What is customs clearance?
*Note: The information in this blog pertains to international shipments sent through Canada Post to partner posts via the postal clearance system. Items sent by other carriers are subject to the commercial clearance process and may have different requirements.
Once an international shipment arrives at its destination country, it must clear customs before it can be delivered.
In the United States, customs authorities now use advanced data to expedite the clearance process, a practice that will become more widespread in the years ahead. In most countries, however, the clearance process happens manually. First, in what is known as a primary inspection, incoming packages are visually inspected by a customs official who decides whether to clear each item for delivery, or forward it for secondary inspection.
There are several reasons a shipment may be subject to secondary inspection* or denied clearance**:
- Assessment of duty/tax*
- Regulated items that require further inspection from agencies such as the Federal Communications Commission, Food and Drug Administration, etc.*
- Dangerous or hazardous goods**
- Prohibited or restricted items**
To avoid complications at customs, it’s important to provide accurate, detailed, and descriptive information regarding the contents of any package you send to an international customer. For example, simply writing ‘shirt’ on a customs form is inadequate – it’s far better to write something along the lines of ‘men’s shirt, size XL, 100% cotton.’ In most cases, the more detailed your description, the faster your package will be cleared.
Depending on the destination country, the nature of the items you’re sending, their value, and the shipping service handling delivery, your international shipments will require different accompanying documents.
What is a commercial invoice?
A Commercial Invoice is an agreement between a seller (exporter) and a buyer (importer). Think of it as your shipment’s biography: it tells the story of the goods being shipped, including all pertinent information customs inspectors may require.
Your shipment will be accompanied by a commercial invoice if it’s over a certain value, generally $500, or it’s going to a destination country that requires one.
Want to sell abroad? Here are some of the details you’ll need to complete a commercial invoice:
A complete description of the items.
Be specific about the materials used in your products. For instance, if you’re selling shoes, you might write ‘leather strap sandals’ or ‘rubber rain boots.’
The corresponding Harmonized System (HS) code.
HS codes are an international tariff classification used by customs organizations around the world. While the codes are standardized, the duties charged on specific goods vary by destination, as each country sets its own rates. HS codes are not a required part of the postal delivery process for international shipments.
The country of origin.
This is where your goods were made. Including this information can result in improved customs treatment. Items that are wholly produced in North America, for example, are exempt from duties and taxes under the North American Free Trade Agreement (NAFTA).”
You are required to include contact information both for the seller (yourself) and the buyer (consignee).
It’s important to complete these, and any other, forms fully and accurately. Doing so will help ensure a smoother customs clearance process, which in turn will get your goods to waiting customers as quickly as possible.
How are duties and taxes assessed?
Individual destination countries each have their own methods for determining how duties and taxes are assessed. Import taxes also have different names in different countries. In Europe and China, for instance, they are known as a Value-Added Tax, or VAT. While the names may change from country to country, the duty and tax amount on shipments sent to nearly every international destination are typically based on the following factors:
- Product value
- Description and use of the product
- Country of manufacture
- Trade agreements
- The products Harmonized System (HS) code.
To avoid confusion and unexpected charges, it’s wise to make your customers aware of the possibility they may have to pay additional duties and taxes on certain purchases.
Take the guesswork out of duties and taxes for you and your shoppers with our helpful tool. Use it to estimate any applicable duties and taxes, and better manage customer expectations.
The bottom line of international shipping
Shipping is one of the key pillars of any successful e-commerce operation. Getting it right will improve both sales and customer satisfaction. Although shipping to international customers adds extra levels to the delivery process, the potential profits to be gained from selling to a global market vastly outweigh any short-lived bottlenecks in your expansion process.
Before you start selling to foreign customers, make sure you have a strategy in place for each international market you choose to target, and a solid understanding of what the delivery experience will be like for customers in that country. This includes making shoppers aware of the possibility of additional duties and taxes, and communicating that extra time may be required for shipments to clear customs.