Step By Step Guide On Custom Clearance Process
Customs clearance is a significant part of the international shipping process for both importers and exporters. It ensures hassle-free approval from the origin and destination governments to move goods across the borders.
This process involves inspecting the imported or exported goods and calculating their taxes, duties, and excises.
Below is how the customs clearance process works step by step.
- Step 1: Goods Arrive At Destination Port
- Step 2: Filing Bill Of Entry (BOE)
- Step 3: Paperwork Review
- Step 4: Processing The Bill Of Entry
- Step 5: Your Shipment Will Be Assessed For Applicable Tax And Duties
- Step 6: Payment Of Duties
- Step 7: Inspection
- Step 8: Your Shipment Clears Custom
- Step 9: Take Delivery Of Goods
Step 1: Goods Arrive At Destination Port
First, the goods arrive at the importing country following the specifications outlined in the arrival notice.
The custodian (appointed by the commissioner of customs) will hold the shipment until it clears with customs.
Step 2: Filing Bill Of Entry (BOE)
Sample bill of entry
Customs requires that shippers make a bill of entry application before continuing with the customs clearance process.
This application is made before or on the arrival of goods, either manually or electronically. It is submitted to customs as part of the clearance procedure. The formats for the bill of entry tend to differ based on the rules prescribed by the destination country’s government.
But most importantly, it should indicate the following:
- Port code
- License number
- Importers name and address
- Vessels name
- Origin port name
- Country of shipment
- Receiving country and its code
- The issuance date for the bill of lading
- Description of goods and assessable value
- Basic rate/amount of duty levied (assed by the importer based on the applicable exchange and rate of import duty)
Here is a sample bill of entry document:
After applying, you will get a bill of entry number.
Step 3: Paperwork Review
The most crucial aspect of customs clearance is documentation. In this process, customs must first check and verify that your paperwork is in order. Otherwise, your shipment will get stuck at this stage leading to frustrations and costly delays.
Documentation Needed For Customs Clearance
The main freight forwarding documents you’ll need in international shipping and customs clearance will depend on several factors that include:
- the type of goods you’re shipping
- where you’re shipping from/to
- The transportation system you use.
Based on these factors, the paperwork needed to clear your goods may differ.
Also, it is essential to stay on top of the import-export policies in the countries that you trade-in. It is because legislative changes could impact your shipping procedures, including customs clearance and documentation.
So make sure to confirm the customs requirements beforehand. It is easier to solve issues of missing or incorrect paperwork before shipping.
That said, these are the export documents you’ll need for clearance in the origin country:
- Export declaration
- Goods packing list
- Certificate of origin (for materials or products)
- Cargo insurance documents detailing the terms and conditions under which your shipment is insured
- Transport document (bill of lading for sea shipments, airway bill for air shipments, and CMR for road shipments)
You may also need to provide export licenses and permits depending on the type and nature of goods you’re exporting.
As for the import documents, most countries’ requirements are the same as for export clearance. However, the following are the most critical:
- Commercial invoice: Customs officials will use the details to determine the applicable taxes and duties for your shipment. So you’ll need to provide an additional copy of the commercial invoice import clearance.
Note that the seller is the one to generate the commercial invoice as a part of the sales contract. They will supply a copy of the invoice to accompany the goods during shipping and another copy for the buyer’s records.
- Import Declaration: The requirements for this document vary from country to country. Generally, though, most countries allow shippers to submit the declaration electronically/manually before shipment arrival.
It helps speed up the shipment’s discharge, verification, and clearance process.
- Transport document: Customs officials will want to see the bill of lading or airway bill for your shipment. This should be completed and signed by your freight forwarder or carrier.
- Other documents: You may need to provide a detailed packing list describing the goods in your shipment. Depending on the importing country, you may also need to provide copies of import permits and the inspection, origin, and insurance certificate.
Remember that the origin certificates must always relate to the country from where your goods or materials originate.
These are not all the documents you may require for your export/import clearance. As such, you must research your specific requirements based on the factors we mentioned earlier.
Step 4: Processing The Bill Of Entry
Approving customs documentation
Remember the bill of entry of application? Yes, it stays in ‘queue’ as customs officials examine your shipping documents and other details.
Suppose all formalities are in order and with proper documentation. In that case, the customs official will approve and pass over your cargo for assessment.
If additional documentation or further clarification is needed, the same will be queried before approving the BOE.
You, your forwarder, or customs broker can always view the bill of entry status online. You can see if your application has passed or failed and if there’s an additional ‘query’ to fill out.
But like I said, if everything is found to be in order, your shipment passes over to the next stage.
Step 5: Your Shipment Will Be Assessed For Applicable Tax And Duties
Here, customs will assess your shipment’s import duty and export duty based on the paperwork you provide.
There is no fixed cost for this. Instead, customs determine the applicable charges based on various factors such as:
- The declared value of goods: refers to a shipment’s worth as indicated in the commercial invoice. This value comprises all costs the load has incurred up to the point of clearance. It includes the buying price of goods, freight costs, and insurance costs, if any.
