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[Clearance Procedures for Export and Import, etc.]
Customs clearance means that relevant goods are exported, imported and returned in accordance with the procedures prescribed by relevant Acts.
In detail, it refers to a series of procedures after export and import were declared to Customs, which is followed by the inspection of submitted documents and of export/import goods and transportation means, and collection of customs duty and approval of export and import, etc.
In most of countries, such clearance procedures are mostly consigned to a clearance expert. That's why even traders who have engaged in the trade business for a long time aren't well aware of the clearance affairs.
However, even a single good may not cross the border without going through customs clearance. Therefore, it's beneficial to comprehend a rough outline of clearance system for your own good in case of emergency.
From this perspective, hereafter, other details related to the clearance as well as clearance system will be outlined.
Most of explanations which will be made hereafter are included in the Acts of each country based on international agreements to which each country has acceded. That's why each national system has the similarity with those of other countries, but the difference between systems may be significantly distinct in the areas which aren't prescribed by said agreements.
ㅇClearance affairs of export and import in Taiwan are controlled by the Directorate General of Customs under the Ministry of Finance, and its detailed matters are processed in four Customs Offices including Kaohsiun, Taichung, Taipei, Keelung Customs Office(hereinafter, referred to as "Customs")
ㅇAs for Taiwan, it has currently been operating a cargo clearance automation system in a quite efficient manner through the computerization and digitalization of clearance system and its related affairs because trade sector accounts for a great deal of economy in Taiwan. (T/V System : Trade Value Add Network)
■ Basic Flow of Taiwan's Export and Import Clearance
In Taiwan, export and import clearance system is categorized into 2 major parts, that is, ordinary clearance and special clearance. Special clearance is again divided into subcategories such as clearance for postal matters, clearance for travelers, clearance for express cargo, etc. Hereinafter, ordinary clearance will be outlined first, and then special clearance later.
Fundamental clearance procedure of Taiwan is as below, and all sorts of export and import goods shall go through such clearance formalities.
1) Procedures for export clearance
Acquirement of goods ⇒ export declaration to Customs ⇒ determination of clearance type(C1, C2, C3) ⇒ implementation of inspection process(the one of three options among omittance of inspection, documentary examination, inspection of goods) ⇒ export license ⇒ shipment and departure
2)Procedures for import clearance
Arrival of goods ⇒ placing goods in a CY or bonded storage ⇒ import declaration at Customs ⇒ inspection and determination of clearance type of Customs (C1, C2, C3) ⇒ implementation of inspection process(the one of three options among from omittance of inspection, documentary examination, inspection of goods) ⇒ import permit ⇒ release of goods ⇒ post-tax audit
※In Taiwan, there is no item on whose customs duty is levied at the time of exportation. Therefore, export clearance may be proceeded rapidly thanks to simpler procedures than those of import. Hereinafter, some controversial issues in import clearance will be simply outlined.
☉ Placing goods in a bonded area
All sorts of goods which are imported to Taiwan shall be placed in state-designated bonded areas or container yards(CY) to be eligible for import declaration.
With respect to export, export goods shall be stored in a bonded area designated by Customs, and export declaration shall be filed. Exceptionally, integrity declaration enterprises, etc. which have high trustworthiness may make an export declaration while placing such goods in their own storage.
☉ Export and import declaration
ㅇExporter and importer shall make export or import declaration by submitting documents containing about 50 items such as the name, quantity, and price, manufacturers, destination, location of goods, etc. and any other required documents to Customs.
Import declaration shall be made within 15 days from the following day of the date on which import cargo entered to the port of Taiwan. Penalty for delayed declaration shall be imposed in the case where said period of declaration is exceeded. If relevant importer fails to declare an import within 35 days from the date of entry of port, Customs will dispose of import cargo to appropriate customs, etc.
ㅇDeclaration for import and export is available by the submission of documents, but generally, such declaration is made through comprehensive electronic system(T/V System) concerning export and import declaration, and cargo, storage and port affairs, and any other particulars.
