ASD GROUP > FREQUENTLY ASKED QUESTIONS – CUSTOMS

Frequently Asked Questions - Customs

You will find in this Frequently Asked Questions, the most frequently asked questions concerning Customs and customs issues.

Customs is meant to protect us:

– Our health by controlling the entry of illegal or counterfeit products and checking that products comply with EC standards.
– From unfair competition by checking that customs duties and taxes on imported products are paid.

 

In order to regulate market prices and protect their industries, countries introduce customs duties at their point of entry.

Customs duties are different for each product and origin.

In theory, the customs duty increases the cost of the imported product so that it is identical to the cost of the same product manufactured in the destination country.

Customs duties are managed by the OECD.

If a product is not manufactured in an importing country or necessary for the country or even in the case of an agreement with another country, the customs duty can be 0%.

However, countries or a group of countries like the European Union can apply an additional customs duty on certain specific products determined depending on the type of good and origin. These duties are called “anti-dumping duty”.

Customs duties are calculated on the basis of the customs value, i.e. the value of the product plus costs until it enters the European Union.

Additional costs are: Transportation costs according to Incoterms, insurance, expert fees, certain commissions.

Customs duties are subject to VAT. Do not omit them when making a reverse charge on your VAT return. Use your IMA’s basis for assessing VAT and not the invoice value.

The customs department may look at the last 3 years if the customs value is disputed.

If you have any questions or a practical example, ask for a free quotation.

 

Trade with countries outside the European Union is subject to the production of a Single Administrative Document (SAD).

– As soon as a good enters or leaves the European Union, it comes under the control of the customs department.
– When the good leaves the European Union, this is an “export”.
– When the good enters the European Union, this is an “import”.

 

All movements of goods between countries in the European Union are subject to formalities.

Trade within the European Union is subject to the production of a trade of goods declaration/Intrastat and/or EC sales list.

When the good originating from the EU enters a country in the European Union, this is an “introduction” or a “purchase”.

When a good is sent from a country in the EU to another country in the EU, this is a “shipment” or an “intracommunity supply”.

 

The Single Administrative Document (SAD) is the document that provides proof of an import or export.

Depending on the operation, the SAD has different names:
IMa for imports – EXa for exports – EUA for certain groups of countries – IMZ for warehousing etc.

But the form of the document remains the same, only the information provided is different depending on the purpose of operations.

The SAD customs declaration provides information that is essential for the traceability of movements:
– statistical information specific to what is being sent
– tax information specific to what is being sent

Each SAD is approved by the customs department and it is the only valid document proving an import or export operation.

 

Determining the appropriate customs tariff for the product is a difficult but essential procedure.
Customs language is not the same as the language we usually use. It is highly recommended to ask a professional for help if you are not an expert in customs tariffs.

The customs tariff is one of two decisive parts for the basis of regulation and taxation. It goes without saying that if the customs tariff chosen does not match the reality of the product, applicable regulation and taxation will not be appropriate for all the resulting consequences in terms of litigation.

 

The tariff is determined on the basis of:

– the product,
– its composition,
– its final destination,
– its functionality,
– its use.

Determining a customs tariff is complex because customs has its own language and a lot of subtleties.

For example, a “computer ” is translated as “machine for processing information”.

It is therefore more than recommended to ask a professional for help.

Classification of some sectors such as textiles and new technologies is very complicated. IT is continually evolving and explanatory notes are not updated before new products are launched. In such cases, even a professional cannot be certain about the right HS code and will suggest that you use the BTI procedure for safety (see 8).

 

Binding Tariff Information

In order to ascertain the right tariff for the product (point 7) and protect the importer or exporter, the European Commission has introduced the BTI procedure.

As we saw in point 7 “How is a customs tariff determined?”, determining the customs tariff is one of two critical factors in an import or export operation.

An error in choosing the customs tariff (called a false declaration of type of good) results in technical and financial complications.

The BTI procedure allows for the tariff to be guaranteed in advance.

A BTI is valid for 6 years throughout the European Union.

A product covered by a BTI cannot be disputed in principle as regards the type of good.

Good to know: The customs department can review the type of good during the limitation period (see 17).

