由 caicai8478 When choosing a logistics service, it’s important to understand the risks involved in the customs clearance process and engage in thorough communication to ensure the safe clearance of goods. Taking Europe and the UK as an example, there are currently three common customs clearance models for cross-border e-commerce: e-commerce companies outsourcing double customs clearance to logistics companies (double customs clearance with tax included), e-commerce companies importing goods domestically in the destination country (local customs clearance), and imports via transit in countries like the Netherlands and Belgium (deferred customs clearance).
Image source: “2023 China Cross-border E-commerce Logistics Industry Blue Book”
Double customs clearance with tax included
The “double customs clearance with tax included” model generally refers to cross-border logistics services provided by international freight companies, including customs clearance (declaration) in the exporting country and customs clearance in the destination country, and includes all fees, including duties, incurred during import customs clearance in the destination country. Simply put, all customs clearance, duties, and other costs are handled by the international freight forwarder from the exporting country to the destination country.
1 Customs clearance refers to domestic export declaration. Domestic export goods must go through two customs clearance stages: customs and commodity inspection. Domestic export declaration is one of these stages, involving declaration and export formalities. The main steps include filing and registration, customs declaration, tariff calculation, customs inspection, release procedures, and customs clearance. Completing these steps ensures legal export of goods and avoids violations.
Second customs clearance refers to foreign import customs clearance. Foreign customs clearance requires preparing documents such as commercial invoices, packing lists, shipping documents, and customs declaration forms, as well as paying customs duties and other related fees. Completing these steps ensures that imported goods pass through customs smoothly and comply with the regulations and standards of the destination country or region.
Tax inclusion refers to the duties and import taxes paid by the importing country. During the transportation process, international freight forwarders will use their registered VAT numbers for overseas e-commerce sellers for customs clearance, eliminating the need for sellers to provide them. Taxes are borne by the freight forwarder, and sellers do not need to pay additional duties and import taxes in the importing country or region. They only need to provide customs clearance information, which improves customs clearance efficiency.
There are two general ways to handle double-clearance and tax-inclusive services: one is for the customs clearance company to prepay the tariffs, which are then included in the freight; the other is to use special channels for customs clearance and tariff processing.
For sellers, double-clearance and tax-inclusive services streamline cross-border transaction processes and reduce disputes and hassles caused by tariffs and other issues. Furthermore, since the freight forwarder handles all customs clearance and tariff issues, tariffs are included in the shipping fee, allowing sellers to more easily understand costs, making the shipping process smoother and improving logistics efficiency.
However, double-clearance and tax-inclusive services do not guarantee safe customs clearance for goods. There are also many risks involved. For example, if a freight forwarder’s tax number is shared, if one shipment is inspected, other shipments could be affected. Some freight forwarders choose to underdeclare to reduce tariffs and freight costs. However, if they are inspected, they are likely to face “high-value audits,” where customs reassesses the goods’ value, sometimes even several times higher than the normal value. Furthermore, some double-clearance and tax-inclusive services use gray customs clearance channels such as local agents, which pose a significant risk of seizure by authorities.
As a result, the “double-clearance and tax-inclusive” model has been the source of numerous freight forwarding failures in recent years. For sellers, the key role of freight forwarders is to help resolve complex cross-border logistics issues such as logistics, customs clearance, and taxation. However, due to irregularities by some freight forwarders, the “double-clearance and tax-inclusive” model now operates in a more gray area, often referred to as “gray customs clearance.” If you declare truthfully according to domestic and destination country policies, pay taxes as required, and comply with legal requirements, then the “double-clearance and tax-inclusive” model is naturally a good option. However, if you consistently engage in illegal practices such as under-declaration or false declarations, you risk facing potential defaults, resulting in goods being seized and fines imposed.
For early-stage e-commerce sellers, the “double-clearance and tax-inclusive” model offers some convenience in simplifying procedures and determining initial transportation costs. However, for businesses still in the due diligence phase, it doesn’t ensure full transparency and compliance. Especially with increasingly stringent customs inspections, sellers applying for their own tax numbers for customs clearance are more compliant. 2
Self-Tax Clearance
Generally speaking, most e-commerce businesses have their own tax IDs. The “self-tariff clearance” model involves providing their own European tax IDs (VAT and EORI), with the international freight forwarder handling the declaration and payment of European import taxes. The taxes (customs duties and VAT) after customs clearance are actually reported to the seller.
This can be categorized as domestic customs clearance or deferred customs clearance, and both involve the seller providing their VAT and EORI numbers. These two numbers are mandatory for cross-border e-commerce businesses to conduct normal trade within the EU. Only after registration can sellers claim import VAT credits after goods are shipped.
VAT (Value Added Tax) is a consumption tax levied on the value added of goods and services within the EU. A VAT number is obtained from the local national tax bureau and is used to pay customs duties, import VAT, and sales VAT. VAT is an indirect tax paid by the buyer to the seller as part of the sales price, and ultimately remitted in full to the tax authorities by the seller, the “taxable person.” According to EU law, customs duties and import VAT are collected from sellers entering the EU through customs. The import VAT is refunded to the merchant after the goods are sold, and then sales VAT is collected based on the corresponding sales volume.
