Customs authority looking at packages

How KlearNow.AI can help Importers and Freight forwarders simplify management of duties and taxes

As most countries bolster trade relations and commercial ties with other nations, international trade in goods and products has witnessed rapid growth. Corporations, in a bid to leverage labor cost advantages, have outsourced manufacturing to low-cost locations, providing further impetus to global exports and imports. In recent years, the diversification of supply chains to incorporate multiple locations and the subsequent interdependencies amongst nations has provided additional impetus to export volumes.

The trade and fiscal imbalance that inevitably accompanies international trade has compelled various countries to implement policies and regulations to safeguard their national interests and protect core domestic freight and sectors. Such legal and policy measures include the imposition of customs duties and taxes.

As per World Bank estimates, in 2023, almost 3,000 trade restrictions were imposed across the world, a five-fold increase from 2015.

Complexity and Variability of International Regulations

All countries exhibit significant differences in their objectives and drivers for engaging in international trade. These differences stem from factors as diverse as development levels, trade patterns, export, and import commodity mix, the need to conserve forex, the extent of trade imbalances, compulsions to cater to domestic sentiments, and the imperative to deter exports or imports of certain key products and commodities.

Therefore, depending on the specific circumstances and requirements of each country, the regulations introduced, as well as customs duties and taxes levied, can vary significantly.

Considering that multiple countries and entities can be involved in an international transaction, the legislative maze can be overwhelmingly complex and pose challenges in ensuring trade compliance.

Importers and freight forwarders (especially international ocean freight forwarders) need to keep abreast of the latest regulations and ensure that their staff and other stakeholders are aware of changes thereto, thus ensuring complete compliance therewith. 

Challenges in Accurate Duty Calculation

The sheer diversity of goods traded internationally has rendered it essential to create a standardized system of segregating and labeling various commodities. The Harmonised System (HS) Codes refer to a standardized numerical method of classifying traded products that are used globally.

With different rates of customs duties and taxes levied for each HS code, the complexity arising from the number of commodities traded is multiplied exponentially.

Additionally, several countries enter into bilateral agreements or free trade agreements, whereunder participants are accorded certain privileges, in terms of preferential access, greater quotas, and lower taxes and customs duties imposed thereupon.

Compounding these difficulties are the difficulties inherent in foreign currency transactions, due to conversion rates and fluctuating duty rates.

All these factors add to the challenges in the accurate calculation of applicable customs duties and taxes. 

Consequences of Non-Adherence to Customs Regulations and Errors in Duty Calculation

It is incumbent upon the importer, freight forwarding business or freight forwarder and customs clearance agent to ensure that all customs regulations are followed in their entirety and that customs duties and taxes are calculated accurately.

Failure to do so can have severe consequences, ranging from delays in customs clearance to goods being stuck at customs to the imposition of fines and penalties to the incurrence of detention and demurrage.

Importers and freight forwarders will subsequently feel the impact in terms of overall supply chain delays, lower reliability levels, increase in TCO, loss of reputation, and sanctions imposed by customs authorities, the federal department responsible for overseeing goods coming into and leaving the country. 

Importance of Efficient Auditing and Reporting

Efficient reporting and auditing throughout the supply chain and covering the duration of the transport process can greatly help alleviate risks arising from non-adherence to regulations or errors in computing customs duties.

This involves sharing data with all stakeholders and alerting them on milestones in the shipping process, besides automated reminders where action is required.

Regular customs audits at key stages can help detect inadvertent errors and rectify them early in the process, thereby avoiding or minimizing the legal, commercial, or operational repercussions.

Technology to streamline management of Customs Duties and Taxes

With growing awareness of the inadequacies of the manual process of customs clearance and duty calculation, importers, most freight forwarders, and customs clearance agents are now turning to technology to streamline their operations and increase accuracy levels.

The logtech industry has witnessed a boom in recent years, with the advent of software solutions aimed at the holistic supply chain or specific aspects thereof.

These logtech solutions have the ability to automate tasks and reduce manual effort, which in turn improves efficiency and accuracy levels.

 As one of the pioneers in the logtech industry, KlearNow has a proven track record of partnering with importers, international freight forwarders, and customs clearance agents, helping them scale their operational efficiency and providing a superior customer experience.

KlearHub, a market-leading global control tower solution offered by KlearNow, helps streamline international trade operations by ensuring regulatory compliance and simplifying the management of customs duties and taxes. KlearHub is an innovative solution to international supply chain managers’ challenges and greatly facilitates smooth transport planning and execution.Please click here to see how KlearHub has helped customers gain a competitive edge and strengthen relationships. For a free demonstration of how KlearHub can benefit your business, click here.

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