Insights
Customs optimization is a collection of approaches that can significantly reduce the overheads, costs, and delays of importing and exporting goods through customs. Most customs optimization services aim to eliminate, minimize, or suspend the payment of duties, tariffs, and other fees. Customs optimization is typically carried out by licensed customs brokers, particularly when integrated with other third-party logistics services.
Common customs optimization strategies include the use of foreign trade zones, bonded warehouses, free trade agreements, temporary import and export, and duty drawback. Expert knowledge of federal and local customs processes also helps eliminate delays and ensure the rapid onward transit of goods.
Key takeaways
- Customs optimization can significantly reduce duties, tariffs, and other fees you pay when moving goods through customs.
- Customs optimization can speed up the clearance of goods through customs while ensuring that importers and exporters meet all regulatory standards.
- Licensed customs brokers use a variety of techniques for optimization, depending on client needs.
- Some customs optimization depends on relationship building and soft skills, while other approaches require compliance with strict standards.
- Used well, customs optimization helps clients meet cash flow challenges, reduces the cost basis of products, accelerates the clearance of goods, and provides a competitive advantage when importing or exporting.
The customs optimization process
There isn’t a standard customs optimization process, as the techniques used to reduce costs and delays vary depending on individual client needs. Instead of presenting a process, we are sharing the customs optimization techniques typically used at each stage when importing goods.
- Prior to import, customs optimization may use tariff engineering, free trade agreements, and correct product classification to understand and reduce duties paid.
- The import clearance process itself relies on complying with customs regulations and using local knowledge to work with local agents. A foreign trade zone may also be used just prior to formal clearance.
- Following import, goods might be moved to a bonded warehouse to suspend duty payments. If duties do need to be paid, a broker can make these payments on a client’s behalf.
- Goods may also be temporarily imported before re-export, and clients can also take advantage of duty drawback for re-exported or destroyed products.
- Throughout the process, customs optimization can integrate with other systems and data, provide a customs control tower, and take advantage of downstream logistics services.
Get in touch with GEODIS to learn how our services can help you optimize your customs processes.
The benefits of customs optimization
Customs optimization provides several benefits for businesses:
- Speed up the clearance of goods through customs: Customs brokers that understand local processes and cultures can work with on-site officials to clear your goods through customs more quickly.
- Reduce duties and tariffs prior to formal entry: Foreign trade zones, free trade agreements, tariff engineering, and product classification can help reduce fees.
- Lower duties and tariffs following entry: Bonded warehouses, temporary import and export, and duty drawback can reduce, eliminate, or even refund duties paid.
- Optimize cash flow: Defer and suspend duty payments until you have the right cash flow in place to pay monies owed.
- Understand customs and product flows: Use systems integration and a customs control tower to understand how goods move and share helpful information.
GEODIS customs insights
“Much of what we do as part of customs optimization is smoothing the entry of goods into the country. When the pre-entry process is handled well, that results in less concern for the post-entry process. We work closely with the individuals, teams, and culture of different importing companies. There’s a big variety in approaches, no two are alike. That’s where the value of customs optimization come from, being flexible enough to adapt to the unique needs and methods of each company.”
Robert Chin Quee, Senior Vice President, Customs Brokerage
Manage federal customs clearance for imported goods
Dealing with the complex rules, regulations, and standards around customs can be daunting for clients. Customs brokers can optimize clearance and compliance by navigating the customs process on a client’s behalf. Licensed brokers stay up-to-date with all customs rules changes, ensuring that imports and exports meet the latest requirements. Brokers will work with US Customs and Border Protection (CBP) to clear goods and obtain any necessary licenses or permits from US agencies.
This can result in faster clearance through customs, reduced costs, and mitigating risks by adhering to all required customs regulations.
