If you're engaging in international trade, you know the importance of declaring accurate shipment value. Besides, it's not simply about ticking boxes on customs forms—it's also about ensuring smooth sailing for your goods and avoiding potential headaches down the line. After all, accurate shipment valuation is the foundation of seamless customs clearance, keeping your business on the right side of the law and your shipments moving smoothly across borders.
In this blog post, we'll go deeper into the importance of correct shipment valuation, the risks associated with inaccurate declarations, and how you can ensure your shipments are valued correctly every time.
Why is correct shipment valuation crucial?
More than filling out paperwork, declaring the correct shipment value is a fundamental aspect of ethical and successful international trade. But what are the key reasons why you should ensure accurate shipping valuation?
Ensuring fair trade practices
Accurate shipping valuation ensures that importers and exporters comply with international trade laws and regulations. A fair and equitable valuation system ensures that countries are not disadvantaged by imports or exports. Shipment valuation is typically the basis of import duty and tax calculations, ensuring that importers and exporters are not able to circumvent trade agreements or profit unfairly. By complying with customs valuation, importers and exporters are able to protect themselves from legal and financial penalties.
Accurate customs duty calculation
Customs valuation is essential for determining the import duty and tax implications of the transaction. After all, the value of your shipment is typically used to calculate the applicable taxes, such as customs duties, VAT, and excise duties.
If goods are undervalued, the importer will pay lower taxes but risk penalties from the government. Conversely, if goods are overvalued, the importer will pay higher taxes, and it becomes burdensome and costly for the importer.
Compliance with regulations
Customs valuation is used to collect international trade data, which is critical for the compilation of trade statistics. With accurate data, governing bodies are able to identify trends and patterns in international trade, as well as to determine the economic impact of tariffs and other trade measures. Additionally, these statistics give analysts accurate information on the import and export patterns in Indonesia, allowing them to make informed business decisions.
Prevention of fraud
Customs valuation can also be an essential tool in the prevention of fraud. Also, proper customs valuation helps prevent the undervaluing of goods and misreporting of merchandise, which could lead to smuggling, tax evasion, and money laundering. By implementing customs valuation, traders and governments can work together to protect the integrity of the international trade and shipping system.
Maintaining global market competition
Customs valuation is necessary to promote fairness in global market competition, especially since it ensures that domestic industries receive some protection from imports and that there is a level playing field between importers and domestic producers. If the proper value of a shipment is not established and maintained, domestic industries could be driven out of business by less expensive foreign competition.
Risks of inaccurate shipment valuation
Inaccurate shipment valuation can lead to severe consequences for businesses involved in international trade. Besides, when declaring the shipping value accurately, you’re not merely getting the numbers right. Instead, you’re also upholding ethical practices, complying with regulations, and protecting your company's reputation.
But what are the risks associated with incorrect shipment valuation?
Financial penalties
Providing inaccurate or misleading information about the value of your shipment can result in high fines imposed by customs authorities, and these fines can significantly impact your profit margins and disrupt your business operations. Also, the severity of the penalties often depends on the extent of the undervaluation or misrepresentation and whether it is deemed intentional or unintentional.
Legal consequences
In more serious cases, inaccurate shipping valuation can lead to legal repercussions. This can range from delays in customs clearance and shipment holds to potential legal action and criminal charges in cases of deliberate fraud.
Additionally, according to the Indonesian Law No. 10/1995 on Customs, amended by Law No. 17/2006, any person who imports or exports goods without complying with the provisions of the law, including accurate valuation, shall be penalized for smuggling. The penalties for such offenses can include imprisonment of up to eight years and a fine of up to Rp 500,000,000.001.
Reputational damage
Inaccurate valuation can tarnish your company's reputation and erode trust with customs officials and international shipping and trade partners. This can lead to increased scrutiny of your shipments, potential delays, and difficulties in conducting future international trade transactions.
How to ensure accurate shipment valuation?
Accurate shipment valuation is essential for complying with international trade regulations and avoiding potential penalties. To ensure that your shipments are valued correctly, you can follow these steps:
Understand valuation methods
The World Trade Organization (WTO) provides guidelines on customs valuation, including six approved methods for determining the value of goods within your shipment:
- Transaction Value: This is the most common method and refers to the price actually paid or the amount payable for the goods when sold for export.
- Transaction Value of Identical Goods: If the transaction value is not available, the value of identical goods can be used.
- Transaction Value of Similar Goods: If identical goods are not available, the value of similar goods can be used.
- Deductive Value: This method is based on the selling price of the goods in the importing country, with deductions for certain costs like customs duties, taxes, and profits.
- Computed Value: This method calculates the value based on the cost of production, materials, and other expenses.
- Fallback Method: This is used when none of the other methods can be applied and involves using a combination of methods or alternative criteria.
Ensure proper documentation
Accurate and complete shipping documentation is crucial for supporting your declared shipment value, and this includes:
- Commercial Invoice: The commercial invoice is a primary document for customs valuation and should clearly state the transaction value, including any additional costs like insurance and freight.
- Packing List: The packing list provides information about the shipment, including the quantity, weight, and description of each item.
- Additional Documents: Depending on the nature of the goods and the specific regulations, additional import or export documents like certificates of origin, licenses, or permits may be required. It's also crucial to have proof of payment readily available, such as receipts or purchase orders because this documentation helps verify the declared value of your goods and ensures consistency with the transaction details. At the same time, customs authorities may request this information to validate the declared value and prevent undervaluation or misrepresentation.
Seek expert advice
If you have any doubts or concerns regarding shipment valuation, it's always advisable to seek professional guidance. Customs brokers or trade consultants, for instance, can provide valuable shipping expertise and help you ensure accurate and compliant valuation practices.
Utilize DHL's resources
DHL Express offers various resources and tools to assist businesses with shipment valuation and customs compliance. By choosing DHL Express as your international logistics partner, you can access online resources, expert support, and specialized services like customs clearance assistance.
Ensure accurate shipment valuation with the right help
Aside from being a procedural requirement, accurate shipment valuation is crucial in achieving ethical and compliant international trade. By declaring the correct value of goods, you can uphold transparency, contribute to fair trade practices, and protect your business from potential penalties.
To ensure accurate valuation, let DHL Express support you throughout the process and help you streamline customs procedures while complying with all the requirements.
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