As the type of good is essential in determining duties rates and taxes, a false declaration results in a reversal for this period.NB: unlike VAT, customs duties are not recoverable.

What is the difference in procedure between a BTI and a customs check concerning the type of good?

During a customs inspection, if there is any doubt about the type of good, the customs department can take samples or documentation to be analysed by a specialist authorised laboratory, which will determine the customs tariff.

This laboratory will also determine the customs tariff in the event of a BTI request. Decisions by EU laboratories are recognised throughout the EU.

The operating principle is the same for both procedures to determine the customs tariff in the event of doubt, the difference being:

The BTI is preventive and for security purposes

The customs check is to find false declarations and can result in penalties.

 

In terms of customs regulations, origin and provenance should not be confused.

The origin of a product is determined according to where it is manufactured.

The provenance of a product is determined according to where it comes from.

With the customs tariff, the origin is the second decisive factor in determining regulations.

The following will depend on the origin: taxation, regulation, obligations, standards.

Products can be manufactured in more than one country,

E.g.: thread from Indonesia is sent to be woven in China and the Chinese fabric is sent to Morocco to make shirts.

What was the origin of the shirts?

Depending on the rules of origin for the tariff heading of the shirts, the origin will relate to the fabric, or even the thread, rather than the manufacture.

Customs are able to check the origin retrospectively. A false declaration of origin results in a reassessment during the limitation period.

 

The preferential origin is the term used when determining the advantages in terms of reduced or zero duties within the framework of a trade agreement between the EU and a third country.

In customs language, the term “preferential origin” is used when there are trade agreements between two countries or groups of countries.

Example: recently the agreements between EU/Canada and EU/Japan

Preferential origin makes it possible to obtain a reduced or zero customs duty and can also facilitate trade by means of uniform standards.

But be careful: preferential origin is not automatic; formalities and obligations are required.

Example: to obtain preferential origin, a product must be manufactured using raw materials representing x% from the country of origin, or the company must be registered in an official database etc.

If it is restrictive, what is the point of preferential origin?

Of course, competitiveness.

For example, with the EU/Japan agreement, certain products manufactured in the EU enter Japan with a zero customs duty, while the same products manufactured in other countries without an agreement are taxed at 30%.

Need help to manage your preferential origins? Ask for a free quotation.

 

Binding Origin Information.

The European Commission, in the same way as for the type of good, has introduced the BOI system to protect importers and exporters.

Origin can be complex to define, for example if the product is manufactured in more than one country, as we have seen in point 9.

In this case, obtaining a BOI is a security valid for 3 years throughout the European Union.

NB: the BOI is only recognised in the EU. It cannot be used to determine preferential origin in Canada or Japan, for example. In the event of a legal dispute in the destination country, the BOI is a strong argument before a board or administrative tribunal.

How do you obtain a BOI?

A file has to be submitted to the ad hoc department containing a description of the entire production chain and components.

In the light of the rules of origin, the customs authority will certify the origin. The BOI is valid for 3 years in the EU.

NB: if there is a change in production or components, a BOI need be resubmitted.

A false declaration of origin is just as significant as a false declaration of type of good.

 

All regulations are determined according to the type of good/origin.

If one of these two pieces of information is incorrect, the regulation relating to the operation will be altered.

The job of the customs department is to check the two basic pieces of information, which are the type of good and the origin, in order to ensure that regulation and taxation relating to the import or export are correctly applied.

Remember that this aims to counter unfair competition and ensure the safety of the consumer.

Goods physically crossing the border is not an end in itself. Like taxation departments, the customs department can look back at the last 3 years plus the current year. This increases to 10 years if fraud is suspected.

Specialist review departments in each area check declarations on an ex-post basis. These departments are also better equipped to detect anomalies in customs flows or values.

Be careful, the inspection concerns the limitation period and accumulated errors over 3 or 4 years may have significant financial repercussions.

Customs duty is not recoverable and therefore adds to the selling price or becomes a cost, reducing the margin, if the good has already been sold.

Determining the exact type of good and origin is therefore essential in international trade.

 

There are several methods of clearing customs and you have to adapt your method to suit your volumes, geographical location and constraints.

Customs are being modernised.

While inspections are necessary, the flow of international trade is essential.