ㅇFOB price shall be stated for export declaration, and CIF price for import declaration, which will be utilized as a standard of assessment. Provided, that in Taiwan, customs duty is levied on import goods currently, and no duty is levied on export goods.
2) Required documents
Following documents shall be retained or attached at the time of export and import declaration.
ㅇB/L, AWB - for import declaration
ㅇData to determine standard of assessment such as freight bill, insurance bill, etc.
ㅇIf there are any additional clearance requirements, certificates related to it, import license, etc.
ㅇCertificate of Origin(C/O) - required in the case where rules of origin are applied such as preferential tariff, conventional tariff, etc.
ㅇPower of Attorney - required for the case of agent clearance
ㅇData necessary for clearance and date required by Customs
3) Declarants and competent Customs
ㅇIn Taiwan, exporters or importers may make export and import declaration on their own, or a customs broker who is eligible for performing clearance affairs may act as a proxy. The latter is a common way, in reality.
ㅇDeclaration for export and import shall be made to the competent Customs where relevant cargo is placed.
☉ Clearance audit of Customs
The term "audit(inspection)" as used in the following paragraphs refers to a provisional examination which is conducted to every goods as the exercise of state police power. For example, it's different from mandatory inspections such as quarantine and inspection of foods. Customs conducts inspections concerning the conformity of declaration, compliance of various legal requirements, submission of required documents, and other possible criminal intentions, etc. Details of them are as the following:
1) Determination of clearance audit type
The Customs Act of Taiwan prescribes that with respect to the cargos related to import, export and transit trade, an audit(inspection) may be performed according to ex officio or upon request as long as relevant cargo isn't exempt from audit(Article 33 of the Customs Act).
In Taiwan, clearance audit of Customs is made through the one of following three options by using professional computerized system. Generally, the closer to the start of the first trading, and the closer to the original handling items, and the closer to a crime-ridden district, and the more law violations, there is a higher possibility to undergo inspection by type C3(In Taiwan, all export and import businesses are classified into 3 categories; low-risk business(category L), general business(category G), high-risk business(category H). Such categories are again divided into subcategories to determine the type of clearance.
ㅇType C1: exemption from document examination, exemption from inspection of goods - Non-audit clearance
ㅇType C2 : document examination, exemption from inspection of goods
ㅇType C3 : document examination, inspection of goods
2) Omittance of examination (Type C1)
It means that clearance audit is completed without document examination or inspection of goods with respect to export and import goods. An audit may be omitted for the goods which are used by the president or vice-president of Taiwan, official supplies or personal effects of diplomats who reside in Taiwan, and other articles whose approval for the exemption from audit is granted. Such approval means that Customs gives the permission to certain goods whose exemption from audit has been applied for, covering military supplies, materials for public business use, equipments of domestic universities for studies use, donated materials, etc.
With respect to the goods whose audit is exempt, Customs immediately permits customs clearance once customs duty, etc. are paid.
3) Documents examination(Type C2)
Under this examination, Customs requires export and import declarants or clearance agents to lodge related documents on relevant declaration, and to provide explanations regarding such submitted documents. If Customs order for the submission of documents is given, a declarant or his/her agent usually visits to Customs to lodge documentations such as packing list, container shipment bill, catalogue, drawing, notarization, etc. and provides an explanation to the questions of Customs.
If no irregularity is found at the result of document examination, Customs grants a license, and for the contrary case, inspection of goods is followed.
4) Examination of documents and goods(Type C3)
ㅇInspection of goods is required in the cases where Customs officials may not ensure the validity of declaration or the compliance of various requirements with documents examination only, or where it's deemed necessary to make sure the possibility of concealed goods other than declared goods and the consistence between declared goods and actual goods, etc. Such inspection of goods is classified into simplified inspection, general inspection, and precise inspection, etc.
