Customs Clearance: What It Is, How It Works, Documents & Common Delays

Introduction

Imagine your shipment is at the border but there is a problem. Suppose the goods are all set, the customer is patiently waiting to receive their shipment, and the carrier is on standby but the load remains in transit because either the necessary documentation is missing or the customs authorities require some more information and are unable to clear the shipment.

This is why customs clearance takes place.

What actually happens during customs clearance is that customs authorities examine the shipment by verifying the details mentioned in the documentation, collecting duties and tariffs, and allowing goods to move through the borders if all requirements are met.

The process of customs clearance is very important for businesses that work in international trade. If it is handled properly, shipments would go without a hitch. If mistakes were made during customs clearance, there would be delays and penalties.

How does customs clearance work? What documents are needed? Who is in charge?

This article is intended to answer these and many other questions about customs clearance.

What Is Customs Clearance?

Customs clearance refers to the process of declaring goods to the customs authorities upon their arrival in or departure from a country or customs territory. The customs authorities examine the information related to the goods during the process of clearance based on which they determine if the goods conform to the customs rules and regulations, and whether any duties or taxes are applicable.

A customs declaration usually consists of the following information:

• Details of goods
• Amount and weight
• Customs value
• Country of origin
• HS code or classification
• Names and details of importer and exporter
• Transport details
• Applicable duties and taxes
• Necessary licenses and necessary documents

For instance, when non-EU goods come into the European Union from abroad, customs clearance must be carried out before these goods can be cleared for circulation within the EU customs area. The European Commission has indicated that customs clearance is part of the import process before any non-EU goods can be allowed into the EU single market.

Why Is Customs Clearance Necessary?

Government authorities rely on customs measures for:

• The assessment of import rates and payments
• The implementation of limits on imports and exports
• The protection of consumers and the national security
• The restriction of entry and exit of banned items
• The definition of trade information
• The confirmation of the correctness of declared goods
• The contribution to other trade laws

Customs measures may involve inspections into the description, origin, and value of goods, as well as the customs duties involved.

To put it differently, customs gate assures businesses that: The goods can cross the border legally and if there are any barriers to the goods.

How Does the Customs Clearance Process Work?

Customs clearance processes are different from country to country, but in general, they follow the same principle of operation.

Step 1: Prepare the Shipment Information

All necessary data for a customs declaration needed to prepare the goods for customs clearance has to be gathered. The data usually includes such information as:

• A commercial invoice
• A package list
• A transport document
• A description of the goods
• The HS code
• The country of origin
• The customs value
• An importer/exporter identification
• Licenses and certificates

At this stage, it is very important to provide the correct information because mistakes may cause inconvenience later.

Step 2: Prepare and Submit the Customs Declaration

The relevant party prepares the customs declaration, making use of all necessary information.

In the EU, customs declarations are usually submitted electronically. The European Commission describes the customs declaration as an official declaration of the goods exported/imported and specifies that the declaration determines the customs procedure to be followed with regard to the goods. Depending on the country and shipment, the declaration may be submitted either by the business itself or by its duly empowered agent, e.g. a customs broker.

Step 3: Customs Reviews the Declaration

After the declaration has been submitted, the customs authorities review the declaration together with other documents. They may check:

• Product classification
• Customs value
• Country of origin
• Applicable duties and taxes
• Restrictions on imports
• Licenses
• Security information
• Consistency among the documents

Not every shipment will be physically inspected. Customs authorities use risk-based controls in order to establish if the shipment needs additional checks.

Step 4: Duties and Taxes Are Approved

If applicable customs will calculate any fees which are due based on the declared products, as well as on the product description and country of origin. This might include:

• Customs duties
• VAT
• Excise duties
• Other applicable requirements

For example, according to the EU legislation, if there is need to release the product, import duties and other applicable fees may be charged.

Step 5: Customs May Ask for More Information

If customs see something wrong with the shipment or needs to verify certain details, it may ask for accompanying documents or information on various things. Some of the normal requests are the following:

• Commercial invoice
• Proof of origin
• Product specifications
• Import license
• Valuation documents
• Other certificates
• Clarification concerning product description

This is why proper customs documentation is so important.

Step 6: The Goods Are Released

Once customs have reviewed the declaration and the payment for taxes has been made, the shipment can be released, and the goods will go to their destination.

What Documents Are Required for Customs Clearance?

A prevalent reason for holdups is insufficient or conflicting documentation.

The specific documentation necessities depend on the country, product, mode of transport, customs process, and type of transaction. Nevertheless, some documentation is frequent.

1. Commercial Invoice

Commercial invoice gives crucial transaction data.

