As a global company manufacturing different products around the world and delivering orders to every corner of the world and invoicing internationally across multiple currencies to countries with different trade agreements in place, trying to understand the full complexities of global product delivery can be a daunting task.
Attempting to simplify such a comprehensive subject is not easy but we will offer a general guideline based on our experience in delivering a variety of different products all around the world over the last decade.
HS Code – HS stands for Harmonized System. It was developed by the WCO (World Customs Organization) as a multipurpose international product nomenclature that describes the type of good that is shipped. Today, customs officers must use HS code to clear every commodity that enters or crosses any international borders.
Local Taxes / Sales Tax – A sales tax is a tax paid to a governing body for the sales of certain goods and services. Different countries have different names for their local tax (such as VAT or GST) and the tax amount will vary from country to country and State to State. Depending on the nature of a business, tax amounts may be lower or even exempt from tax .
Duties – Import duty is a tax collected on imports and some exports by a country’s customs authorities. A good’s value will usually dictate the import duty. Depending on the context, import duty may also be known as a customs duty, tariff, import tax or import tariff. Import duties have two distinct purposes: raise income for the local government and to give a market advantage to locally grown or produced goods that are not subject to import duties. A third related goal is sometimes to penalize a particular nation by charging high import duties on its products.
DDU delivery – “Delivered Duty Unpaid” is an international trade term indicating that the seller is responsible for the safe delivery of goods to a named destination, paying all transportation expenses and assuming all risks during transport. Once the goods arrive at the agreed-upon location, the buyer becomes responsible for paying import duties, as well as further transport costs.
DDP delivery – DDP stands for “Delivered Duty Paid” which means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport, and ready for unloading at the named place of delivery.
When it comes to Fuse Innovation shipping the goods, there are many factors that need to be taken into consideration as far as you receiving the goods safely into your hands (or your clients’ hands) quickly and efficiently.
Please remember this is a general guide, as delivering different products internationally and dealing with different customs departments around the world and where different customs officers may behave differently, there is no single process or ‘one method fits all’ solution. Every delivery may be different.
So here we hope you can familiarise yourself with what ‘could’ happen – but please don’t worry – we will guide you through the process from start to finish by asking and confirming all the important information ahead of time and whilst this here may be information overload, we feel it’s better to have it for reference.
We courier the goods from our factories around the world direct to the consignee (the person/company that you want to receive the goods).
Every product we offer has a different HS code. And even product variations can have a different HS code depending on the format (for example our VideoPak product comes in many different shapes and sizes and can be categorised as having a different use and therefore a different HS code by different customs officers around the world)
The couriers we use most of the time for our international deliveries are DHL/UPS/FEDEX/TNT (confirmed before shipping).
The couriers often work closely with the local customs offices in different countries and work collaboratively servicing both the local government agencies responsible for collecting Local Tax and Duty payments and also the end client or the company due to pay the tax on the imported goods.
We will process the order delivery using the HS code (Harmonised code) we normally apply for this product. There are often a few options as our products are not easily categorised like a consignment of T-Shirts, or Books, or Bananas. There are lots of different tech components all working together to create a complex beast of a product.
The HS code we normally use for our products should attract a 0% duty. However, times are changing and so do trade agreements between countries.
As an example, a few, out of the many thousands of deliveries we have made, been challenged by the local customs office as the goods are being checked for release from customs. We always work to have the decision overturned if they try to add a Duty, but it can cause delays in releasing the goods. Sometimes the customs officer may select a different HS code that attracts a 3% duty. Sometimes a code that attracts a 10% duty.
We will ask you before delivery for a company EIN number in advance so that we can provide this to the courier in case they have to allocate any local sales taxes and duties against the EIN number.
Depending on the order requirements and who we deliver to, we will need to pass an EIN number to our factory ahead of shipping for the recovery of the local Sales Tax.
