January 13, 2023
AGI News
Customs
With the rise of global trade over the last decade, more businesses are becoming involved with the requirements of customs clearance. The relative simplicity of local, in-country trade, is being replaced by a seeming myriad of rules and regulations. Whilst the process can seem daunting at first, by understanding the basics of the customs clearance process, businesses can reduce the time, effort, and cost of this element of international trade.
What is customs clearance?
Customs clearance is the term used to describe the process of shipping goods across international boundaries that form different customs territories. Where different countries share a single set of customs rules, such as the European Union, no customs clearance process is required. Customs clearance applies to the import and export of all goods, including low-cost items, or indeed free samples.
Whilst the outline customs clearance process is broadly similar for all international regulatory boundaries, the details will vary based on specific country rules and the goods being shipped. It is important that businesses understand the specific rules for each customs boundary, to avoid unnecessary delay and cost. For this reason, specialist logistics companies with dedicated customs clearance agents are often used.
Who has a role in customs clearance?
The people or businesses that have a role in the customs clearance process are sometimes known as agents.
The owner, or holder, of the goods, is ultimately in charge of the export and customs clearance process. Often, the owner will use a customs clearance, or forwarding agent to manage the process on their behalf.
A customs clearance agent is a professional responsible for clearing, duties, and documentation for import and export of all types of goods, in compliance with the relevant customs and government regulations.
The couriers, or freight shippers, are responsible for the physical transportation of the goods. A good logistics company will offer customs clearance as part of their service.
The importer is the company or person to whom the goods are being delivered in the country. They may not be the final owner of the goods once the full logistics process has been completed.
The customs clearance process
Whilst the exact process will vary by geography and the types of goods being shipped, the customs clearance process falls into the following six steps:
Prearrival preparation
Preparation is key to a successful customs clearance. Ensuring that all the documentation is clearly completed, in accordance with the local customs requirements, and that goods are packaged correctly. Because the rules vary by customs area, it is vital that you fully understand all the requirements for the import or export you wish to carry out.
Declaration and arrival of the goods at customs
A detailed declaration of the goods being shipped is required by customs authorities, and acts as the checklist by which the clearance process will succeed or fail. The level of detail required will vary by customs area, and whilst generic declaration forms are available online, it is always worth checking to see what details will be required for the specific geography. A declaration form is likely to include the following details:
- Shipper’s details including name, address, tax or VAT number, or EORI number.
- Authorised person in the sending company including name, phone, e-mail address.
- Buyer company details, such as name, address, tax or VAT number, or EORI number.
- Authorised person in the destination company, including name, phone, e-mail address.
- The local and English name and description of the goods.
- Declaration of the country of origin of your goods.
- Quantity of the product.
- Net weight and gross weight of goods.
- Shipment purpose of the product, for example commercial, sample, etc.
- Description of the goods.
- Goods HS code.
- Packaging details such as number of packages, dimensions, package type, etc.
It is also important to establish when the declaration form needs to be sent, and any specific requirements for the physical arrival of the goods.
Inspection of the goods
Once the goods have arrived, they will be inspected by the customs authority to ensure they meet the detail outlined in the declaration. Whilst not all items being shipped will be checked in detail, it is wise to assume that they might be. Poor documentation, or damaged packaging, may increase the length of time inspections take. Sometimes the goods will be moved to a remote inspection facility, which can cause additional delays to the customs clearance process.
Examination of the documents
The examination of the required documentation is perhaps the most important part of the clearance process. As a minimum, there are three documents that will be required:
- Commercial Invoice
- Packing List
- Bill of Lading, Air waybill, or CMR
The commercial invoice contains the date and invoice number, the shipper’s and buyer’s details, name and description of the goods, quantity, price, delivery method and banking details. Although not mandatory, including the HS Code of the goods on your invoice can help speed up the clearance process.
The packaging list also contains details of the invoice, shipper and buyer, as well as a more detailed description of the goods, including weights and dimensions. Ensuring that the details are clear, comprehensive and match the physical goods, is key to minimising delay.
The bill of lading is a legal document, issued by a carrier and passed to the shipping company, that details the type, quantity, and destination of the goods being carried. It accompanies the goods and needs to be signed by an authorised representative of the logistics company, shipper, and owner of the goods in transit. The equivalent document is an Air Waybill for air transportation, or CMR for road travel.
Additional documents will depend on the nature of the goods and route, but may include insurance details, certificate of origin, movement certificates, electronic export information (EEI) as well as test and inspection certificates.
Payment of any taxes and duties
As well as ensuring the legal status of goods entering and leaving a customs area, one of the fundamental purposes of the process is to collect any taxes, tariffs or duties that are owed. As an example of import duty to the United Kingdom, the governments import tariff guide says:
“Customs duty is assessed on the fair market value of imported goods at the time they are landed in the UK. Import prices for products entering the UK generally consist of: Cost, Insurance, Freight and Duty, with a standard VAT of 20% levied on the aggregate value. VAT is reduced to 5% for some goods and services such as children’s car seats and home energy. VAT is further reduced to 0% for certain goods such as food and children’s clothing.”
Penalty fines may also be payable, where UK or international law is broken.
Release of the goods from customs for onward shipment
The final step in the customs clearance process is to release the goods for onward transportation. Typically, customs clearance takes between 12 and 24 hours, however this time may vary according to the destination country, type of cargo being shipped, and the volume of goods. It is always wise to plan for a longer duration of time and set expectations accordingly.
How to make the customs clearance process easier
Most delays in the customs clearance process come from easily avoidable problems, such as incomplete documentation, incorrect product licences, lack of appropriate packaging and markings, and not ensuring that goods are properly described in the customs declaration.
Another common problem comes when shipping sample goods. In this case it is important to ensure that the items are clearly defined as such, for example, “samples with no commercial value”. However, customs will still charge tax on the actual value of the goods, so a non-zero figure must be shown on the invoice. The quantity of samples being shipped should also be made clear.
How can we help?
Here at AGI we have a huge amount of experience when it comes to the customs processes, including customs clearance. Working with companies, we can advise on the exact information that is required, and provide templates that will ensure the smoothest clearance possible. We can also advise on some of the other customs documents and processes that are required.
If you would like to find out more, please get in touch. We would love to hear from you.