Three ways that customs compliance can help your business
As per Merriam Webster, 'customs' refer to duties, tolls, or imposts imposed by a country's law on imports or exports. Trade and customs compliance involve strict adherence to regulations set by countries involved in importing and exporting.
The ever-changing rules, including 7000 new trade barriers since 2008, have emphasized non-financial aspects like product compliance, safety, and environmental protection. This reflects the growing focus on ESG within trade regulations, addressing forced labor, deforestation, and carbon taxes. Businesses often outsource transactional customs tasks while maintaining in-house expertise to navigate duties, goods classification, licensing, and trade agreements.
In managing customs compliance for global trade, businesses often prioritize daily operations, lacking the capacity to explore compliance strengthening, process simplification, or leveraging trade agreements.
Even proficient compliance teams may encounter knowledge gaps, necessitating the involvement of customs consultants for specialized support. According to William Petty; from Maersk's Global Trade & Customs Consulting, expert advisors can mitigate risks, deliver savings, and prevent penalties for businesses that may lack the foresight to engage expertise before facing consequences.
The advantages of customs' costs
Customs might present an opportunity, and awareness is the first step. When a company is aware of the possibilities for gaining from effective customs administration, its strategy may be permanently altered. As follows:
Free trade agreements (FTAs), as defined by the International Trade Administration, involve obligations between countries impacting trade in goods and services, allowing for duty-free or reduced duty imports. Analyzing these agreements is crucial, given the complex, ever-changing global regulatory landscape, ensuring compliance with origin rules and thorough documentation. Conducting a comprehensive FTA analysis offers a potential cost-saving advantage.
Another approach for businesses to maximize their customs duty payments is through duty recovery. Depending on the national legislation, there are many ways for enterprises to recover duties that have already been paid.
For instance, if a business imports products and pays charges on them but rejects those items, or in the case of the US and some other nations, simply does not use those things, the business can re-export or destroy those goods and recoup the duties.
The recovery of overpayment duties is another option. These possibilities, which are accessible in most economies if certain conditions are met, can be useful. The amount that can be recovered varies on the type of commodities the company imports, the volume, the value, and other factors.
How does adherence to customs laws affect business?
In addition to the cost-saving possibilities (free trade agreements, duty suspensions, or recoveries) listed above that firms employ to increase and manage cash flow, there are other advantages that make customs compliance a competitive advantage:
Risk management: Correct customs compliance can assist a corporation in staying ahead of hazards and reducing its exposure to penalties and liabilities. Customs infractions can result in significant penalties, fines, and even the seizure of goods, and they can even harm a company's reputation if the issue is of public importance, such as compliance with Environmental, Social, and Governance rules.
Logistic efficiency: Being knowledgeable about customs compliance might aid in supply chain efficiency. Compliant businesses face fewer unexpected waits at crossings and can even qualify for special "fast track" procedures by qualifying for "trusted trader schemes." Border clearance that is quick and predictable not only saves time and money, but it also allows a business to keep their delivery promises to customers, which helps them retain strong stakeholder and end-consumer connections.
Expansion and growth: When expanding into new areas, firms must ensure that they are in compliance with all legislation and that they have the necessary permits and licenses. Companies, on the other hand, can employ strategic customs planning farther upstream to identify prospective regulatory constraints and optimisation opportunities in different nations, which can assist drive the decision on where to go and grow.
Source: https://www.maersk.com/insights/growth/customs-compliance by: Silvia La Face