Customs Clearance

Customs Clearance document in yellow file book

Customs clearance is the process of getting authorization for the movement of goods into (import) or out of (export) a country. 

The process is carried out by customs officers on behalf of the government, based on local and international trade laws. Customs clearance is important for:

  • Maintaining national and international security
  • Ensuring all duties and taxes have been paid
  • Ensuring trade is facilitated smoothly and in accordance with all applicable trade laws
  • Customs clearance is the process of authorizing the movement of imported and exported freight into and out of a country.
  • The main aspects of customs clearance include:
  •      ◦   Checking of documentation against physical goods
         ◦   Collection of duties and taxes
         ◦   Ensuring the adherence of relevant trade laws in international trade
  • Important customs clearance documents include the Certificate of Origin, export license, commercial invoice and Bill of Lading.
  • To speed up the customs clearance processes, all documents should be completed accurately, with information that is consistent with all items in the shipment.
  • Key Documents in Customs Clearance

    It is important to ensure that all customs documents are in order to ensure a smooth clearance process.

    Certificate of Origin

    A Certificate of Origin (CO) is a document that states the country of origin for goods being shipped. It is used to verify that legal requirements for import are being met and whether the goods are dutiable.

    Export License

    An export license is a document that legally authorizes consignors to ship restricted commercial goods, such as certain chemicals or medicine. They may also contain additional considerations for customs to note.

    Commercial Invoice

    A commercial invoice is a compulsory document that must come attached with any internationally shipped goods. It contains detailed descriptions of every item being shipped along with their individual valuations. It is used for duties and tax calculations.

    Bill of Lading (BoL)

    A Bill of Lading (BoL) is a legal shipment contract between consignor and consignee for the movement of goods. It acts as a receipt for freight contents and a title for the ownership of these goods.

    Customs Clearance Process

    Once a sea or air freight shipment reaches a port, customs officers will assess the goods against customs documents – unless it is destined for a free trade zone or bonded warehouse.

    The process may take a few hours or days, depending on how complete the furnished paperwork is. This may also differ depending on the country and time of year.

    1. Verification of Paperwork

    A customs officer reviews all necessary documents, ensuring that they are completed accurately.

    2. Assessment of Import Taxes and Duties

    The officer then assesses the tax and duty fees applicable to the shipment. They calculate these fees based off:

    • Type of goods being shipped
    • Declared value of these goods
    • Mode of shipment
    • Customs laws of the destination country

    They also check if the value of the goods exceeds the tax bracket.

    3. Payment Request by Customs

    If the tax bracket has been exceeded, the customs officer will proceed to check whether tax and duty payments have been made. 

    There are two common payment options available. They are usually selected by the consignor (seller) and accepted by the consignee (buyer) as part of the terms of purchase.

    • Deliver Duty Paid (DDP)

    DDP is the payment of duties and taxes before goods have been shipped out. The cost is typically absorbed by the consignor.

    DDP is the commonly preferred payment method as it greatly speeds up the clearance process. It is also generally the cheaper option as there are usually no additional inspection or storage fees incurred.

    • Deliver Duty Unpaid (DDU)

    DDU is the payment of duties and taxes after the goods have arrived at customs. It is also known as Delivered-at-Place (DAP). The cost is typically split between consignor and consignee.

    DDU is the less preferred payment method as there are many variables that make the method more costly than DDP, such as:

    • Inspection and storage fees
    • Additional customs brokerage fees
    • Additional transportation fees

    This payment method also tends to slow down the clearance process.

    4. Release of Shipment

    Once tax and duties payment has been made, customs will release the approved cargo for shipment to its final destination.

    Tips to Avoid Clearance Delays

    All documents, items and payment should meet customs requirements to prevent clearance delays. Here are some additional tips to ensure a smooth customs clearance process.

    Ensure All Documents Are 100% Accurate

    Ensure all required documents are furnished with accurate spelling and contain consistent item descriptions. Accurate values should be declared, especially with free samples and zero value items.

    Opt for DDP

    Payment of duties and taxes beforehand will ensure that customs does not need to withhold any cargo prior to clearance.

    Pack Shipments Strategically

    Attach documents to the shipment in a secure but accessible manner. It is also good to ensure that goods in multiple packages are labeled clearly and thoroughly logged in a packing list.

    Engage a Customs Broker

    Customs brokers use their wealth of experience to effectively prepare the necessary documents and payments to ensure speedy customs clearance. They are also well equipped to provide relevant advice on variables such as country-specific trade laws.

    Customs Broker vs Freight Forwarder

    A freight forwarder arranges for the shipment of goods from one point to another. A customs broker assists consignors and consignees in all preparations pertaining to customs clearance.

    While many freight forwarders offer customs brokerage as part of their services, not all customs brokers operate as freight forwarders.
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