IOR Services - Top 6 Reasons Why Companies Need Them
Released On 8th Aug 2022
When your company plans to import goods, you’ll quickly discover that it must have a physical presence or appointed agent in the destination country.
This is the vital role played by the Importer of Record (IOR), whose responsibility it is to take care of all the local legal requirements relating to customs, documentation, import taxes and duties.
Should your company be its own Importer of Record? Or is it better to engage the help of an external IOR service? It depends on a variety of circumstances, but here are six top reasons why an IOR service is the better choice.
1. The Seller has sold the goods on DDP (delivered duties paid) incoterms
A common situation arises when a vendor, distributor or reseller sells goods to an end-user who has international sites, and part of the agreement is that the seller takes care of all the logistics. This type of arrangement is typical of the DDP incoterm.
DDP incoterms represent the maximum responsibility to the seller in terms of costs and risk assumption, so it’s very important that the import process runs smoothly.
If the seller does not have an in-country entity to act as the Importer of Record, or their in-country personnel does not have adequate knowledge and experience of the IOR’s role, an external IOR service is the best choice to mitigate the risks associated with DDP agreements.
2. End-user doesn’t want to be the Importer
There are a number of reasons the end-user might not want to be listed as the IOR; perhaps the goods are going to a small remote office or a location where the staff have job functions not related to importing or Trade Compliance.
It might also be because the goods would become a taxable asset if imported against their in-country entity, yet ownership is with the company’s HQ elsewhere.
We’ve written in greater detail about why the end-user might not want to be the Importer of Record, and in these situations the obvious solution is to use an external IOR service.
3. The end-user has no in-country legal entity
Some businesses rent or use huge amounts of rack space in data-centres to provide online or ecommerce services, but it’s very common for the end-user not have staff physically located there. In this kind of situation, an external IOR service can fulfil the role of the Importer of record.
4. They don’t have the knowledge in Trade Compliance
The end-user may have an in-country entity, and many staff, but that doesn’t necessarily mean that the staff on-site have any knowledge or expertise in Trade Compliance. In countries where the import process and import licenses are extremely complex, an IOR services fills that knowledge gap and gives peace of mind to the importer.
5. Companies cannot keep up with changing global trade requirements
Import processes can be complex and time-consuming, and sometimes, even if the end-user does have resources in-country to deal with trade compliance, they might still prefer to use an IOR service to alleviate workload.
It’s also important to keep abreast of changing import processes and requirements. If in-country personnel struggle to stay up-to-date, it is often more efficient for an external IOR to be used.
The end-user does not have the necessary certifications to import the goods.
In some countries, companies must go through a number of registrations and certifications to be permitted to act as an importer, even if they have a registered entity there.
When the time becomes excessive for staff to comply, and / or the cost of becoming certified is just too high, the best solution is to engage the services of an approved importer of record.
3 top reasons for using an Exporter of Record service
Just as the Importer of Record is recognised as being the owner or purchaser of imported goods, so an Exporter of Record is noted as the owner or seller of goods being exported internationally.
They have responsibility for ensuring all exported goods comply with the local and international export legislation of the destination country. A company’s main reasons for outsourcing this role are broadly similar to those already mentioned.
1. The owner or seller doesn’t understand the export process
A company may not wish to be the Exporter of Record because it simply does not understand the process of exporting, and doesn’t have the time or in-house resources to learn quickly.
In addition, if the goods are controlled (we’ve written in detail about controlled goods and ECCN classification codes), then the export process entails a great deal more than just handing the goods over to a courier with their company details.
2. No in-country presence
Sometimes, goods have formed part of a service agreement, or they have been on loan for a contracted period. When that agreement comes to an end, the goods need to be exported back to their place of origin.
However, where the end-user was not the owner, and didn’t import the goods originally, they may not able to act as the Exporter of Record. And if the goods have been in a data-centre, there may be a lack of personnel or knowledge to facilitate an export.
3. When the Exporter of Record is for Reverse Logistics
In a slightly different scenario, goods are being returned because they are faulty, or they are under a Return Material Authorisation (RMA), or they are end-of-life.
In these circumstances it’s very common for the end-user to be unwilling or unable to be the exporter. This is especially likely if the country the goods are shipping from has complex requirements or processes.
For all of these reasons, an external Exporter of Record service is the best solution.
01 September 2020