Getting customs compliance right is an essential task for any importer or exporter. The consequences of failure in this area can be large, from financial penalties or the cancellation of licenses to the risk of criminal prosecution.
With so many rules and regulations to follow around the world, fast, accurate filing is always a challenge. Indeed, there are a few common mistakes that companies often make that pose major compliance risks.
Knowing what these are and how they can be avoided is the first step in ensuring firms are following all requirements and meeting their obligations. Here are five key issues to be on the lookout for.
1. Incorrect goods classification
Failing to correctly classify goods is one of the most common causes of compliance failures. This can lead to issues like paying incorrect duty rates that may result in fines and the need to make further payments in the future, or goods being seized at ports of entry.
These issues can be avoided with smart customs classification software that can automatically assess any items and assign the correct HS codes. It's also important to ensure that all employees are fully trained to understand the various categories. If in doubt, firms can usually request a binding tariff ruling from the relevant customs authority.
2. Not providing full documentation
Incomplete or inaccurate documentation can cause delays at ports, with goods being held up while essential information is sourced or corrected. This can be especially true for items in sensitive categories, such as pharmaceuticals, chemicals or food products that may require additional certification. However, any goods may be impounded by customs authorities if they lack documentation such as supplier declarations or proof of origin.
The right software solution can assist with this by automatically requesting necessary paperwork from suppliers and connecting directly with customs authorities to file information in a timely manner before shipments arrive. It can also alert firms to any specific requirements for a certain territory and highlight any changes to rules or any areas where necessary data is missing.
3. Miscalculating valuations
Importers and exporters are expected to provide accurate information on the value of their goods, including costs such as shipping and handling and insurance. However, there are several methods for calculating the true customs value of goods and it can be easy to get this wrong.
Having clear documentation of the process used and how valuations are determined can help ensure smooth passage through customs, while regular internal reviews can flag any changes that may affect valuations.
4. Not knowing your trade partners
Having a complete understanding of who your customers and partners are is essential to trade compliance. Companies that do business with individuals or organizations that have sanctions placed against them may find themselves liable for very large fines.
To achieve this, an effective restricted party screening program is a must. This should be able to quickly check all existing and potential partners against current sanctions lists around the world. Firms must also remember to do this on an ongoing basis, not only when they form new partnerships, as denied parties listed are constantly evolving. Tools that can ensure companies can keep up-to-date with any changes are crucial.
5. Not having complete, auditable records
Firms may be asked to produce records as part of a customs audit and, if they cannot do so, this can be highly costly. Documents that must be kept as part of this typically include invoices, bills of lading, customs and supplier declaration and payment records. Generally speaking, this paperwork must be maintained for at least five years, though this may differ depending on jurisdiction.
The right software tools can automatically store the relevant documentation within a single platform and quickly retrieve them on demand. This helps ensure importers and exporters can demonstrate their customs compliance whenever required.