Navigating Global Customs: Key Considerations for Pharmaceutical Manufacturers
|Update : 30th October, 2023|
The pharmaceutical industry plays a critical role in global healthcare, producing life-saving medications and treatments that are distributed worldwide. When it comes to shipping pharmaceutical products across international borders, navigating customs regulations can be a complex part of the process – countries need to regulate the movement of goods across international borders while balancing various interests, including trade facilitation, security, and public health.
“In the world of customs, there are many variables to consider when securing cross-border trade and adhering to different regulations across multiple regions and countries.
As if the challenge of complexity is not enough, the importer and exporter are also expected to maintain records of all transactions and retrieve them upon requests from authorities, this can be a challenging task” – Anna Klettner - Global Customs Manager, Envirotainer
The consequences of incorrect customs handling and flaws in shipping processes can be particularly severe when handling these life-saving products. This can include compromised product integrity, supply chain disruptions, regulatory non-compliance and even financial losses and reputational damage.
For pharmaceutical manufacturers, an informed and strategic approach is paramount to ensure a seamless passage through customs.
Common Pitfalls: Avoiding the Biggest Mistakes in Global Pharma Shipping
Common mistakes relating to customs regulations can lead to delays, fines, and reputational damage for manufacturers. By being aware of these pitfalls, you can take proactive measures to avoid them and ensure a smoother customs clearance process. Here are some of the biggest errors which must be avoided:
- Inaccurate Documentation: Failing to provide accurate and complete documentation is one of the most significant mistakes that can lead to customs delays. Missing or incorrect paperwork, such as customs valuation, country of origin and shipping invoices can cause shipments to be held at the border, disrupting the supply chain and potentially impacting patient access to medications.
- Incorrect Harmonized System (HS) Code Classification: Incorrectly classifying pharma products with the wrong HS code can result in incorrect customs duties and taxes being applied. It is important to understand that there is no global standard for HS codes and their names, so they can be different in different countries.
Manufacturers must engage valid stakeholders who understand the classification system and have in-depth knowledge of the goods so that they can carefully assign the correct codes to their products to prevent costly errors.
- Ignoring Import/Export Restrictions: Failure to research and understand import and export restrictions in both origin and destination countries can result in shipments being rejected, confiscated, or delayed at customs. Manufacturers must be aware of any restrictions on pharmaceutical products, such as licensing requirements and prohibited ingredients. This means that you must correctly document what good are being shipped, to whom and where.
- Poor Quality Control and Documentation: Inadequate quality control practices and lack of comprehensive documentation can lead to additional customs challenges. Customs authorities may request proof of product quality, testing, and compliance, so detailed records must be readily available to avoid delays.
- Incorrect Country of Origin or Customs Valuation: It is important to include the correct Country of Origin in invoices. Rules of origin determine where goods originate, i.e. not where they have been shipped from, but where they have been produced or manufactured. As such, the ‘origin’ is the 'economic nationality' of goods traded in commerce. The tariff classification, value and origin of a good are determining factors based on which the customs tariff treatment is applied. The correct customs valuation is equally important as it establishes the accurate value of these products, preventing under- or over-valuation that could impact tariff calculations and regulatory adherence during cross-border shipments.
Best Practices: How to Keep your Product Moving
The seamless movement of pharmaceuticals across borders requires careful planning, detailed documentation, and a proactive approach to customs guidelines. Here are some of the best practices that you should consider:
- Establish Strong Partnerships: Building strong relationships with logistics partners, customs brokers, and suppliers ensures effective communication and collaboration. Open lines of communication enhance understanding, streamline processes, and can help to resolve customs-related challenges if they arise.
- Engage the Experts: Collaborating with skilled customs brokers or experienced freight forwarders who specialize in pharma shipments can help to simplify the process for you. These professionals have an in-depth understanding of local customs regulations and documentation requirements to help to ensure a smooth customs clearance process.
You should also ensure that you have a knowledgeable Importer of Record (IOR) and Exporter Of Record EOR (EOR) who are responsible for making all the payments of duties, tariffs, and fees of the imported/exported goods. This will ensure that the shipment will happen correctly in relation to local legal points and taxes.
- Accurate Product Classification: Properly classifying pharmaceutical products using the correct Harmonized System (HS) codes is essential for your shipment. This involves a clear understanding of the specific components of each product, as well as the classification criteria in the origin and destination countries.
- Comprehensive Documentation: Detailed documentation is the cornerstone of successful customs clearance. Stakeholders should maintain reliable records, including entry documentation, invoices, and certificates of origin. This is mandatory in all countries, although may be for different amounts of time. Ensuring that documentation is complete, accurate, and available will speed up the process and reduce the risk of delays.
- Conduct Regular Audits: Periodic internal audits of customs compliance processes are invaluable for identifying areas of improvement and rectifying potential issues. These audits help ensure that customs practices remain up to date, accurate, and aligned with current regulations. Any customs brokers that are used should also be audited and to ensure that the information according to invoices, classification and valuation is used correctly.
- Stay Informed and Updated: The world of customs regulations is always changing. To stay ahead of these changes, you should establish a system to consistently monitor changes in customs rules, import/export restrictions, and industry-specific guidelines in your target markets. Engaging with industry associations and trade organizations can provide valuable insights and ensure compliance with the latest customs requirements.
The potential impacts of incorrect customs compliance are far-reaching, including compromised product integrity, patient safety concerns, financial losses, regulatory non-compliance, and damage to the manufacturer's reputation. By recognizing the importance of customs compliance and implementing strong customs procedures, pharmaceutical manufacturers can enhance their global distribution processes and contribute to improved healthcare access worldwide.
Do you want to learn more about customs? We offer 4 general customs training modules on the Envirotainer Academy – log in or sign up here.