Import outsourcing

Customs risks: typical problems and their solutions

Here we will tell you about the details and problems that you may encounter at customs, and how to avoid them.

Incorrect HS code (TN VED)

HS code is commodity nomenclature of international trade. This is a kind of reference book that contains all possible goods imported into the country. An individual 10-digit HS code is assigned to each product type. As a rule, the first 4 digits are very important – they define the group to which the product is assigned. The code is needed to determine the rate of import duty, and the amount to be paid at customs, consequently, the cost of goods depends on the correctness of the code. Also, the HS code helps to determine whether the product is subject to excise duty or certification. However, the HS code does not always clearly define the need to apply non-tariff regulations. This will be discussed in the article below.

On the one hand, the scheme is simple – we open the directory, look at a product group, then a subgroup, and select the suitable code. In some cases we request it at manufacturers. But, firstly, sometimes the product is not so easy to classify (or the product is absent in the list, for example, if it is a new innovative product), and, secondly, the code assigned by a foreign manufacturer may not match the Russian code, which can cause a misunderstanding at customs. As a result, a delivery that was supposed to cost, for example, $100, will actually cost 10,000.

Difficulties with the import of equipment may also arise. The directory does contain a list of various machines and installations, but what if the machine combines several functions? To avoid troubles, we select one main functionality, select the code and prove to customs that we have chosen everything correctly.

The import of the production line is particularly difficult. Usually it includes many units with various functions. To register a proper HS code, the customs office can be consulted by requesting a “classification decision”. But the decision on import and the project cost estimation can take ages. For example, waiting for a response on a request sent right now may take up to three months.

Experienced companies, such as ours, aim to correctly divide lines into functional production areas and declare them separately. This takes less time and allows quick changing of codes if some of the equipment functions change in the process.

It is important to keep in mind that customs inspectors pass goods more easily and quickly if they see the level of documentation preparation and competence on the part of an international trade participant.

Absence of the necessary certificates

Let’s assume that you import fans. You easily select the HS code, calculate the cost, but at the customs it turns out that you weren’t aware of the need to certify this product, and now the entire delivery may be arrested. Here is an example: if you import household fans that are ready for use, the certificate of compliance with TR CU is usually required. But if you import fans as part of certain industrial products, the certificate is not required. However, this fact must be confirmed by the appropriate documentation. There are situations when a certificate for a certain HS code has been obtained and agreed with the manufacturer, but for some reason, the applied labeling is incomplete or superfluous (for example, some numbers or letters are added to the main labeling on the cargo). As a result, the certificate may be considered invalid and a violation may be recorded.

Certainly, it is possible to inspect the cargo together with an inspector immediately before declaring, but when there are continuous flows of goods, examining all the packaging and labeling can slow down logistics.
For such cases, the team must have a competent certification specialist. This expert will understand whether the certification is required or not, correctly draw up all documents, give the necessary instructions on correct labeling to the consignor, request a photo of the labeling in advance, and, if necessary, make adjustments to ensure fast and smooth delivery across the border.

Improper cargo packing

Another case when the cargo documents are in order, but an unexpected issue arises. An inspector with a sanitary controller check the packaging and find, for example, that the wooden pallets on which the equipment stands do not have safety labels and proper fumigation mark. This is a violation.

The marking of wooden pallets must be accompanied by a paper confirming that the entire package has been fumigated (treated against insects and harmful substances), otherwise the cargo may be detained.
Usually, it is possible to arrange that the manufacturer properly prepared the marking and all the papers, but it happens that foreign trade participants simply forget about this, and then lose precious time and money. This requires a well-coordinated work of the foreign trade manager, who acts in accordance with a cut and dried checklist because it can be very difficult to keep in mind all the details of foreign trade.

Customs does not pass spare parts for products

Let’s go back to the example with fans. It is often inconvenient to transport them assembled. For this reason, the lot is shipped disassembled – engines and impellers as individual parts.

The difficulty is that a customs duty is not required for the fan, but is mandatory for certain types of motors. The simplest solution is to transport all the parts in one container and attach the correct drawings of the assembled equipment to prove to the inspector that this is a single item and not several individual items.

In some cases components are transported on different routes. in that context, we aim to calculate the shipping time so that all the containers of one delivery arrive at customs at the same time. To do this, we have highly professional logistics managers in our team.

Customs requested the customs value adjustment (CVA)

Let’s assume that company “A” is carrying a fan for $5. Our company has found the same for $3.

The customs inspectors know that the average price of fans is $5. The fact that we declare a cheaper fan may be regarded as an understatement of the customs value, and the inspector agrees to release the goods only after paying the average cost, putting a mark “release against security” on the cargo customs declaration
To avoid this, we prepare additional documents to confirm the cost of the goods. Sometimes it takes a very long time to prove, and without competent specialists, a company will be forced to overpay.
The most important thing is that if we proved that the fan costs $3 this time, the next time we will need to prove it again. Because our delivery won’t change the statistics all that much.

So, each delivery is unique, even if we import the same items every month. Assigning the HS code, proving the cost, preparing certificates and packaging, calculating the route – all this is too difficult for an untrained and inexperienced specialist. Here, every mistake may result in arresting goods or additional costs.

To prevent this to happen to your goods, ask a question to our specialist. ©