Customs Clearance Guide

Customs refers to a government agency responsible for regulating the import and export of goods and enforcing customs laws and regulations within a country. It is usually part of a country's border control. Its responsibilities include collecting duties and taxes on imported goods, preventing smuggling and ensuring compliance with trade regulations. Customs plays a crucial role in facilitating international trade, while also protecting domestic industries, public health and national security.

• What does it mean to "clear customs?"

  When importing or exporting goods, “clearing customs" is the process of officially passing through the Customs authority of a country. Shipments arriving in a foreign country must “clear customs” to comply with the regulations and requirements of that country. It is a critical step in the international shipment process, allowing goods to legally enter or exit a country and ensuring all customs regulations and obligations are met. Failure to clear customs properly can result in delays, penalties or seizure of goods.

What is a Customs Broker?

A customs broker is a licensed professional or a company that assists individuals and businesses in importing and exporting goods across international borders. They act as intermediaries between the importer or exporter and the Customs authorities, facilitating the clearance of goods through customs and ensuring compliance with the relevant laws, regulations, and documentation requirements. Licensing requirements and qualifications for customs brokers may differ from country to country.

• What does a customs broker do?

  Before imported merchandise can be delivered to its final destination, the customs broker prepares a customs entry and files it with the local Customs authorities, manually or electronically. The broker will apply classification codes to the merchandise, calculate its value and report relevant statistical information. A broker also helps facilitate clearance of cargo through other interested government agencies, such as the Food and Drug Administration (FDA) in the US or the Canadian Food Inspection Agency (CFIA).

International shipping can be complex. Here are some ways a customs broker might help you:

• Expertise/Knowledge - Customs regulations and procedures are constantly changing. A competent broker has specialized knowledge and expertise in navigating these regulations, ensuring compliance and avoiding costly errors.
  
  
• Customs Documentation - Customs brokers can help you accurately prepare and submit necessary documents, such as import and export declarations, commercial invoices, packing lists and certificates of origin. This can reduce the risk of delays or penalties.
  
  
• Customs Clearance - Brokers facilitate the customs clearance process, which involves the examination and release of goods by Customs authorities. Brokers work closely with Customs authorities to make sure your goods meet all necessary requirements, duties and taxes and are cleared efficiently. 
  
  
• Cost and Time Savings - Brokers can help minimize unnecessary expenses and identify cost-saving opportunities. Some brokers offer additional trade advisory services on duty reduction programs, trade agreements and tariff classifications that may lower your import costs. Brokers can also help streamline the customs clearance process and expedite the movement of your goods across borders. This saves you valuable time to focus on your core business.
  
  
• Risk Management - Brokers help mitigate risks by ensuring accurate and timely submission of documentation and adherence to customs regulations. They can identify potential compliance issues and resolve them before they become costly problems.
  
  
• International Trade Regulations - Brokers are well-versed in the complex landscape of international trade compliance, including proper goods classification, screening for restricted or prohibited items and ensuring compliance with export control laws. 

Are there advantages to using the same customs broker and freight forwarder?

Yes. One team can seamlessly work together to handle your shipment, end-to-end. This should facilitate better coordination and communication, reduce the chance of error or miscommunication and reduce unexpected costs. It should also help streamline international customs documentation processes, invoicing and visibility, as well as enhance overall accountability. Some groups offer bundled service discounts, which can save money, especially if you have frequent or large shipments. 

Customs clearance involves multiple steps and procedures, including:

1. Documentation - The importer or exporter must provide the necessary documents—such as invoices, packing lists, bills of lading, import/export permits, etc.—to the customs authorities. Often an importer/exporter will utilize a customs broker to work directly with customs on their behalf. To learn more about the documents needed to keep your freight moving, you can visit our documents page.
   
   
2. Customs Declaration - The importer or exporter must submit a customs declaration form that provides detailed information about the shipment, such as the nature of the goods, their value, quantity, country of origin and intended use.
   
   
3. Examination and Inspection - Customs authorities may conduct physical inspections, x-ray screenings or laboratory testing of the goods to verify the provided customs declaration information and ensure compliance with all regulations.
   
   
4. Duty and Tax Assessment - Customs authorities assess the applicable duties, taxes and fees, based on the classification and value of the goods. There are some occasions where you can get the duty paid refunded to you. To learn more, take our two-minute duty drawback questionnaire.
   
   
5. Payment and Clearance - The importer is responsible for paying the duties, taxes, and fees. Once payment is made, customs authorities issue a customs clearance certificate or release order, and goods can proceed to their final destination.
   
   Canadian importers: CBSA Assessment and Revenue Management (CARM) is changing how importers declare, account for and pay duties and taxes for goods imported into Canada. Learn more at Navigating CARM. 

How long does customs clearance take?

The duration of a particular customs clearance process can vary depending on various factors, including the country, the specific customs procedures, the volume of shipments being processed and any potential issues or inspections that may arise. Generally, customs clearance can range from a few hours to several days, sometimes even weeks. Consult with the local Customs authorities or shipping agents involved for a more accurate estimate, based on your specific situation.

Incoterms, or International Commercial Terms, are a set of standardized trade terms published by the International Chamber of Commerce (ICC).

• They are used in international trade contracts to define the rights and obligations of buyers and sellers regarding the delivery, transportation and insurance liability of goods throughout their journey.
• They provide a common framework for commercial transactions across different countries and legal systems, to help ensure clarity and avoid misunderstanding.

