Import Compliance: Everything You Need to Know for Importing Goods

When trying to import goods, the concerned entity has to deal with a vast system of import compliance. This process entails a long list of trade rules, regulations, and controls enforced by customs authorities and various other agencies. While customs compliance initially aimed at making revenue from the good entering the country’s borders, it is now a means to safeguard national interests as well.

Given the current state of international trade and the geopolitical front, it is crucial to have an effective compliance program. The first step to it is awareness and we are here with a guide on everything you must know before beginning to import.

Let’s begin.

What Is Import Compliance?

Import compliance can be understood as a complete framework dictating the rules, regulations, and activities associated with the process of importing goods. An import compliance program needs the involvement of all stakeholders and concerned departments to be successful.

Customs and related authorities expect and promote voluntary compliance from the international trade community. This is why the stakeholders are notified beforehand of all the regulatory changes, thereby, making importers directly responsible for compliance. Importers are required to keep track of all the regulatory updates and documents. One way they can navigate import compliance efficiently is by leveraging advanced trade compliance software.

It is mandatory for businesses and individuals to strictly comply with all the regulatory and statutory legislations involved in the whole import process. It’s not just one primary authority but many subsidiary agencies that maintain distinctive sets of import controls. Customs authorities of every country are responsible for calculating and collecting the duties and taxes on imports.

What Are Import Controls?

Import controls can be understood as the set of trade regulations and restrictions placed by countries on goods entering their borders. Generally, these controls are aimed at safeguarding the national interests or domestic economic vitality.

There are different kinds of import controls used by authorities to regulate the type, volume, and value of imports. Some of the common ones include tariffs, licenses/permits, and prohibitions. The controls also extend to specific substances, prohibited ingredients, preferential rules of origin, etc.

Tariffs denote the different types of taxes, duties, and fees directly applicable to imports. Licenses or permits are required for certain kinds of imports that have volume restrictions. Similarly, prohibition controls are applied on certain goods, mostly harmful items, banned from entering the borders.

Import controls are primarily aimed at controlling intuitive, dual-use, or dangerous goods but they also regulate common goods under special conditions. Items like weapons, firearms, chemical substances, or any other ingredient with potential use for harmful purposes come under import controls. At the same time, some countries also regulate items like food, agricultural products, cosmetics, etc. with potential usages that can trigger diseases, cultural differences, or any other unwanted circumstance.

What Are the Main Aspects of Import Compliance?

While beginning with the process of import compliance, there are a few basic requirements everyone needs to know and follow. There may be more compliance requirements to consider depending on the concerned country of import and the nature of the items. Thus, it is important for the importer to be aware of all such conditions and information.

Here are some of the basic aspects of import compliance one must consider before importing.

Identification of The Goods

It is only by beginning with the accurate classification of goods that one can ensure complete import compliance. The correct classification of goods based on the HS nomenclature system of the World Customs Organization followed by the country-specific HS/HTS system is crucial. With goods being assigned the correct HS/HTS code, it becomes clear to ascertain the country of import, fair valuation, duties/taxes applicable, and documents required for compliance assessment.

Any error in classifying your imports can lead to huge penalties or get your shipment stuck at customs. With Trademo Compliance’s HS Classification, you can classify your goods quickly and precisely.

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Value of The Goods

The total value of goods denotes the final amount payable by the importer to the seller for the goods. This value, as mentioned on the commercial invoice, may not be the actual one as other services involved in the transaction may also be chargeable. For example, packaging cost, handling services, etc. are also considered for fair valuation of goods being imported.

Country of Origin of The Goods

Importers must also focus on determining the country of origin of the goods being imported. This is because the country of export may not necessarily be the country of origin. Having awareness of the country of origin is vital and may also benefit you with fair duty calculation or even duty reduction.

With more clarity on the country of origin, importers can also gain awareness of the various suppliers involved in the importing process. What makes it more crucial is the high chances of involvement of restricted entities in modern multi-tier supply chains. Thus, importers must strive to achieve improved supply chain visibility to prevent trade with denied parties and ensure full compliance for their goods.

