Kickstarter campaigns are usually international. And when it comes to international shipping, customs clearance and brokerage are key parts of the process.
If you’re shipping Kickstarter orders internationally, make no bones about it – you’re in global trade. That means you need to understand customs to avoid delays, extra costs, and legal trouble.
This guide will help you handle customs clearance and brokerage for your campaign with minimal hassle. In it, we will cover:
- What goes into customs clearance
- Who pays for customs
- The 3 main strategies for handling customs
- Best practices for handling customs
- Finding the right customs broker
By the end of this article, you’ll know how to handle customs clearance and brokerage for your campaign. That way, you can focus on the fun part – raising funds and turning your ideas into physical products!
What is Customs Clearance?
Customs clearance is a process where customs authorities inspect and approve goods entering a country. It involves several steps, like checking documents, calculating duties, and inspecting goods.
The concept of customs clearance exists for a number of reasons, but the main two reasons are very simple. Countries don’t want to let unsafe or illegal goods get in through the borders. And they want to make sure they get their fair share of taxes.
If you are shipping internationally, you’ll hear certain terms come up again and again. Some key terms you will want to know include:
- Tariffs: Taxes imposed on imported goods.
- Harmonized System (HS) Codes: Numerical codes used to classify products for customs purposes.
- Import Duties: Taxes paid on imported goods based on their value, weight, or quantity.
Because customs, as a concept, exists primarily for taxation and safety, you need the right documents to get your goods over borders. Documentation is incredibly crucial for customs clearance.
Important documents include the commercial invoice, bill of lading, packing list, and certificate of origin. Making sure these documents are accurate and complete helps prevent delays and extra costs. Each country has different customs rules, so it’s important to know the specific requirements of the country you’re importing to.
Who Pays For Customs & When?
When it comes to Kickstarter campaigns, you often hear about customs through backer complaints. If you’ve followed enough campaigns, you’ve probably seen comments along the lines of “I thought this campaign had EU-friendly shipping! Why am I paying this extra bill?”
But customs fees are actually applied at two main points in the supply chain. Here’s how that works:
1. Initial Customs Fees During Import to Warehousing Country
For many Kickstarter creators, goods are manufactured abroad and shipped to a fulfillment center. Upon arrival in the warehousing country, customs fees are charged based on the value of the imported goods.
For example, when goods are shipped from China to the U.S., the creator pays customs duties upon entry into the U.S. These fees are determined by the value of the inventory and are necessary to legally bring goods into the country. This is the first point at which customs fees are applied.
If you have backed a lot of campaigns but never run any, you might not know about this. That’s because the fees assessed here never go to the backers. If anyone pays them, it’s the creator.
2. Secondary Customs Fees During International Shipping to Customers
Once the rewards are stored in a warehouse, they are often shipped internationally to customers. At this point, customs fees can be applied again.
This second set of customs fees is charged by the destination country and is usually based on the value of the shipped goods. Exceptions to this rule include low-value shipments, domestic shipments, and shipments covered by free trade agreements.
If you, for example, ship a Kickstarter reward from the US to the UK, the recipient in the UK will probably need to pay a customs charge. In a lot of cases, what that comes down to is their local carrier – let’s say Royal Mail, for example’s sake – gives the recipient a bill. When that bill is paid, they get their reward.
There are ways to handle this that don’t require backers paying for customs. We’ll discuss that in the next section.
3 Strategies For Handling Kickstarter Customs
How you handle customs is important. Backers don’t like having to pay extra fees if they can avoid it. But sometimes, it just doesn’t make sense to go out of your way – as a creator – to account for all the customs regulations of all the countries in all the world.
So bearing that in mind, there are three strategies you can use to handle customs fees.
1. Making Backers Pay Customs Fees
One simple option is to have your customers pay the customs fees upon delivery. While this might sound unappealing, many international customers are used to this practice.
This approach is simple for the business but can irritate backers, especially if they are unaware of these additional charges. But just because it might cause some backers to grumble, that doesn’t mean you should write this off entirely. For many small campaigns, this may very well be the only practical way to handle customs.
If you do this, please make sure you communicate this policy clearly. This is the best way to avoid negative feedback.
2. Storing Inventory in Multiple Countries
Another strategy is to minimize international shipping and customs fees by storing inventory in multiple countries. Creators of highly successful campaigns can afford to maintain warehouses in key regions like the U.S., Europe, and Asia. That means they can provide domestic shipping within those areas.
To do this, the creator would split their freight shipments to multiple warehouses. So they would pay multiple bills to multiple countries to import bulk inventory. But individual backers in those countries or regions (like the EU) would not have bills on their individual orders.
