Avoid Hidden Costs in International Shipping

Identifying Hidden Costs in International Shipping Can Be A Challenge

Pinpointing the hidden costs of temporary exports a.k.a. boomerang freight® can be a game of hide and seek.  Temporary exports are shipments of items that will return to the country they were shipped from such as display stands, signage, meeting supplies or audio visual equipment that meeting planners might require.

It helps to understand that all imported equipment (that exceeds a minimum value) is dutiable and taxable in all countries. This includes meeting equipment, supplies, trade show exhibits and their associated tools and samples that will be re-exported. Duty rates range from 0% to 80% and import taxes range from 0% to 25%, depending upon the country (these are estimates only). Import duties and taxes into South Korea, for example, would be an average of $17,900 on a $100,000 of equipment since VAT is 10% and duties average 7.9%. This is what a corporation would pay at the point of customs clearance if not using a temporary import method to avoid those duties and taxes.

Typically, costs such as import duties and taxes are not transparent since they may be included in the fees paid to intermediaries such as shipping companies, freight forwarders, customs brokers, trade show organizers and overnight delivery services. Duties and taxes may or may not be listed as a separate line item on the shipping company or freight forwarder-customs broker estimate or invoice. Often this is because the freight forwarder-customs broker is using their own customs bond or guarantee and assuming the liability of the foreign duties and taxes. The fee for that guarantee service may be lumped in with other services so it would not be readily identifiable. It pays to probe into the fees to understand what is actually being charged for a temporary import bond or for the use of a foreign broker’s customs guarantee.

To help understand your temporary export/import options, here is a list of temporary import methods:

     1. ATA Carnet – A uniform, international customs document accepted in 87+ countries.
     2. Foreign Temporary Importation Under Bond (TIB) – This is the foreign temporary import bond usually requiring collateralization. Bonds/guarantees vary by country.
     3. Foreign Customs Broker’s Entry Bond –The liability for duties and taxes is assumed by the broker and the exporter pays a fee for that service.

Once the costs of the duties and taxes (or a temporary import method) are clarified up front for a shipment, the key to getting more value from this temporary import expense is to:

      A. Take responsibility for selecting the temporary import method,
      B. Select the temporary import method separate from the movement of the goods and the services provided by an intermediary, and
      C. Purchase any temporary import documents directly from the document issuer to avoid the intermediary’s handling fees.

Even if you opt for method C (above), companies always have the option of using a freight forwarder-customs broker as a one-stop-shop for the temporary import documents, shipping and logistics while still selecting a preferred method of temporary importation. They simply have to request that the freight forwarder secure an ATA Carnet, for example, on behalf of the corporation and use it as the method of temporary importation.

The most versatile temporary export method, an ATA Carnet, is available from the national guaranteeing association (or their service providers) in each ATA Carnet country or can be obtained through an international freight forwarder.