Have you sought to understand the import requirements for your planned shipment but all you can see is jargon?
You are not alone. Importers, especially those new to global supply chains, struggle to understand terms such as importer of record, consignee, customs brokers, customs declaration, and other technical terms.
Figuring out who is involved in your transaction and what they are responsible for without understanding such terms can be challenging.
The importer of record and consignee are amongst the most puzzling to distinguish. This is because of the overlap in their responsibilities under certain shipment terms, making it unclear who is accountable for what.
So, how do you determine each party’s responsibilities when importing into a foreign country?
This article discusses the responsibilities, differences, and similarities of an importer of record versus a consignee. You will also get answers to commonly asked questions to help you make informed decisions when initiating a cross-border transaction.
Let’s get the ball rolling!
Who is a Consignee?
A consignee is the party that assumes ownership of imported goods at the destination country. They are listed on the bill of lading (B/L) or airway bill (AWB) as the recipient of the goods after customs clearance.
The consignee can be one of the following:
- An individual receiving a personal shipment
- A business importing goods for resale, re-export or production
- A third-party entity receiving imported goods on behalf of the buyer
5 Responsibilities of a Consignee
The consignee, considered the buyer, often takes responsibility after the goods have cleared customs.
However, their role in the import process depends on shipment terms between the seller (supplier, manufacturer, importer) and buyer (individual, business, IOR).
Here are the five main responsibilities of a consignee:
- Receiving imported goods: The consignee coordinates with the carrier to ensure goods are delivered to the rightful destination. They then receive, inspect, and accept the goods, officially taking legal ownership.
- Unloading and customs clearance: Under a Delivered at Place (DAP) agreement, the consignee handles unloading and customs clearance expenses, including payment of duties and taxes.
- Storage and inventory management: certain products like electrical machinery and medical equipment require special handling.
The consignee arranges for safe handling and storage in a warehouse, retail store, or distribution centre till they are ready for resale or use.
Additionally, if the consignee is a business, they may record and track the inventory in a management system, for appropriate distribution.
- Quality and quantity verification: Once received, the consignee checks imported goods against the purchase order to verify no discrepancies, missing items, or damages.
If the goods are damaged or the quantity or quality is mismatched, the consignee must notify the shipping company or carrier for a resolution.
- Last-mile delivery expenses: The consignee covers transportation costs to the final destination for DAP and Delivered at Terminal (DAT) shipping agreements. This includes transportation to a warehouse, retail store, or end users.
Would you like a detailed discussion about how the consignee (buyer) and seller responsibilities vary under different agreements? We covered that in a previous article: DAT, DAP, and DDP shipping agreements and what they mean to your business.
Who’s the Importer of Record (IOR)?
The importer of record (IOR) is the entity legally responsible for the import process. They ensure that imported goods comply with all local import regulations and customs requirements at the destination country for a successful import transaction.
The IOR can be any of the following:
- The buyer (if responsible for import customs clearance)
- A freight forwarder importing on behalf of the seller
- A dedicated third-party IOR experienced in global compliance
Note: If you are a business importing into a foreign country without an established local presence, you must appoint an IOR for your industry for entity representation.
The IOR ensures technical and customs compliance before handing over responsibility to the consignee.
9 Responsibilities of an IOR
Regardless of the shipping terms, the importer of record assumes more responsibilities than the consignee throughout the global supply chain processes.
Here are the nine main responsibilities of the IOR:
- Customs declaration: Restricted imports such as dual-use equipment require the IOR to prepare a customs declaration.
The document offers details of your shipment, including value, quantity, country of origin, and importer and exporter information.
- Import documentation: The IOR identifies and fulfills required import documentation, including bill of lading, commercial invoices, certificates of origin, and relevant permits to facilitate customs clearance.
- HS classification: The IOR assigns your products the correct code under the harmonized tariff to determine applicable duties, tariffs, and product regulations.
- Quality control and testing: IT equipment, medical products, and other controlled goods require conformity assessments and certification.
The IOR ensures timely assessment and approval from relevant authorities and obtains required test reports for compliance verification.
- Logistics management: Weather changes, trade sanctions, and the nature of your goods determine the means of transport to adopt.
An IOR utilises tracking and route optimisation to identify the safest and most effective means of transportation.
- Regulatory compliance: The IOR ensures compliance with all trade restrictions, customs requirements, local regulations, and licensing requirements to avoid delays and unnecessary expenses due to non-compliance.
- Shipment valuation: With an accurate HS classification, the IOR performs product valuation to estimate payable duties and taxes and applies relevant tax exemptions.
- Customs clearance: The IOR clears imported goods of customs, paying applicable duties and taxes. They also handle any compliance issues that may arise from your import transaction.
- Post-delivery compliance: The IOR handles post-import requirements such as record keeping, product regulation changes, and licensing renewals.
Importer of Record and Consignee Similarities
An import transaction cannot be completed without the IOR and consignee working together. Although they have distinct responsibilities, they also have a few shared responsibilities.
Here are the three main areas of collaboration between the consignee and IOR:
1. Import Documentation
The IOR handles most paperwork requirements. However, they may require the consignee’s input when preparing essential documentation such as the import declaration, and bill of lading.
The consignee and the seller also validate storage agreements, shipping terms, and freight invoices to ensure accountability.
