Introduction

After analyzing over 50,000 customs declarations, we've identified the five most frequent errors that lead to penalties, delays, and overpayments. Understanding these common mistakes and how to prevent them can save your business significant time and money.

Error #1: Incorrect HS Code Classification (73% of Errors)

The Problem: Misclassifying products by using the wrong Harmonized System code is by far the most common error. This often occurs due to:

• Insufficient product knowledge
• Choosing codes based on general description rather than official nomenclature
• Not accounting for material composition or intended use
• Using outdated HS codes after regulatory updates

The Impact: Incorrect classification can result in paying the wrong duty rate (either overpaying or underpaying), customs holds and inspections, penalties of up to 100% of the duty amount, and loss of preferential trade agreement benefits.

How to Avoid It:

• Maintain detailed product specifications including materials, composition percentages, and intended use
• Apply the Six General Rules of Interpretation systematically
• Request Binding Tariff Information (BTI) rulings for complex products
• Review classifications when product specifications change
• Use AI-powered classification tools with expert validation

Error #2: Valuation Mistakes (45% of Errors)

The Problem: Customs value must be declared according to WCO valuation rules, typically using the transaction value method. Common mistakes include:

• Omitting costs that should be included (assists, royalties, commissions)
• Including costs that should be excluded (post-importation costs)
• Using incorrect currency conversion rates or dates
• Failing to adjust for related party transactions

The Impact: Valuation errors lead to duty under- or overpayments, increased audit risk, penalties for undervaluation, and cash flow issues from duty overpayments.

How to Avoid It:

• Understand which costs must be included in customs value
• Document the relationship between buyer and seller
• Use contemporaneous exchange rates from official sources
• Implement systematic reviews of invoices before declaration
• Automate valuation calculations where possible

Error #3: Origin Documentation Issues (38% of Errors)

The Problem: Incorrectly declared country of origin or missing/invalid origin certificates cause problems such as:

• Declaring manufacturer's country instead of country of origin
• Missing or expired certificates of origin
• Incorrect origin determination for multi-country manufacturing
• Wrong FTA claimed due to origin errors

The Impact: Origin errors result in loss of preferential duty rates, retroactive duty charges, penalties for false declarations, and customs holds pending verification.

How to Avoid It:

• Understand origin determination rules (substantial transformation, regional value content)
• Obtain valid certificates of origin before shipment
• Verify origin for each new supplier
• Track certificate expiration dates
• Maintain records supporting origin claims

Error #4: Missing or Incorrect Documentation (29% of Errors)

The Problem: Incomplete or inaccurate supporting documentation includes:

• Missing commercial invoices or packing lists
• Invoices not matching actual shipped goods
• Missing licenses for restricted goods
• Incorrect or missing supplier information

The Impact: Documentation problems cause customs delays and storage fees, rejection of preferential claims, inability to clear goods, and additional inspection costs.

How to Avoid It:

• Create checklists of required documents for each product/country
• Verify document accuracy before shipment
• Implement digital document management systems
• Train suppliers on documentation requirements
• Conduct pre-shipment document reviews

Error #5: Preference Claim Mistakes (22% of Errors)

The Problem: Incorrectly claiming free trade agreement (FTA) benefits through:

• Claiming preference without valid origin certificate
• Using wrong FTA for the origin country
• Incorrect tariff preference code
• Claiming preference for non-qualifying goods

The Impact: Incorrect preference claims lead to retroactive duty charges with interest, penalties up to 100% of evaded duty, loss of future FTA benefits, and increased audit scrutiny.

How to Avoid It:

• Verify product qualifies under the specific FTA rules of origin
• Obtain valid origin declarations from suppliers
• Use correct preference codes for each FTA
• Document qualification analysis
• Review FTA eligibility when sourcing changes

How AI-Powered Auditing Helps

Modern customs compliance platforms like MyCustomsInfo® can automatically detect these errors before declarations are filed:

• Pattern Recognition: AI identifies inconsistencies across declarations
• Regulatory Database Matching: Validates codes against current tariff schedules
• Document Verification: Checks for missing or inconsistent documentation
• Expert Validation: Licensed brokers review AI findings
• Training Insights: Identifies which team members need additional education

Conclusion

While customs errors are common, they're also preventable. By understanding these top five mistake categories and implementing systematic controls, you can dramatically reduce your compliance risk.

Want to see what errors exist in your declarations? Request a free 48-hour audit sample analyzing up to 10 HS codes, or contact our team to discuss your compliance needs.