Brazil PRC

Customs Clearance Issues: Getting Past the Complexities

Monday, July 9, 2018
4 mins

While some customs clearance issues are beyond our control (think earthquakes or hurricanes), there are many other customs hang-ups that can be avoided with the right processes in place. When it comes to international logistics, it’s all too common to experience the following:

  1. Shipments to get stuck in customs for days or weeks
  2. Duties and tariffs to cost more than expected
  3. Paperwork to get filed incorrectly or incompletely

Logistical missteps and miscommunications are always frustrating, but when you add in language barriers, time zone differences, and great distances between yourself and your products and paperwork, the frustration gets compounded. It’s important to be well informed about customs clearance issues and to plan ahead in order to avoid as many of these challenges as possible.

Why Customs Clearance Issues Happen

From the time an international order is shipped, a large number of documents get created before and during transit to indicate what the shipping company is carrying and what customs should expect--from the type of good, to the monetary value, to the weight. All of this data requires a lot of paperwork and verification throughout the shipping journey, especially at customs.

Customs clearance issues can keep your goods locked up in ports instead of at their destination. - image source

With all of this information to track, customs clearance issues can easily happen, and whether it’s a simple misunderstanding or miscommunication, companies run the risk of these mistakes being construed as fraud. Regardless of the reason for the clearance issues, however, these hold ups are costly for your business, as there may be penalties on top of duties and taxes.

Such delays are also frustrating for your customers, who may be forced to wait for weeks beyond the anticipated delivery date to receive their purchased goods. According to PagBrasil, the average Brazilian consumer waits 40 days to receive their internationally-purchased parcels. Avoiding any unnecessary delays is obviously critical for ensuring your customers’ positive experience with your brand.

The best way to avoid customs clearance issues is to identify and fix any problems before your shipment is in progress. So what sort of things do you need to watch out for? The following questions will help steer you in the right direction.

Are you allowed to ship your goods to that country?

It’s the most basic question, but it should always be asked. While there are obvious examples of things that are highly regulated across international borders—like firearms and live animals—there are some less obvious reasons for goods being disallowed.

Regulations and laws in each country can keep seemingly innocuous items from entering. In Singapore, for example, there has been a decades-long prohibition on the import, manufacture, and sale of chewing gum—and now the country is also banning vaping devices.

While Singapore is cracking down on imports of vices, Chile has restrictions on perfume imports. While such imports are permitted, any perfume product requires a special permit from the Health Ministry that costs $30 per perfume item.

In the age of international e-commerce, ensuring that you’re allowed to ship your goods to your international customers is a critical first step.

Are your goods classified correctly?

Once you determine that you’re allowed to ship your products, it’s critical that you accurately represent the goods you’re shipping. While goods are classified according to the Harmonized System (HS) in many regions around the globe, HS codes aren’t as common in Latin America. It’s important to check on the classification system used by your specific destination country in order to comply fully with local customs standards.

Since countries depend on incredibly specific classification systems to accurately tax and track goods coming in and going out of country, your company needs to understand the ins and outs of these systems as well. The classifications are very precise, and a misclassification can result in costly penalties and accusations of fraud.

Take, for instance, this example of misclassification from The Geography of Transport Systems: a company misclassified canned chickpeas they were exporting as dry chickpeas. It may seem like a small difference, but that country’s tariff schedule for dry chickpeas was 5% versus 20% for canned chickpeas.

Misclassified goods can cause big problems at customs. - image credit: Dr. Jean-Paul Rodrigue, 2016

The lesson? Make sure you have the local knowledge and experience that enables you to categorize goods correctly the first time around - and avoid paying the price with penalties down the line.

Did you pay all the taxes?

While we’re on the topic of money, taxes are an unavoidable part of international shipping. For the most part, mail and printed materials don’t incur duties when traveling across international borders, but parcels of a certain value often will—although these regulations can vary by country greatly.

For e-commerce companies who ship low value items, it pays to know the low-end limits for paying taxes. These limits, known as de minimus, exempt items under a certain value from duties. Chile, for example, does not levy duties on items under $30.

Items of greater value, though, require taxes to be paid; those over a certain amount, along with large shipments, can require a customs broker or a similarly equipped third-party logistics company to manage it all. These companies can help you understand the regulations and exceptions for your shipments to ensure that you pay the correct amount during the entry process.

Since the taxes you pay depend upon the goods you’re shipping, it’s critical that you have the right customs codes and accurately represent the weight of your products to avoid any hold ups in customs.

Is all of your paperwork filled out (correctly)?

Customs paperwork is a hassle, but it’s also a vital part of ensuring that your shipment is legal and won’t be stopped by customs agents. It’s also one of the most common reasons for delays, because paperwork needs to be complete and accurate. Up to 80% of delayed shipments can be attributed to poor descriptions of goods, incomplete consignee information, or missing details.

The amount of paperwork necessary to import varies from country to country. According to the most recent data from the World Bank, the number of documents it takes, on average, to import across Latin America is seven (compare that to North America which requires three documents, on average).

While seven documents may not sound difficult, for small-to-medium sized businesses just breaking into foreign markets like Latin America, documentation can present a huge challenge. In Argentina, for example, documents like the commercial invoice and packing list need to be in Spanish.

The Port of San Antonio in Chile is one of the largest ports importing goods to South America. - image source

If you don’t have a regional presence in Latin America, the language barrier can make accurate paperwork a difficult—and potentially costly (if it results in held up shipments)—part of the customs process.

Another thing to keep in mind is that customs officers also inspect shipping manifests. According to the CEO of SeaLand, Craig Mygatt, “Colombia can hold containers for weeks if there’s a slight change in the manifest.” Thus, it’s crucial to get your paperwork right before your shipments set sail (or take flight) if you want to avoid any unnecessary delays.

Avoid Customs Clearance Issues by Using 3rd-Party Logistics Providers

A story recently posted on Shopify exemplifies the risks that companies place themselves in when they pass on forging a relationship with a third-party logistics provider early on. According to the article, a multi-million dollar company called Death Wish Coffee received a huge bump in sales from media exposure, which quickly led to fulfillment, shipping, and logistics breakdowns that cost the company their ability to sell on Amazon and eBay.

If your company ships more than a handful of parcels internationally, it’s a wise move to invest in developing a relationship with a third-party logistics company with the manpower and expertise to manage customs clearance issues. But even a one-time shipment can trip up any company who isn’t familiar with the ins-and-outs of customs clearance issues.

When you choose an experienced third-party logistics partner like SkyPostal, expect the most challenging parts of the customs clearance process to be handled for you. Without this support, you increase the likelihood of your shipments getting denied entry or being rejected by the buyer due to excessive duties they don’t want to pay. Bringing in help will reduce issues such as:

  • Merchandise abandoned at customs because of extended delays
  • Wasting money on fulfillment and transport costs because of abandoned merchandise
  • Unexpected costs from duties and taxes
  • Negative customer experiences with your brand

Third-party logistics providers spend years developing relationships with local carriers, customs authorities, and service providers. That sort of know-how and access is invaluable when it comes to avoiding customs clearance issues.

Try the SkyPostal Way

If you’re a retailer looking to break into the Latin American markets and you’re unsure about how to manage the customs process, consider partnering with SkyPostal for your shipping and logistics needs. Our integrated approach to Latin American shipping means we manage the entire import process, including duty and tax management, customs paperwork, and any other customs clearance issues that may arise.

Contact us today to learn how you can make the switch to SkyPostal’s personalized logistics services.