It usually includes:

• Giver and receiver information
• Description of product
• Number of units
• Single and total price and cost
• Currency type
• Country of origin
• Incoterms if applicable
• Number of invoices
• Data on payment made

Customs is able to get data from invoice to assess and validate the transaction.

2. Packing List

Packing list describes how shipment is physically structured.

It may present:

• Number of packages
• Type of package
• Gross and net weight
• Size
• Components
• Marks and figures

By having proper packing list makes it simpler for customs and logistic teams to validate the cargo.

3. Bill of Lading or Air Waybill

There are two distinct documents that can provide details on how the shipment moves. Depending on the type of transportation, the following documents may be used:

• Ocean freight bill of lading
• Air waybill of air transport
• Road transport consignment notes

Through these documents, customs and business information is obtained regarding the delivery operation.

4. Customs Declaration

Customs documentation contains the necessary information required by the customs office to process the shipment.

It is one of the most important in customs paperwork since incorrect information in declaration may influence the classification, assessment, duties, and other regulatory implications.

What Information Is Needed for a Customs Declaration?

Documents alone are insufficient. Customs declarations hinge on precise shipment data.

1. HS Codes and Product Classification

HS code is vital for customs classification of goods.

Classification has a bearing on:

• Duty rates
• Import restrictions
• Licensing requirements
• Trade actions
• Statistics

Incorrect classification, therefore, is more than a mere data-entry problem. For companies dealing with several products, the manual classification process may become tedious and difficult to apply consistently.

2. Customs Value

The declared customs value may influence the amount of tax due. Thus, it is necessary to obtain satisfactory transaction and valuation information.

In case the declared value does not reflect the actual customs value rules, customs may ask for additional proof and check the declaration.

3. Country of Origin

Origin is another vital customs element. This factor may influence:

• Duty treatment
• Trade agreements
• Quotas
• Restrictions
• Trade remedies
• Origin documentation requirements

It is necessary to differentiate country of origin from the country of shipment.

Common Customs Clearance Delays and Their Causes

How can a delivery which looks simple sometimes take a long time?

In most cases, it is not the fault of the customs authority. The problem starts with incomplete, inconsistent, or wrong information about the shipment.

1. Missing or Incorrect Customs Documents

Losing invoices, incomplete packing lists, wrong shipping information, or missing certificates can cause a shipment not to be cleared. For that reason, companies should check their documents before the cargo reaches the border.

2. Wrong HS Codes

Using the wrong HS code can influence the amount of duty paid and other customs regulations. If customs do not agree with the classification given, the shipment will definitely be studied more attentively.

3. Wrong Customs Valuation

Not declaring or wrongly calculating customs value may lead to compliance issues. Customs authorities may ask for documents to realize how the announced value was calculated.

4. Incomplete or Wrong Product Descriptions

Words like “parts,” “samples,” or “electronics” may not give needed information to clear customs efficiently.

How to Avoid Customs Clearance Delays

Preventing customs delays can be solved if the necessary mistakes are avoided before the shipment has crossed the borders.

1. Check Documents Before Shipment

Make a check-list for pre-clearance. This list should have the following items.

• Commercial invoice
• Packing list
• Transport documents
• HS codes
• Customs price
• Country of origin
• Licenses and authorizations
• Certificates
• Information about the importer and exporter

It is easier to check documents prior to transportation than adjusting all the unnecessary mistakes in the documents after the goods have arrived.

2. Use Accurate Product and HS Code Information

Outdated classifications of description of products must be avoided at all times. The master data should be updated timely before the products are sold to avoid complications that might arise.

3. Verify Duties, Taxes, and Customs Requirements

Make sure to identify the duties, tariffs, and customs requirements that have to be paid prior to importation to avoid extra charges on customs clearance.

4. Keep Shipment Data Consistent

The information must also be the same for commercial invoices, packing lists, transport documents, purchase order, customs declaration, and supporting certificates.

The Role of Technology in Customs Clearance

Old customs procedures typically require communication of facts across invoices, spreadsheets, shipment systems, platforms, and emails.

What happens if one needs to process many packages?

Manual data entering starts taking too long. It is difficult to notice mistakes. Compliance departments spend too much time analyzing documents instead of dealing with issues. Technology may resolve the problem.

1. Automating Customs Data and Document Processing

Modern customs platforms have capabilities to extract data from the documents and convert it into structured information. Instead of entering the information manually, the system can recognize such parts as:

• Supplier
• Customer
• Description of goods
• Quantity
• Amount
• Currency
• Country of origin

This will avoid repetitive data entering.

2. AI-Powered Document Extraction and Validation

Using AI technologies allows the companies to handle immense amounts of trading documentation more effectively.

For example, Droblet AI is designed for extracting documentation and managing customs processes.

