Avoiding Customs Misunderstandings: A Checklist for Procurement Officers

Prices, transit times, geopolitics, service – there are many reasons to find a new supplier when trading internationally. But, do you know how to manage customs risk when doing so?

In this article, we explore the customs considerations of procuring goods from a new country, and how you can avoid costly mistakes by asking the right questions from the start.

Contents:

• Classification
• Import licences and permits
• Product standards and compliance
• Duties, quotas, and other trade agreements
• Sanctions, embargoes, and other controls
• Your customs checklist for procurement
• How Customs Support Group can help

Classification

All of your import clearance obligations are tied to your goods classification, so it’s essential to check that your current commodity code still applies.

This can apply even when the goods are identical, and the only difference is the country of origin.

For example, kitchenware containing polyamide or melamine has a separate commodity code when it originates from China or Hong Kong. This is because there is a requirement for a Plastic Declaration Document (PDD) and test results to be submitted to health authorities with these origins.

Customs Support Group can help you with checking your classification against your new origin so that you can be sure of your obligations from the start. Contact us for more information.

Import Licences and Permits

When you are importing goods from some origins, you may need to have a licence that was previously not required. This can be because of risks related to the products or because of geopolitical reasons.

These licences and permits may come with additional reporting or audit requirements, so it’s important to consider the full cost when looking to procure goods from a new country.

Customs Support Group can help you obtain customs permits and review whether your current permit profile is working for you. Contact us for more information.

Product Standards and Compliance

In addition to licences and permits, there may be other quality controls on goods from your new origin, which can lead to delay or rejection.

For example:

• Checking the origin of the ingredients, such as eggs, used in the final product
• Reviewing labelling and packaging standards
• Meeting safety and environmental testing requirements
• Phytosanitary certification

Even with the same commodity code as your current goods, there may be additional levels of due diligence required. Get in touch with Customs Support Group for guidance.

Duties, Quotas, and Other Trade Agreements

Import duty can change from one origin to the next, for multiple reasons:

• There may be no option to claim preferential origin, or different standards*
• There may be a quota, which only allows a certain volume of goods to enter under preference within a certain period
• There may be an anti-dumping duty on your goods from your prospective origin

*Under some trade agreements, preferential origin can only be claimed when certain conditions are met. For example, a car may qualify for a customs origin when it has a majority of its parts from one country, but it may only qualify for preferential origin when it has 60%. This figure may vary depending on your origin.

(Related: Customs origin vs preferential origin.)

Sanctions, Embargoes, and Other Controls

In addition to extra duty, licence, and certification considerations, your prospective origin may also be subject to restrictions which can affect customs inspection rates. You may also face complications or higher fees when processing funds, or have extra requirements when using Letter of Credit and escrow accounts.

Check which bank processes or Incoterms would be best for you if there are possibilities of delays due to restrictions on trade.

Your Customs Checklist for Procurement

As you can see, changing your country of purchase involves more than just the price and transit times.

Here is a quick customs checklist for you with some questions you need to ask when considering purchasing from a new country:

• Is your goods classification the same?
• Are any customs licences or permits required?
• Are there any new or differing standards for product quality, safety, or the environment, and what documentation is needed for this?
• Are there any new or differing labelling or packaging requirements?
• Can you claim preference, and what evidence of preferential origin do you need?
• Are there any quotas, additional duties, or trade conditions that you need to be aware of?
• Are there any sanctions or other restrictions on the origin, and how can that increase your risk?
• Given the risk profile, is your Incoterm the right one for this route?

How Customs Support Group Can Help You Explore New Suppliers

Strategically located throughout Europe and experienced in procurement, Customs Support Group provides a full suite of customs and trade solutions that make your supply chain more efficient. Whether you need help with checking your classification, calculating new duty costs, streamlining your due diligence processes, or processing your customs clearance in a new location, you can count on our experts to get it done. Contact us to get started.