Companies can secure their international trade flows and save thousands of euros,” says Stéphane Hamouche, head of customs affairs at Bolloré Logistics in Paris. “These are strategic and economic decisions.”
Here are the top ten questions that companies should ask themselves before shipping their goods across borders.
1/. Which Incoterm to use?
Hamouche advises importers and exporters to reduce risks by choosing an Incoterm that gives them control over customs regimes, import duties and export tax receipts.
“Handing over responsibility for customs procedures to your trade partners may seem like the easy option but it creates extra risks for the company,” he warns.
For example, Hamouche counsels exporters against opting for Incoterms such as the Ex Works rule because it means they have to rely on the importer to obtain the documents needed to prove their goods have left the European Union. Without these documents, exporters face repaying the value-added tax on their goods which equals a hefty standard rate of 19.6 percent in France, for example.
2/. Where are the goods going?
Customs formalities vary among countries and companies must know what is required. Even when exporting goods to another European Union country, exporters must provide a trade of goods declaration, says Hamouche. In France, for example, the trade of goods declaration or DEB must be made within 10 working days following the month the goods were transported. The rules only apply to companies with a certain amount of annual trade. The threshold is 460,00 euros in France, for example, and 200,000 euros in Italy.
3/. What is the nature of the goods?
Certain goods such as pharmaceuticals or fruits and vegetables and other perishables require special customs authorizations before they can be exported or imported. They may also need special certificates issued by other authorities, says Hamouche. Importers and exporters need to be fully aware of these rules and apply for any certificates or licenses ahead of time to avoid the risk of the goods being blocked in customs, he says.
4/. What is the origin of the goods?
The European Union has bilateral trading agreements with some non-EU countries including South Korea, Morocco, Algeria and Tunisia. Goods that are sold into these countries benefit from the reduction, suspension or relief of duties in the importing country.
In order to qualify for these advantages, companies must precisely determine the origin of their goods. This can be complicated in the case of finished products, says Hamouche, because some of the components may have been manufactured outside of the European Union. Customs experts can help companies navigate the paperwork with the customs authorities, says Hamouche.
5/. Should you use the Binding Tariff Information System?
Importers and exporters shipping or receiving goods that are complicated to classify should request Binding Tariff Information or BTI classification decisions from their national customs authorities, says Hamouche. This is important because the classification of each product determines the customs duties and the rules that apply to the goods. The rates of customs duties can vary from zero to 14 percent. If a company declares the wrong classification to customs, it could be subject to fines of up to three times the value of their goods, he warns.
6/. What is the value of the goods?
The value of the goods is important for both importers and exporters because it will determine the amount of taxes and customs duties they pay, says Hamouche. In principle, the transactional value of the goods is used but companies should also examine whether the products generate royalty payments, trademark payments and other fees. These are often overlooked by companies but should be included in the calculation of the value of the goods, Hamouche says.
7/. Which customs regime?
Importers and exporters wanting to maximize their cash flows can, under certain conditions, opt to have their goods placed under a customs procedure with economic impact. These procedures can reduce or eliminate rates of duty on goods that are temporarily imported under specific conditions such as when they are being processed or repaired within the European Union. In another example, companies that export goods outside the European Union for processing or repair will only have to pay customs duty and VAT on the work done outside the European Union, says Hamouche.
8/. Are there faster and more secure clearance procedures?
Companies with over 50 operations annually can opt for a domiciled clearance procedure in France, says Hamouche.
Customs clearance at domicile allows importers and exporters to clear their goods directly in their premises. It is also possible for companies to centralize customs clearing formalities such as customs declarations and payments in a single customs office called the “domiciliation office”. This makes customs procedures simpler, says Hamouche.
“We advise companies to use these procedures because they give companies greater visibility over their trade flows and allow them to better master customs risks by dealing with a single customs office,” says Hamouche.
9/. Can you import goods free of VAT?
Companies that import goods that are then destined for export may qualify for VAT-free imports and should ask their customs office for information, says Hamouche.
“It is simple to obtain this procedure and it has existed for a long time,” says Hamouche. “Nevertheless, many eligible companies still do not apply for this exemption.”
10/. Can you be released from financial guarantees for VAT payments and benefit from deferred payments and group guarantees?
Some companies can ask to be released from the requirement to provide a financial guarantee for VAT payments. They can also opt to pay the VAT they owe customs in monthly instalments on the 25th of the following month. These procedures allow companies to deduct or recover the amount of VAT they owe before they have made the payments. This helps them reduce their financial outlay and banking costs, Hamouche says.