There are several methods to clear customs.

Customs clearance provided for by law

This is the most common method. Goods are presented to a customs office where the declaration is submitted by a freight forwarder.

These are generally ports or airports.

The constraints for this kind of customs clearance are:

A stop at the customs that raises extra costs with the journey and the carrier’s increased working time due to the wait*

Unloading and/or cross docking in the event of an inspection

A time restriction due to the customs office opening hours

* Customs estimate a national average of 3 minutes per customs clearance, but this average does not take account of the time taken to prepare the declaration. It can take considerably longer to collect all the documentation and financial information required to make a customs declaration.

Domiciled CC (Centralised Clearance)

A Centralised Clearance (CC) procedure is in place at the centralising office. Customs formalities are carried out when goods are with the importer or exporter or with another customs office.

Advantages: no more trips to the customs office.

For import inspections, goods are unloaded at the importer’s (at domicile, therefore no charge)

Constraints: the carrier has to wait

For export inspections, goods have to be unloaded again for checking.

The CC procedure also allows for multi-site customs clearance. If you have more than one storage location, for example, the CC will be extended to all of your sites.

Customs clearance at domicile and/or customs warehouse

This procedure allows for customs formalities to be carried out directly within the company.

Advantages: Carrier no longer has to wait either for imports or exports

No unloading if there is an inspection

Security in your customs operations

Use your own credit to pay duties and taxes

Constraint: Minimum volume of operations (estimated from 150 operations per year)

Other specific procedures are possible but, in any case, it is highly recommended to use a registered customs representative (see chapter 14).

In 2023, centralised EC customs clearance should be opened within the European Union. It should be possible to clear customs anywhere in the European Union from your local customs office.

This type of customs clearance is very flawed but is not yet possible for the time being for a simple technical reason: European customs offices’ IT tools are not compatible.

This problem should be solved in 2023. Watch this space.

 

A registered customs representative is the equivalent of the old authorised forwarding agent.
This is a company authorised by the customs authority to carry out freight forwarding activities and customs operations for others.

 

AEO – Authorised Economic Operator

AEO can be compared to ISO certification. This is an importer or exporter quality certification recognised in most countries around the world.

There are two levels of AEO.

Customs AEO

Security/safety AEO

This certification will become compulsory in international trade.

The AEO logistics chain requires all parties to be authorised –

“the seller, the carrier(s), the forwarder(s) (registered customs representative), the buyer”.

Obtaining AEO is subject to submitting files to the customs department followed by an audit.

Customs AEO covers administrative management, accounting, document management, disputes and business ethics.

Security/safety AEO covers premises, accessibility, staff, checking of containers

Once AEO has been obtained, audits are performed periodically. An AEO can be withdrawn if obligations are not met.

 

In the European Union, every company (legal entity) carrying out import or export operations must have an EORI number.

The EORI number allows customs departments to cross-check all import or export operations carried out by a company anywhere in the European Union.

A single EORI number per company for customs operations anywhere in the European Union.

NB: The EORI number does not allow you to carry out taxable operations in another European Union country. The EORI number should not be confused with the VAT number – these two numbers are used for different purposes.

If you need to carry out import or export operations in a member state other than that in which you are established, you will probably need to register in this member state depending on local regulations.
NB: forwarding agents do not necessarily know about tax intricacies at the beginning or end of a customs operation. It is best to contact a VAT specialist.

 

Penalties are charged depending on the offence and can go as far as doubling the amount of duties and taxes evaded. But in general, penalties only apply to a single declaration.

Penalties are charged in the event of the following violations:
– False declarations of type of good or origin resulting in a reduction in duties and taxes;
– Failure to meet safety or consumer standards;
– Failure to produce documents
– etc.

Ex-post reassessments can come from two channels

Either: When a violation is observed during customs clearance, this generally results in a review of previous imports.

Or: No violation is observed during the physical crossing of goods, but the review department notes anomalies in documentation ex-post.

The customs authority has a limitation period of:

5 years to recover customs debt (recovery of duties and taxes)

Furthermore, a false declaration of origin constitutes a customs contravention, which may be subject to legal proceedings for 3 years and 6 years in the case of offences.

 

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