8.3 Customs Procedures and Incoterms
Customs Procedures and Incoterms
Maritime shipping plays a vital role in international trade, facilitating the movement of goods across borders. However, navigating the process requires an understanding of customs procedures and the specific roles assigned by Incoterms (International Chamber of Commerce terms). This chapter explores both aspects, ensuring a smooth and efficient maritime shipment.
Customs Procedures
Customs authorities are responsible for regulating the flow of goods across borders. Their primary functions include:
- Revenue Collection: Customs duties and taxes are levied on imported goods, generating government revenue.
- Security: Customs ensure prohibited or controlled goods (e.g., weapons, drugs) are not smuggled.
- Trade Facilitation: Streamlining legitimate trade through efficient clearance procedures.
Customs Clearance Process
The following steps outline a typical customs clearance process for maritime imports:
- Preparation: The importer gathers necessary documentation, including commercial invoices, packing lists, bills of lading, and certificates of origin.
- Entry Filing: The importer electronically submits customs declarations detailing the shipment's contents and value.
- Assessment and Inspection: Customs assess duties and taxes based on the declared information. Physical inspections may be conducted for high-risk goods or discrepancies.
- Payment and Release: Once duties and taxes are paid, and the goods are deemed compliant, customs release them for onward movement.
Incoterms in Maritime Shipping
Incoterms are a standardized set of international trade rules published by the International Chamber of Commerce (ICC). They clarify the responsibilities of buyers and sellers in international sales contracts, particularly regarding:
- Cost: Who pays for transportation, insurance, and other charges?
- Risk: At what point does the risk of loss or damage transfer from seller to buyer?
- Customs Clearance: Who is responsible for clearing the goods through customs at origin and destination?
Key Incoterms for Maritime Shipping
Four Incoterms are specifically applicable to maritime transport (sea and inland waterways):
- Free Alongside Ship (FAS): Seller delivers the goods alongside the ship at the loading port. The buyer is responsible for all subsequent costs and risks.
- Free on Board (FOB): Seller loads the goods onto the ship at the loading port and bears the costs until that point. The buyer assumes responsibility for all remaining costs and risks.
- Cost, Insurance, and Freight (CIF): Seller arranges carriage, pays the freight costs, and obtains minimum insurance coverage for the goods until they reach the destination port. The buyer is responsible for unloading and any additional costs at the destination.
- Delivered Duty Paid (DDP): Seller delivers the goods to the named place of destination after clearing them for import. This is the most comprehensive Incoterm for the seller, covering all costs and risks until the goods are delivered.
Choosing the Right Incoterm
The selection of the appropriate Incoterm hinges on factors like:
- Risk Allocation: How much risk is each party comfortable assuming?
- Control: Does the seller need control over the entire transportation process, or is the buyer comfortable arranging some aspects?
- Cost Considerations: Each Incoterm assigns different cost responsibilities.