Customs Cleared and What it Means for International Shipping?

April 25, 2024

Reading Time: 7 Minutes

You’re looking to get your goods to a new location. However, getting products from your manufacturer or vendor to a new location where you don’t have a physical presence is a bit more complicated than conventional mail or even couriers who don’t cover you every step of the way. You must undergo customs clearance to become customs cleared so that the goods will be released for delivery to the final destination.

Customs Clearance Process

If you’re ready to send products across borders, the customs clearance process, especially ‘customs cleared,’ is an important concept to understand. No matter your destination, customs cleared is the successful movement of goods through a customs office or border authority.
Often, people only associate “customs cleared” with the destination country (importing), but customs formalities and processes need to be adhered to before the cargo can leave its home country as well (exporting). This can cause major problems for businesses looking to expand and become truly global-reaching.

What Does Customs Cleared Mean?

Customs cleared is the stamp of approval assigned to a package once it has been released by the customs department.

There is a distinct difference between customs clearance and customs cleared. Customs clearance is the process a shipment undergoes when the customs authority reviews the shipment prior to releasing it. Customs cleared is the aforementioned seal of approval issued by the customs department that releases the shipment into the country for free circulation.

Your shipment is now free to proceed to the next stage of its journey or delivery.

What Does Customs Cleared Mean For Imported Goods?

Customs cleared means that the government has given you the green light, following the customs clearance process, for your shipment to enter the country and for you to move your parcel down the line to the final destination.

So, what is the customs clearance process, and what can a seller expect at this point in the shipping journey?

The importance of having the correct customs paperwork for your specific products completed accurately can’t be understated. So, we’ll state it again—completing the right customs paperwork filled out properly is extremely important.

Just to recap:

Customs clearance is a process a parcel has to undergo once it arrives in a country.
Customs cleared means your parcel has undergone the necessary customs inspections, and the duties and taxes have been calculated and paid. The international shipment is then free and clear to move on to its next destination.

Frequently Asked Questions for Customs Cleared

Does Customs Check Every Package?

In short, yes. Although the exact process differs from country to country, it is always best to be properly prepared. TecEx ships to over 200 destinations, each with unique customs processes. This is why having an expert on board is essential to getting your goods through customs every time.

For example, at the John F. Kennedy International Airport, the U.S. Customs and Border Protection (CBP) has a multi-tier process to tag which packages to open and fully inspect.

Their inspection to-do list includes:

Cross-check shipment data with Homeland Security, the FBI, and the DEA,
Have detection dogs sniff out drugs,
And visually review all packages with an x-ray scanner.

If your shipment arrives damaged, that may also signal full inspection before clearing customs. A good rule of thumb is to package and document your shipments with the expectation that they will be thoroughly inspected during the customs process.

How Long Does Customs Clearance Take?

As with any process that deals with safety and regulations, customs clearance can take some time. The entire process can take anywhere from a few hours to a few weeks. The amount of time depends on several factors, including:

The regulations of the origin and destination countries,
The type of cargo,
Whether or not the imported goods are controlled/regulated,
And how efficient your customs broker is.

Some countries have agreements with others that allow for quicker clearance times. Meanwhile, others have quite the opposite. Meaning times can vary to get to the customs cleared status.

For example, did you know that if you’re importing something from China to the United States, it’ll take longer than importing something from Canada to the United States? You might think, “Sure, that makes sense, China is on an entirely different continent!” But geography isn’t the only thing that comes into play here.

Due to China’s stricter regulations and an ongoing trade war with the United States, customs clearance lead times are much longer than they would be if you were importing something from Canada. Getting expert advice in these instances is highly recommended – trying to figure it out as you go can sometimes lead to your shipment getting stuck, penalized, ‘returned to sender’, or destroyed. And, no one needs that pain.

What Duties & Taxes Have To Be Paid To Clear A Shipment At Customs?

If you’re shipping goods across the world, you’re probably familiar with the long list of taxes and fees you have to pay to get your product from point A to point B. Included on that list is something called duties. Most countries require that the importer pay duties (also called tariffs) and taxes on their imports.

Duty rates vary from 0% to 20% or more, depending on the product, country of origin (the country the product is manufactured in), the origin country (the country the products are being shipped from), and the country’s policies. Different types of goods are subject to different rates, with the cost usually calculated by quantities, weight, volume, or a combination.

Another unavoidable fee is import VAT (Value Added Tax). This is a tax levied on all imports with a set rate that varies for each country. In some countries, such as India, there are varying VAT rates applied, depending on the product. The good news about VAT is that this isn’t always a sunken cost, as TecEx has numerous VAT products and customized solutions to help you reclaim it, or avoid paying it altogether.

Every country has additional unique import taxes based on their tax structures and policies. These may be isolated percentages of the shipment value, as with VAT and duties, or compounding in nature where, for example, the taxes are applied to the shipment value as well as the total VAT and Duty amounts.

The best way to estimate these duties and taxes is by understanding and using the Harmonized System (HS) Code and tax structures for the country in question. 3 But your focus should be on creating and selling your products—not on learning facts and figures outside your wheelhouse. Give your business its best chance by focusing on your strengths and letting an expert handle the tax and duty estimates. If you’re shipping with TecEx, we handle the HS Code classifications for your products, and we understand these tax structures. So, we can provide you with extremely accurate duty and tax calculations thanks to our years of experience, this includes the handling of the customs clearance process.

