The task of customs clearance is seemingly simple but can become a minefield for businesses because of the intricate procedures and regulations involved. After all, a crucial step in international trade is ensuring your goods cross borders quickly and efficiently.
Customs clearance involves inspecting goods to ensure compliance, followed by the collection of any necessary duties and taxes. While this process typically takes less than a day, even minor hiccups and errors can cause significant delays and frustrations.
As customs clearing experts, we want to break down the customs clearance challenges that you could possibly face when moving goods around the world.
Common Customs Clearance Challenges:
1. Unexpected duty costs
1. Unexpected duty costs:
The most common challenges that occur in customs clearance are the surprise of customs duties costing more than expected and incomplete or incorrect customs declarations.
This is because the cost of duties are determined by the value of the goods being imported and the country of origin. This means that these costs can vary significantly depending on the specific regulations and tariffs of the importing country.
The calculation of these duty costs can be complex and may involve the application of various taxes and fees. As a result of these complex calculations, it is easy for discrepancies and misunderstandings to occur between the importer and the destination countries customs authorities.
2. Incoterms Mishaps:
Incoterms are important because they define the responsibilities of buyers and sellers in international trade. Picking the wrong Incoterm can be problematic and cause issues with customs authorities.
For example, selecting "Ex Works" (EXW) as an incoterm might seem like a good deal for a new buyer, but without the know-how for custo ms clearance and transport it can turn into a nightmare. You'll be responsible for navigating unfamiliar customs regulations which could lead to delays and fines if not handled correctly. Additionally, there might be hidden costs for permits and unexpected logistics like arranging freight forwarding and insurance. If you're unsure about which Incoterm to use, it is better to consult with a freight forwarder or customs broker.
3. Unclear Responsibilities:
When the division of responsibility between the buyer and seller isn't clearly outlined in the documents, it can lead to finger-pointing and delays while customs officials determine who's accountable for what. This can lead to incurring additional costs due to storage fees and potential demurrage charges (penalties for exceeding the free time allowed for unloading the container).
If an issue arises such as missing paperwork or incorrect declarations, both you and the seller could get stuck in a finger-pointing frenzy.
Clearly outline each party's responsibilities in the contract. Specify who handles export licenses, prepares customs documents, and arranges inspections. This can help prevent any unnecesaary back and forth that will delay the clearing process.
4. Export Control Violations:
Different countries have varying regulations regarding what can be exported. Using an Incoterm like "Ex Works" (EXW) can increase the risk of non-compliance with export controls and customs which leads to hefty fines and potential legal trouble.
The reason for this is that you as the buyer may not have the expertise to correctly handle the regulations or customs procedures. If export compliance control is a concern for you then consider using an Incoterm that places more responsibility on the seller like Delivered Duty Paid (DDP). DDP makes the seller accountable for ensuring export compliance which will take some of the responsibility off your shoulders.
5. Missing Permits or Licenses:
Certain goods, like food products, endangered species materials, or high-tech equipment, require specific permits and licenses for import or export.
Failing to research and obtain these beforehand can result in your shipment being held at customs for extended periods, while authorities verify its legitimacy. In worst-case scenarios, the shipment could even be confiscated.
6. Inaccurate or Incomplete Information:
Even seemingly minor errors on your paperwork can have significant consequences. Double-check all details on your documents such asproduct descriptions, quantities, and values.
Ensure they align perfectly with the information on your commercial invoice. Discrepancies can trigger delays for verification by customs officials which will extend your delivery timelines and potentially frustrating your customers.
7. Improper Packaging:
Improper packing can cause issues with customs for various reasons. Goods that are not packed proprly can result in damage during transit, making them unsuitable for sale or use. Customs officials may reject or delay clearance of goods that are poorly packed as they need to ensure compliance with regulations and safety standards.
Additionally, improper packing can hinder the inspection process. It can makeit difficult for customs officers to verify the contents of the shipment which will potentially raising suspicions for further inspection. In some cases, inadequate packing can also lead to incorrect labeling or documentation that is crucial for customs clearance.
