Import and Export Services

Trade Compliance

The term "international trade compliance" refers to the processes and procedures used to export and import products across country borders while abiding by the laws, rules, regulations, and specifications of each country’s jurisdiction.

All businesses involved in the import and export of goods and services, regardless of size, must adhere to the principles of trade compliance.

Customs uses routine audits as a crucial tool to make sure the correct amount of duty and taxes are collected. During a customs audit, the customs officers will examine and review the records that companies supply as exporters or importers of products. In certain cases, these audits can take place immediately following imports, or the customs authorities may review records dating back several years.

The World Customs Organisation's (WCO) classification guidelines must be followed when classifying products for customs clearance. The codes developed by WCO apply to most countries in the world. Using the wrong tariff code, commodity code, or HS code to incorrectly classify your products can have a significant negative financial impact on your company and your interactions with customs authorities.

Customs clearance is a compulsory process for any goods entering or leaving a country. It requires the submission of various export and import documentation, as well as the payment of duties, VAT, and any additional costs such as storage. Normally, customs clearance takes a few minutes or hours, but if any documentation is missing or the products are selected for inspection, it could take many days or even weeks.

Customs Duties

Charges assessed on products when they cross country borders are known as customs duties. Various products may be subject to varying customs duties depending on their country of origin. The customs duty rate is expressed as a percentage. This percentage isn't dependent on weight, size, or quality but is based on the customs valuation. Companies must follow clear customs rules on how to value goods when they cross a country’s border.

In international trade, rules of origin are used by customs officials to categorise the country of origin of an export and determine the import duty payable. There are two types of origin rules: preference and non-preferential. Preferential rules of origin in conjunction with trade agreements confer a reduced or zero rating of duty. To implement various commercial policy measures and safeguard measures, non-preferential rules of origin are used to determine the country of origin of goods.

In general, import VAT is payable at the point of importation into the United Kingdom and European Union. When you import goods, the import VAT due on the goods is calculated on the total landed cost of the goods. This includes transport costs, insurance costs, and any applicable customs duty charge. For most VAT-registered companies, VAT imports can be reported on their VAT return. By doing it this way, companies can declare any import VAT and then reclaim it as input tax. If a company is registered for VAT in the UK, they will pay VAT at the standard rate of 20%, which is what they would normally pay when buying items from within the UK.

In the UK, there are no rules regarding how companies must keep their records; they can keep them on paper, digitally, or using programmes like book-keeping software. The only requirement is that companies have an effective and robust process in place. Customs, excise, and VAT are known as the indirect tax pillars. As a result, when goods are moved, stored, and sold, HM Revenue and Customs require record-keeping evidence in support of every stage of the transaction and movement. This is known as a "full visible audit trail." The archiving period for keeping records will vary according to the individual customs procedure.

It's critical to have clear payment arrangements if you trade overseas. When importing or exporting goods internationally, there are several payment options available, including an open account, bills of collection, advance payments, and letters of credit (L/C). Companies can agree on terms regarding risks for both the supplier and the buyer, collateral fees, and the timing of payment. The most widely used international payment options can also differ by country. Although there are risks associated with overseas trade, companies can minimise losses and maximise revenues from their global trade dealings by becoming familiar with a few basic international payment methods and related terms.

The International Chamber of Commerce (ICC) developed the International Commercial Terms (Incoterms®), which serve as the global standard terms of trade for the sale of goods, to assist companies in the import and export of commerce. These rules, which are meant to serve as a guide, are applicable whether filling out a purchase order, labelling and packing a shipment, or creating a certificate of origin. The ICC has been upholding and advancing the rules since their initial publication in 1936. The most recent edition, Incoterms® 2020, went into force on January 1, 2020, and moving ahead, they should be referred to for assisting companies in international trade.