The idea of paying multiple bills on multiple freight shipments might sound unappealing, but it’s worth noting that when you import bulk inventory into a country, you pay a tax on the manufacturing price. But when backers receive individual orders, they pay tax on the retail price. That’s a HUGE difference in most cases.
Taking this approach reduces the frequency of international shipments and the associated customs fees. However, it is often impractical for smaller businesses due to the high costs of managing multiple warehouses.
3. Using Delivery Duty Paid (DDP) Shipping
If you can’t justify having multiple warehouses, the next most customer-friendly option is to use Delivery Duty Paid (DDP) shipping. In doing that, the creator takes responsibility for paying all customs fees on behalf of the backer.
This method means that customers receive their packages without any additional charges. It improves the customer experience by eliminating surprises and making the purchase process smoother.
The key issue with this method is that creators have to pay for international shipping plus customs. Those fees can really add up to a huge total with enough backers. It’s great if you don’t have many international shipments to send, but it’s simply not reasonable if you have a large volume of orders going overseas.
5 Best Practices for Customs Clearance
No matter which strategy you use for customs, there are some best practices that stay constant. Here are a few simple rules you can follow that will help you reduce the risk of things going wrong.
1. Do your paperwork correctly
Having accurate and complete documents is vital for customs clearance. To restate: important documents include the commercial invoice, bill of lading, packing list, and certificate of origin.
Make sure all documents are filled out correctly and include necessary details like product descriptions, HS codes, and declared values. Incorrect or incomplete paperwork can lead to delays, fines, or even shipment rejections.
Basically – dot your I’s and cross your T’s.
2. Follow import and export regulations
Every country has its own import and export rules. Get to know the specific requirements of the countries you’re shipping to and from. This means understanding restricted or banned items, packaging and labeling needs, and any special certifications required.
Complying with these regulations will make your life generally easier.
3. Don’t be afraid to hire a customs broker
Customs brokers are experts in navigating customs procedures. They can help prepare your documents, calculate duties and taxes, and make sure you follow all regulations.
Choosing an experienced customs broker can save time, reduce errors, and speed up the clearance process. Don’t be afraid to hire help if you need it!
4. Use technology and automation to cut down on grunt work
Using technology and automation can make customs clearance easier. Many modern customs solutions offer features like automated document preparation, real-time tracking, and integration with shipping platforms. These tools help reduce manual work, minimize errors, and give you better visibility into your shipments’ status.
5. When in doubt, communicate like you’re an open book
Clear communication with everyone involved in the customs process is crucial. This includes suppliers, freight forwarders, and customs brokers. Make sure everyone knows their responsibilities and deadlines.
If you have questions, ask them. If you think someone might need to know certain information, make sure they know it. Err on the side of over-communication.
Choosing the Right Customs Broker
You are able to book your own freight. And if you work with the post office and other carriers like UPS and FedEx, you can also send international shipments without too much trouble.
But if you’re worried about customs clearance, it might be a good idea to hire a helping hand. Should you choose to do that, here are a few tips to make sure you find the right partner.
1. Find an experienced broker
Look for a broker who has lots of experience with shipments like yours. They should know the rules and needs of the countries you trade with. An experienced broker can offer area expertise and help you avoid common customs traps.
2. Learn about their services
A broker with a wide range of services can simplify your logistics. Besides customs clearance, many brokers offer freight forwarding, warehousing, and distribution. Choosing a broker that provides end-to-end solutions saves time and reduces the hassle of dealing with multiple service providers.
3. Review costs
Cost matters, but it shouldn’t be your only concern. Compare pricing from different brokers but also think about the value they offer. A cheaper broker might not give you the same level of service or expertise as a pricier one. Look for transparent pricing with no hidden fees.
4. Look at reviews
Check the broker’s reputation and customer reviews. Positive feedback and a good reputation usually mean reliable, high-quality service. Ask other businesses for references and search for online reviews to see how satisfied their customers are.
5. Check out their tech system
It’s important to find a person you like working with. But it’s also wise to make sure you like their software too, since you’ll probably work with that more than the actual person.
Look for brokers who offer online tracking, automated documentation, and integration with your systems. These features streamline the customs process and give you real-time shipment updates.
Final Thoughts
If you run a Kickstarter campaign, you will probably ship internationally. That means you will need to know how to handle customs clearance and brokerage.
Getting packages across country borders is intimidating and complex. But once you understand the logic and the reasoning behind the rules, it’s easier to deal with.
Before you launch your campaign, make a decision about how you plan to handle customs. Figure out who will pay for customs and figure out if you will be hiring help.
As intimidating as international shipping can be, don’t let it scare you away from launching the product of your dreams. This is just a logistical hurdle to clear along the way. You can do it, as have so many others before you!
