Customs Clearance | Meaning, Process & Documents

Customs Clearance | Meaning, Process & Documents

Customs clearance is a necessary process for foreign trades, but its content and fees may not be well understood by everyone. In this post, I will provide a detailed explanation of customs clearance.

• Understanding Customs Clearance
• Required Documents for Customs Clearance
• What is the customs clearance process?
• What to consider for US customs clearance?
• What is the cost of customs clearance?
• Time Frame for Customs Clearance

Understanding Customs Clearance

Customs clearance is the set of procedures that goods must go through in order to enter or leave a country. It is important to follow customs regulations at every step, from submitting the necessary documents and declarations to the final release of goods.

Although some people define customs clearance only in the context of importing, others refer to the process of clearing goods in both import and export countries. In this document, we will be using the latter definition of customs clearance.

Why Customs Clearance Matters

1. Prevents smuggling of goods.
2. Ensures that no illegal or harmful items enter the country, which could pose a threat to national security.
3. Levies duties and taxes in order to protect domestic companies’ competitiveness, with these fees being a crucial source of revenue for the country.

Required Documents for Customs Clearance

Documents for Import and Export Customs Declaration

Customs Declaration Form

The customs declaration form provides information about the goods being shipped, including the HS code, type, number, value, etc. Freight forwarders or customs brokers apply it.

Commercial Invoice

The commercial invoice is a document provided by the seller to the buyer and indicates information like product name, specification, quantity, packaging, unit price, value, terms of trade, etc., and other specific instructions. It also provides transaction amounts in detail and helps calculate tax.

Packing List

Your packing list needs to include information about the number of units, boxes, and any other available packaging information. And all of those details should match the commercial invoice and reflect the same parties involved in the transaction.

Sales of Contract

The sales of contract is a document containing the details of the order with a description of the goods, price, terms of payment and delivery, and other clauses. It is essential for the customs officer to assess the value of goods and calculate tax.

Documents for Export Customs Declaration

Export License

The export license is a government document that authorizes or grants permission to conduct a specific export transaction. For example, in China, an export license is a must for export.

Shipping Order

The shipping order is a certificate signed by shipping companies to carriers that informs them of loading goods. After checking, customs officers will stamp the document. Then, they can load the cargo and ship it to the importing country.

Documents for Import Clearance

Bill of Lading (BOL)

The BOL is a receipt that shows the pick-up date, name of the vessel used for transport, details of the goods (number of units, weight, and dimensions), etc. Ensure all information is accurate to avoid a second check for the new document and customs clearance delays.

Certificate of Origin (CO)

The CO affirms the original countries or regions where the products are manufactured and processed. It provides all the details regarding the shipping, making inspection much quicker. And this certificate is a must if there is preferential import duty and you want to apply for it.

Warehouse Receipt

Customs officers check this receipt for which warehouse the goods are delivered.

The documents mentioned above are suitable for general cargo. However, for non-general cargo, additional certificates are required for customs clearance. For instance, wooden products and packaging necessitate a fumigation certificate, while DG cargo must be shipped with an MSDS.

It is important to note that every country has different regulations and requires varied documents for customs clearance. Therefore, it is advisable to directly inquire from your freight forwarder or customs brokers.

What is the customs clearance process?

The process for customs clearance may vary from country to country, but generally, it follows a similar procedure. Let’s say you are importing products from China to the USA. In China customs, the export declaration process involves 5 steps, which are:

1. Submitting documents and completing declaration

In most cases, you can complete the declaration and fill out the content online. Please note that the export declaration should be filed 24 hours before loading the goods (except for goods that have special permission from customs).

2. Document inspection

China customs will check all submitted documents, with a focus on quantity, product name, HS code, and whether commodity inspection has been conducted or not. It is important that the information declared is accurate and complete, otherwise it may cause a delay in customs clearance.

3. Goods inspection

All goods must be checked by scanning. If customs officers find something wrong with the goods, they will conduct an inspection. However, the probability of this happening is very low, around 5%.

4. Duty and tax collection

Freight forwarders or customs brokers will pay the required duty and taxes.

5. Cargo release

If all steps go smoothly, customs will stamp the shipping order for admission. Freight forwarders will then load the goods and proceed with shipping.

The clearance process is similar to the customs declaration process. However, it is important to note that different import countries may have different policies, so it is crucial to pay attention to specific points. For example, in the US, the clearing process may differ. Let’s take a closer look at it.

What to consider for US customs clearance?

The most important aspect is to purchase customs bonds. Here are some key points to keep in mind:

• Customs bonds can be purchased by importers, which can be individuals or registered companies.
• They can also be purchased in the name of freight forwarders.

It’s important to note that the customs clearance process is carried out in the name of the person who purchases the customs bonds. If any issues arise, they will also be responsible for resolving them.

There are two ways to apply for a customs declaration:

• The first is to apply online through the Automated Broker Interface (ABI) system and fill in the required information. ABI will provide permission or request further checks within 48 hours.
• The second is to submit paper documents. Precise electronic products and textiles often require paper documents. In such cases, the release process is slower and takes about three days.

In addition, the US requires AMS filing and ISF. Both must be filed 24 hours before the cargo is loaded onto the departure port. If these requirements are not met, the goods will not be allowed to enter the US. Freight forwarders or customs brokers can submit these materials.

What is the cost of customs clearance?

Customs clearance fees cover charges incurred in the declaration process and costs at the port.

Charges in the declaration process

This includes the following three types of charges:

• Customs declaration fee

This fee is not determined by the value of goods but is charged per customs declaration form at a certain amount. In China, it costs nearly $21 for an export declaration.

• Value-added tax

This tax is related to the cargo’s HS code and policies in different countries. For example, many countries in the EU set VAT rates of about 20%, while the US does not levy VAT on imported goods.

• Duties and taxes

Different countries have different tax rates, and taxes are also related to the type and value of cargo. For instance, in the US, any imported goods with a value of $800 or more are subject to import duties. Moreover, the US has imposed additional taxes on imported goods from China. You can check the latest tax rate for your imported goods using tools like HTS Search.

Furthermore, US customs require a Merchandise Processing Fee (MPF) and Harbor Maintenance Fee (HMF). If you import certain items like alcohol, tobacco, etc., you need to pay Federal excise tax.

• Charges at the port

This covers harbor fees, inspection fees, and quarantine fees, among others. There are different charging standards in every port. Moreover, if your goods are randomly selected for customs inspection, another inspection fee will be generated.

Your agent will pay for the cost generated in the clearance process in advance and charge you for the actual amount.

Time Frame for Customs Clearance

The duration of customs clearance depends on the type of goods and mode of transportation. For regular cargo, the process typically takes 2-3 days by sea, and is even quicker by express or air, taking nearly 1 day.

However, if you are importing or exporting sensitive goods or DG cargo, or if your goods are selected for inspection by customs, the entire clearance process could take longer.

Conclusion

We hope this article has provided you with a better understanding of customs clearance. If you have any questions, please don’t hesitate to comment below.

Onestopimport is a top sourcing company based in China. If you need assistance sourcing high-quality goods from China at competitive prices, we are here to help. Additionally, we offer customs clearance services to ensure your goods arrive smoothly. Feel free to contact us to learn more.