Quantity of The Goods

Reporting the total quantity of goods being imported is crucial and helps several aspects of compliance. When the concerned goods are appropriately classified, their HS code is used to determine the applicable unit of measure while reporting the import declaration.

Duties/Taxes Applicable to The Goods

Importers must also pay attention to determining the relevant duties and taxes applicable to the concerned goods. If the customs do it for you, then there are high chances of unnecessary or additional duties being levied. Thus, it's better you take charge and calculate the duties/taxes followed by ensuring their payment to the right authorities.

The aspects discussed above are meant for ensuring that the goods are fully compliant with the trade laws and import controls. Essentially though, they are also about ensuring due payment of money as owed by the importer for trading the concerned goods. Here is how it’s done:

Country of Origin + HS/HTS classification = Duty Rate

Duty Rate + Value of goods + Quantity of goods = Revenue (payable to the importing country’s government)

Is There Any Documentation Necessary for Import Compliance?

Proper documentation is equally important for importers to seamlessly bring their goods inside the borders. It enables the customs authorities to assess compliance for shipments faster. For all the aspects of compliance mentioned above, you must maintain all the proper documents that should be readily available for review.

The documents required for an import compliance assessment can vary depending on the nature of the goods, shipment type, country of import, and specific trade regulations applicable. Here are some of the common documents that are required by authorities for checking imports- bill of lading, proforma invoice, certificate of origin, commercial invoice, packing list, and SLI.

How To Identify an Item with Import Controls?

You can check the government websites to find the list of import controls. Countries mostly develop such lists following their national legislation. You may find a lot of similarities among the import regulations implemented by different countries. However, it is mandatory to thoroughly check the import control lists of the country of your business.

Finding your goods on an import control list is no matter of worry. You can still import the concerned goods only in a limited quantity and with an import license.

What Is an Import Permit?

Also referred to as an import license, an import permit serves as a document authorizing the import of controlled goods. Governments issue an import permit to the traders/importers to allow the trading of a fixed quantity of concerned goods. These licenses help countries to regulate foreign competition in the domestic market, prevent the import of harmful goods and restrict currency outflow. Businesses with appropriate import licenses can avoid financial losses and legal disputes.

The process of getting an import license or permit depends upon the country of import and the nature of the goods being imported. It is, hence, recommended that companies take help from customs brokers to streamline the process of securing licenses.

What Is an Import Quota?

As the name suggests, import quotas are applied to specified goods to limit the quantity of their import. Import quotas are usually of two types- tariff rate and absolute. Tariff rate import quotas set a certain duty rate for a certain volume of goods with the duty rate going higher for additional volume. And, absolute quotas set a fixed limit to the volume of concerned imports with no possibility of additional import at any cost.

What Does Importer of Record Mean?

Importer of the record is a term used for an organization, individual, or any entity with the responsibility of making the import declaration with all documents to the customs authorities. Usually, an importer of record is the buyer or owner of the goods that are being imported into the country.

The full responsibility of ensuring import compliance lies with the importer of record. In the case of an organization importing goods, it can delegate the responsibility to any entity or employee. In some other cases, custom brokers are hired for carrying out the compliance procedure and charged with the responsibility of maintaining all the paperwork effectively.

Conclusion

Ensuring import compliance is a process that you cannot automate. At the same time, the process is not as simple too. Every aspect of the compliance procedure comes with complexities like the involvement of restricted entities, meeting specific import requirements, hidden costs, and much more.

A violation of import controls can occur in different ways. It can be anything including prohibited items, embargoed entities, embargoed regions, restricted container companies, and much more. This makes the process of import declarations tedious as authorities check compliance declarations at every port of entry. Getting import compliance wrong at any step can prove you very costly or even land you in jail.

With so much at stake, it is advisable that organizations move ahead of manual methods of ensuring compliance. After a proper assessment of their operational scope and compliance model, companies or individuals can take help from professional trade compliance tools and solutions. You can avoid risks by maintaining an effective import compliance strategy and we hope this guide proves helpful there.

Thanks for reading!