ㅇA declarant of import cargo shall apply for the inspection of Customs within 10 days from the date of import declaration with respect to the goods which are targeted for inspection of goods. If no application is filed during such period, Customs may carry out an inspection in the presence of storage supervisors of relevant goods without the participation of relevant import declarant.
ㅇInspection of goods, usually, is carried out at the place where relevant goods are stored, but if necessary, a declarant has an obligation to bring such goods to the place in which inspection will be conducted.
ㅇA declarant shall make all preparations necessary for inspection of goods, and the full cost for such inspection falls upon the declarant(the cost for loading and unloading, the personnel placement for opening store and packaging, cost for repackaging, the securement of equipments, etc.).
In the course of inspection of goods, a declarant or his/her agent is required to attend on-site inspection to make sure the validity of such inspection, and to answer the questions Customs officials might ask.
ㅇDuring the inspection, in the event relevant goods are confirmed as those of People's Republic of China, the words "People's Republic of China", and its flag, party insignia, etc. are required to be deleted before import license is granted(the same will not apply to the simplified Chinese.).
ㅇAfter the completion of inspection of goods, based on the result of inspection, declared matters are corrected, or the permission of customs clearance is determined. With regard to the goods subject to the inspection of goods, certain cost may be charged additionally, and a day or less is taken to process such goods even if no irregularity is found during the inspection of goods. In addition, there is an extra need for the personnels to deal with such matters, which is such a burdensome process for declarants in many ways. Accordingly, it's recommendable to faithfully meet legal requirements in the usual, and to be very cautious not to be listed as the one of untrustworthy declaration businesses.
☉ Payment of customs duty, etc. and pledging of security(for importation)
In Taiwan, customs duty for import only is being imposed, but there are currently no customs duty imposed for export. Therefore, it's not required to pay customs duty, or to provide the security particularly for exportation.
1) Clearance after payment - Declaration and payment system(pre-clearance, post-audit)
Taiwan has adopted a declaration and payment system under which an importer himself/herself declares item name(HS code) and quantity of goods, standard assessment, tax amount, etc. and pay the amount thereby(The principle of declaration and tax payment). That is, both import declaration and tax declaration are made at the same time, and internal taxes(including trade promotion service fee, business tax, liquor tax, tobacco tax, health and welfare charge, and special goods and services tax) other than customs duty are required to be paid simultaneously.
Such procedures are proceeded in an order, import declaration(tax declaration) ⇒ payment of customs duty, etc. ⇒ import permit ⇒ release of goods.
Inspection regarding the adequacy of declared amount such as customs duty, etc. is carried out after customs clearance of goods, in principle, but with the exception of some cases, pre-inspection on tax amount may be conducted.
2) Tax payment after customs clearance- Security system
It depends on the choice of declarants whether to provide the security for customs duty, etc. at the time of import clearance. Such security may be provided by cash, loan, warranty, etc. If such security is provided, Customs allows customs clearance, and collects customs duty later. In the event that customs duty, etc. fail to be paid within a fixed period, Customs may appropriate customs duty, etc. with the security provided.
The procedure is proceeded in the following order: import declaration(tax declaration) ⇒ pledge of security ⇒ import permit ⇒ release of goods ⇒ payment of customs duty, etc. within 14 days.
☉ License for export and import
License for export and import means that Customs gives the permission for customs clearance by recognizing that declared contents are legitimate and fair. As the meaning of honoring, a notice of license is issued to relevant declarant.
As for exportation, at the point where an export license is granted, domestic goods are turning into foreign goods in nature. It's impossible to load relevant goods until an export license is granted.
As for importation, at the point where an import license is granted, foreign goods are turning into domestic goods in nature. The goods whose import license is granted may be allowed to be released from bonded area(storage).
☉ Audit for tax amount
Taiwan has adopted declaration and payment system with respect to importation, in principle, so tax amount is determined primarily based on the declaration of importer. But, it's difficult for Customs to figure out the accuracy of such declaration.
