Customs clearance: when to handle it yourself and when to outsource it?
When is it beneficial to handle customs clearance yourself and when to outsource it? And what factors should you consider in this decision process? We have asked expert in customs clearance Carsten Amtrup these questions. Get his answers here.
If you import or export goods and shipments from or to countries with different customs clearance terms than your own country, duties, taxes and in some cases excise duties on imported goods must be paid. This requires a bit of work in terms of data handling, paper work and paying the right amount in relation to which product and country you are dealing with. This process is called customs clearance.
According to Carsten Amtrup, there are two ways of handling customs clearance: (1) companies handle it themselves or (2) outsource it to others such as freight forwarders, carriers or customs brokers. A combination of the two options is also a possibility. Carsten Amtrup recommends companies to make a cost-benefit analysis of which method is most profitable. He splits this process into 6 steps.
6 things to consider when evaluating if it is profitable to handle customs clearance yourself or to outsource it
1. Number of import/export declarations
Find out how many import/export declarations you have. Carriers and freight forwarders charge per import/export declaration and often on line items, as well. The latter means the number of different products on a customs declaration. Companies with many import/export declarations typically handle customs clearance themselves.
2. Free customs clearance systems
Customs services in many countries such as Denmark, Sweden and United Kingdom offer free systems, where you declare your goods online by typing in all necessary data. As this is a manual solution, this can only be recommended to companies with very few import/export declarations.
3. Collect offers
Collect offers from different carriers and freight forwarders on their price for handling customs clearance based on your number of import/export declarations and line items.
4. Calculate the costs of handling it yourself
Calculate whether you can match their price by handling customs clearance yourself. This includes start-up costs (buying the software needed to handle customs clearance, integration of the system, training). Also add the fixed costs, monthly or yearly license of the system and amount of time employees must spend on handling customs clearance, which can’t be automated by the software. Also consider if you have the staff to perform this job or have to hire new people.
5. Keep track of performance
If the equations show that outsourcing your customs clearance is most profitable, it is important that you keep track of whether the freight forwarder or carrier produces correct clearances, as customs authorities will hold you legally accountable for their mistakes.
6. Consider a combination of the two options
It can be difficult to know the customs clearance terms in all countries you export to, why a combination of the options might be profitable. In that case, you handle the required export documents on the shipments you are exporting, and a carrier, freight forwarder or customs broker handles the import clearances, when your shipments arrive to the country of destination.
It is usually big companies with many import/export declarations and/or complicated products such as alcohol, energy products, electricity, food and tobacco who handle customs clearance themselves. In some cases a customs bonded warehouse may be useful. This is a part of your warehouse, where you don’t have to pay duties or taxes on goods, which have not been exported yet or fully imported into a country. This allows you to postpone the duty and tax payment, or avoid paying double import duties and taxes. Many companies both pay duties and taxes when goods arrive at their warehouse and then pay duties and taxes again, when the products are exported and enters another country. This directly reduces the profit margin of the products. The customs authorities in your country must give you permission to have a customs bonded warehouse. You can choose to outsource customs clearance to a freight forwarder or carrier, and still have an in-house customs bonded warehouse.
Small companies with a low number of import/export declarations typically choose to outsource all their customs clearance. Mid-sized companies often do a combination of the options, as they don’t have their own warehouses/departments in the countries they export to and thus the knowledge about local customs clearance.
The benefits of handling customs clearance yourself vs. the benefits of outsourcing are listed below.
Benefits of handling customs clearance yourself
- Totally in control of the costs of handling customs clearance and the potential to optimize this work through integration to your order management system.
- Avoid costly mistakes made by freight forwarders or carriers.
- Faster customs process resulting in reduced delivery times.
- Secure and maintain in-house customs competences.
Benefits of outsourcing handling of customs clearance
- Releases time to focus on the company’s core competences.
- You don’t have to be up to date on the latest customs rules, as your carrier or freight forwarder are experts in the field.
- Reducing the administrative burden.
- Only affected economically and not administrative if the number of declarations increase.
Now it is up to you to make the necessary calculations and consider which of the ways to handle customs clearance match your business and strategy the best.
- Carsten Amtrup is Vice President Business Development at Consignor Group and has a background in the carrier and software industry where customs handling has been a part of his daily tasks for more than 20 years.
- The software for handling customs clearance is often the same regardless of it is a carrier, freight forwarder or import/export company using it.
- Most freight forwarders and carriers offer services to do customs clearance for customers.
- There are both local and international suppliers of customs clearance software systems.
Text by: Consignor, firstname.lastname@example.org