The impact of rising inventories
From a cost perspective, the budgeted costs for transport and insurance will affect the customs value and therefore lead to for example increased duties and VAT, if applicable. In addition, the budgeted costs may not meet your organization's or your customer's cost reporting expectations, depending on the Incoterms agreed and used. In the event that third parties are engaged for the import brokerage through representation and perhaps using your own guarantee, pending financial guarantees need to be reviewed to cover the additional sourcing that affects customs brokerage. I would advise Customs managers to alert senior management to these potential and exceptional budget misstatements and to manage the financial impact.
Things will get even more complicated if the goods have not been released for free circulation directly. If the sourced goods are under Customs supervision (for example via a bonded warehouse), the average amount of (reserved) duties will increase and this may have consequences for current agreements with customs (for example the financial customs guarantees). Many importers have also been given a forfeit permit for determination of the customs value (granted and based on a former period). For the budgeting of this lump sum for the coming calendar year, the calculation of transport and insurance costs needs to be reviewed with extra attention for these enormous cost increases and impact on the aforementioned calculations.
Looking at the increased inventories it becomes more interesting to estimate and assess the current import and export flows where your organization can benefit from import simplifications, authorizations and use of preferential origin. Changes in supply chain and sourcing can also affect customs handling and costs in different ways. Food for thought in my next article.
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Source: Supply Chain Movement
Head of Customs & Trade Affairs
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