By considering this, Customs adopted tax audit system under which Customs carries out audit on whether an import declarant declared and paid customs duty, and other matters exactly.
1) Pre-tax audit
Customs may conduct an audit on tax amount before import license is granted with respect to any cases falling under the following conditions, which is called pre-tax audit(pre-audit, post-clearance).
ㅇWhere declared goods are inconsistent with actual goods;
ㅇWhere clear irregularities are found in declared price of importer;
ㅇImport goods from untrustworthy business;
ㅇImport cargo, etc. such as goods for exhibition whose real deal isn't made.
2) Post-tax audit
It means that Customs examines and ensures the accuracy of tax amount after customs clearance, and most of goods in Taiwan are subject to the post-audit because Taiwan has adopted declaration and payment system, in principle(pre-clearance, post-audit).
Under the post-audit system, Customs must notify relevant declarant of the possibility of post-tax audit within 6 months after customs clearance, and it may perform post-tax audit within 2 years after such notice. If no notice is offered to declarant within 6 months, previously paid tax amount is regarded as the final amount.
■ Assessment Standard and Customs Valuation
☉ Assessment standard
Assessment standard means the value or quantity which serves as the basis for determining tax amount. In principle, the value or quantity of goods at the time of import declaration become assessment standard(amount of customs = assessment standard × tariff rate).
Ad valorem duty is a tax based on the value of an item, and a specific duty is a tax based on the quantity of an item, regardless of price. And combined duties which ad valorem duty and a specific duty are combined are based on both the value and quantity of an item.
With respect to an ad valorem duty, the price which serves as an assessment standard is called dutiable value. Taiwan has determined CIF price(FOB price + international freight + freight insurance premium) as a dutiable value for import, and FOB price(no target items) as a dutiable value for export.
☉ Customs valuation
A customs valuation refers to the procedure and method to determine the price of import goods, that is, a dutiable value which serves as an assessment standard(in particular, it becomes an issue in an specific duty).
If a customs valuation is different from each country, the unity of international trade may not be fulfilled easily. By taking it into account, when the WTO was launched, it completely integrated new Valuation Agreement into the WTO system under which the signatories to the new Valuation Agreement only may be eligible for acceding to the WTO. By doing so, a member country of WTO may use internationally unified customs valuation system. Taiwan, as one of member countries of WTO, may be subjected to the following regulations.
(Provided, that each country may determine whether to include international freight and insurance into a dutiable value at its discretion. With respect to a dutiable value for importation, the U.S. adopted FOB price which doesn't include such elements into a dutiable value, and most countries such as Japan, China, Taiwan, EU, etc. adopted CIF price which includes freight and insurance.)
WTO Valuation Agreement specifies 6 methods of customs valuation. By doing so, in the case where the dutiable value cannot be determined by the first method, it's determined by sequential application of the valuation method in descending order.
ㅇThe first method : dutiable value based on the transaction value of relevant goods
ㅇThe second method : dutiable value based on the transaction value of identical goods
ㅇThe third method : dutiable value based on the transaction value of similar goods
ㅇThe fourth method : dutiable value based on domestic sale value
ㅇThe fifth method : dutiable value based on estimated value such as production costs of relevant goods
ㅇThe sixth method : dutiable value based on reasonable standards
Most of customs duties are pertaining to an ad valorem duty, and the first method accounts for a majority of the methods for dutiable value determining assessment standard. On the other hand, the first method is often misunderstood by relevant trader as a method under which customs amount may be adjustable because such method is based on the transaction value on the list of Invoice which is declared by the importer.
But, the first method may easily turn out a great embarrassment if due attention isn't paid to detailed information on that because it has plenty of application requirements. That is, actual transaction value shall not be affected by special circumstances, and it shall be the amount to which added elements is added, and if dutiable value cannot be determined by the first method, the second method or the following methods shall be applied, etc.
