1 June 2011
2.8 Packing, Shipping and Insurance (Air/Ocean)
2.8.1 Entry and Warehousing
a) Entry of Goods
From the moment that goods enter into the customs territory of the EU, they are subject to the supervision of the customs authorities and may be subject to customs control. In general, goods which are brought into the customs territory must be conveyed without delay either to the customs office designated by the customs authorities, or to a free zone as long as the goods are directly brought into the free zone.
Once goods arrive at the customs office or other designated place, they are to be presented to customs by the person responsible for conveying the goods. The person responsible for conveying the goods is the person who brings them into the EU or any person who assumes responsibility for the carriage of goods after they have been brought into the customs territory of the EU. Generally, the goods are to be unloaded solely with the permission of the customs authorities and only in places designated or approved by them.
After presentation of the goods to the customs authorities, the person responsible for conveying the goods has to issue a summary declaration covering all import goods. The summary declaration shall be lodged once the goods have been presented to customs and should in general be made on a form corresponding to the model prescribed by the customs authorities.
During the period between presentation and assignation of a customs-approved treatment or authorised use, the goods are referred to as “goods in temporary storage”. Goods are placed in storage on the basis of the summary declaration and remain under customs supervision until their customs status is changed.
b) Customs Warehousing
Warehousing allows the owner to hold imported non-EU goods in the EU and choose when he pays the duties or re-exports the goods.
Customs warehouses are places that were approved by and are under the supervision of the customs authorities and may be either public or private. Public warehouses are available for the use of any person for the warehousing of goods, whereas private warehouses are reserved for the storage of goods by the warehouse keeper, who is the person authorised to operate the warehouse, but not necessarily the owner of the goods.
While imported goods are stored in a customs warehouse, they may, subject to authorisation, undergo “the usual forms of handling intended to preserve them, improve their appearance or marketable quality, or prepare them for distribution or resale”. Such authorisation may, however, only be granted, if the purpose of processing the import goods does not predominate over the purpose of storing the goods in the warehouse.
Import goods may also, again subject to authorisation, be removed from the customs warehouse for a period generally not exceeding three months. They may furthermore be transferred from one customs warehouse to another. While, in general, there is no time limit to the storage of goods in a customs warehouse, the customs authorities may in exceptional cases limit the length of storage.
2.8.2 Shipping Requirements
International shipping puts high demands on the packing of goods. Hong Kong traders should be aware of the risk of damage that might be caused by breakage, moisture, excess weight or pilferage. Therefore, it is recommended that the following requirements should be respected when packing:
- provide for strong and adequately sealed containers,
- distribute the weight of the goods evenly,
- use moisture-resistant materials, and
- respect product-specific hazardous materials packing requirements, if applicable.
If Hong Kong traders decide to use wood packaging material or wood to wedge or support non-wood cargo, they should keep in mind that, pursuant to Directive 2000/29/EC as amended, such material may only be made from debarked round wood as of 1 March 2006. The EU regulation on wood packaging material is based on the International Standards for Phytosanitary Measures. (For further details on requirements relating to wood packaging material, please see the section elsewhere in this guide dealing with EU sanitary and hygienic measures).
Furthermore, Hong Kong traders should be aware of the fact that, pursuant to European customs law, both “the cost of containers”, and “the cost for packing, whether for labour or materials”, must be added to the price actually paid or payable for the imported goods to determine their customs value. In other words, the higher the expenses for packing, the higher the customs value of the imported goods. Obviously, this provision only applies if the costs for packing are not already included in the price paid or payable for the imported goods.
Hong Kong traders should also note that packing materials and packing containers presented with the goods therein have to be classified with the goods “if they are of a kind normally used for packing such goods”. This classification is binding as long as the packing materials or packing containers are not clearly suitable for repetitive use.
The cost of shipment, the delivery schedule and the accessibility to the product by the purchaser are important factors to be considered when determining the method of shipping. In this regard, Hong Kong traders may find it useful to consult with their freight forwarders. Freight forwarders may also assist Hong Kong traders in preparing price quotations by advising on freight costs, port charges, costs of special documentation, etc.
In general, shipment by air carrier will be more expensive than shipment by sea carrier. However, an air carrier’s additional costs may be offset by quicker delivery times and lower domestic shipping costs, if a local airport is nearer to the final destination than coastal seaports.
Goods that are imported into the EU have to be accompanied by a valid transport document (e.g. a bill of lading or an airway bill). Additional documentation might be required depending on the specific nature of the imported goods. Given that carriers are often used for large and bulky shipments, Hong Kong traders should furthermore keep in mind the need to reserve space well before the actual shipment date. Inexperienced traders should consult with their freight forwarders in this respect.
2.8.3 Marine and Air Insurance
The continuing growth in world trade is resulting in unprecedented levels of goods moving across borders. This rise in trade volumes has increased the potential for companies’ goods to be lost or damaged in transit. To guard against this risk, Hong Kong traders should arrange adequate insurance of their goods.
Export shipments are usually insured against loss, damage and delay in transit by cargo insurance. If the sales agreement makes a Hong Kong trader responsible for insurance, he should either obtain his own policy or insure the cargo under a freight forwarder’s policy for a fee. If, pursuant to the terms of sale, it is the buyer who is responsible to insure the import goods, Hong Kong traders should not automatically assume that the buyer will have obtained adequate insurance. In fact, a Hong Kong Trader may still have to bear the financial loss in case a buyer neglects to provide for adequate coverage and the goods are damaged.
Shipments by sea should be covered by marine cargo insurance. Marine insurance compensates the owner of goods transported overseas in the event of loss that cannot be recovered from the carrier such as losses and damage sustained from shipwreck, fire, etc. Air shipments may also be covered by marine cargo insurance or it may be purchased from the air carrier.
The cost of protection, i.e. the insurance premium, for the same consignment carried between the same two points will not be the same for sea and air transportation. In fact, the costs will generally be lower for goods moved by air. This is because insurers assume that the risk of damage or loss during air transportation is likely to be less.