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What is customs? A complete guide to import and export

Do you plan to trade with countries outside the EU, such as China, the US or the UK? Then customs clearance is a threshold you have to cross. For many entrepreneurs it feels like a jungle of bureaucracy, but understanding the basics is crucial to your profitability.

What exactly is customs?

In short, customs are a government instrument for regulating trade.

  1. When exporting: A control function for security and statistics.
  2. When importing: A tax that protects domestic industry and provides revenue to the state.
 

Here we go over what applies to both import and export, and how to avoid costly mistakes.

Customs, VAT and the EU Customs Union

The difference between customs duty and VAT

Many people confuse customs duty and VAT, but they are two completely different charges. We make sure to explain the difference simply: VAT is paid on all goods and services in Sweden, regardless of where they come from. The VAT rate is generally 25 percent and the Swedish Tax Agency is responsible for this. Customs duty, on the other hand, is only paid when you import from countries outside the EU, so-called third countries.

When you import, the total cost is: price of the goods + shipping + duty + VAT. VAT is calculated on the entire amount including duty, which means that the total cost can be significantly higher than you initially thought. If you have a VAT-registered company, you pay VAT to the Swedish Tax Agency, while private individuals and companies without VAT registration pay directly to the Swedish Customs Agency upon import. This is important to keep in mind to avoid surprises.

The EU Customs Union: How it affects you

The EU operates as a customs union, which means that member states have common rules for goods from outside the union. The most important thing for you to know is that within the EU there are no tariffs between countries, you can trade freely with Germany, France or any other EU country without any extra fees.

But if you buy from the US, China or other countries outside the EU, customs duties may apply. In practice, the customs authorities in all 27 EU countries work as a single unit. This means that once your goods have entered the EU in one place, they can move freely throughout the EU. The EU also has special customs agreements with certain countries such as Iceland, Switzerland and Turkey. These so-called customs preferences can mean lower or no customs duties at all for certain goods. The EU is constantly negotiating new free trade agreements that may affect your trading opportunities.

Why are there customs duties?

For Swedish companies that want to export or import, it is crucial to understand why tariffs exist. Countries use tariffs primarily to protect their domestic market. When foreign goods become more expensive through tariffs, domestic companies have a better chance of competing.

Customs duties also contribute to the state budget and provide revenue that is used for public services. At the same time, customs duties act as a tool for trade policy, with countries negotiating tariff rates to get better terms in trade agreements. We have seen this clearly with Trump's trade tariffs against China and the EU, which created a carousel of countermeasures and affected all of global trade.

From a security perspective, the Swedish Customs Service plays a crucial role. They check that dangerous goods do not enter the country, ensure that imported products meet Swedish safety standards, and stop prohibited goods such as drugs and weapons. This affects all Swedish companies, regardless of whether they trade internationally or not.

What is customs? Customs officer reviewing documents in a container port - illustration for guide on customs regulations for import and export.

1. Customs duties on exports

When you sell goods to a country outside the EU, you rarely need to pay customs duties in Sweden. In the context of exports, the term What is customs? rather about control than cost. Customs needs to know exactly what is leaving the country for security reasons and for statistics.

The entire process is controlled by the new digital export system (AES) and takes place in three critical steps:

  1. Declaration (IE515): Before the goods leave your warehouse, you submit a customs declaration. When it is approved, you will receive an MRN number that will accompany the goods.

  2. Registration (IE507): When the goods arrive at the border (e.g. the port), customs must be notified that the goods are in place for export.

  3. Proof (IE590): Once the goods have physically left the EU, you will receive an automatic export confirmation. Keep this carefully – it is your proof that the sale was made VAT-free.

Without proper handling in these steps, the goods risk being stopped, leading to expensive delays. What is an export declaration?

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2. Import duties

When you buy goods from a country outside the EU (third country), the basic rule is that the goods must be cleared through customs before they can be sold. But to understand What is customs? In real money, you have to be able to count on it.

The most common mistake is to think that the customs duty is calculated on the purchase price. This is wrong. The customs duty is calculated on customs value. To get this, you have to add up all costs up to the EU border:

Customs value = Price of the goods + Shipping cost + Insurance

It is this total amount that your duty rate (e.g. 6 % or 12 %) is based on. Remember that you will also pay import VAT on the full amount (including the duty).

Getting the numbers right in the documentation is critical to avoiding penalties. How do I fill out an import declaration?

The details that determine your cost

Regardless of the direction of your goods, there are three concepts you need to keep in mind to avoid unnecessary expenses:

  • Commodity code (HS code): Each product has a unique numeric code. When importing, it determines how much you have to pay and when exporting, whether the product requires a permit. If you choose the wrong code, you risk a fine.