Build relationships and optimize for local conditions and regulations
Customs regulations are typically set on a federal level and differ from country to country. Customs brokers are familiar with these formal, high-level regulations, and work closely with clients, agencies, and other stakeholders to optimize processes accordingly. In addition to these overall standards, customs practices, procedures, and culture can vary at a local level. The “way we do things” will vary between the entry ports.
Local customs brokers will also optimize for regional conditions and variances. Brokers with a presence at US ports and points of entry will develop relationships with on-site CBP and other agency officials. Understanding these port-by-port subtleties helps brokers integrate with local customs processes, optimizing the flow of goods through these points of entry.
Automate customs processes to increase efficiency and reduce overheads
Automation can drastically improve efficiencies. Customs brokers use best practices and economies of scale to collect, process, manage, and file customs clearance paperwork. This includes integration with CBP and other software systems for the rapid transfer of information. Customs brokers can drive cost savings through automation by eliminating delays and reducing the work required to clear products.
Classify products to ensure the correct calculation and payment of tariffs
Products are classified according to the Harmonized Tariff System. CBP then levies duties based on product classification, country of origin, trade agreements, quantity of goods, and various other factors. A broker can ensure that products are classified correctly and advise on the duty to be paid and possible ways to reduce those fees.
Pay duties, tariffs, and fees on behalf of clients
A customs brokerage will pay customs tariffs, duties, and other fees directly to CBP and other agencies on behalf of clients. Brokers can advise importers on how to align duty payments with the client’s schedule to reduce the overhead of keeping up with duty payment deadlines, ensuring that fees are paid correctly and on time. Depending on client needs, brokers can also suggest several approaches that can suspend or minimize customs payments.
Use tariff engineering to reduce duties and taxes
Customs specialists can advise companies on manufacturing changes to reduce duties paid when importing goods. This is known as tariff engineering and involves making small changes to the design and manufacture of products that reclassify those finished goods into a lower tariff band. When the goods are imported, duties are calculated based on the reclassified product, resulting in cost savings.
Understand free trade agreements to take advantage of lower tariffs
Free trade agreements allow for the transfer of goods between partner countries, with minimal or no tariffs charged. The US is a partner in many free trade agreements, and importing goods from certain countries can result in very significant cost savings.
Implement foreign trade zones to avoid duty
Foreign trade zones (FTZs) are designated warehouses that allow for the import, storage, transfer, and export of goods without having to pay duties or other taxes. FTZs are considered to be “outside” of US customs territory, and certain product types can move into and through an FTZ without having to go through customs entry procedures. Goods only go through customs clearance when they are removed from an FTZ, typically into the US marketplace. A customs broker can integrate with local FTZ warehouses to minimize or eliminate duty payments on stored products.
Move goods to customs-bonded warehouses to defer duty payments
A customs-bonded warehouse is a secure facility that stores goods still under customs control. This allows importers to defer tariffs, duties, taxes, and other payments until imported goods are sold or removed from the bonded warehouse. Some customs brokers integrate with bonded warehouses to help clients delay payments until a time that’s optimal for their cash flow and schedule.
Manage temporary import and export to avoid duty and taxes
Temporary import and export arrangements allow clients to bring goods into the country and send them out again on a limited timeline, thereby avoiding paying duty or taxes. Clients can hold goods in storage for up to three years under a temporary import and can either re-export or destroy them in that time to limit financial exposure. Under some circumstances, clients can even make use of products within a country and then export them, provided the goods do not enter the country’s market, typically by avoiding selling them.
Temporary import and export essentially “suspends” the duties, tariffs, and other fees that would normally be due on goods, and is a very effective way to optimize for costs.
Claim refunds via duty drawback for re-exported or destroyed goods
Duty drawback allows importers to get a refund of duties paid if they re-export or destroy imported goods. Products can be re-exported in their original form, or manufactured into a new product and exported for a refund of the import duties paid. Goods can also be destroyed prior to sale, and an importer can claim a refund. A customs broker will claim a duty refund on behalf of a client, and refund claims can be made up to five years after goods are originally imported into the US.
