Customs

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A customs officer in Amsterdam Airport Schiphol checks the luggage of an incoming traveler. Netherlands Customs Douane Schiphol Airport.jpg
A customs officer in Amsterdam Airport Schiphol checks the luggage of an incoming traveler.
Vienna Convention road sign for customs Vienna Convention road sign C16-V1 (Customs-EN-FR).svg
Vienna Convention road sign for customs

Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. [1] [2] Traditionally, customs has been considered as the fiscal subject that charges customs duties (i.e. tariffs) and other taxes on import and export. In recent decades, the views on the functions of customs have considerably expanded and now covers three basic issues: taxation, security, and trade facilitation. [3]

Contents

Each country has its own laws and regulations for the import and export of goods into and out of a country, enforced by their respective customs authorities; the import/export of some goods may be restricted or forbidden entirely. [4] A wide range of penalties are faced by those who break these laws. [5]

Overview

Officers from US Customs and Border Protection boarding a ship CBP female officers going aboard a ship.jpg
Officers from US Customs and Border Protection boarding a ship

Taxation

The traditional function of customs has been the assessment and collection of customs duties, which is a tariff or tax on the importation or, at times, exportation of goods. Commercial goods not yet cleared through customs are held in a customs area, often called a bonded store, until processed. Authorized ports are usually recognized customs areas.

Trade facilitation

A more recent objective of customs has been trade facilitation, which is the streamlining of processing of import and export of goods to reduce trade transaction costs. The contemporary understanding of the “trade facilitation” concept is based on the Recommendation No. 4 of UN/CEFACT “National Trade Facilitation Bodies”. [6] According to its provisions (para. 14), [6]

facilitation covers formalities, procedures, documents and operations related to international trade transactions. Its goals are simplification, harmonization and standardization, so that transactions become easier, faster and more economical than before.

Security

The Finnish police, customs and border guard working together in 2006. Prt-yhteistyo.jpg
The Finnish police, customs and border guard working together in 2006.

The September 11, 2001 terrorist attacks in the United States has become the cardinal factor in prompting a significant strengthening of the security component of modern customs operations, after which security-oriented control measures for supply chains have been widely implemented for the aims of preventing risk identification. At airports today, customs functions as the point of no return for all passengers; once passengers have cleared customs, they cannot go back. Anyone arriving at an airport must also clear customs before they can officially enter a country. Those who breach the law will be detained by customs and likely returned to their original location. [7] The movement of people into and out of a country is normally monitored by migration authorities, under a variety of names and arrangements. Immigration authorities normally check for appropriate documentation, verify that a person is entitled to enter the country, apprehend people wanted by domestic or international arrest warrants, and impede the entry of people deemed dangerous to the country.

The most complete guidelines for customs security functions implementation is provided in the World Customs Organization Framework of Standards to Secure and Facilitate Global Trade (SAFE), [8] which has had five editions in 2005, 2007, 2010, 2012, and 2018, respectively.

Privatization of customs

The customs-and-duty house at the port of Haifa, Israel Orrling of CentralHFA 15.jpg
The customs-and-duty house at the port of Haifa, Israel

Customs is part of one of the three basic functions of a government, namely: administration; maintenance of law, order, and justice; and collection of revenue. However, in a bid to mitigate corruption, many countries have partly privatised their customs. This has occurred by way of contracting pre-shipment inspection agencies, which examine the cargo and verify the declared value before importation occurs. The country's customs is obliged to accept the agency's report for the purpose of assessing duties and taxes at the port of entry.

While engaging a pre-shipment inspection agency may appear justified in a country with an inexperienced or inadequate customs establishment, the measure has not been able to plug the loophole and protect revenue. It has been found that evasion of customs duty escalated when pre-shipment agencies took over. [9] It has also been alleged that involvement of such agencies has caused shipping delays. [4] Privatization of customs has been viewed as a fatal remedy. [9] In many countries, import and export data are issued on the basis of national laws (Transparency Laws / Freedom of Information Act ). [10]

There has, however, been some speed bumps when transitioning customs over from the public to private sector. Factors such as an incompetent private sector, government's reluctance to change the traditional roles of customs, neglecting priority-setting and lack of transparency in the transition process have slowed the rate at which the public to private transition has taken place. [11]

Red and green channels

Customs control zone at Sheremetyevo International Airport, Moscow Oblast, February 2019 20190221 160044 Sheremetyevo Airport terminal D February 2019.jpg
Customs control zone at Sheremetyevo International Airport, Moscow Oblast, February 2019