  • Tariff: Once you have your product code, you can see exactly what duty rate (percentage) applies to your product in Customs tariff at the Swedish Customs It is the Swedish Customs database where you can see which % customs is on.

  • Certificate of Origin & Certificate: Does the EU have a free trade agreement with the country you are trading with? Then the customs duty can often be reduced to 0 %. But it requires the right paperwork. We at Tullify help you issue exactly the certificate you need:

Customs duties and classification of goods

Every imported product must be assigned a specific code according to the Harmonised System (HS). This code determines the tariff rate and any restrictions that apply. There are over 10,000 different commodity codes, so it is easy to make mistakes. To find the right code, you need to analyze the product carefully; materials, function and composition all play a role. Then you use the Common Customs Tariff, the EU's database of all codes and tariff rates. But be careful, incorrect classification can be expensive.

As an importer, you are always responsible for ensuring that the classification is correct, even if you hire help. Mistakes can lead to additional duties, interest or administrative fees. Many companies therefore choose to turn to experts to avoid costly mistakes.

How the customs value is calculated: more than just the purchase price

The customs value is the basis for the customs duty and is based on the transaction value, the price you actually pay. But it is not just the purchase price that counts. To this are added shipping costs to the first place of arrival in the EU, insurance during transport and certain licenses or royalties. This means that the total cost of getting the goods to Sweden affects the customs duty. An item that costs 1000 SEK plus 200 SEK in shipping has a customs value of 1200 SEK, and the customs duty is calculated on that entire amount.

When the transaction value cannot be used, such as in the case of gifts or trade between related companies, alternative methods are available. However, these are more complex and often require expert assistance to be done correctly.

Frequently asked questions about customs

What does a customs agent do and why should I hire one?

A customs agent is an expert who handles the contact with the Swedish Customs on your behalf. The regulations are complex and small mistakes can lead to large costs. By hiring an agent, you ensure that your goods are classified correctly and that the declarations are submitted on time, which frees up time for you to focus on your core business. Read more about how we can help you as a customs agent

The new export system (AES) is based on a fully digital flow where information is sent between exporter, customs and point of exit. The process can be summarized in three critical steps:

Step 1: Submit the declaration (IE515) It all starts with you submitting your customs declaration to the Swedish Customs before the goods leave the loading dock. In the new system, this message is called IE515. When the declaration is approved, the goods may be released for transport towards the border. Read more about IE515 and how to start the export

Step 2: Declare the goods at the border (IE507) When the goods arrive at the place where they are to leave the EU (for example the port of Gothenburg), customs must be notified that ”the goods are now here”. This is done via the message IE507 (Declaration of goods at the office of exit). Without this step, the system does not know that the goods are ready to leave the country. Read more about IE507 and reporting upon exit

Step 3: Get your proof of exit (IE590) Once the goods have physically left the EU territory, the system will automatically send a confirmation back to you. This message is called IE590. It is your most important document for accounting purposes, as it proves that VAT-free export has taken place. Read more about IE590 and export confirmation

We don't make it complicated. In order for us to help you with your import or export, we usually only need to see your commercial invoice and packing list. Do you have these documents ready? Then we can take over the work immediately.

Upload your documents or contact us here

Yes, if you are a company that trades with countries outside the EU, you must have an EORI number. It is a unique registration number that is used to identify your company in all contact with customs within the EU. You apply for it free of charge at the Swedish Customs, and without it you cannot import or export goods.

Yes, it is highly recommended. If your import declaration or certificates of origin are missing when the ship or truck arrives, the goods may not be released. They will be held in a bonded warehouse or at the port, which will quickly lead to expensive port rents and storage costs.

If you trade with a country that the EU has a free trade agreement with, you can often get a tariff reduction (often to 0 %). To prove that the goods actually have the correct origin, a EUR.1 certificate. This is stamped by customs in the exporting country and presented upon import. Read more about EUR.1 certificate

While EUR.1 gives you lower duty (tariff preference), a Certificate of Origin (COO) only a proof of the origin of the goods. COO does not usually provide a duty reduction, but is often required by the buyer or authorities in certain countries for the goods to be allowed to enter, or for political reasons (e.g. when trading with the Middle East). What is a COO certificate?

 

Trade with Turkey is special because we are part of a customs union. Here, EUR.1 is not usually used, but instead a A.TR certificate. If you have a valid A.TR certificate, you do not have to pay customs duties for most industrial goods shipped directly between the EU and Turkey. Read more about A.TR certificate and Turkey

 

Response: No, there is an important difference. Import VAT is usually deductible for VAT-registered companies, just like regular input VAT. The customs duty, on the other hand, is a pure cost for the company (a so-called ”government instrument”) that not can be pulled off.