Who Handles Paperwork and Payments Needed For Customs Clearance?

Usually, it is the responsibility of the Importer of Record or consignee (traditionally the buyer) to handle the paperwork and payments during the import process. However, this can depend on the Incoterms used.

TecEx acts as a third-party Importer or Record (IOR) which means we must be present to declare the paperwork, pay the fees, and receive the shipment. But what is an Importer Of Record (IOR)? An IOR is the legal entity entrusted with customs clearing the products and taking responsibility for the import, both at the time of clearance and for numerous years after a successful import. In essence, it’s a party appointed by the buyer/consignee or seller/shipper to handle customs formalities.

When is Customs Clearance Needed?

Customs clearance is required for all international shipments. So, if you’re a business looking to import and/or export products, you’ll need to have all the relevant documentation ready for customs officers to review.

The Customs Clearance Process: Explained

There are four key stages in getting your goods cleared through customs:

1. Inspection of documents

First, a customs officer will review your paperwork to ensure all the information is correct and complete.

For example, they’ll look at your commercial invoice and Air Waybill or Bill of Lading. The commercial invoice should list the products in the shipment and their values and quantities as well as the contact information and address for the shipper and consignee, among other details.

If all of the paperwork is in order, the clearance process will proceed to step 2. If the paperwork is not correct (or in some cases, random), the shipment may be physically inspected by customs or another government agency. This can be a tedious, expensive, lengthy process.

2. Tax and duty calculations

Next, if the shipment passes the document or physical inspection, the import taxes and duties will be calculated by the customs official. They’re also responsible for verifying and tracking whether the relevant fees have been wholly paid.

TecEx’s duty and tax calculations are 99% accurate, so you’ll know what to expect upfront.

3. Payment of taxes, duties, and fees

You have two incoterm-dependent options for payment: DDP (Delivered Duty Paid) and DDU (Delivered Duty Unpaid).

If the goods are shipped on a DDP incoterm, it is the responsibility of the seller to pay the duties and taxes and to deliver the products to their final destination once customs cleared.

If the goods are shipped DDU (or on any other incoterm), the buyer is responsible for paying the duties and taxes. In DDU specifically, once the products are customs cleared, the seller is still responsible for delivery to the final destination; whereas for any other Incoterm, the delivery responsibility is the buyers’.

When using an IOR for your shipment, the IOR will pay the duties and taxes on your behalf, no matter the incoterm.

4. Release of shipment

Once everything has been paid, the shipment will be released, and the goods will be in free circulation in the country which means they can be delivered to the final delivery address and circulated without restrictions from there.

How to Avoid Customs Clearance Delays

1. Get your products compliant

Every country has varying compliance requirements for specific products. These are especially strict when products are imported to be sold.

For example, many products have labeling requirements, such as textiles which need care instructions, or electronics requiring markings as proof the product has undergone and passed certain safety tests. In other cases, such as with foodstuffs, an entity in the destination country needs to be appointed to fulfill certain reporting requirements.

TecEx has a dedicated compliance team that can handle all of these compliance requirements for you.

2. Adhere to country-specific regulations

Rules and regulations differ from country to country, so make sure to do your research to meet local requirements. For example, there may be licenses and permits or additional documentation you need for certain countries.

This is a highly complex process and, if done incorrectly, can lead to delays and stuck shipments. For example, any plastic or electronic goods entering India require EPR registration.

3. Get your paperwork ready

It’s advised to have all paperwork and documentation prepared for customs before you ship your goods.

For example, you need a commercial invoice. This helps customs to assess whether your goods can enter or leave the country. It includes information about the buyer and seller, HS codes, country of origin, incoterms, and more.

You also need a transport accompanying document. This is different for each mode of transport. For example, ocean freight requires a Bill of Lading (BL), air freight an Air Waybill (AWB), and road freight a CMR.

4. Write an accurate goods description

You need to provide an accurate goods description on your commercial invoice.

If you do this incorrectly, the customs officer won’t be able to classify the goods, potentially resulting in delays and stuck shipments. It also helps customs work out taxes and duties.

You need to be specific in your description. For example, instead of writing ‘shirts’, you should write ‘T-shirts, XL (50% cotton, 50% polyester)’. Include quantities, unit values, HS Codes, and the country of origin.

5. State the value of your goods

Stating the value of your goods enables customs to calculate taxes and duties. You need to declare what the buyer has paid and provide customs with proof of the transaction so they can calculate all relevant fees.

6. Explain the reason for shipping

By stating your shipping reasons, you may be eligible for lower customs charges and preferential duty rates. Conversely, if you don’t state this, you may have to pay higher charges than necessary.

7. Keep information consistent

If you have any discrepancies across your documentation, this could lead to customs delays. To avoid any issues, make sure your values, goods descriptions, and codes are all consistent.

Work With The Right Import Partner To Grow Your Market

Developing your business internationally is a daunting task already without having to worry about import compliance. You need a partner you can trust for import logistics – one that understands the local rules and regulations when it comes to shipping products internationally.

TecEx has the answers to all of your international shipping questions. Explore our import compliance and logistics solutions, including:

We can help keep your international shipping while making the shipment process easy and efficient. And if any questions arise, our customer care team is always just a phone call away.

Sources:

Insider. How JFK customs searches 1 million packages a day for illegal items.
Crowley Logistics. All About Customs Clearance.
CSA Transportation. Customs Clearance: A Complete Guide.