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How can we help you?
There is no customs clearance without an IOR. This is why understanding the relationship between IOR and customs clearance is critical.
Without a designated IOR, your goods are delayed or, worse, may not clear customs at all. And before your shipment leaves the country of origin, you should be able to answer the following questions:
Whether you are the IOR or want to engage a third-party IOR, you want to understand:
But as a new importer, it can be unclear what you need to act as the IOR and the exact role the IOR plays during customs clearance.
In this article, Blackthorne takes you through what the IOR handles during customs clearance. This includes what the customs procedure entails and the key requirements the IOR must meet for hassle-free customs clearance.
So what role does the IOR play during customs clearance?
Previously, we discussed customs clearance as one of the key responsibilities of the importer of record when shipping internationally. But what exactly does the IOR handle during customs clearance?
Here are the five key roles the IOR handles to facilitate customs clearance:
As the IOR, you must confirm your shipment meets all import requirements before shipping. The verification includes:
The verification lowers the risk of noncompliance, saving you time and unnecessary fines.
The transaction value is the primary valuation method for 90% of goods traded internationally. It entails summing the invoice price and associated costs, including insurance, packing, and international freight.
However, if there is no clear invoice, customs may utilise other valuation methods, such as the transaction value of identical goods exported to the same country.
Regardless of the method used, you must ensure that goods are neither over-valued nor undervalued, as valuation is the foundation for estimating duties and taxes.
You must pay all applicable import duties, excise taxes, tariffs, and Value Added Tax (VAT). Even if a customs broker handles the customs documentation, it is your account or bond that secures the payment.
The key documentation you must prepare includes:
Customs officials may decide to audit or inspect your shipment in the destination country, requiring your physical presence.
Additionally, you must respond to customs queries and respond to any issues arising from your shipment. These could be classification or valuation disputes. You must also keep a record of the import transaction to facilitate any future compliance audits.
Since you understand your responsibilities as the IOR, you want to know when each of those responsibilities comes into play.
Here are the six key customs clearance steps in the global supply chain, highlighting noncompliance risks at every step and how to mitigate them:
Once you have drafted a sales agreement, you must check the customs clearance instructions for the specific shipment.
That way, you will have a clear picture of all the required import documentation so you can prepare it in time.
Common mistakes to avoid at this stage include:
HS classification is the basis for all other import requirements. And determining the correct HS code for your shipment can be challenging. Assigning the wrong HS code results in fulfilling incorrect import requirements, increasing the risk of noncompliance.
So if you are uncertain of the HS code for your product, consider engaging a customs broker or a third-party IOR in your industry to handle it on your behalf.
Once you have prepared the import documentation and dispatched your shipment, you must submit a customs declaration. The declaration lists the value, quantities, and classification codes for the imported goods.
You must ensure consistency between the values and quantities you declare for the imported goods. You can manually check the commercial invoice against the declared values or have an internal control system that automatically verifies the documents.
Customs officials check your submission against your shipment for completeness, consistency, and accuracy.
In case of inconsistencies, they may schedule your shipment for inspection or delay clearance until you address their concerns.
In some import destinations, physical inspection of high-risk goods such as IT equipment is mandatory.
Other scenarios that may trigger physical inspection include:
With or without inspection, always ensure your shipment meets all import requirements before leaving the country of origin.
This is the last step in the customs clearance process. At this point, there are no pending issues concerning your shipment. You pay the assessed duties and taxes, and any other fees such as storage and inspection fees.
If your business imports frequently and wants to lower upfront costs, you can check if there are available duty deferment programs. Such programs allow you to postpone payment of duties and taxes to a set date.
After paying applicable fees, customs issues a release notification, allowing you to transport the goods to the final destination.
Before designating an IOR for your shipment, you must assess how well the IOR can handle the customs clearance procedure.
The IOR must meet the following requirements to seamlessly fulfill the import requirements and lower the risk of noncompliance:
You must be locally established in the destination country, as customs needs a local entity they can hold accountable.
If you have yet to register a local business, check if the country lets you act as a non-resident importer. If they don’t, consider a third-party IOR with a local presence to represent you.
Figuring out international shipping rules, customs codes, and documentation requirements from scratch is expensive and time-consuming.
Plus, you need cross-border shipping knowledge to judge whether the information you are finding online is accurate and trustworthy.
Every product category has a wide range of customs classification codes, with the only key differentiator being the product descriptions. And it can be confusing to determine the correct code.
An understanding of how your products are made (design, specifications, components) and how they are used can help in choosing the correct code.
If you are collaborating with a third-party IOR, you can check out a previous article for the factors to consider when selecting an IOR for your industry.
You have done your due diligence. But your shipment is held at customs. What do you do as an IOR?
What to do depends on the reason for holding the shipment.
Here are the steps you can take to secure your shipment in case of any issues:
Customs won’t always call you to explain the status of your shipment and why it is held. You must proactively check your shipment status in the tracking system. The status could be something like “Clearance Event”, “Exception”, or “Held at Customs.”
By expanding the tracking details on the carrier’s website, you can find details about your package’s delayed clearance.
Sometimes, customs need more context for your shipment. They may ask for proof of payment, technical specifications, or a better description of product functionalities.
Always ensure you have documentation such as technical specifications, user manuals, licences, and certifications. These are life-saving, especially when customs is looking for proof of compliance.
A typo on the commercial invoice or a weight discrepancy between the packing list and shipping label can raise concerns. Such concerns would require you to make the necessary amendments, ensuring consistency.
Customs may disagree with the choice of your HS code or the value of your goods.
If they claim your goods are worth more, you may want to understand why they think so. Because that means more tax.
However, that doesn’t mean you accept the claim.
You can provide evidence, such as previous purchase orders or contracts, to prove your valuation accuracy.
If customs want to inspect your shipment, they will move the cargo to an inspection area. You may be required to pay the associated fee so the officers can inspect the goods.
Customs clearance is a central stage in the global supply chain. And the IOR determines how successful the procedure will be.
While the procedure is straightforward, it can be overwhelming, especially if you are new to international shipping. Also, time and resources may not always allow you to act as your own IOR.
If you need help with customs clearance for IT and medical equipment, Blackthorne IOR is happy to help
Our IOR service focuses on the safety, compliance, and on-time delivery of your high-value equipment, featuring:
What is that import destination you are dreaming of venturing into? Is it a data centre you are planning to expand internationally?
Blackthorne IT would like yo contribute to your business expansion, simplifying market entry at low cost.
You can email us at sales@blackthorneit.com or simply call us to discuss your business expansion goals so we can meet them.
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