Customs Compliance

Each shipment must be described in a customs declaration. The firm must classify the goods under the tariff code, which sets the duty rate and any controls. It must state their value in line with customs valuation rules, prove where they were made for preferential rates, and pay duties and taxes on time. Records are usually kept for several years because customs authorities audit after the event. Errors, for instance undervaluing goods to pay less duty, can lead to back payments, penalties or prosecution. Many customs authorities offer trusted trader schemes, known as Authorised Economic Operator (AEO) programmes, which give faster clearance to firms with strong controls and security. Authorities audit after the event, so a firm with no paper trail for its classification choices cannot defend them.

An importer of electronic components finds during a review that a supplier's invoices exclude a licence fee that customs rules count as part of value. For two years the company has paid too little duty. It calculates the shortfall, tells the customs authority, pays the difference with interest and changes its declaration process to include the fee.