by | Jun 15, 2011 | Exports, Trade Policy

Carnets cut costs when your goods are only temporary exports

by Bill Armbruster, blog anchor

If you’re traveling internationally, you need a passport to get back home. Normally, if you’re shipping, it’s because you have sold the goods. But what if you’re shipping samples to prospective customers, or for display at a trade show, and you plan to bring them back to the US? It sure would be nice to avoid import duties and taxes – and to speed through Customs both here and abroad.

Well, you can do that with a carnet, which is a temporary passport for goods.

Carnets may be the best kept secret in international trade. The biggest benefit is that they allow you to avoid value-added taxes, according to Cynthia Duncan, vice president of the US Council for International Business, which administers the carnet program in the US.

Most countries have VATs, which are often far higher than import duties, Duncan explains. The minimum VAT in the European Union is 15% of the value of the goods, she said. As a result, the total cost of duties and VATs in Europe generally range from 20% to 30%. VATs apply even to trade between countries that are partners in free-trade agreements. In addition, FTA duty provisions do not apply to temporary imports.

Without a carnet, you can get duties and VATs refunded, but it may take up to six weeks, and the refund comes in the foreign currency.

Carnets make it much easier to bring the goods back into the US. because they eliminate the need to register goods with Customs at the time of departure.

The standard processing time for a carnet is two days, but in an emergency you can get one the same day for an extra fee. The standard fees are $215 for goods valued at up to $2,000; the maximum rate — $355 — applies to merchandise worth $250,000 or more. In addition, there is a security deposit (by certified check or surety bond), usually based on 40% of shipment value, to cover any Customs claim that might result from a misused carnet.

One of the great benefits of carnets is that you can use them when you’re shipping merchandise from one country abroad to another. If, for example, you’re exhibiting machinery at a trade show in Germany and then want it to show it to prospective customers in France and Italy, you can do it all with the same carnet. You can also use the same carnet if you’re shipping the same merchandise back and forth to the same country multiple times during the same year.

Importers can benefit if they want to see samples without having to travel abroad simply by telling the foreign supplier to use a carnet.

Carnets are valid for 12 months but should not be used if you plan to sell your “temporary exports” abroad. Then you will have to pay the duties and taxes, plus a 10% penalty.

More than 70 countries recognize carnets; Brazil is the only major trading nation that does not accept them. China and India will take them, but only if the intended use of the goods is for display at exhibitions and fairs. In addition, China and India generally allow the goods to remain there for just six months. Still, that can pave the way for big long-term relationships.

Carnets are normally used for standard commercial merchandise, but there are many exceptions.

One regular user is Sotheby’s, the New York-based fine arts auctioneer.

“They’re very user-friendly. We use them to highlight upcoming exhibitions,” says Ken Dixon, vice president for operations. Sotheby’s sends masterpieces to Europe and Asia to stimulate interest among potential bidders.

Other customers include NBC, which purchases carnets for equipment it uses in telecasting events such as Beijing Olympics and for emergency shipments of equipment for covering natural disasters like the Japan earthquake.

The most bizarre example that Duncan  has ever seen came last October when a carnet was used to ship a pumpkin catapult (or punkin chunker) to Belgium.

So whether you’re marketing machinery or chunkin punkins, don’t let your goods leave without a carnet if you plan to bring them back home.

Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].

The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.

Related Posts:

Global Trade Data: Tracing the Supply Chains that Deliver a Cold Beer on St. Patrick’s Day

Global Trade Data Confirms Seasonal Shift in How we are Stocking up for the Year-End Holidays

Global Shipping Crisis: Managing Supply Chain Risk More Complicated as U.S. Imports Hit Record High