2. Import Compliance
Unless stated otherwise in the bill of lading, the consignee must be present at the destination port to accept imported goods from the carrier.
The consignee also works with the carrier and the IOR to resolve issues related to the shipment such as damage and mismatch, for quality compliance.
3. Logistics Management
The consignee coordinates with the IOR and logistics service provider to ensure cargo handling processes comply with quality and safety standards.
They also supervise the unloading and loading processes at the destination port to minimize the risk of loss and damage to imported goods.
Note: An experienced third-party importer of record like Blackthorne IT can handle the entire import transaction with a door-to-door delivery. The IOR acts as a single point of contact between the buyer and seller until the goods reach the final destination.
Importer of Record and Consignee Differences
The main difference between an importer of record and a consignee lies in the level of legal obligation. While the consignee may assist in meeting the compliance requirements, the IOR handles the better part of import compliance.
Here are the three main differences between the two:
1. Legal Responsibility
The IOR bears the full legal responsibility, ensuring imported goods comply with trade laws, customs regulations, and local import restrictions in the destination country, including:
- Acting as the legal importer during customs clearance
- Ensuring quality, safety, and labeling requirements fulfillment
- Bearing legal liability for any non-compliance issues arising from the shipment
On the other hand, the consignee assumes minimal to no legal responsibility. They are responsible for receiving and managing goods after customs clearance.
Even in a DAP agreement, the consignee handles customs clearance with lesser legal accountability than the IOR.
2. Documentation and Customs Clearance
The IOR is responsible for:
- Preparing and submitting required documentation
- Coordinating with customs officials for customs clearance
- Accurately classifying imported products for customs and licensing compliance
The consignee does not necessarily file customs paperwork. However, they contribute their input to ensure the accuracy of the documentation, especially paperwork related to logistics management.
3. Financial liability
The IOR is responsible for pre-import expenses, including:
- Import duties and taxes (except when the consignee is responsible for customs clearance)
- Compliance assessments and inspections
- Any penalties for non-compliance
- Freight forwarding expenses
The consignee is responsible for post-clearance expenses, including:
- Warehousing and storage fees
- Unloading expenses
- Last-mile transportation costs
Who is a Third-Party Importer of record?
A third-party importer of record is a legally accredited entity that specialises in fulfilling national and international trade regulations, standards, and requirements.
The IOR assumes legal responsibility for businesses without a local presence in the destination country or expertise in global trade.
While buyers and sellers can act as the IOR, some situations require a third-party IOR to reduce non-compliance risk.
When Do You Need a Third-Party IOR
Here are some of the scenarios that necessitate a third-party importer of record:
- You (the seller) do not want to be the IOR: Some countries have complex regulatory requirements that can be challenging for sellers to comply with.
Partnering with a third-party IOR helps import compliantly without the seller taking on any financial or legal liability.
- You need local entity representation: Most import destinations require a locally registered IOR to handle customs clearance.
If you haven’t established a local presence in a desired import destination, you can appoint a third-party IOR with a local presence to represent you.
- You want minimal or no involvement in the import transaction: The international supply chain processes are complex and ever-changing, especially when importing to multiple countries with varying trade laws.
If you lack the time, expertise, or resources to handle the complexities, you can leave it to a third-party IOR.
- The seller is also the consignee: If you are a manufacturer, supplier, or own a data centre, you may want to expand your business abroad.
And if you do not have a local presence in the destination country, you need a third-party IOR to offer entity representation for a compliant and cost-efficient shipment.
- You’re importing restricted equipment: Certain products such as electrical machinery and telecom equipment are highly regulated, requiring licences and permits to authorise shipping.
A third-party IOR with import/export licensing expertise ensures technical compliance by fulfilling all licensing requirements.
Note: Blackthorne is a dedicated IOR for IT equipment importers, with over 25 years of experience and a local presence in over 200 import destinations. You can partner with us for a compliant, cost-effective, and timely import transaction.
FAQs
1. Who is considered the importer of record?
The importer of record is the individual, business, or entity legally responsible for handling the import compliance for a shipment in an import-export transaction.
They ensure imported goods comply with all technical, customs, and local regulations in the destination country.
2. Who is the importer of record on a FOB shipment?
Under a Free on Board (FOB) shipping agreement, the buyer is the importer of record as they assume responsibility once the goods are on board at the seller’s port. Hence, they handle customs clearance at the destination country.
3. What does consignee mean?
A consignee is the party who receives a shipment at the destination country. It can be the buyer or a designated IOR who receives the goods at the destination port or during customs clearance (depending on the shipping terms between the buyer and seller).
4. What is consignee IOR?
A consignee IOR is a consignee who also acts as the importer of record. That means the consignee handles all import procedures, from customs declaration to last-mile delivery. It’s a common scenario for businesses importing to the same business abroad.
5. Can the consignee be the importer of record?
Yes! The consignee can be the importer of record only if the consignee has the legal capacity and expertise to fulfill all required import requirements and regulations. Otherwise, they will need the help of a third-party IOR.
6. Who is the importer of record in a DDP shipment?
Under the Delivered Duty Paid (DDP) agreement, the seller is the importer of record. This is because the seller fulfills all import requirements and regulations until the goods reach the destination port.
The consignee (buyer) bears no risks or costs until the shipment reaches the agreed-upon destination.