Track customs clearance and share data via a customs control tower
A customs control tower provides a central monitoring and data-sharing tool that clients, brokers, and supply chain partners can use to track products. This allows clients and other stakeholders to have “one view of the truth” related to their global shipments, so they can understand and share customs information to simplify import and export management.
Transfer and share data across software and systems
Customs brokerage can often involve disparate systems and data management across many supply chain businesses, logistics providers, ports, federal agencies, and other stakeholders. A broker can provide data sharing across systems, allowing integration and visibility, leading to faster clearance and greater cost control.
Integrate with downstream supply chain and logistics services
Many licensed customs brokers are part of larger supply chain businesses and integrate their clearance services with a complete third-party logistics solution. Clients can take advantage of downstream collection, storage, picking, packing, and distribution of imported goods to end customers. This significantly reduces the overhead of importing and managing products, saving clients time, money, and hassle.
GEODIS customs insights
GEODIS highly values our reputation and relationships with CBP, at both national and local levels. We are very engaged with CBP and other federal agencies and work hard to build and maintain mutually beneficial relationships. Our engagement and commitment ensure that our clients have access through GEODIS to the parties and policies that affect import and export processes.
GEODIS customs optimization services
GEODIS provides a comprehensive, complete range of customs optimization services, including:
- Clearing goods through customs quickly by providing local services at all key ports and points of entry in the US.
- Classifying products correctly according to the Harmonized Tariff Schedule.
- Paying duties and tariffs on behalf of clients in line with their cash flow schedule.
- Advising on sensible tariff engineering and how clients can make changes to design and manufacturing processes to reduce likely tariff fees.
- Consulting with clients on free trade agreements and using international arrangements to reduce costs when importing and exporting between trade partners.
- Making use of foreign trade zones to align import schedules and duty payments with client needs.
- Offering bonded warehouses to delay tariff and duty payments until goods are removed for sale.
- Allowing for temporary input and export to avoid duty payments on certain types of products.
- Claiming tariff refunds via duty drawback for goods that are re-exported or destroyed.
- Tracking and sharing customs information and product flows via a customs control tower.
- Providing a full range of supply chain services via integrated, end-to-end logistics.
Get in touch with GEODIS today and discover how we can optimize your customs processes.
Frequently asked questions about customs optimization
What are some options to avoid duty payments?
Duty payments can be avoided by taking advantage of free trade agreements that allow for the transfer of goods between trading partners without tariffs being levied. Products can also be imported on a temporary basis, and can then be exported again to avoid duty.
What are some options to suspend duty payments?
Importers have several ways that they can defer duty payments. Prior to import, goods can be held in a foreign trade zone, meaning they have not yet formally been imported into the US, so tariffs would not be due. Following import, goods can be held in a bonded warehouse, where duties only become payable when goods are removed from that warehouse.
How can duty payments be refunded?
Fees can be reclaimed through the duty drawback process. When goods are received into the US, the importer pays tariffs on those products. If those products are then re-exported, either in their original or a manufactured form, the importer can make a duty drawback claim within five years of the original import. This can refund up to 99% of the duties paid. Duty drawback also applies if goods are destroyed after being imported.
How can tariff engineering help reduce duty payments?
Tariff engineering makes changes to the design and manufacture of a product to place it into a lower tariff band and reduce the potential duties paid. For example, “Product A” is manufactured from certain goods and attracts a tariff rate of 4%. But, some small changes to the finished product may instead allow it to be classified as “Product B” which attracts a lower tariff rate of 3%. Tariff engineering would then save duty costs of 1% for every product.
Does GEODIS provide a local presence at US ports and points of entry?
GEODIS US customs brokerage operates in 13 offices throughout the country. Local practices vary between ports, and our brokers maintain strong working relationships with on-site customs officials. This facilitates the smooth flow of cargo within and through each point of entry.
