serve as substitutes for commercial invoices in the determination of import duties and taxes. Your customs broker can provide clarity on whether this applies to your shipment.
Customs Invoice
The customs invoice essentially mirrors the commercial invoice, but adheres to a particular format mandated by customs authorities in either the exporting or importing country. If a customs invoice is required, your customs broker will furnish you with the appropriate form.
9. Perform Pre-Shipment Inspections
Conducting a pre-shipment inspection is a pivotal aspect of your quality control measures, ensuring all aspects are in proper order prior to your goods departing the export country. This practice helps prevent potential delays upon arrival at your destination port.
Health Requirement
When shipping hazardous materials, often referred to as dangerous goods, it’s imperative to ensure proper handling and appropriate packaging.
Labeling Requirements
Prior to dispatching your goods, it’s advisable to thoroughly investigate the product labeling prerequisites in your destination country. Labels should be legible and securely affixed to prevent detachment during transit.
Quality Requirements
Before your goods are sealed within shipping containers, performing a final quality and consistency check is essential. This step helps prevent any potential disappointments for the consignee.
