Do Customs Requirements Impede the International Use of Reusable Packaging?

Recommendations from ICC aimed at eliminating red tape and duties that can increase the cost of using reusables for international shipments.

Shipping goods across borders with reusable containers and tracking systems is better for the environment, consumers and companies yet differential treatment by customs authorities can be detrimental to business.

The volume of goods shipped globally has reached impressive proportions in recent decades. Goods moved annually by ship alone weigh more than 10 billion tonnes, or 15 times the weight of all cows on Earth.

The estimated value of global trade has increased tenfold since 1979 to more than US$16 trillion, a figure close to the GDP of the world’s biggest economy. Moreover, in the rise of global value chains and the global e-commerce boom have meant that companies increasingly export goods in small consignments as opposed to standard shipping containers. With so many goods crisscrossing the globe, the kind of packaging and container systems that companies use to ship their products has a significant impact on both their bottom lines and on the environment. In this context, an increasing number of businesses have been using ‘return-refill’ packaging  and container systems (the term used by ICC for reusable packaging), where containers are shipped back to the exporter empty after delivery and reused.

Beyond its obvious positive implications for sustainable shipping, sending their goods in containers that are returned to them allows companies to use tracking and tracing systems that improve quality control, security and logistics management. These tracking devices, integrated into different kinds of packaging, can track location, humidity, light, temperature, pressure and shock during carriage—capabilities that are crucial for transporting sensitive products such as life-saving medical devices and treatments.

Disparate customs requirements

However, one factor that can dissuade traders from reusable packaging programs is that these return-refill containers and packaging are often subject to stringent customs clearance formalities upon their empty return. While customs duties are rightly imposed on the goods in containers that enter countries, there is little international coherence on how customs should treat the returning containers that are empty except for perhaps their tracking systems.

Some customs authorities will impose duties on the empty returning containers, effectively penalizing companies for adopting this more sustainable transport method. Others will ask companies to navigate through lengthy transit procedures that can cost as much in time as the customs duties themselves. Such disparate customs procedures between countries mean that companies shipping their goods in return-refill container systems cannot be certain of the fees, taxes and time their trading will entail.

One ICC member works with a number of small- and medium-sized Central American companies (SMEs) that export to other countries in the region using road transportation. The products, mostly fruits, and vegetables are shipped in plastic containers, which are then returned empty to warehouses in their home country. Customs would consider the empty box merchandise, though, and accordingly, ask the companies to pay import duties on it.

The member said that a workaround was found in which the returning empty boxes were considered temporary imports and exonerated from duties, but this means companies have had to invest resources in doing two different types of declaration for each order. SMEs are disproportionately affected by anything that makes border procedures more cumbersome as they lack the resources of bigger businesses to comply.

Tim Debus, President & CEO of the Reusable Packaging Association told that he has had firsthand experience with this issue, based on his past work in developing reusable packaging systems for the import of bananas from Central American countries into the United States.  “Some Central American countries, for example, have established free trade zones and policies to allow for the re-export of packaging duty-free under certain conditions,” Debus commented. “However, it is not the case for all countries, and many variations exist on these rules and how they are interpreted and governed.”

Debus agreed with the ICC statement that “Return-refill systems can significantly contribute to more efficient and less costly cross-border trade as well as environmental sustainability in line with the UN Sustainable Development Goals.”  As such, he commented, “efforts like the ICC recommendation to bring consistency and certainty across customs handling of reusable transport packaging products to streamline their border-crossing without undue fees or processes for their re-export would benefit international trade, participating businesses, and environmental objectives.  RPA joins the business community like the International Chamber of Commerce seeking greater use and value from reusable packaging systems, and thus we would support this initiative.”

A need for global guidelines

ICC stresses that predictability, reliability, and consistency are prerequisites to fostering international trade, and the lack of clear guidance on how customs authorities should treat return-refill container systems risks is dissuading companies from moving towards a more efficient and sustainable means of trade. In response, the group has released a set of business recommendations on the issue calling on the World Customs Organisation to develop international guidelines on return-refill container systems in close cooperation with the private sector.

Longstanding international customs conventions, such as the 1990 Istanbul Convention on Temporary Admission, provide for the temporary admission of containers imported to “facilitate carriage in connection with a commercial operation”. The 1972 Customs Container Convention covers any container above one cubic meter. Many challenges faced by companies using return-refill container systems could thus be addressed by proper implementation and compliance with international conventions and guidelines.

On this basis, ICC recommends that as long as the packaging has been used and/or will be re-used and that there is no change in ownership, return-refill systems should be allowed to cross borders without formal customs declaration, without duties, taxes and customs fees, and without the necessity of re-exportation.

Sources: ICC, RPA