In many countries, customs procedures for arriving passengers at many international airports, ports and some road crossings are separated into red and green channels. [12] [13] Passengers with goods to declare (carrying goods above the permitted customs limits and/or carrying prohibited items) go through the red channel, while passengers with nothing to declare (carrying goods within the permitted customs limits and not carrying prohibited items) go through the green channel. However, entry into a particular channel constitutes a legal declaration, so that if a passenger going through the green channel is found to be carrying goods above the customs limits or prohibited items, he or she may be prosecuted for making a false declaration to customs, by virtue of having gone through the green channel. Each channel is a point of no return, once a passenger has entered a particular channel, they cannot go back.

Australia, Canada, New Zealand, and the United States do not officially operate a red and green channel system; however, some airports have adopted this layout.

Blue channel

Airports in EU countries also have a blue channel. As the EU is a customs union, travellers between EU countries do not have to pay customs duties. Value-added tax (VAT) and excise duties may be applicable if the goods are subsequently sold, but these are collected when the goods are sold, not at the border. Passengers arriving from other EU countries go through the blue channel, where they may still be subject to checks for prohibited or restricted goods. Luggage tickets for checked luggage travelling within the EU are green-edged so they may be identified. [14] [15] In the recent years usage of the blue channel has become limited mostly to flights between the Schengen Area member states of the EU and the remainder of EU member states, while flights which cross the border of neither the customs union nor the Schengen Area are in practice treated as domestic, and therefore, the people travelling on them do not go through customs channels at all.

Red point phone

All airports in the United Kingdom operate a channel system; however, some airports do not have a red channel, instead having a red point phone which serves the same purpose.

Summary of basic custom rules

Europe

The basic customs law is harmonized across Europe within the European Union Customs Union. This includes customs duties and restrictions. Customs tax from €22 to €150. In addition, see regulations of each member state.

For customs declarations in the EU and in Switzerland, Norway and Iceland, the "Single Administrative Document" (SAD) is used as a basis. [16]

Germany

Up to €22, there are no taxes. From €22 up to €150, it is necessary to pay VAT (EUSt in Germany), which is 7% or 19% depending on the goods. From €150 it is necessary to pay VAT and customs.

Romania

Customs may be very strict, especially for goods shipped from anywhere outside the EU. Up to €10 goods/package.

Italy

Customs in Italy takes additional 22% VAT (Value-added tax) for goods imported from outside the European Union even if the VAT is already paid to the origin country sender.

Czech Republic and Slovakia

Up to €22, there are no taxes. From €22 up to €150, it is necessary to pay VAT (DPH in Czech/Slovak), which is 21%. From €150, it is necessary to pay VAT and customs. Customs may range from zero to 10% depending on the type of imported goods.

Ukraine

Ukraine has had 5 reforms of its customs authorities. The recent one, in 2019, reorganized State Fiscal Service into the State Customs Service. The reform attempt seeks to digitize customs procedures, get market-level wages, innovate customs checkpoints, integrate into EU customs community, open reference database of customs inspections. [17]

The Americas

United States

Predicted US customs revenue
YearPredicted revenue (billion USD)
2017
35
2018
38
2019
41
2020
43
2021
46
2022
47
2023
49
2024
51
2025
52
2026
54
2027
56
2028
58

Source: Congressional Budget Office (April 9, 2018). The Budget and Economic Outlook: 2018 to 2028 (PDF) (Report). p. 72.

Every person arriving in the US is subject to inspection by Customs and Border Protection (CBP) officers for compliance with immigration, customs and agriculture regulations. This public service is administered on almost a million visitors who enter the US daily. [18] Travelers are screened for a number of prohibited items including; gold, alcoholic beverages, firearms and soil. [19] A wide range of penalties face those non-compliers. [20]

The United States imposes tariffs or "customs duties" on imports of goods, being 3% on average. [21] The duty is levied at the time of import and is paid by the importer of record. Individuals arriving in the United States may be exempt from duty on a limited amount of purchases, and on goods temporarily imported (such as laptop computers) under the ATA Carnet system. Customs duties vary by country of origin and product, with duties ranging from zero to 81% of the value of the goods. Goods from many countries are exempt from duty under various trade agreements. Certain types of goods are exempt from duty regardless of source. Customs rules differ from other import restrictions. Failure to comply with customs rules can result in seizure of goods and civil and criminal penalties against involved parties. The CBP enforces customs rules. All goods entering the United States are subject to inspection by CBP prior to legal entry.

