Every country imposes import duties and taxes on goods crossing their borders to help generate income and protect the economy, environment, and the citizenry of the country.
When you decide to expand your business beyond the borders of your country, your goods have to pass through the customs clearance process before claiming them. This process is usually handled by the Customs Department of your country and the receiving country.
What happens when your shipment arrives in customs? In this article, you will learn the customs clearance process plus tips for affordable importing and exporting.
What is Customs Clearance?
Customs clearance is the legal process of getting permission or a pass from the associated government agency to either move goods out of a country called exporting or bring goods into the country called importing. Custom clearance can also be referred to as a document that the customs authority issues to a shipper to claim his or her goods. This document typically indicates that the shipper has paid all duties and that their goods are cleared.
What is the Customs Clearance Process?
Customs clearance simply means the act of moving goods outside or inside the country through customs, so they can enter the country legally. The clearing customs process is a simple 4-step process for 99% of merchants. All that is needed is a few documents and it is done.
Don’t want to go through the rigors of a DIY process? Terminal Africa helps merchants to generate all their customs paperwork and pre-pay import duties, and taxes which is essential to shipping and save on shipping couriers that transport the package from customs directly to the customer.
The Customs Clearance Process
Below is the 4-step customs clearance process when a shipment arrives:
Examination of the paperwork by the customs officer. The paperwork must be accurate and complete especially, the shipping label and commercial Invoice.
The import duties and taxes are carefully assessed using the customs paperwork. Import fees depend on the type of goods, their value, and specific import regulations in the receiving country. However, import duties are assessed on goods that exceed the minimum value, or the minimum taxable threshold for imported goods.
The customs requests payment for taxes and duties when necessary. If the shipment exceeds the tax threshold, the customs officer will check if the duty and taxes have been paid. Note, certain restricted goods may attract additional fees regardless of their value.
At this point, the choice between shipping with Deliver Duty Unpaid (DDU) and Deliver Duty Paid (DDP) becomes relevant.
Delivery Duty Paid (DDP): It means that import duties and taxes have already been paid. This payment means the price paid for shipping also covers any import fees and it is usually reflected on the attached shipping label.
Delivery Duty Unpaid (DDU): It means that import duties and taxes are unpaid. This happens if by any chance the customs officer forwards the shipment to an independent customs broker to collect the required amount.
The shipment clears customs once all duties are paid. As long as the customs clearance is complete, the chosen courier service transports the shipment from customs to the final destination. It is rare for shipment to get stuck at customs, just make sure your paperwork is complete and you are good to go.
Lists of Documents Needed for Customs Clearance
To have access to those customs clearance documents, you must have your customs declaration document with you and it must list the goods you have in your cargo, plus the following documents:
- Export and Import Licenses
The document enables you to move goods freely across borders. The licence allows you to export goods and it can only be granted according to the type of goods you are shipping. The import license allows you to bring in goods that are restricted. You have to apply to the licensing authority to have both of the documents.
- Pro Forma Invoice
This is what is usually sent to the buyers after they confirmed their order. It serves as an agreement between all the parties involved in the transaction and it is used in place of a commercial invoice. Usually, the customs authorities use this information in the pro forma to determine taxes and duties.
- Customs Packing List
The customs packing list includes all the items included in your shipment. When your ship leaves the port, this list goes with it to help transportation companies keep track of every item included in your shipment.
- Country of Origin Document
This is a document issued by the owner that states where the goods to be shipped are manufactured, processed, or acquired.
- Commercial Invoice
This is the pro forma invoice, it connects you and the buyers. It also provides proof of transaction between both parties and it contains the following information:
- Your name and address
- The name and address of the party receiving the shipment
- The address to which the shipment will be going
- The customer reference number
- Volume and weight of goods
- Number and date of the invoice
- Terms of payment for the goods
- Currency of payment for the goods
- Terms of sales of the goods
- Description of goods
- Quantity of the goods sold
- Unit of measure
- The total price of the goods
- Mode of shipment
- The freight insurance details
- Package marks
- You and the buyer’s tax identification number and other information
- The incoterm you and the buyers had agreed upon
- Miscellaneous charges
After the customs officer on duty confirms a match of the shipment with the details on the commercial invoice, they then proceed to forward the shipment
- The shipping bill
It is what is filed after the vessel carrying the goods is allowed to move out of the country. It is properly assessed to know the value of the goods intended to export.
- Bill of Lading
This is a receipt that lists the goods in the shipment intended to be exported. It is usually issued by the carrier of the shipment.
- Bill of Entry
This bill is filed by the customs broker before the shipment arrives at the port.
It is usually requested by the customs department to examine your load and
use it for the clearance process.
- Customs Invoice
It is the same as a commercial invoice and has a specific format set by customs authorities. It is part of the shipper’s customs broker’s responsibility to get a customs invoice form to fill out.
- Insurance certificate
This certificate provides coverage for losses or damage to cargo while it is in transit. It also helps to determine the import duty aggregate.
Customs brokers are official agents authorised by the U.S Customs and Border Protection to help importers and exporters with their customs issues, an activity called customs brokerage.
A customs brokerage firm ensures that shippers comply with customs regulations. They are either private individuals or firms that are licensed by the appropriate government office to handle the issues. They also help in different ways in which assisting with HTS codes is included.
Customs clearance is one of the most important aspects of shipping, it keeps exporting and importing in check and helps to generate income for the country. With Terminal Africa, you can now easily navigate the complexities of customs clearance, expand your business globally and make profits.