In consideration of continuous and repetitive nature of trading, traders need to pay attention to customs valuation because if any irregularity is found in the course of customs valuation, relevant trader is subjected to the criminal punishment as well as significant surcharge.
■ Items Classification and Tax Rate
☉ Commodity classification system
Taiwan also has been using HS(Harmonized System - in short, CCC) code system in accordance with the HS agreement, and currently, it's using 11 digits of code system(Chinese Commodity Classification). Compared to other countries, as for Taiwan, various statutory requirements and related systems are well corresponding to respective HS code.
☉ The type of tariff rate
CCC(Chinese Commodity Classification - HS) of Taiwan classifies various tariffs imposed on import goods currently into the first column, the second column, the third column, and specifies various tariff rates thereby. Other than those, there are countervailing tariff, anti-dumping tariff, retaliatory tariff, emergency tariff, etc., which are applied in the special circumstances.
ㅇThe first column contains tariff rates which are applied to the signatories to the WTO Agreement, and to the signatories to WTO Conventional Tariffrate and to the countries which signed Mutual Reciprocal Agreement with Taiwan.
ㅇThe second column contains tariff rates between the countries which concluded FTA(Free Trade Agreement) with Taiwan and preferential tariff which is applied to least developed countries.
ㅇThe third column contains base tariff.
In the case where tariff rates are competitive with respect to identical goods, application order prioritizes on the lowest tariff of tariff rates in the first column and the second column, and if relevant item isn't applied to tariffs in both the first and second column, the third column is applied.
☉ Other internal taxes which are imposed at the time of import
Internal taxes other than customs duty are as follows(6 internal taxes):
ㅇTrade Promotion Service Fee : Service cost for trade promotion : it's applied to
all items, not just duty-free items, and to export as well as import.
ㅇCommodity tax : It's a tax with the nature of excise tax which is levied on
specific import goods, covering up to 400 items by HS code of Taiwan.
ㅇTobacco tax, Health and Welfare Charge : it's a tax levied on import tobacco,
and the items on whose health and welfare tax is levied are liable to pay
tobacco tax as well.
ㅇLiquor tax : it's levied on import liquors, based on a specific duty.
ㅇBusiness tax : it's similar with value added tax(VAT) of other countries. Tax is
collected against the value added in the distribution phase of goods, which is
levied on every goods.
ㅇSpecial Goods and Services Tax : It's a tax levied on items such as specific
luxuries, vehicles, etc. whose import amount exceeds a certain level.
■ Regulations for Export and Import
Export and import of Taiwan are regulated by item based on individual Act, focusing on the Trade Act and the Customs Act.
Extra notes are required for regulations on export and import.
☉ Export regulations
Regulations for export are providing restrictions by item with respect to the export from Taiwan to foreign countries. Up to 1000 items by HS code of Taiwan are subject to the regulations for export, and the reasons for regulations are to perform the duties between nations, to protect the endangered flora and fauna, and to achieve administrative purposes of each Act, etc.(relating to about 20 Acts).
The items subject to export regulations, in many cases, are required to obtain proof documents such as an export license, etc. In addition, restrictions over the goods infringing intellectual property right, and goods violating rules of origin, etc. are rigorously applied.
☉ Import regulations
Import regulations for Taiwan is a system under which import regulations prescribed by about 50 Acts including the Trade Act are integrally managed. Up to 5000 items by HS code of Taiwan are under the control of import regulations, and most of items may be cleared only if meeting the requirements by item such as an import license.
■ Special Clearance
☉ Simplified clearance
Under simplified clearance system, relevant goods may be cleared in simplified ways including omitting export and import declaration, and other simplified ways in the cases where trading amount is small, or payment itself isn't made, or expedited clearance is required. Target items cover traveller's personal effects, containers, governmental supplies which may be exempt from customs duty, etc.
☉ Clearance for postal matters
Postal matters less than a certain value(less than U.S. $ 5000) may pass through simple inspection at a Customs post office without the formalities of declaration for export and import and license process. With respect to more than that amount, all items shall go through a regular procedure in accordance with the Customs Act.