Uruguay

Uruguayan Customs place a cap on the importation of personal packages to up to 3 packages of a nominal value of no more than US$200 which can be entered into the country without extra charge. For a package to be included in the 3 free slots, the addressee must register the package with the Uruguayan Postal Service linking the tracking code, their address, national ID number phone and email address. Should a package arrive prior to registration the package must pay the 60% tax and no less than US$10. Any personal package worth more than US$200 or after the 3 free packages, must pay a 60% tax. This severely limits the public's ability to buy products online. Due to Uruguay's small population and market, many popular and specialty products are unavailable in the regular marketplace, forcing Uruguayans to strategically pool several purchases together and max each one of their free slots.

Argentina

Customs may be very strict. Goods valued up to US$500 [22] brought in by plane and up to US$300 by sea or land are free of duties and taxes, cellphones and laptop computers are duty free regardless of their value only one per passenger, clothing and other personal use items are free of taxes. Above those values, tax is 50% of the value of all acquired goods summed up.

International Customs Day

Customs, Tolls or Duties of the Corporation of Kinsale (1788) Customs, Tolls or Duties - Corporation of Kinsale.jpg
Customs, Tolls or Duties of the Corporation of Kinsale (1788)

International Customs Day recognizes the role of agencies and customs officials in maintaining border security around the world. In focuses on the workers and their working conditions as well as the challenges that some customs officers face in their job. [23] Custom agencies hold employee appreciation events where custom officers are recognized for their work. Several agencies also hold events for the public where they explain their jobs and responsibilities in a transparent manner. [23]

Each year, at the end of January is celebrated the International Customs Day with a particular theme, as follows:

See also

Related Research Articles

<span class="mw-page-title-main">U.S. Customs and Border Protection</span> Department of the United States Federal Government

United States Customs and Border Protection (CBP) is the largest federal law enforcement agency of the United States Department of Homeland Security, and is the country's primary border control organization. It is charged with regulating and facilitating international trade, collecting import duties, and enforcing U.S. regulations, including trade, customs, and immigration. CBP is one of the largest law enforcement agencies in the United States. It has a workforce of more than 45,600 federal agents and officers. It is headquartered in Washington, D.C.

<span class="mw-page-title-main">Border trade</span>

Border trade, in general, refers to the flow of goods and services across the border between different jurisdictions. In this sense, border trade is a part of the normal trade that flows through the ordinary export/import legal and logistical frameworks of nations and smaller jurisdictions. However border trade specifically refers to the increase in trade in areas where crossing borders is relatively easy and where products are significantly less expensive on one side of the border than the other – often because of significant variations in taxation levels on goods. Common items involved in border trade include alcohol, tobacco, medication, recreational drugs, automobiles, automotive fuel, groceries, furniture and clothing.

<span class="mw-page-title-main">Australian Customs and Border Protection Service</span>

The Australian Customs and Border Protection Service was an Australian federal government agency responsible for managing the security and integrity of the Australian border and facilitating the movement of legitimate international travelers and goods, whilst protecting the safety, security and commercial interests of Australians. It was headquartered in Canberra and employed over 5,800 people around Australia and overseas.

<span class="mw-page-title-main">Duty-free shop</span> Type of retail outlet

A duty-free shop is a retail outlet whose goods are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods sold will be sold to travelers who will take them out of the country, who will then pay duties and taxes in their destination country. Which products can be sold duty-free vary by jurisdiction, as well as how they can be sold, and the process of calculating the duty or refunding the duty component.

<span class="mw-page-title-main">New Zealand Customs Service</span>

The New Zealand Customs Service is a state sector organisation in New Zealand whose role is to provide border control and protect the community from potential risks arising from international trade and travel, as well as collecting duties and taxes on imports to the country.

VAT-free imports from the Channel Islands were imports into the United Kingdom from the neighbouring Channel Islands that were exempt from value added tax (VAT), a European Union purchase tax. The exemption was a result of low-value consignment relief (LVCR), a tax relief that applies to low-valued imports into the EU. The UK was a member of the EU from 1973 until Brexit in 2020, but the Channel Islands never became a part of the EU and they did not charge VAT on purchases. Once the UK government had applied LVCR to imports from the Channel Islands, distribution centres were set up and many low-valued goods were exported. The practice was unilaterally brought to an end by HM Treasury in April 2012.

<span class="mw-page-title-main">Trade facilitation</span> Policies intended to encourage trade between nations

Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory objectives. Business costs may be a direct function of collecting information and submitting declarations or an indirect consequence of border checks in the form of delays and associated time penalties, forgone business opportunities and reduced competitiveness.

