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KMR Global Blog - What is Customs Clearance?

Updated: Jul 21, 2022

When is Customs Clearance Needed?

Every cross-border shipment of goods must clear customs before it can be imported or exported. However, navigating the customs clearance process requires some additional document preparation and familiarity with the rules and regulations in Canada and the USA.

Our complete guide to the customs clearance process can help you understand the process and complete your next international shipment with your peace of mind intact.

What is Customs Clearance?

Customs clearance is a process that involves the submission of documentation to the associated government custom agency and then the subsequent review and clearance of the goods in transit.

  • The customs clearance documentation is assembled by the assigned customs broker to the shipper. It will prove that any taxes or duties have been paid. Then, the goods are released for import or export.

  • The customs clearance process is the act of passing a shipment of goods through customs, the government agency responsible for overseeing the compliance of shipments with international trade laws. Customs officials oversee each incoming or outgoing shipment to make sure it is in line with the country’s regulations. It is then cleared for import or export, at any time during this process a shipment can be inspected.

What involves in the Customs Clearance Process?

Document inspection - A customs officer will review the paperwork for your shipment to signal an initiated customs clearance process. This can include a commercial invoice (CI) (stating the contact information for the shipper and receiver, export date, description of the cargo, and its value), a purchase order from a buyer, packing list, shipping bill, bill of lading (BOL) or air waybill, and certificate of origin (NAFTA or USMCA Certificates of Origin, for example). There may also be further documentation required by the buyer, financial institution or LC terms, or the importing country.

Tax & Duty Calculation and Payment - Based on goods being shipped, the customs broker will ensure that the appropriate taxes and duties are prepaid or collected for the type of goods in your shipment, their declared value, and the customs laws of the importing country. Customs officers are responsible to verify and track whether these charges have already been paid.

Release of Shipment - Once any outstanding taxes and duties are paid, the shipment is released by customs and can continue to its final destination.

One of the easiest ways to simplify the custom processes is by working with a customs broker who can process tax and duty payments in advance for a fixed custom clearance fee.

Who is a Customs Broker and how can they help?

When you hire a customs broker to facilitate your international shipment, you are paying for peace of mind.

Brokers procure all the documents you need and assist in completing the paperwork, so the custom clearance process proceeds smoothly. They help you navigate the alphabet soup of import and export codes and forms (including HS codes and CF-28 or CF-29 forms), assist with valuation analysis and determining country of origin, and automate the process via electronic document and reporting systems like ACI, RLF, EDI, and ACE.

Customs brokers are also experts on trade agreements that offer beneficial duty and tax rates like the USMCA/ CUSMA (the new agreement replacing NAFTA for North American Trade) to help you take advantage of any opportunities these may offer, and what customs fees you can expect when shipping from Canada and the US.

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