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Customs clearance and tax-related duties for EEE parts

  • Posted by Federico Fernández Esquivel
  • On December 11, 2020
  • 0

Customs clearance and tax-related duties

  1. What is Customs Clearance?Customs
  2. How is customs clearance done?
  3. What documents do I need?
  4. Do I have to pay taxes?

What is Customs Clearance?

Any company that exports or imports goods with other countries not belonging to the EU Customs Union must carry out the Customs clearance.

The Customs Clearance is the set of procedures carried out to control, monitor, and approve the entry or exit of goods in a particular territory during any international trade operation.

Consequently, it can be said that Import Customs Clearance is a delicate process because the Customs office of entry will carry out a series of documentary and physical controls to check that the goods comply with all the requirements in terms of customs duties and taxes, as well as other commercials, health and safety requirements.

The customs clearance is a crucial part of the EEE procurement process since countries worldwide are taking part in this activity.

It is therefore of great importance to know how it works in order to release the goods quickly and avoid having to pay any unnecessary taxes.

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How is customs clearance done?

The person in charge of performing the customs clearance is the customs agent, who represents the importer or the exporter at the customs within the international transport process.

Among other actions, the customs agent is responsible for notifying the client of any information announced by customs, as well as for paying taxes and duties on his or her behalf, among other tasks.

This process is based on the declaration of certain information related to the import before the corresponding customs authority, such as the data of the goods and the persons or organizations that are in charge of sending or receiving it.

The goods are declared by the customs representative in a computerized manner, and the customs office assigns a channel that evaluates the risks and the need to inspect these products, based on, among other factors, the identity of the exporter, the type of goods and so on.

The existing channels in customs clearance are:

channels in a customs clearance

customs clearance

Airway Bill (AWB)

The airway bill is a document that proves the contract of carriage between the shipper and the airline. It is issued by the carrier’s agent and is governed by the Warsaw Convention

A single airway bill can be used for several shipments of goods. It consists of three original documents and several copies. Each of the interested parties (sender, recipient and carrier) keeps an original. Copies may be required at the departure or destination airport for delivery and, in some cases, for other carriers.

The airway bill proves the contract of carriage and the receipt of the goods.

Packing List

The Packing List (P/L) is a commercial document that is attached to the commercial invoice and transport documents. It provides information on imported items and the particularities of each package (weight, dimensions, handling instructions, etc.).

It is required for customs clearance and has the inventory value of the incoming goods.

It generally includes the following data:

  • Details of the exporter, importer, and transport company
  • Date of issue
  • Shipping invoice number
  • Type of packaging (drum, cage, carton, box, barrel, bag, etc.)
  • Number of packages
  • Contents of each package (description of goods and number of items in each package)
  • Marking and numbers
  • Net weight, gross weight, and dimensions of the packages

Commercial Invoice

The commercial invoice is a document or proof of the transaction between the exporter and the importer. The exporter issues it to the importer for collection of the goods when they have been made available to the importer.

The commercial invoice contains basic information about the transaction and is always required for customs clearance.

Although it includes some data that is specific to import and export operations, it is similar to a regular sales invoice. In general, the following minimum data is included:

  • Identification of the exporter and importer (name and address).
  • Date of issue.
  • Invoice number.
  • Description of the goods (name, quality, etc.).
  • Measurement unit.
  • Quantity of goods.
  • Unit value.
  • Total value.
  • Total invoiced value and currency of payment. The equivalent quantity in a currency freely convertible to euros or to another currency of legal tender in the importing Member State must be indicated.
  • Terms of payment (mode and date of payment, discounts, etc.).
  • Terms of delivery according to the relevant Incoterm.
  • Means of transport.

Declaration of the customs value

The declaration of the customs value is a document that must be submitted to the customs authorities when the value of the imported goods exceeds 20,000 euros and must be submitted together with the Single Administrative Document (SAD).

The main purpose of this requirement is to establish the value of the transaction in order to set the customs value (taxable base) on which the customs duties are applied.

The customs value corresponds to the value of the goods, including all costs (e.g. invoice value, transport and insurance), up to the first point of entry into the European Union. To establish the customs value, the transaction value (price paid or payable for the imported goods) is usually used.

Single Administrative Document (SAD)

All goods imported into the European Union (EU) must be declared to the customs authorities of the Member State concerned using the Single Administrative Document (SAD), which is the common document for making the import declaration in all Member States.

The main data to be declared are the following:

  • Identification of the participants in the operation (importer, exporter, representative, etc.)
  • Customs destination (release for free circulation, clearance for consumption, temporary import, transit, etc.)
  • Identification data of the goods (TARIC code, weight, units), location and packaging
  • Data of the means of transport
  • Country of origin, country of export and country of destination
  • Commercial and financial information (incoterms, invoiced value, invoicing currency, exchange rate, insurance, etc.)
  • List of documents associated with the SAD (import licenses, inspection certificates, a document of origin, transport document, commercial invoice, etc.)
  • Declaration and mode of payment of import taxes (customs duties, VAT, excise taxes, etc.)

Three copies are generally used for imports: one is kept by the authorities of the Member State where the entry formalities are completed, the second goes to the Member State of destination for statistical purposes and the third is delivered to the consignee once it has been stamped by the customs authority.

Dual-use export authorisations

On some occasions, customs could request a statement to ensure that goods initially classified as dual-use will not be used for military purposes.

 Do I have to pay taxes?

The customs authorities will be checking if any taxes or duties apply to your goods. It will depend on the value, the law from the importing country and type of good.

Most EEE-parts go through customs tax-free. Only some components that belong to the following families eventually have taxes associated: transformers, wires, connectors, filters, relays, switches, fuses and coils.

Customs officers will request payment of taxes and duties if they have not been paid. At this point is where the Incoterm selected to have its appearance.

For instance, if shipping conditions were as DDP, this means that the seller already handled payment.

taxes

Click here for specific information on the applicable taxes

Once outstanding taxes and duties have been paid, the shipment is released. So, that would be it! goods continue their journey to the destination!

Federico Fernández Esquivel
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