Custom brokers or Customs House Brokerages are working positions that may be employed by or affiliated with freight forwarders, independent businesses, or shipping lines, importers, exporters, trade authorities, and customs brokerage firms.

<span class="mw-page-title-main">ATA Carnet</span> International customs document

The ATA Carnet, often referred to as the "Passport for goods", is an international customs document that permits the tax-free and duty-free temporary export and import of nonperishable goods for up to one year. It consists of unified customs declaration forms which are prepared ready to use at every border crossing point. It is a globally accepted guarantee for customs duties and taxes which can replace the security deposit required by each customs authority. It can be used in multiple countries in multiple trips up to its one-year validity. The acronym ATA is a combination of French and English terms "Admission Temporaire/Temporary Admission." The ATA carnet is now the document most widely used by the business community for international operations involving temporary admission of goods.

<span class="mw-page-title-main">Isle of Man Treasury</span>

The Treasury of the Isle of Man is the finance department of the Isle of Man Government. It prepares the annual budget for the Government, and also handles taxation, customs and excise, economic affairs, information systems, internal audit, currency and the census in the Isle of Man.

<span class="mw-page-title-main">European Union Customs Union</span> EUs common customs area

The European Union Customs Union (EUCU), formally known as the Community Customs Union, is a customs union which consists of all the member states of the European Union (EU), Monaco, and the British Overseas Territory of Akrotiri and Dhekelia. Some detached territories of EU states do not participate in the customs union, usually as a result of their geographic separation. In addition to the EUCU, the EU is in customs unions with Andorra, San Marino and Turkey, through separate bilateral agreements.

<span class="mw-page-title-main">European Union value added tax</span> EU-wide goods and services tax policy

The European Union value-added tax is a value added tax on goods and services within the European Union (EU). The EU's institutions do not collect the tax, but EU member states are each required to adopt in national legislation a value added tax that complies with the EU VAT code. Different rates of VAT apply in different EU member states, ranging from 17% in Luxembourg to 27% in Hungary. The total VAT collected by member states is used as part of the calculation to determine what each state contributes to the EU's budget.

<span class="mw-page-title-main">Bundeszollverwaltung</span> Customs service of the Federal Republic of Germany

The Bundeszollverwaltung is the customs service of the Federal Republic of Germany. It is also the executive and fiscal administrative unit of the federal government and part of the Federal Ministry of Finance. It was founded in 1949 in West Germany. The purpose of the Customs Service is to administer federal taxes, execute demands for payment on behalf of the federal government and federal statutory corporations, monitor the cross border movements of goods with regard to compliance with bans and restrictions, and prevent illicit work.

When goods are imported into a European Union country from a non-EU territory, those goods may be subject to customs duty, excise duty and value-added tax.

The United States imposes tariffs on imports of goods. The duty is levied at the time of import and is paid by the importer of record. Customs duties vary by country of origin and product. Goods from many countries are exempt from duty under various trade agreements. Certain types of goods are exempt from duty regardless of source. Customs rules differ from other import restrictions. Failure to properly comply with customs rules can result in seizure of goods and criminal penalties against involved parties. The United States Customs and Border Protection (CBP) enforces customs rules.

A customs declaration is a form that lists the details of goods that are being imported or exported when a citizen or visitor enters a customs territory. Most countries require travellers to complete a customs declaration form when bringing notified goods across international borders. Posting items via international mail also requires the sending party to complete a customs declaration form.

<span class="mw-page-title-main">Value-added tax</span> Form of consumption tax

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to, and is often compared with, a sales tax. VAT is an indirect tax because the person who ultimately bears the burden of the tax is not necessarily the same person as the one who pays the tax to the tax authorities.

Customs Regulations in Thailand is a combination of requirements affecting on import and export of production across the border of Thailand. Thailand has a system of “green” and “red corridor”. “Green corridor” can be used by person transferring goods which are not subject to a customs declaration. “Red corridor” is provided for persons transferring goods which are subject to a customs declaration. For instance, goods that should be paid by customs taxes, forbidden goods or goods that required a special authorization.

<span class="mw-page-title-main">Import One-Stop Shop</span>

Import One-Stop Shop (IOSS) is an electronic portal in the European Union which serves as a point of contact for the import of goods from third countries into the European Union. The scheme aims to simplify the declaration and payment of value-added tax when importing goods into the European Union (EU).

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