Head of US Customs and Trade Compliance DHL Express US
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Getting Up to Speed on the Border Clearance Process and Duties and Taxes

Jan 11th 2016
Head of US Customs and Trade Compliance DHL Express US
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An increasing number of US companies are entering the international trade arena. According to the US Department of Commerce's International Trade Administration, nearly 300,000 American businesses are engaged in global trade, and the US Chamber of Commerce estimates that more than 28 percent of the US gross domestic product is now tied to international trade activity.

If your organization's supply chain is global, or if you work with clients who are engaged in international trade, then you understand that one of the greatest challenges to cross-border business is the complex and often cumbersome border clearance process.

Thanks to rapid advances in logistics and communications, businesses and economies around the world are increasingly interconnected. Unfortunately, customs and border security agencies have been slower to adopt cooperative strategies and to integrate functions, in part because of the complex security challenges they face. As a result, when it comes to estimating and paying duties and taxes, as well as the proper filing of documentation for imports and exports, businesses must fully understand the multiple – and changing – rules that apply from country to country.

The light at the end of the tunnel is the current move toward automation of the border clearance process, as plans for customs modernization will significantly alter the way that goods are processed and duties and taxes are paid. Here is a closer look at the issues.

For those moving goods into and out of the United States, the push for speed often runs up against the reality of border clearance requirements. While US Customs and Border Protection (CBP) is primarily responsible for the processing, screening, and clearance of imports and exports on the US side, 47 different US government agencies may be involved in the process, and each has historically required the filing of documentation for certain goods.

The CBP's move to implement the Automated Commercial Environment (ACE), which should be fully operational in 2016, will consolidate and streamline the export and import process, providing one automated system for entry processing, cargo release, and export processing. Without ACE, a paper-based system requires importers and exporters and their logistics agents to submit the same data to different agencies, and it requires the same information to be keyed-in manually to multiple electronic systems. With ACE and the single window, information can be submitted and processed quickly, for use by multiple government agencies for review and clearance.

In the future, automation should allow for better cooperation among customs agencies in different countries so that information can be shared for faster and more secure border processing globally. Progress toward full-scale automation of customs procedures is in various stages of development in different countries, creating a challenge for logistics managers as they implement their own strategies. Over time, automation will mean that the cumbersome process of complying with multiple and changing requirements and regulations from country to country should become easier. Ultimately, automated systems may allow faster clearance throughout the entire process: lodging, acceptance, and processing of cargo; goods declarations for import, export, and transit; payment of applicable duties and taxes; and release of goods from customs.

Duties and Taxes
Because there is still no single automated process that can be used from country to country, the task of understanding and estimating duties and taxes presents a clear challenge. Duties and taxes are imposed on dutiable goods that move across political boundaries; they are enforced by local customs authorities and are subject to changing rules that vary from country to country. A shipment is considered “dutiable” when the goods shipped are part of a sales transaction and are for permanent export. Duties and taxes can vary depending on the commodity's classification code, value, country of manufacture, and associated freight charges.

While international logistics managers are aware of the complexities involved in the duties and taxes estimation and payment process, a review of the general procedure can shed some light on this important part of the logistics equation. Customs uses the following information found on the commercial invoice to calculate the duties, taxes, and fees that are applied to a shipment: Harmonized System (HS) codes (classification codes) for each commodity; the country of manufacture; total costs of the goods (commodities); and other associated freight charges. For example, an electric guitar and amplifier being shipped from the United States to the United Kingdom have a 3.7 percent and 2.7 percent duty tax rate, respectively. Customs uses this percentage against the value, freight, and any other incremental charges that resulted in the sale of the merchandise to determine the total costs.

Shippers also need to know that the HS code they assign to their goods on export documentation may not be the same as the one used at the destination country – and it's the destination country HS code that is used in calculating the duty and tax charges.

Typically, the recipient pays customs charges prior to delivery. A customs broker or shipping partner may contact the designated payer on behalf of customs to arrange for payment of duties, taxes, and fees – which can help streamline the process. To avoid shipments being held until the payment of duties or taxes are made, some international logistics and shipping companies offer special services to expedite payment. For instance, at DHL Express, our Duties and Taxes Paid program allows customers to pay customs charges by including their account number on the waybill.

Until a multi-country, automated, and coordinated system for calculating and paying customs fees is established, the best way to avoid delays and difficulties in the border clearance process is to understand its intricacies, and to work with logistics experts who are up to speed on the changing environment. With the right information and support, your global supply chain can be as fast and productive as any domestic equivalent.


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