Learn More About Incoterms

A customs entry is the formal documentation submitted to Customs authorities when goods are imported or exported. It contains detailed information about the nature, quantity, value, origin and intended use of the goods. It also includes relevant shipping documents, such as the commercial invoice, bill of lading or waybill, packing list and required permits or licenses, and it enables officials to assess and verify the goods, determine applicable duties, taxes and customs regulations, and ensure trade law compliance and security.

What is the most common type of entry form?

In the US, the most common type of entry is a consumption entry, the formal entry of imported goods that are intended for domestic consumption or use within the US. When goods arrive in the US, a consumption entry must be filed with US Customs and Border Protection (CBP) to declare the goods and pay any applicable duties, taxes or fees. This is CBP Form 3461–Entry/Immediate Delivery, commonly used for both immediate delivery and consumption entries.

What are the different types of entries?

Types of customs entries, as well as required documentation, vary by country. Here is a breakdown of the more common types of customs entries by country:

• United States - Consumption; Formal; Informal; Warehouse; Temporary Import Bond (TIB); Section 321 (Entry Type 86); Immediate Transportation (IT); Transportation & Exportation (T&E); Foreign Trade Zone (FTZ).
  For more detailed information for importation into the US, please visit www.cpb.gov
  
  
• Canada - Low-value shipments (LVS), not exceeding $3,300; High-value Shipments (HVS); Temporary Entries (Form E29B); Temporary Admission Permit, also known as an A.T.A Carnet (Used to temporarily import or export goods without having to pay customs duties or taxes); Type V (Voluntary), and Form B3 (Canada Customs Coding Form for goods in/out a Customs Bonded Warehouse).

Types of documentation, vary by country. To view the shipping documents that are necessary for moving your international shipments, you can visit our document center. Here is a breakdown of the more common types of documentation:

• Commercial Invoice - Used by the exporter when processing the original terms of sale, quoting pricing and/or determining duties and taxes. Detailed information about the transaction between shipper and receiver/consignee, typically with these characteristics:
  • Printed on company letterhead
  • Full details of shipper, consignee, intermediate consignee, importer of record etc.
  • Reference numbers (Invoice, Purchase Order, etc.)
  • Date
  • Description, quantity and value of goods
  • Country of Origin
  • Harmonized Tariff Code specific to import country
  • Original signature in blue ink
    
    
• Bill of Lading (B/L) - Primarily used in ocean transportation, the B/L is a legal document issued by the carrier (shipping line or freight forwarder) to the shipper of goods. It has three main functions: 1) serves as evidence of the contract of carriage; 2) represents the title of the goods, and 3) provides instructions for the carrier and receiving party for handling and delivery of the goods. Contains critical details, such as shipper and receiver/consignee name and address, description of goods, port of loading and discharge, vsesel name, freight charges and agreement terms (See Incoterms above). 
  
  
• Waybill - Commonly used in air and road transportation, a Waybill—also called an Air Waybill (AWB) in air freight—is a contract of carriage between the shipper and the carrier, similar to a Bill of Lading. It contains information about the consignment, such as shipper and consignee details, description of goods, origin and destination airports or locations, charges, and any special handling instructions. Unlike a Bill of Lading, the Waybill is not a negotiable document and does not represent the title of the goods. It serves as a receipt of the goods and provides delivery instructions to the carrier.
  
  
  • House Air Waybill (HAWB) - Used by a freight forwarder, it identifies a single shipment.
    
    
  • Master Air Waybill (MAWB) - Used by an airline for the consolidation of several HAWBs.
    
    
• Packing List - A document providing detailed information about a shipment’s contents, typically prepared by the exporter or freight forwarder. Provides vital communication between shipper, consignee, and other involved parties (e.g., Customs authorities, carriers and warehouse personnel). Also aids in logistics management, inventory control and resolving disputes or discrepancies. Typically includes:
  
  
  • Description of goods — Brief description of each item or product in the shipment, to help correctly identify and classify the goods.
    
    
  • Quantity — Specifies the quantity of each item or product in the shipment, including the unit of measure (e.g., pieces, boxes, pallets, etc.), so the recipient can verify the received quantity against the ordered quantity.
    
    
  • Weight and dimensions — Weight and dimensions of each item or product, as well as the total weight and dimensions of the entire shipment. This helps determine transportation costs, and space required for storage and handling.
    
    
  • Packaging details — The type of packaging used for each item, such as cartons, pallets, drums or crates. May include information on packaging markings or labels.
    
    
  • Harmonized System (HS) Codes — Standardized numerical codes that classify each product or item for customs and statistical purposes. Helps Customs authorities assess duties, taxes and import/export restrictions. To learn more about HS/HTS codes, read our Importer's Guide to HTS Codes. 
    
    
  • Additional information — Other relevant information, such as special handling instructions, hazardous material declarations, PGA forms such as those needed from the FDA for medical equipment or other requirements specific to the shipment.

Importers or shipping agents provide relevant information to Customs authorities in the importing country. They assess the type of goods, their declared value, country of origin and applicable trade agreements or tariff schedules, then levy applicable duties and taxes based on their established guidelines. Tariffs, customs regulations and local tax laws are also key factors that influence the calculations.

Entry records are expected to be maintained for five years in the US; six in Canada. These records include customs entry documents, commercial invoices, packing lists and transportation documents (bill of lading or waybill). Willful failure to provide records requested by the CBP can result in penalties up to $100,000 per file not produced. 

NOTE: UPS Supply Chain Solutions does not act as a certified third-party recordkeeper for clients; CBP requires that importers maintain their own records.