So shippers need to ensure that the value declared for goods is accurate. Inaccurate values can lead to customs disputes and lengthy clearance delays.
Most countries have a minimum threshold for dutiable goods.
For example, if the minimum threshold is $2500, goods under $2500 will not incur duties.
But beware; some restricted items may incur duties and taxes regardless of their economic value.
- Description of goods: aside from the value of goods, customs officials also use the type of goods to determine duty and tax information.
Customs authorities worldwide list tariff (duty) rates by each product’s HS Code (harmonized system number). A HS code or harmonized system number is a 6-digit number used to classify physical goods in cross-border delivery.
So, customs officials must first classify your cargo based on the product/s HS Code before determining its applicable tariff.
There is a harmonized system number for every physical product, from toys to clothing. Most countries have a free online tool where shippers can search their product’s classification number. The number can also be found on the commercial invoice.
Commercial invoice for customs clearance
- Free trade agreements: where possible, customs may consider the trade agreements between the origin and destination country before applying tariffs on goods. The existence of a free trade agreement between the export and import countries may mean that you pay little to no duties.
As you can see, your shipment paperwork is significant in calculating your tariff rates.
Therefore, you must ensure to supply truthful information in your documents. Erroneous data may result in you paying more than necessary in duties and taxes.
Step 6: Payment Of Duties
If your shipment incurs duties and taxes, customs will request payment.
So, if you are liable for tariff payment, customs will send you an invoice detailing the applicable charges.
You’ll need to pay these charges and provide proof of the same before customs can release your cargo for final delivery.
You can let your forwarder or customs broker pay the tariff on your behalf. It’ll help save you the hassle of paying and processing the payment by yourself.
In other cases, you (the importer) may not be liable for the payment of duties. It will depend on which incoterm you agreed on with your supplier.
For example, in DDU shipping, the importer is responsible for paying customs charges. In this case, customs will forward the invoice to you, your forwarder, or customs broker requesting payment.
On the other hand, if shipping on DDP incoterms, the supplier is responsible for paying duties and taxes. So the price you pay for the products covers any customs clearance charges.
If you cannot pay the requested duties, some countries like the UK allow you to apply for a duty deferment.
A duty deferment application allows you to delay payment of most customs charges to a later date.
If you’d like to defer your duties when importing to the UK, this link on how to use your duty deferment account may be helpful.
Step 7: Inspection
Quarantine inspection by china customs
Depending on the product and country of importation, customs may subject your cargo to quarantine inspection.
For instance, animals, some plants, human remains, and certain minerals must undergo inspection and/or treatment before being cleared for entry.
Step 8: Your Shipment Clears Custom
As soon as you clear all customs charges and your shipment is confirmed safe for entry, customs will clear it.
But for the shipment’s release, customs has to provide you with a copy of the processed bill of entry. Your assigned customs official will sign on the BOE, after which you will submit the signed copy to your carrier.
After paying any pending carrier charges, the carrier will issue delivery order to the custodian who will release your cargo.
Note that after the customs clearance process is done, it takes an average of 24hrs for shipments to get clear.
However, this can be delayed for several reasons that include:
- Prohibited products
- Faulty paperwork
- Incorrect product code
- Seasonal holidays such as Christmas and new year
- Poor packaging of goods, especially if they are fragile or hazardous
- Natural calamities such as flooding
- Incorrect shipment value
- Poor description of goods
If your shipment delays to clear, then try to find a solution as soon as possible. Issues with paperwork, incorrect valuing, or prohibited products can invoke a customs hold on your goods.
When this happens, customs will move the cargo to a holding facility. Here, it will incur demurrage, storage fees, and other surcharges.
The longer the shipment stays in holding, the more costs you incur. That is why it is essential to ensure that your cargo meets all import requirements, paperwork is in order, and timely payment of duties.
Step 9: Take Delivery Of Goods
Once your shipment is released, you are now ready to take over ownership and deliver it to the final destination.
It could be to your warehouse, distribution center, or direct delivery to the customers.
The delivery of goods from the destination to the final location is called last-mile delivery.
You will contract a trucking company/courier service to transport the goods from the clearance point to the end destination.
There are several things you must consider to ensure a quick and successful customs clearance process. For instance, custom rules vary from country to country.
So make sure you’re familiar with the requirements of your respective origin and destination countries.
You must know the type and number of documents needed and the items that are prohibited or legally banned for export/import.
Make sure you learn all about the customs regulations before beginning the shipping process.
Experts in international shipping, such as Bansar, can make things much easier for you.
They will ensure your shipments meet customs requirements and even assist in document preparation and tariff payments.
An expert will also help in many other aspects of the international shipping process, such as warehousing and pickup and delivery.
It’s in your favor if you work with an experienced and reputable custom brokerage service provider.
Bansar China has a vast knowledge of international shipping and the customs clearance process.
We can help with shipping from China and ensure your shipments’ safe, secure, and fast clearing.