EORI stands for Economic Operators Registration and Identification. An EORI number is a registration number required for all businesses or individuals engaging in economic activities within the EU, especially import and export businesses. It can be applied for at customs in any EU country and is a single customs number used for customs clearance throughout the EU.
The connection and difference between the two lies in the following: VAT is a value-added tax number. If an economic entity already has a VAT number, it must be activated at customs to become an EORI number. VAT numbers are country-specific and require separate registrations for different countries. EORI numbers are usually applied for by tax agents when applying for a VAT number. A company can only apply for one EORI number. That is, if an EORI number is applied for in one country, it cannot be applied for in other EU countries.
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VAT and EORI numbers play a crucial role in the customs clearance process. A VAT number is required for customs clearance in the destination country and subsequent invoicing. Many e-commerce platforms include VAT on their European sales platforms. If local tax authorities discover that a seller has not applied for VAT, the platform will be held jointly liable. Therefore, the platform will require the seller to apply for a VAT number. The EORI number also impacts the seller’s tax refund and legal customs clearance. If a seller imports goods into the EU or the UK under the name of the importer and subsequently claims a refund of import tax (IMPROT VAT) (only for merchants with a VAT number), they must submit the EORI number to customs.
In addition to VAT and EORI numbers, the “self-tax customs clearance” model also involves tax and refund issues.
Regarding taxes, international freight forwarders typically advance the tax to ensure timely customs clearance. If the freight forwarder advances the tax, the seller will pay an advance tax fee and will also be charged a prepaid tax fee, typically 1%-3%. After customs clearance, the international freight forwarder will provide the tax invoice to the seller’s customer for subsequent tax credit applications.
Regarding tax refunds, taking the UK as an example, since the implementation of new tax reforms on January 1, 2021, most transactions on the Amazon platform have been withheld by the platform. Transactions by UK B2B businesses are not withheld and must be self-declared by the seller. However, if the sales amount is small, the import tax documents cannot fully offset the tax, which may lead to tax refund issues. The UK tax authorities require a tax audit to process tax refunds, starting from the date the store starts selling. Without an agreement, the tax authorities cannot refund the tax.
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Deferred Customs Clearance
The “deferred customs clearance” model involves using the e-commerce company’s own tax number and entrusting it to a logistics company for guarantee, thereby indirectly clearing customs and entry.
VAT deferral, also known as Postpone VAT Accounting (PVA), refers to the option of VAT deferral when goods enter the EU declaration country and are destined for another EU member state. This means that the consignee does not have to pay import VAT upfront during customs clearance of the imported goods, but instead defers the tax to the final country of delivery. Simply put, during customs clearance, EU customs only collects duties, exempting VAT. VAT is only paid after the goods are sold.
For example, if a seller wants to ship a batch of goods to Lyon, France by air freight, the normal route is to ship the goods directly to Paris Airport in France, where a French agent will handle customs clearance and delivery. However, this requires paying VAT during customs clearance, which does not effectively defer the payment of import VAT. However, if the goods are first shipped to another country, such as Liège, Belgium, or Amsterdam, the Netherlands, for customs clearance before being re-imported into France, the consignee only pays duties upfront, omitting VAT. This tax can be deferred to France through a tax deferral declaration.
Why choose deferred customs clearance? On the one hand, deferred customs clearance can defer import VAT payments, playing a positive role in cash flow and significantly helping businesses with longer product sales cycles. However, due to the complex influence of factors such as channels, volume, timeliness, stability, destination country, and customer relationships, it is difficult to defer the overall advantages and disadvantages of local customs clearance versus deferred customs clearance.
For example, the UK’s VAT deferral program has restrictions on the transaction price and delivery address. Normally, only goods shipped directly from China to UK e-commerce platforms (such as Amazon/eBay) and their overseas warehouses are eligible for deferral. VAT will be withheld and remitted by platforms like Amazon on these transactions. This simplifies the customs clearance process and optimizes cash flow for Chinese sellers without any tax omissions. However, duty must be paid as normal upon import. Note that goods valued at more than £135 are ineligible for deferral and must pay customs duties and VAT during customs clearance.
Image source: “2022 China Cross-border E-commerce Logistics Industry Blue Book”
Tax deferral requires the VAT holder’s UK tax agent to verify the VAT deduction for all imported goods with that VAT number after they are sold on the e-commerce platform and the sales VAT is withheld by the e-commerce platform. The compliance of tax deferral requires highly professional tax support, and the core issue is whether the VAT holder has remitted sales tax in the UK. Failure to ensure this can render a legal and compliant declaration non-compliant.
Summary
Since the implementation of EU tax reforms, which have mandated that platforms be held responsible for VAT payments to third-country sellers, the “double-clearance and tax-inclusive” model has been significantly impacted. With the implementation of stricter regulatory policies, underdeclaring goods to reduce corresponding tariffs and VAT is becoming increasingly unfeasible.
With the influx of goods, the EU customs system has accumulated a wealth of data and corresponding cargo values. Based on this internal data, it sets a floating margin for product values and corresponding quantities. Companies that over- or underdeclare their goods will increase the inspection rate. Once detected, the results will be counterproductive and potentially disastrous. Therefore, whether you’re a logistics company, seller, or freight forwarder, avoid blindly pursuing low prices. Complying with customs clearance regulations is not only essential for survival, but also for development.