What is the customs clearance process and how to make it much easier?
When you decide to expand your business outside your country/region, you must carry your goods through the customs clearance process. This process is handled by the customs department of your country/region and the receiving country.
The government authorizes customs departments to enforce policies related to import and export. These policies vary from country to country/region. As someone looking to move goods across borders, it helps if you are familiar with the international trade policies of your own country/region.
Customs departments also levy duties and taxes and move goods in and out of the country. When the goods leave your country, the customs department of your country/region handles the clearance, while the customs department of the receiving country clears the goods for entry into their country.
Once the goods enter a country, they are warehoused in the customs jurisdiction, await clearance, and then released. This article details what you can expect from the customs clearance process and how you can use it to make your international shipments easier and more enjoyable.
Table of Contents
What does customs clearance mean?
Customs clearance means the process of obtaining permission from the relevant government agency to move goods out of a country (export) or to bring goods into that country (import). We can also define customs clearance as a document issued to the shipper by the customs authorities. This document usually indicates that the shipper has paid all customs duties and exported their goods for customs clearance.
To obtain this clearance document, your customs declaration document must be available, which lists the goods in your shipment, as well as the following documents on hand.
- An import and export license allows you to transport your goods seamlessly across borders. As the name implies, an export license allows you to export goods, and whether you need an export license depends on the type of goods you are shipping. An import license will allow you to carry restricted goods, and you must apply to the licensing authority for both types of goods.
- You send a pro forma invoice to the buyer after confirming the order. Since the pro forma invoice is an agreement between the two parties, some countries use it instead of a commercial invoice. Therefore, customs authorities use the information in the pro forma invoice to determine duties and taxes.
- Customs packing list, which includes all items contained in your shipment. When it leaves the port, this list is included to help the shipping company track each item in your shipment.
- Country of origin, a document issued by you stating where the goods you are shipping were manufactured, processed, or purchased.
- Like a pro forma invoice, a commercial invoice links you to your buyer and provides proof of the transaction between the two parties. It contains the following information.
When the customs officer on duty confirms that the goods match the details on the commercial invoice, they forward the goods.
- The shipping bill, which customs officers use to assess the value of the goods you want to export. This bill is usually filled after the vessel carrying your goods can leave the country.
- Bill of Lading or Airway Bill of Lading lists the receipts for the goods in the shipment you are exporting. The carrier of your shipment issues the bill of lading to you, the exporter.
- The customs broker files a customs declaration before the shipment arrives at the port. The Customs Department requires the entry form to begin inspecting your shipment and using it in the customs clearance process. A customs broker is an agent authorized by U.S. Customs and Border Protection to assist importers and exporters with customs issues, an activity known as customs brokerage. Customs brokers ensure that you comply with customs regulations. They can be individuals or companies that the appropriate government agencies license to handle these issues. Customs brokers help in different ways, one of which is to assist you with HTS codes.
- Customs invoices, like commercial invoices, have a specific format set by the customs authorities. It is the responsibility of your customs broker to obtain customs invoice forms for you to complete.
- Insurance Certificate, which covers the goods for loss or damage in transit. It also helps to determine the total amount of import duties.
What is the customs clearance process?
The Customs clearance process involves several steps, which we list below.
Step 1: Document check.
This is where all the documents listed above are relevant. The customs officer will review all documents, and if they are found to be correct, the customs clearance process will begin.
Step 2: Calculation of duties and taxes.
Here it is advisable to have the help of a customs broker, as they are responsible for paying taxes and import duties. These taxes and duties are calculated based on the type of goods in your shipment, the declared value, the customs laws of the country/region you are shipping to, and the shipping method (Incoterms) you have chosen.
Step 3: Incoterm selection and payment of duties and taxes
You can choose DDU (Delivered Duty Unpaid) or DDP (Delivered Duty Paid). The customs officer will check which Incoterms apply to your shipment. If you have already paid, your shipment will be marked as DDP (Delivered Duty Paid), which means that all taxes and import duties have been paid in advance by your customs broker.
If you have not paid these taxes and duties, your shipment will be marked as DDU (Delivered Duty Unpaid). If this is the case, customs officials will forward the shipment to an independent customs broker to process and collect payment. In this case, additional fees will be charged, such as inspection, storage, handling, insurance, and payment.
Step 4: Shipping.
Once all outstanding taxes and duties have been paid, the customs department releases the goods and proceeds to their final destination.
6 Tips to Make the Customs Clearance Process Easier
While the Customs Clearance Process may seem simple, it can also be overwhelming, especially if you are new to importing and exporting. However, the following tips will help make the process smoother and more manageable.
