Whether you’re importing raw materials or exporting custom items, you’re going to have to deal with customs. Mistakes can be costly, whether you’re forced to pay unplanned expedite fees to get things through in a timely manner or have perishable items go bad while stuck in customs. Let’s learn more about the impact of customs procedures on business performance.
A Failure to Understand Procedures Can Cost You Dearly
Many businesses try to fill out customs forms without bothering to learn the finer details. As long as the item passed through customs without an undue delay, they think things are fine. Yet you may be paying too much in import duties. That’s common if you’re misclassifying items and paying excessive import duties. If you don’t know how to fill out these forms properly, you may end up paying fines or expedite fees to get things out of customs. Keep up with tariffs and other fees, because you may not get a refund if you over-pay.
It Can Disrupt Your Supply Chain
If you don’t understand customs regulations, your goods may be stuck in customs until it is cleared by security, if it ever is. If they don’t clear customs, the items will be shipped back to their point of origin or destroyed, wasting the money you spent on shipping. In a worst-case scenario, the items are destroyed. A more common outcome is having items waiting days for you to send a copy of the purchase order, packing list and other essential forms for it to be loaded onto the truck and sent on its way. And delays will affect your supply chain. Any serious delay is a disaster, if you have a just-in-time supply chain.
Corruption Can Serve as an Extra Tax
Corruption leads to fees you have to pay to get things done outside of the legally mandated ones. This is essentially a second tax on small businesses. And corruption is common in customs, because they know how much you need to get your goods to their destination. Hiring third party firms to get goods through corrupt ports is yet another expense, but it may limit the opportunity for the corrupt to hold your goods hostage until you pay various additional “fees”.
On the other hand, if you hire the first third party logistics firm you find to handle the import and export of goods, you may be hit with duplicate and/or unnecessary fees. This is why you should audit all bills.
Tariffs Can Affect the Total Cost of Goods
A tariff is a tax on goods being imported into a country. Tariffs are often raised to raise money by taxing popular foreign imports. And they may be increased in order to protect domestic markets. Pay attention to the tariff rates you have to pay. Ensure that you aren’t absorbing this cost and eating into your profit margin as a result. Furthermore, you need to track the sales of items as tariff rates go up so that you don’t pay a fortune to ship inventory that takes forever to sell or may be returned due to a lack of demand.