It is critical to ensure proper packing, labeling, and documentation to avoid complications with customs and facilitate smooth clearing processes.
8. Perishable Products and Quirky Regulations:
Perishable items can cause customs challenges due to regulations that govern their transportation and handling. These regulations aim to ensure food safety, prevent foodborne illnesses, and protect consumers.
For example, perishable food items must be stored at specific temperatures to prevent spoilage, and they may require special packaging or labeling to meet import requirements. Customs officials determine the safety of perishable items for import based on various factors.
They look at things like the packaging, labeling, and documentation of the perishable goods to see if they comply with regulations and safety standards. Customs officials might inspect the condition of the items upon arrival to verify that they have been stored and transported at the correct temperatures to prevent spoilage and contamination.
9. Customs Inspections: The Eagle Eye (and Nose) of Customs:
Weight discrepancies can raise concerns for customs officials about the accuracy of the shipment's documentation and the potential for undeclared or hidden goods. Customs officials may use the recorded weight of the product and compare it to the weight it had when it was sent to ensure that the shipment's contents match the declared value and description.
Unusual smells coming from a container can also raise concern for potential issues with the storage or handling of the goods during transit. Make sure that all your perishable goods are correctly stored, and the declared values and descriptions are accurate to avoid further inspections.
10. Country-Specific Labeling and Marking Requirements:
Many countries have specific labeling and marking requirements for imported goods. Labels that don't comply with the countries guidelines can result in shipment rejection or delays while the labeling is corrected. Many of these label complaince issues can come in the form of not including the country of origin, missing information, incorrect layout, wrong storage instructions or providing inaccurate information.
These labels help customs officials verify the authenticity of products and assess any potential risks associated with the goods. Proper labeling that correctly indicates the nature of the perishable item, its ingredients, expiration date, and storage requirements is crucial for customs officials to assess the safety and suitability of the product for importation. Authorities are strict on these compliance regulations as it prevents health risks and guarentees food safety.
11. Non-Monetary Trade Barriers:
Some countries might impose non-monetary trade barriers like quotas or technical standards that make it difficult to import certain goods. Countries might impose strict technical standards that exceed their own domestic requirements. This protects domestic manufacturers adn protects local businesses.
These strict standards can act as a barrier to entry where foreign companies may struggle to comply with these regulations, making it difficult and expensive to bring their goods to that market. In simpler terms, these barriers make it more challenging and expensive for foreign companies to sell their products in a particular country,
12. Sanctions and Embargos:
Sanctions:
These are targeted restrictions imposed by one or more countries on another. They can limit trade in specific goods (like weapons) or restrict financial transactions. Sanctions prevent you from doing business with a particular country due to political reasons, even if your product isn't harmful.
Embargos:
These are even more severe and basically ban all trade with a specific country. If a country you do business with gets hit with an embargo, you might be suddenly unable to import or export goods altogether.
Why is customs compliance so important:
If your goods do not does not clear customs, several things can happen:
Delay in Delivery:
Customs may hold the package for further inspection or clarification, which can cause a delay in delivery.
Return to Sender:
If the package contains prohibited or restricted items, it may be returned to the sender. In this case, the sender may be responsible for any additional shipping costs and may not be able to recover the cost of the item.
Seizure of your goods:
If the package contains illegal items, customs may seize the package and initiate legal action against the sender.
Additional Fees:
If the appropriate duties and taxes have not been paid, the recipient may be required to pay additional fees to clear the package. If youre goods get held up for inspections you may run into charges for storage and demurrage.
Destruction of goods:
If the package contains hazardous materials or items that cannot be imported, customs may destroy the package.
If your package does not clear customs, it's important to contact the shipping carrier or customs officials to find out why it was held and what steps can be taken to resolve the issue. In some cases, providing additional documentation or paying additional fees may be necessary to clear the package. It's also important to ensure that you are aware of the customs regulations in the destination country before shipping to avoid any issues.
The Final Word
By understanding the common challenges of customs clearance, you can significantly increase your chances of a smooth and efficient experience. Approach customs clearance with the support of experienced customs clearing professionals to help you ensure your goods reach their destinations on time and within budget without any complications.