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Today’s international container shipping industry encompasses hundreds of ports in more than 200 countries; nine trade routes that connect all continents; as many as 500 business services agencies assisting along each route, and more than 680 million containers. Those systems carry more than 60 percent of the world’s internationally traded goods, which were estimated to be worth more than A$ 5.3 trillion dollars in 2014.

China is the World’s Top Exporter

Of the top 20 containerized-cargo exporters, China is number one and accounts for more than one-third of all international containerized exports. In 2014, the country shipped 36 million cargo-laden containers; that’s almost 100,000 containers per day. The goods that go into each container have been transported from across China and are the final product of the labour of millions of factory workers and thousands of supply chains. Anywhere along the route, from the materials contributed by the supply chain participants, through the manufacturing process, and into the cargo container for shipment, challenges can be introduced to the products that can cause their seizure by customs officials when they arrive at the destination port.

Customs Searches

Every country that receives international shipments has the authority to inspect those shipments. The inspections ensure that the contents are safe to move into the state and are legal within that jurisdiction. Although the laws in each country are different, most customs inspections begin with an evaluation of the entity that shipped the goods (the exporter); the entity that is receiving the goods (the importer); taxes (tariffs) paid or to be paid; and the country of origin. Because of national security concerns, most often, the full scope of the inspector’s search is rarely shared with the trade community so, most of the time, neither exporters nor importers can be 100% confident that their containers – their goods – are going to clear the customs office. In the worst case scenario, whole shipments can be confiscated, and importers are held liable for the costs of the inspection, the costs of any further handling by the inspector’s office of the – now contraband – goods, as well as fines and penalties for any criminal activity revealed.

The Authority to Seize Goods

Countries reserve the right to seize the property of any entity entering its jurisdiction if that property violates the law. Exporters must be aware of the laws of each country into which they ship their goods. Products that are made with illegal or false materials, are falsely or inappropriately labeled, or that pose health or safety risks are subject to seizure.

 

As the world becomes more sensitive to the issue of forced labour, more countries are also banning the import of products that were created using that resource. In February 2016, the United States passed a law prohibiting the import of products made by forced labour. Within five months, the American border agency had seized three shipments that violated the law, and each shipment originated in China. One importer, PureCircle, objected to the confiscation and claimed that it had documentation, including a certification issued by an independent auditor, that its supply chains were free of slave labour.  Those cases are ongoing.

Seized Shipments Cost Money

For the importer, the cost of a seized shipment can be very high:

  • Not only must it pay the fees and fines associated with the confiscation, but it also loses its entire investment into the manufacture and transportation of those products.
  • The importer also loses the revenue from the sale of those goods.
  • Seizures often result in higher insurance fees on future shipments, which add to the cost of doing business over time.
  • Supply chain interruptions impact downline contractors such as retailers and distributors who are relying on the goods to move their businesses forward. When those sellers don’t receive the goods, they also experience losses. Lawsuits are not uncommon between importers of confiscated products and the contractors who suffer when those goods are seized.

The Global Economy Relies on Shipping

The international economy is growing. The Internet now facilitates commercial transactions between buyers and sellers across countries and continents. To fully reap the benefits of the global market, manufacturers who are active in that economy must ensure that their product shipments are safe and legal. Because of the country’s current market volatility, those producers who source their goods in China are especially vulnerable to counterfeit or illicit product aspects being introduced into their supply chain or manufacturing process. If that happens, and those goods are seized by the local border protection agency, that producer will certainly suffer significant, potentially devastating financial losses.

I have been advising off-shore producers about sourcing products in China and Asia for close to 2 decades. In my book, you can learn how to avoid some of the pitfalls. To prevent the seizure of your China-made goods, contact me today. I can be reached at (+61) 413 089 020 or via email: carsten@vantagecompliance.com

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