Businesses often struggle to navigate the tricky process of import costs because it is one of the great unknowns. No matter how frequently a company trades with others, even regular exporters and importers find long distance shipping and import costs a pain to deal with.
However, thanks to tariff engineering, retailers can now save thousands of dollars of additional charges by understanding the system a lot better. You can always work around the system with a smart strategy to save on import costs.
This way, you can avoid paying more duties even if it is required by law. Then you can maximize profitability by making shipping as easy as possible. Here are 5 ways to achieve lower import costs so that you can gain from real savings on every import.
1. Keep All Paperwork
There are many ways a business can lower customs duty rates to increase profitability. The first step is to ensure you generate and hold onto all your forms and paperwork. Even though this is tiring, it is essential to keep all records.
Besides having a collection of paperwork, you should also ensure that your forms are all stored and filed correctly. If you lose any paperwork related to your imports, you may end up having to deal with long distance shipping delays.
2. Learn Differences Between Countries
Every country that an order is made from will create a new tariff. This typically includes an import tax. Depending on the country, you may need to research the different rules and rates that apply to your business operations. The process at customs also differs at each international border.
The duty rate and import costs charged by one country will not be the same for another. This applies to neighboring countries as well. Even if Canada and the United States are practically touching each other, they have different processes.
The area you conduct business in matters greatly. Never assume that you will be charged the same tariff for different countries. This way, you can avoid significant problems down the line by staying prepared. Otherwise, you may end up making mistakes and face penalties or shipment delays that will unnecessarily add to your expenses.
If you are working with a broker, ask them to confirm their most reasonable charge for your freight. Then get on the phone with your supplier and confirm the quote through their channels. You should always do this before making any final payments before shipping.
During this process, you still have plenty of time to negotiate and save more money. The main thing to remember is that you have trusted partners and brokers to get advice from, and all this can be done before paying any costs for import goods.
3. The Supply Chain’s Responsibility
There are several companies that calculate duty rates and assign tariffs. However, others will leave this problem to those who provide fulfillment and transport. Some of the providers can also imply that they can accurately calculate duty rates and classify products.
The truth is that providers are not obligated to get anything done right. At the end of the day, if mistakes are made, it will all become your responsibility if you do not comply.
The shipping provider does not get held responsible even if they make any incorrect estimates and misclassify shipments. Knowing this goes a long way to ensure that you reduce expenses by taking control instead of relying on other providers.
It is incredibly challenging and time-consuming to calculate duty rates correctly if you do not have every product on your catalog assigned with a tariff code. The first digits are always locked in internationally, and the last digits change according to country.
Getting this code wrong can incur additional charges. You should check each product in your catalog individually to ensure the right codes are applied. One of the best solutions is to maintain a harmonized tariff schedule to avoid unexpected charges.
4. Always Doublecheck Information
Getting your customs and duty rate right all the time is a major undertaking. On many occasions, if a rate has already been calculated for a new country, companies tend to become complacent. This is because your duty rate can stay the way it is in your shopping cart for years without being updated.
This is not feasible in the long term and can cause a significant problem because taxable product rates are continuously changing. For instance, a drop in oil prices can change currency values since governments now need to find new sources to gain tax revenues.
Several imports these days are also being scrutinized more than ever before. Rates that were valid previously are no longer effective since they are out of date.
Then you may have shipments refused if the rates are not updated on your side. Therefore, it is essential to stay on top of all the factors that affect the duty rate to avoid losing money.
5. Avoid Undervaluing Goods
If you undervalue import goods, you can face expensive penalties. However, many companies do this because undervaluing items in shipments is a great way to avoid paying a costly duty rate. Companies lower their estimated value even if the product’s actual value is much higher.
This way, they can take advance of duty-free or inexpensive policies. Even though this strategy has worked wonders in the past for businesses, governments have caught on to this tactic.
Now they are not lenient at all. Companies can expect to face customs processing delays and hefty fines if they are not careful and continue to engage in these types of practices.
Practice Successful Tariff Engineering
Tariff engineering is tricky for many businesses to navigate. However, keeping a close eye on duty rate calculations and tariff codes can help you avoid being charged extra money unnecessarily. Never rely on other providers to get things right because the responsibility falls on you. It is best to take charge and save a lot of money by having a harmonized system. If you enjoyed reading these import tips, check out some of our other posts for more information.
