Jail Time, Audits, and Import Risk: What It Means to Import in Your Own Name

Megan MacKeown|November 10, 2023

Reading Time: 5 minutes

We frequently receive inquiries from our clients, mostly our end-user and reseller clients, regarding the feasibility of importing tech gear through the local entity in a foreign country. While we don’t want to scare you off, it is necessary that we share all the risks that come with acting as your own Importer of Record (IOR) so that you can make an informed decision for your global deployments.

Besides the complexities associated with the cross-border movement of tech hardware (we delve into this here), there are a number of other risks that come along with importing tech goods using your entity.

Need to brush up on what an IOR is and other import FAQs?

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Cargo ship in harbor, importer of record

Tax Implications for Importing

As you will be acting as both the consignee and the importer (which is possible), various tax risks will come up for your business. These can be things like the cost of the goods being imported getting significantly taxed or even tariff wars having financial constraints on your business. Businesses that fail to comply with import tax laws will be fined or criminally prosecuted.

Permanent Establishment Risk

What is Permanent Establishment:

Put in place by the OECD, Permanent Establishment (PE) refers to whether a non-resident business has done enough activity to warrant creating a taxable presence in a foreign territory. The concept was developed to address taxing rights for businesses that operate in other countries.

Custom Duties and Taxes

Each country will have different tax structures. On top of this, these amounts will change all the time. Acting as your own importer, you will need to know what to expect when entering customs.

Import duties and taxes are imposed to protect local producers and provide an additional revenue stream for the local industry. Duties and taxes will need to be paid before customs authorities clear your shipment. These amounts are calculated based on the contents declared and the corresponding HS codes.

Without proper due diligence, you will fail to calculate the full landed costs to customs and may exceed budget requirements. And when it comes to tech gear – which is considered dual-use – some products may be subject to additional import duties and charges. Any errors in declarations or undervaluing goods can result in major consequences for your business – you may be subject to stuck shipments, revoking import/export abilities, and financial and legal penalties.

This then leads to the other risks associated with customs.

Did You Know?

If goods are not declared correctly, Brazilian customs can fine you for up to 200% of the value of the imported goods! Now, considering most tech gear is high-value – that is a significant penalty.

Dealing with Customs Authorities

Importing goods in your own entity’s name also increases the likelihood of customs inspections. Customs officials are more likely to inspect shipments that arrive in private names rather than those sent from registered import companies. This is where working with a trusted Importer of Record (IOR) can help streamline the customs clearance process.

Global Trade Compliance

From a trade compliance perspective, if you are importing tech products without having a complete understanding of the complexities involved and should something go wrong, you will either have the shipment seized or even destroyed.

You must ensure that the tech gear you import complies with all applicable product safety regulations for that destination. This often involves pre-testing and certification of the goods. Any failure to comply can result in recalls, fines, and even criminal charges. An example of this is the Bureau of Indian Standards (BIS) certification that is needed to import certain electronic goods into India.

It’s crucial to keep in mind that some countries impose restrictions on the import of particular types of tech gear. It’s essential to obtain the necessary licenses before importing such equipment to avoid the confiscation of these goods and potential criminal charges for violating country regulations.

Legal Risk

Aside from the potential tax and financial risks, importing goods in your own name can also expose you to legal risks. If you import counterfeit, pirated, or illegal goods, you can face prosecution. You will also face criminal charges for audit violations.

Import Audit Risk

What most people do not realize is that importing gear is not a once-off in terms of the legal requirements. Following an import, the entity responsible is held liable for any audits for up to 10 years. This means that all accompanying compliance documentation will need to be kept on record. On top of this, should any compliance changes occur – the importing entity needs to maintain compliance with regulations.

A real-world example:

TecEx recently saw this with a distributor who imported gear into India. A recent addition was made to the BIS certification, and the distributor was not aware. This meant that the goods would need to be reimported with the correct certification before the goods could be sold in-country.

Read Our Case Study Here

Sometimes, even if you are no longer held liable for the audit, your business may still be subject to civil or criminal penalties for violating customs laws. For example, if you have (even accidentally) underpaid customs duties or taxes, you will be required to pay the outstanding amount, plus interest and additional penalties – you may also be subject to criminal prosecution.

An IOR is a brilliant solution to ensuring accurate record-keeping. An IOR will keep all the documentation for every shipment on file – less paperwork and admin for you!

Conclusion

You don’t have to become a customs compliance expert. Using an IOR specialist can mitigate all these risks, and the additional value-added services make an IOR the best solution for international deployment.

TecEx has developed relations with various customs authorities and has teams on the ground to ensure our shipments clear efficiently. We understand all the compliance regulations and requirements, which means you can sit back and focus on your business while we move your tech gear across borders.

Sound Good? Reach Out To Us Today

Jail Time, Audits, and Import Risk: What It Means to Import in Your Own Name

Tax Implications for Importing