What You Should Know About Standardized Declaration of Import Shipping Surcharges

 

 

 

 

Customs audits frequently reveal undeclared shipping surcharges by enterprises. Although shipping surcharges typically involve relatively small amounts and taxes, companies often overlook or underreport them, leading to administrative penalties that may damage corporate reputation and credit ratings.

Maritime shipping serves as the lifeline of international trade transportation. The Analysis Report on Operation of Chinese Ports (2024) indicates that in 2023, global shipping capacity reached 2.34 billion deadweight tons, marking a 3.3% year-on-year increase (0.1% higher than the previous year). China's foreign trade shipping volume accounted for 30.1% of global maritime transport, representing a 2.2% increase from the prior year. Originally designed to cover additional transportation costs, shipping surcharges have evolved into complex and varied charges in practice. Proper declaration not only ensures regulatory compliance but also mitigates potential legal risks. So how should these charges be properly declared? Let's examine this in detail.

I. Understanding Shipping Surcharges

 

 

 

 

First, we need to clarify the concept of maritime freight surcharges. Carriers may adjust shipping costs due to fluctuations in vessel operations, cargo types, port conditions, exchange rates, and other factors. To offset these additional costs, carriers impose various surcharges, collectively referred to as "shipping surcharges."

II. Common Types of Shipping Surcharges

Common shipping surcharges include Bunker Adjustment Factor (BAF), Currency Adjustment Factor (CAF), Peak Season Surcharge (PSS), and Low Sulfur Surcharge (LSS). Each surcharge has specific triggers and calculation methodologies. For instance, BAF is adjusted based on international fuel price fluctuations to compensate carriers for increased fuel costs, while LSS covers the additional expense of using low-sulfur fuel in Emission Control Areas (ECAs).

The following are the most commonly declared shipping surcharges:

(1) Bunker Adjustment Factor (BAF/FAF)

(2) Currency Adjustment Factor (CAF)

(3) Emergency Bunker Surcharge (EBS)

(4) Demurrage Charges

(5) Low Sulfur Surcharge (LSS), etc.

It is noteworthy that

Surcharges come in various types and names, and may be canceled or newly established based on shipping conditions. Some different surcharge names may even refer to the same fee. For example, the Low Sulfur Fuel Surcharge (LSS) is also referred to by over 10 different names, including Global Marine Fuel Recovery Surcharge, Sulfur Emission Reduction Fuel Treatment Fee, and Low Sulfur Green Recovery Fee.

III. How to determine whether ocean freight and related charges should be included in the dutiable value?

The key lies in three criteria:

Transportation-related, calculated up to the point before unloading at the domestic place of importation, and actually paid or payable by the buyer. Additionally, "before unloading" serves as a critical point for determining whether fees need to be declared.

IV. How to properly declare shipping surcharges?

 

 

 

 

Customs Audit Advisory

When surcharge details can be confirmed during customs declaration, they must be accurately reported in the "Miscellaneous Charges" field of the declaration form.

V. How should companies address underreported shipping surcharges?

Customs Audit Advisory

Enterprises should proactively declare to customs to mitigate legal liability risks.

(I) During customs clearance, if unreported shipping surcharges are identified and the carrier's freight list is unavailable, a supplementary declaration may be submitted to customs upon amount confirmation.

(II) Prior to customs detection, voluntarily gather supporting documentation for proactive disclosure to amend declared values and settle outstanding duties. Currently, the Customs Audit Department oversees voluntary disclosure procedures. Import/export entities discovering non-compliance shall submit a Voluntary Disclosure Report for the department's verification and determination.

VI. Typical Cases

Case 1:

Company penalized for undeclared low-sulfur fuel surcharge

In May 2023, Customs C conducted an audit on an enterprise and discovered underreported low-sulfur fuel surcharges for imported used automotive starters and generators during the period from June 11, 2021 to April 28, 2023. After verification, the total unpaid tax amounted to RMB 13,573.7. The enterprise failed to declare mandatory items for imported goods, compromising state tax revenue collection, thereby violating Article 24 of the Customs Law of the People's Republic of China and constituting a regulatory violation. Pursuant to Article 15 of the Regulation of the People's Republic of China on the Implementation of Customs Administrative Punishment, Customs C imposed a monetary penalty on the enterprise.

Case 2:

Enterprise exempted from penalties after voluntary disclosure of tax-related violations to customs

In April 2024, an enterprise submitted a Voluntary Disclosure Report to Customs C, disclosing undeclared low-sulfur fuel surcharges and currency depreciation surcharges on imports between April 2023 and October 2023. Through self-audit, the enterprise estimated 1,020.6 yuan in unpaid taxes and requested to make supplementary payments in accordance with customs regulations. Pursuant to Article 1 of the Announcement of the General Administration of Customs on Handling Matters Concerning Voluntary Disclosure of Regulatory Violations (GACC Announcement No. 127 [2023]), this case qualifies as a tax-related violation voluntarily disclosed to Customs within six months of its occurrence, with outstanding tax liabilities below RMB 1 million. Following verification and confirmation by Customs C, the enterprise was granted exemption from administrative penalties.

Policy Benefits

To further optimize the business environment and facilitate high-quality foreign trade development, the General Administration of Customs (GACC) issued Announcement No. 127 [2023] in October 2023 to expand the scope of voluntary disclosure thresholds. Building upon this framework, GACC subsequently released Announcement No. 87 [2024] in July 2024, further extending the applicability of voluntary disclosure mechanisms for AEO-certified enterprises, enhancing error tolerance space, and fully unleashing high-value policy benefits.

Customs voluntary disclosure is a fault-tolerance mechanism. When import/export enterprises identify underpaid taxes, tax omissions, or other customs regulatory violations during self-audits, they may voluntarily submit written reports to Customs and accept handling. Customs shall legally impose reduced, mitigated, or waived administrative penalties. As a pro-business policy, voluntary disclosure provides foreign trade enterprises with a compliance channel for self-examination and correction. It permits proactive error rectification, encourages voluntary compliance, and continuously improves the business environment.

 

 

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Disclaimer：The above content is translated from Chinese version of Shijiazhuang Customs 12360. The Shijiazhuang Customs 12360 version shall prevail.