In many countries, goods that are to be temporarily imported and re-exported within one year may be imported without duties. Traders/travelers may choose from one of the following three options:
1. At time of entry, register the good as a temporary importation, deposit the duties and taxes and receive a refund when the good is re-exported within the year;
2. Purchase a temporary importation bond (TIB) against the duties that would otherwise have been paid in each country and have the bond returned when the good is re-exported within the year; or
3. Purchase a Carnet.
A Carnet is used by an importer to remove the need to deposit duties and taxes or purchase the TIB. To get a practical look at why, when, and how to use this essential international customs document, we interviewed Jackie Dalgleish, Carnet Specialist & Team Manager with boomerang carnets:
What is the origin of this interesting name for the company?
boomerang carnets is a trade name, corresponding to items that go out and come back in, as a “boomerang”.
The word “boomerang” is recognized around the world – spelled the same way and pronounced the same way. A Carnet acts like a boomerang as it accompanies goods that must be returned to the holder. Our official company name is Corporation for International Business.
boomerang carnets has been appointed as a service provider of US carnets by the U.S. Council for International Business (USCIB). We have been issuing carnets for 25 years and provide 55% of all U.S. Carnets.
What is a Carnet?
A Carnet is an international Customs document. The Carnet allows the holder to ship products overseas without paying duties or taxes to a foreign government so long as the goods are going to be re-imported into the country of origin, in our case into the U.S., within 12 months. The document also allows the goods re-entry to the country of origin. In our case, the goods are allowed back in as US goods returned, duty/tax free.
The Carnet is secured by a surety bond, which acts as a guarantee against a demand by a foreign government for duty and tax on a product that has not been re-exported but been left in that country. If the owner cannot pay the duty and tax, the bond goes into force to pay on their behalf.
Who uses a Carnet?
boomerang carnet serves a very diverse set of clients, including commercial shippers and/or their Customs brokers/agents. We also serve individuals from a variety of backgrounds:
- A museum curator shipping a Monet painting to have it evaluated in France;
- Media personnel with their equipment to cover the Olympics or other international event;
- Fashion industry sending clothing for an overseas catalogue shoot or a fashion show;
- Clothing or jewelry designers sending their samples overseas in search of buyers;
- Orchestra players shipping their instruments abroad for a concert or competition;
- Owners of prototypes, e.g. in the science industry with medical or diagnostic equipment;
- A large company shipping cranberry pickers;
- Drivers or owners of sports cars destined for international rallies.
boomerang carnets is the sponsor of the League of American Orchestras. We are very proud to have provided the Carnets that accompanied the instruments shipped to the 2015 New Year’s Day Parade held in London.
Are there a common set of requirements that your clients must all meet to obtain a carnet?
The shipper must have an ownership stake in the goods. Consumable products – e.g. food, water, cleaning supplies — that are likely to be consumed while overseas are not eligible for a carnet.
Our carnets are backed by a surety bond obtained through Lloyds of London. Holders must pay a bond or cash equal to 40% of the value of goods being shipped.
boomerang carnet clients are also required to have a US presence or affiliation. They must be shipping goods from the United States to one of the 84 countries that subscribe to the Carnet Convention with the intention of having the goods returned within the required 12-month period.
Please provide some more details about the Carnet Convention.
All of the signatory countries to the Convention have agreed to respect carnets issued by the other signatories. As a result, they all respect the US carnet. The United States, in turn, respects carnets issued by the other countries.
The Convention remains open to new members. To join, they require a National Guaranteeing Association (NGA), such as a government entity or chamber that is appointed by the national government to facilitate the issuance of carnets. In the case of the United States, for example, the guaranteeing association is the U.S. Council for International Business (USCIB). Each NGA is a member of the World Chambers Federation (WCF) and the World ATA Carnet Council. Both operate as divisions of the International Chamber of Commerce (ICC).
Please walk us through the process of applying for and obtaining a carnet from your company.
Information required on the application includes:
- Company/individual information: basic information about the company or individual completing the application.
- Countries to which goods are being shipped: the goods can be sent to the countries listed as often as desired within the 12-month period. It is also possible to add to the list of countries once the Carnet has been issued. However, the goods listed cannot be updated once the bond has been issued.
- A U.S. address where the carnet is to be mailed: the recipient of the Carnet can be a freight forwarder if the shipment is sent via cargo freight or to the traveler if flying. The Carnet will be activated by the U.S. customs officer prior to departure. It will also be stamped by the Customs officers in the countries to which the good is shipped upon importation and re-exportation out of the respected country.
- Need for other available products: the company also provides additional products, such as international insurance (not required but highly recommended) and a warranty program that will replace a lost Carnet at no additional cost.
- Financial information: within 24 hours of receiving the initial application, we request a financial statement to qualify the applicant for the surety bond that secures the Carnet.
We will typically issue the carnet within 24-48 hours of receiving a completed application.
How much of the bond does the client pay in advance?
Our NGA, the USCIB, requires that our carnets be secured by a bond equal to 40% of the value of the good(s) being shipped. One exception includes situations where a vehicle is being exported and is to be driven on open roads, in which case we require a bond equal to 100% of the value for companies and 150% of the value for individuals.
Typically, the client pays only 1% of the 40% premium. This is based on our assessment of the risk of issuing the carnet to the company or individual and likelihood of having to actually pay a bond for a good that has been left overseas. The information provided in the application – how long the company has been in business; the type of business; the destination – are all used to help us to assess the risk and in that way, determine the actual percentage of the bond which the client will need to pay.
What if the client is a start-up with no financial history?
We serve clients that do not have an adequate history to qualify for a bond. This might be a new company or start-up with no financial statement. In that case, we ask the company to pay a Non-Standard Risk Premium of 20% of the 40% of the value of the goods being shipped.
Clients always have the option of putting down cash in lieu of providing a financial statement. The cash payment is equal to the 40% of the value of the goods being shipped.
Do the clients get their bond or cash payments back?
The Carnet holder must present the document and goods being exported for inspection by a Customs officer upon departure and at each port of entry. Upon return to the country of departure, in our case the U.S., the holder again presents the Carnet and the returned goods for inspection by Customs. If the Carnet is not to be re-used, the holder must surrender the Carnet to boomerang carnets. Once the Carnet is successfully closed, the bond is also closed. The premium paid on the bond is not returned.
Are there other factors that will determine if an application for a carnet is accepted?
As we explained, our Carnets cover only the countries that are members of the Carnet Convention. The Convention actually comprises three signatory agreements that cover temporary imports/exportations for: (1) exhibitions and fairs; (2) professional equipment; and (3) commercial samples.
Not all countries have signed onto all three agreements. For example, China is a member only of the convention covering temporary imports for exhibitions and fairs. As a result, an application for a Carnet to ship commercial samples to China would not be permitted. However, the Carnet could be used for duty/tax-free re-importation of the samples back into the U.S.
In addition, the Customs officer in the U.S or foreign country has the discretion to reject a Carnet if there is a question about the goods or if they raise a security concern.
Is there an application fee?
boomerang carnets charges a non-refundable application fee. This fee is set by the USCIB and varies, depending on the value of the goods being shipped.
Why do your clients use Carnets?
Carnets are an efficient and economical way to temporarily export their products/goods, whether they are being shipped on a large ocean shipment, being driven across the border, air-freighted, or hand-carried by a passenger on a plane.