☉ ATA Carnet Clearance
The term "ATA" is a merger word of Admission Temporaire(French) and Temporary Admission(English), referring to provisional duty-free customs clearance system of goods.
Under ATA clearance system, member nations of ATA Agreement may make clearance system rapid and convenient by replacing complicated clearance documents and a security with a certificate. Therefore, through ATA Carnet clearance, relevant person isn't required to not only fill out documents for clearance, but also to provide customs duty, surcharges, security, etc. for Customs of importing country, enabling faster and smoother customs clearance in any member countries of ATA Agreement.
Target items are covering product samples, professional equipments, goods for exhibition, etc. and ATA certificate is valid for maximum 1 year without the possibility of extension.
※ Signatories: the United States, China, Japan, Taiwan, EU, etc.
☉ Special clearance of express cargo
Customs clearance for express cargo refers to a system under which expedited and simplified clearance may be made at dedicated express area or air cargo terminal, etc. in the case where quantity, amount, weight, etc. of goods are complying with regulations.
Express cargo means a cargo less than 70 kg by weight, with the conditions that they shall be transported by registered express business, and not be pertaining to import prohibited goods.
With respect to express cargo complying with these requirements, such cargo may be cleared within 24 hours, and be declared prior to export and import, and be cleared with a simplified declaration combining shipping list and notification form.
☉ AEO System
This system was introduced by the WCO(World Customs Organization) to reinforce related regulations under the circumstance where clearance procedures at U.S. Customs had been inclined to be delayed by putting strong emphasis on security after 9.11 terror attack(called C-TPAT in the U.S.). AEO certification system was agreed at WCO in 2005 which made all member countries adopt it compulsorily.
The term "AEO (Authorized Economic Operator)" refers to the persons authorized by a Customs authority of each nation in terms of the safety, efforts to comply with the Acts, sincerity, etc. from among supply chain relating to the flow of cargo including import and export shippers, carrier, warehouseman, etc. Enterprises which meet the criteria for a certain level may enjoy the benefits such as alleviated inspection of goods and clearance procedures.
Under AEO system, applicants shall undergo a comprehensive audit including maintenance work around the system, financial situation, document management, security management, and compliance with laws and regulations, freight management. As for small and medium size business, it's not easy to meet such criteria.
※ Since 2007, Taiwan has implemented this system.
■ Other Notes
☉ Timing of import declaration - related to fast clearance
In Taiwan, an import is declared when import cargo arrives and is brought to the bonded area generally. But, it's helpful to use the following system in order to further streamline customs clearance system of import cargo.
ㅇPre-entry import declaration - In order to expedite import clearance procedure, it's allowed to make an import declaration before vessels or aircrafts loaded with import cargo enter to the port of Taiwan.
ㅇDeclaration after entry of port and before arrival at bonded area - An import may be declared after transportation means loaded with import cargo enter to the port of Taiwan, but before relevant goods arrive at the bonded area.
☉ Preliminary audit on HS code before import of cargo
ㅇTaxpayers or their agents, prior to the import of cargo, may apply for audit for HS code, and Customs is required to offer answers with written documents.
ㅇIn the event where taxpayers or their agents need to raise an objection to such audit, they may apply for re-audit to the Directorate General of Customs under the Ministry of Finance.
ㅇExport and import clearance in Taiwan is very rapid compared to other countries, and if any irregularity isn't found and relevant items aren't subject to the inspection, customs clearance procedure is completed in an almost real time.
ㅇMost of clearance is consigned by a customs broker, charging NT$ 700-800 yuan(about USD 23~27).
ㅇInland transportation means from each port and airport to final destination are mostly trucks, taking 24 hours or less as long as there aren't any particular circumstances.
ㅇAny person who intends to run trade business shall register as an exporter with Board of Foreign Trade under the Ministry of Economy.