Explore Droblet AI

Its CDS workflow supports document upload, AI-assisted classification and calculation, declaration preparation, HMRC CDS submission, and tracking through clearance.

3. Improving Shipment Visibility

With a digital customs workflow, companies can know where in the shipment process the declaration is. There will be no longer need to look through emails or spreadsheets. The steps can be viewed as follows:

Data extraction → Validation → Declaration → Submission → Customs response → Release → Audit

Customs Clearance for Importers, Exporters, and Logistics Providers

Customs procedures include different participants, but responsibilities vary for each of them.

What Importers Need to Know

Importers are generally responsible for the accurate declaration of goods and compliance with duties, taxes, restrictions, and documentation requirements. Before importing any goods, an importer should know:

• What goods are being imported?
• What classification is it placed under?
• What is its value for customs purposes?
• Where is it produced?
• Is a license required?
• What are the customs duties and taxes?
• Who will take care of the customs declaration preparation and submission?

For example, UK businesses importing products may independently manage the import process or hire a transport company or customs agent to handle customs declaration. The official government website also provides details related to the process of customs clearance in the UK.

What Exporters Need to Prepare

Exporters must ensure that their products are in compliance with the export regulations of the exporting country as well as any other import or export processes at the port of destination. In the EU, the exportation process includes a combination of the “export” and the “exit” procedure, and the customs provisions precede the departure of goods from the customs territory of the EU.

How Customs Brokers Support Clearance

Customs broker or customs intermediary provides assistance to enterprisers with filing of documents, communication with customs entity, and execution of customs requirements. This may prove beneficial to companies that:

• Make frequent imports and exports
• Operate in several countries
• Have complicated product types
• Transport controlled goods
• Do not employ customs specialists

Nevertheless, involvement of brokers does not dismiss necessity of providing correct commercial details. The correctness of the declaration strongly relies on the accuracy of data.

Customs Clearance vs. Customs Compliance

Although related, these two expressions do not mean the same.

Customs clearance describes the process of clearing the particular shipment through customs.

Customs compliance refers to the more complex definition of customs regulations relating to consistent compliance with customs laws, rules and regulations, customs documents, as well as import duties paid in a timely manner.

Thus, for example, successfully clearing 1,000 shipments does not mean that a company possesses high customs compliance.

In practice, a company may continue to clear its shipments but may have:

• Product classification issues
• Valuation issues
• Origin issues
• Recordkeeping issues
• Documenting issues
• Regulation control issues

For a broader explanation, see Droblet AI's guide, What Is Customs Compliance? A Complete Guide to Regulations, Documentation, and Best Practices.

Strong customs operations therefore require both efficient clearance and long-term trade compliance.

How Digital Customs Workflows Can Improve Clearance

Utilizing digital customs workflows allows the linking together of various phases of customs procedures instead of dealing with them separately.

In a usual automated process, the workflow looks like this:

• 1. Upload the documents
• 2. Extract shipment information
• 3. Validate information
• 4. Determine customs classification and requirements
• 5. Calculating applicable fees and taxes
• 6. Preparing customs declaration
• 7. Submission of declaration
• 8. Monitoring the reply from customs
• 9. Keeping track of the customs clearance process and keeping records.

That is how operations become less manually performed and at the same time more transparent to both customs officers and logistics specialists.

This is true for the UK Customs Declaration Service, for instance, where Droblet's CDS service comprises all steps from document provision and processing to declaration creation and submitting the same to HMRC.

Explore Droblet AI's CDS solution

Conclusion

Customs clearance is necessary for easy movement of goods throughout the world. Proper documentation, accurate declarations, and compliance with customs regulations help businesses get rid of complications and expenses. Importers, exporters, freight forwarders, and customs brokers can minimize human errors, boost productivity, and create a scalable custom process by implementing digital and AI-assisted custom workflows.

Frequently Asked Questions

1. What is customs clearance?

Customs clearance is the process of declaring goods to customs authorities, verifying shipment information, paying applicable duties and taxes, and obtaining permission for goods to enter or leave a country.

2. What documents are required for customs clearance?

Common documents include a commercial invoice, packing list, bill of lading or air waybill, customs declaration, and required licenses or certificates.

3. How long does customs clearance take?

The time varies depending on the country, shipment type, documentation, and whether customs inspection is required. Accurate and complete documents can help reduce delays.

4. Why do shipments get delayed in customs?

Common reasons include missing documents, incorrect HS codes, inaccurate product descriptions, incorrect valuation, missing permits, and customs inspections.

5. Can a customs broker help with customs clearance?

Yes. A customs broker can help prepare and submit customs declarations, manage documentation, communicate with customs authorities, and support the clearance process.