Hire an experienced freight forwarder or carrier
A carrier or freight forwarder is the most important gift you can give yourself when starting an export business. The convenience you will enjoy by having an experienced and reliable freight forwarder handle your exports is priceless. With their experience, professional freight forwarders know everything there is to know about shipping and customs clearance procedures. This knowledge is priceless and can save you from headaches.
Make sure your paperwork is complete and 100% accurate.
Incomplete paperwork or paperwork with even the slightest error can be costly. If your paperwork is incorrect or incomplete, the customs department will not clear your merchandise.
Instead, it will remain in customs, and you will have to pay a detention fee. In addition, your shipment will be released late, resulting in missed delivery dates and more hassle for your business. Therefore, it is best to make sure all the information is correct on your paperwork. One way to do this is to have your freight forwarder or carrier ensure that nothing is left out of your paperwork.
Know that your shipment will clear customs in every country it passes through.
This understanding is valuable when deciding which shipping method to use to move your shipment. For example, if you choose to ship by air, your merchandise will only pass through the destination country’s customs, saving you a great deal of time.
Understand that international trade laws and regulations change frequently
The import/export market is fluid, and its laws are constantly changing, so it can be challenging to keep track of what’s going on, and the process you followed in the past may not work the next time you use it. Therefore, you should keep up to date with what’s going on in the import/export industry, so you’re not caught off guard.
Make sure you pack your shipments properly.
It cannot be stressed enough that you must pack your shipments properly. Simply put, properly packaged shipments mean a faster customs clearance process. In addition to faster customs clearance, a properly packed shipment has less chance of being messed up during transit. In addition, when it arrives at the receiving port, it is easier to handle the shipment if everything is in the right place and not upside down.
Make sure your documents are attached to your shipment in an easy way to get.
If the paperwork regarding your documents is easily accessible, customs agents will not have to go through the shipment to get them, and they will be able to clear your shipment faster.
The Customs Clearance Process Frequently Asked Questions
As a new entrant to the import/export industry, you are likely interested in learning all you can about the industry to avoid making mistakes. But, unfortunately, there is a wealth of information available to you with just a few keystrokes – so much that you can find yourself at risk of information overload.
To address this, we’ve compiled a list of frequently asked questions as a quick guide for you to navigate through and provide you with easy-to-understand answers.
Does every shipment have to be cleared for customs?
Yes, customs clearance is mandatory for all international commercial cargo shipments. The process is mandatory because it ensures that no illegal or prohibited items enter a country and that the government receives taxes and duties on the responsible goods.
How long does customs clearance take?
While the customs clearance process seems to have a series of layout steps, the reality is that the situation does not usually unfold at the same pace for all shipments. The time it takes to clear a shipment depends on the goods in the shipment. Some products may require additional documentation or medical examination to clear customs. However, it can take anywhere from 20 minutes to several days.
Will my shipment be held up in customs?
Yes, shipments can be held up in customs for various reasons, from unpaid taxes to inaccurate paperwork. If you are concerned or suspect that your shipment is stuck in customs, please get in touch with your freight forwarder and wait for them to resolve the issue for you. Shipments may also be stuck in customs if they contain prohibited items or if problems are contacting the recipient.
What if my shipment is not stuck in customs but is being held there?
Sometimes shipments may exceed the allowed value and be held by customs until the balance is paid. Contact the courier company responsible for your shipment if customs hold your shipment. Usually, they will pay the balance and then charge you a handling fee. Sometimes shipments can be held at customs if they arrive at a busy time at the port and there is a backlog.
How long can Customs hold my shipment?
The length of time your shipment can be detained at Customs depends first and foremost on the reason for the detention. For example, if Customs is holding your shipment for an unpaid balance, it will only be held until the balance is paid, after which it will be released.
Will I pay customs fees for my shipment?
In most cases, Customs requires a fee for international shipments. These fees are usually set by the receiving country’s customs team and are determined by the value of the shipment. Customs regulations vary from country to country; therefore, there is no fixed price for customs fees.
Are import duties required to be paid when exporting goods?
When goods enter a country, import duties are an important aspect of the customs clearance process. Before your goods can officially enter the importing country, they must go through import clearance, and one of the requirements for import clearance is the payment of import duties. Every country imposes import duties because it is a good way to generate revenue, and the amount depends on the importing country. Your customs broker can handle this for you.
Do I have to use a customs broker?
You can choose whether or not to use a customs broker. However, a customs broker makes the customs clearance process easier and faster. All you need to do is hire the services of a customs broker, have them deal with customs officials, and handle everything for you, including paying customs duties such as import and export clearance.
