Dealing with Missing Import Licenses
“The import permit was rejected, because of missing license!” says your Customs agent in a text message.
“Are you sure? We’ve been importing this for years!”, you reply.
Unfortunately, similar conversations like the above happen all the time, and in all parts of the world because of various reasons:
Importer’s ignorance: Sometimes the concerned authority is not obvious to the importer or even the Customs broker because the product appears harmless.
For example, imports of books or publication materials may require approval from the media authority, harmless chemicals may need approval from the environmental agency and gadgets shaped like toy guns may require approval from the police force.
Assuming Customs brokers will take care of it: Many traders outsource transportation and with it assume that the Customs clearance liabilities will also be taken care of.
This is a big mistake that many traders make. The broker may be an expert in Customs procedures, but only the importer knows exactly what the product it and hence is in the best position to determine the licenses required.
Being unaware of changing regulations: Regulatory changes can be driven by several factors such as changes to economic policy, newly available safety information, changes in technology and environmental concerns and/or new administrative leaders in agencies.
Unfortunately, regulatory changes could easily trigger changes to licensing requirements that do not get published in main media.
Poor license administration: If a single person has been handling licensing matters for many years with no back-up, this is an area of risk. A suitable back-up should be identified and trained as quickly as possible. If the organization is very lean. Then all procedures related to licensing should be documented as work job aids.
Who is responsible to get Import Licenses?
Commercial agreements and sales contracts can say a lot of things but ultimately to Customs, the importer is responsible to ensure all licenses are available at time of import.
This responsibility cannot be passed to an agent, freight forwarder, or distributor warehouse. Even if you contract the work of screening and applying for the license out to a third party, it is the importer who is still directly responsible to Customs and other authorities.
If the shipment has already arrived at the port and you don’t have a license for it, what can you do?
Some possible remedies:
1. Clear under protest if possible. This can only work if you don’t agree with Customs assessment that a license is required for the import. If a license is clearly required, this remedy is not an option.
2. Clear under security bond, with no conditions attached. This remedy may work if separate licenses are required for import, storage and local release.
3. Break bulk and clear the rest of cargo. If the rest of the shipment is free of licensing concerns, this approach will minimize port storage costs. This option must be measured against costs of sorting and business requirements of receiving the rest of the shipments.
4. Return to source if license approval takes too long. This option can be considered for shipment that require special transport conditions like cold chain.
5. Scrap/Abandon goods to Customs. If the license is impossible to obtain and cost of transport to origin exceeds the cost of the cargo, this may be an option to consider.
6. Appoint a licensed trading house. These trading houses will act as the importer of record and local reseller for the product. Of course, this option requires setting an additional sale layer and hence suppression of margins.
What NOT to do?
1. “We’ve imported for so long, with no license! What’s the problem now?” is not the most ideal choice of words when responding to Customs. If a license is indeed required, highlighting years of non-compliance is not a useful defense plan.
2. Manipulate HS code. License regimes in many countries are determined on tariff codes. Attempting to reclassify the item wrongly out of desperation may lead to other more serious compliance issues. That being said, legitimate tariff engineering opportunities may exist.
3. Escalate to higher authorities. If a license is necessary, a license is necessary. Escalating the issue to higher authorities only brings the matter to the attention of more eyes and increases pressure on the ground officer to follow procedures as closely as possible.
4. Delay providing Customs a response. Customs can wait for your response indefinitely, or if they choose to, they can declare the attempted un-licensed import as a violation. The importer then is put in a position where they have to defend the missing license formally.
Be clear of licensing regimes and requirements, not just from Customs but from all other agencies as well. You may need an experienced Customs broker or local trade consultancy to do an annual review for you.
It should also be included in your Customs agent contracts that they must proactively inform you of license changes or requirements.
An administrator should be assigned to manage license expiry dates, do not depend on authorities to send renewal reminders, as they have no obligation to do so.
This article was written by the Globalior’s Global Trade Specialist team. The team comprises of trade compliance professionals from various industries with extensive combined experience relating to Customs compliance in APAC. Globalior.com provides a knowledge repository with a focus on trade compliance topics such as HS Classification, Free Trade Agreements, Customs valuation and Incoterms.