International trade is important for upholding the economy of the world. Customs clearance is one of the crucial operations in dealing with international trade and commerce. It ensures that the movements of the goods comply with the laws and regulations of the country in which it’s entering or exiting.
It also helps in maintaining quality, safety, and environmental standards. This article will explain how the customs clearance process affects international trade and commerce. We will also delve into various components of the procedure and know the impact of each.
International Trade: Imports and Exports
Over the years, the global economy has increased gradually. It was only possible due to the increasing demand for international trade. Countries from all over the world have developed an environment of helping each other for their social and economic growth. In the long run, global events impact supply, demand, and economy internationally.
Imports and Exports
Export is said to be done when a product is raised for sale to the global market, while import is buying products from the global market. It means very much the same as it sounds. In a country’s balance of payments, import and export is maintained in the current account section.
International trade helps economically strong countries efficiently utilize resources like technology, labor, etc. Different countries have different perks regarding land, gold mines, petroleum grounds, technology, etc. Through international trade, every country uses each other’s artificial or natural resources by importing or exporting. It maintains an equilibrium.
Evolution of International Trade
The evolution of international trade began with the barter system of goods or services among different people. Here are some of its ages:
● Silk Road
International trade started very early in the ancient ages and continues. The Silk Road was the first-ever trade route connecting the West and East poles. It served for more than 2000 years, connecting Europe and Asia through the Middle East.
● Mercantilism
It was an old theory used to ascertain a Nation’s economy from its net exports and gold reserves. When a country sells more goods to other countries than buying, it is said to have a positive balance of payments.
● The World War I
Early in 1914, the First World War began and disturbed the harmony in every aspect. The assassination of Archduke Franz Ferdinand in Sarajevo provoked all the European powers to enter into a war against the world. It continued for four years until Germany surrendered in 1918. However, the war ruined many countries socially as well as economically. The Great Depression lasted till 1939, resulting in World War II.
● End of World War II
After the end of World War II, many countries joined the UN to recover the economic loss suffered by them. It resulted in the formation of different MNCs and other organizations. The production of goods became easier, faster, and cheaper. These MNCs regulated every Nation’s economic trade and kept peace between them.
What is Customs Clearance?
The movement of all goods across borders, whether between countries or regions like the European Union, necessitates a customs clearance process. A fundamental objective shared by customs agencies worldwide is the emphasis on protection. This entails safeguarding various aspects such as national security, public health, and economic interests.
Importance of Customs Clearance
Custom clearance is important in completing worldwide trade and commerce. Its focus is to move products securely and lawfully across the boundaries. There are different motivations behind why customs clearance is important for worldwide trade:
● Laws & Regulations
There are different laws and regulations followed by different countries. Custom clearance makes sure that the shipment that you move, duly follows the laws and regulations of the country. Such procedure helps in smooth movement of shipments and makes easy international trade transactions.
● Safety Measures
Safety is the major issue that needs to be focused on. Custom clearance prevents movement of any items with low quality, weapons, drugs or any other illegal items. By this, it makes sure that it maintains the safety of the public and the nation.
● Collection of Revenue
Each country’s government imposes duties and taxes on the imported shipments. The clearance makes sure that such impositions are paid. By this, the government collects revenues to fund public services.
● Consumer Protection
Its clearance also protects the interests of consumers. It guarantees the quality and safety standards of the shipment that is received. This helps in preventing harm from products that are unsafe and substandard.
● Preventing Delays
Following the customs clearance processes helps prevent delays in the supply chain of international trade and commerce. It allows effective and fast movement of goods that further affect manufacturing and distribution.
● Trade Relations
Custom clearance promotes the trade relationship between countries. It promotes the development factor of each country while respecting the culture, laws, and regulations.
Custom Clearance Process
The following are the steps through which custom clearance is approved for you for your shipments:
● Paperwork Verification
All the necessary paperwork must be done. After submitting the paperwork, a customs officer will verify the documents. There must be a commercial invoice for international shipments. Once the documents are verified, a shipper will be listed with the contact information of the receiver. The shipment document shall also include the airway bill number and the export date.
● Custom Officer Check
In cases where the tax bracket surpasses the value of the goods, additional taxes and duties may be levied. A customs Officer will check if any charges will be levied on the shipment. If there is, the officer will ensure it is being paid.
● Payment, Taxes, & Duties
If there are any additional charges like taxes and duties applied to the shipment, customs will verify if it’s being paid. They are marked either as DDU (Delivery Duty Unpaid) or DDP (Delivery Duty Paid). If it is marked DDP, the taxes and duties have already been paid for the shipment. Here, the services are offered at a fixed price according to the label.
● Release of Shipment
The shipment gets released once the tax and duties are paid and all the formalities are completed. After completing the paperwork and payments properly, the shipment will head to its destination.
Cost of Custom Clearance
You will pay the following fees for Custom Clearance:
● Import Duties
Import duties are the charges levied on the shipment per the classification code and country of origin. It is a percent of the value of the shipment to be paid.
● Custom Fees
The customs broker overseen all the processes, including paperwork and payments. The broker charges a fee for their services. The charges depend upon the type of service and the product involved.
● Inspection fees
If your cargo is among one of the lowest percentages of imported cargo that are inspected, then you shall pay the inspection fees. The fees are levied due to the delay by such inspection. The fee depends on the location, type, and scope of such reviews.
● Fees to Regulators
If your cargo is overseen by some external agencies other than customs, then additional charges and paperwork need to be cleared to the customs.
Customs Clearance Affecting International Trade
Custom clearance affects the smooth functioning of international trade. The customs clearance process can be a lengthy and time-consuming procedure, but it is one of the crucial operations in International trade and commerce. Here are key ways in which it affects global business:
● Trade Facilitation
Customs clearance looks over the movement of goods across borders, reducing delays that can hamper international trade transactions. An effective clearance process helps increase trade speed and reliability, fostering economic growth.
● Regulatory Compliance
Clearance procedures make sure that goods adhere to exporting and importing country regulations. The goods must comply with safety, quality, and environmental standards that are verified, preventing the entry of substandard or unsafe products into markets.
● Tariffs and Duties
Customs clearance often checks and collects tariffs and duties on imported goods. These fees highly affect the cost structure of traded goods, influencing pricing strategies and market competitiveness.
● Revenue Generation
For governments, customs duties constitute a significant source of revenue. Efficient clearance procedures facilitate timely revenue collection, contributing to public funds that support various services and projects.
● Trade Balance
Customs clearance influences a country’s trade balance by regulating the inflow of imports and the outflow of exports. Stringent clearance can impact trade deficits or surpluses, affecting a nation’s economic position.
● Market Access
Proper clearance ensures that goods meet specific labeling, packaging, and safety requirements. This compliance grants access to foreign markets, expanding opportunities for exporters.
Conclusion
In international trade and commerce, custom clearance takes the spotlight. The procedure not only makes sure that the movement of goods is in compliance but also helps in preventing substandard, illegal, or unsafe shipments. The procedure of clearance may seem lengthy and hectic. Sometimes, the process may take its toll, delaying the freight and making things difficult for you. But fret not! Canworld Logistics takes away all your worries.
Canworld Logistics is a known name in the logistics industry. We provide effective and efficient custom clearance services for all procedures and compliances. With Canworld Logistics, you can rest assured that your shipment is arriving at the destination on time.