Local Sales Tax:
We believe that as a tax registered company, if you pay customs directly, reclaiming the Local Sales Tax will be more efficient for you. Please check this with your commercial / finance team
From post deliveries we have seen that sometimes customs ask for this sales tax to be paid in order to release the goods for forward delivery, and sometimes they are happy to release and deliver the goods and invoice for the GST amount and then chase for payment at a later date.
When preparing the paperwork for your delivery we will need to determine if the final delivery will be to the end client direct (the brand on the product/goods we have manufactured? Or perhaps to a middle-man; perhaps a mailing house or printer?
The company that pays the Sales Tax can most likely reclaim the tax through the normal business process (see your accountant for more information in this) But somebody somewhere may need to be responsible for helping to clear the goods through customs and paying any local sales tax / duties that are due so the goods can be released into the hands of whoever is receiving the goods or responsible for importing the goods.
This can sometimes get complicated as there can be multiple people/ companies involved.
1. Company A is responsible for generating the order.
2. Fuse Innovation (Company B) is the order taker. We are responsible for making and delivering the order
3. We have our goods produced by different factories around the world (Company C). A large majority in China. Our factory will be responsible for shipping the goods.
4. The order is ultimately on behalf of, say Coca-Cola (as an example – Company D) which is the brand name on the product itself.
5. But we may be delivering the goods to a 3rd Party (Company E), say, a Mailing House, or a printer (for example).
6. And there may be other intermediaries in the chain as middle-men and agencies have their involvement.
As you can see there can be several companies involved between placing and receiving the order which causes great admin complexities.
When we deliver the goods into the receiving country, there are three possible companies that the local customs may want to contact to invoice for the local Sales Tax (Company A, D or E) and the tax amounts will differ form country to country and state to state).
On our shipping paperwork (Waybill and Commercial Invoice) we need to tell the courier who to contact when the goods arrive in Customs so they can make contact and request the payment ahead of releasing the goods. As mentioned, the company that pays the Sales Tax will most likely be able to reclaim this as long as they are a tax registered company (which we assume will be the case). Duties cannot be reclaimed.
So, will the Local Charges be paid by:
1. Your company?
2. Your customer?
3. The recipient (Mailing House or Printer)?
If you have a DHL/UPS/FEDEX account (detectable by your EIN number (USA) / VAT or GST (Rest of World) the importing courier may automatically clear the goods on your behalf and send invoices for local taxes and duties (if applicable) for payment after the goods are released.
Or, they may hold the shipment and ask you to pay any taxes and duties in advance in order to clear the goods on your behalf.
If you do not have a courier account:
1. The goods will arrive at your local customs in your country.
2. The courier will make contact (by phone) on the number we provided on the paperwork (the company with the EIN number / local company tax number)
3. They will ask for payment of the local taxes (and any duties) before releasing the goods
4. Once payment is made, they will release the goods and deliver to your hands
NOTE – with some very large blue-chip companies, they may choose to release the goods without the payment for local taxes and duties for future collection, even if there is no account with the courier, and they will send the invoice after delivery.
As there is not always a set pattern it seems to differ on every occasion (depending on the country’s customs policies, rules and regulations) to avoid any clearance delays, we advise for you to make a call to the courier company, a few days before the goods arrive quoting the tracking number and pre-empting the customs requirements asking if payment will be required.
“We have an important delivery incoming. It is urgent and we do not want any delays. Please can you confirm the customs clearance process for me. Can we pay in advance to avoid delays?”
I hope this scenario helps to paint a bit of a picture of the process and clarify what is involved, as this company to company triangulation (as it is often referred) is best discussed in advance as we will create the delivery paperwork (Waybill and Commercial Invoice) with the PRECISE important information in advance to prevent delivery/clearance issues down the line.
And this is often paved by knowing two key details:
1. Where will the goods be delivered to? Who will be the ‘consignee’ of the goods
2. Who’s company EIN number will be given as the company that will be responsible for paying the local Sales Tax and helping to clear the goods through customs ahead of delivery.
Thank you for your time. Please contact us with any questions.