Top 4 International Customs Brokerage Compliance Challenges We Saw in 2020
Aug 24, 2021 9:00:00 AM
Customs compliance has always been a challenge, and despite recent digital innovations, it’s still costly and tedious for freight forwarders. From issues with changing duties to blank fields on documents, there’s no shortage of potential catch-and-fix opportunities in customs paperwork.
As a customs brokerage processing services provider, we’re very familiar with the most common customs compliance challenges. We observed four key challenges in 2020, as well as how customs brokerage processing helped our customers overcome them.
#1: Incomplete paperwork
Most issues in filing and processing customs forms are the result of simple human error. Companies often accidentally leave important fields blank, don’t provide enough information, or forget to include additional forms that are required for specific goods. Failing to include items like incoterms or contact information are common mistakes that lead shipments to be rejected or held up at customs.
Some shipments require additional paperwork, and the more fields there are to fill out, the more opportunities there are for mistakes. Shipping hazardous materials across national borders requires very specific, detailed documentation. When this vital paperwork is incomplete, cargo sits at the border, awaiting updated processing information. The result is delayed delivery, lost profit, and unhappy customers.
A customs brokerage processing partner will help identify blank fields and missing forms before they present a problem. Thanks to advances in digitization, many are now using easy-fill forms and automation to expedite processing and prevent mistakes.
#2: Incorrect duty estimates
Duty estimates are intended to streamline the customs process by allowing carriers to anticipate expenses related to customs processing. However, when duty estimates are wrong, they can create an obstacle at the border.
Each country has a unique set of customs rules, forms, and procedures related to taxes and tariffs. These duties can (and often do) change with little warning. Shippers who misprice duty estimates put their profits and their reputation at risk.
If the buyer is expected to cover the difference, they may refuse to pay, and the shipper will lose money. No matter who picks up the tab, someone will be unhappy (and you will lose business).
A customs brokerage processing partner can help with this challenge by catching errors and discrepancies in shipment data to create accurate, up-to-date duty estimates.
#3: Incorrect HTS codes
Duty rates are determined according to HTS (Harmonized Tariff Schedule) codes used to classify cargo. These ten-digit numbers are used to declare what kind of cargo is being transferred, and finding the right code for a shipment is notoriously difficult.
With an incorrect HTS code, you could end up overpaying duties. Moreover, freight forwarders could face legal penalties or fines for using incorrect codes where fraud is suspected, in some instances leading to seized shipments, costly investigations, and/or litigation.
A customs brokerage processing provider will be well versed in which HTS code is appropriate for use with any given shipment. That way, your cargo is categorized correctly the first time, limiting the risk of costly mistakes.
#4: Language barriers
While the hope is always that your shipment paperwork is complete, correct, and processed without any issues, there are inevitably times when verbal communication is required between your organization and customs agents, the shipper, or the recipient.
Complex issues are often easier to resolve over the phone, but language barriers can slow down the resolution and introduce more risk of miscommunication. There are 26 official languages used in the EU alone, and having a native speaker of each on staff is a tall order, even for large freight forwarding companies.
In 2020, DDC was able to resolve a large number of issues thanks to our multilingual capabilities. We have dozens of fluent speakers in common languages on hand to resolve discrepancies and ensure smooth customs processing around the globe.
Challenges on the horizon
In 2021, all of the above issues have continued, and Brexit-related challenges have exacerbated many of them. UK-based businesses struggle to export to the EU thanks to demanding new paperwork requirements, VAT changes, T1 certification, and more.
Customs compliance has become more challenging and complex in recent years, and many companies are finding that it’s not feasible to handle transfer paperwork entirely in-house. Now that many new post-Brexit regulations have gone into effect, the import-export landscape continues to evolve.
Consider working with a business process outsourcing (BPO) partner who provides customs brokerage processing services, including origin data capture, import/export rating, invoice matching, and customer contact. An experienced partner can help you mitigate customs compliance challenges and continue providing your customers with the best possible service.
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