A Comprehensive Guide to Understanding and Calculating Customs Duties

What Are Customs Duties?

Customs duties are financial obligations imposed on goods when they cross national borders, whether imported or exported. They are sanctioned by tax legislation and serve several purposes, including protection of local industries from foreign competition, increasing state revenues, and as a tool of political pressure.

Types of Customs Duties

There are several types of customs duties, which vary depending on their calculation. An understanding of these types is crucial for anyone involved in the business of import and export.

Basic Customs Duties

These are the duties imposed by a state on imported and exported goods that cross its political borders. They are calculated as a fixed percentage of the total purchase value of the goods in the supplier country, determined by the HS Code for goods.

Additional Customs Duties (Revenue)

These duties are imposed to generate tax revenues that benefit the state and increase its financial resources.

Compensatory Fees (CVD)

When goods are imported from a country that has granted tax exemptions and aid to its manufacturers, the importing country imposes countervailing duties on these goods to protect their markets.

Protection Fees

These duties aim to protect national industries, especially emerging ones, by imposing high duties on imported goods, making them more expensive.

Anti-dumping Duties

To protect the national economy and counter dumping policies adopted by some countries, anti-dumping duties are imposed.

Prohibitive Fees

These are customs taxes levied at prohibitively high rates, effectively preventing the commodity from entering the importing country.

Value Added Tax (VAT)

VAT is imposed on all imported goods, regardless of the classification of those goods, the rate of customs duties applied to them, or if they are exempt from customs duties.

How to Calculate Customs Duties

Calculating customs duties involves determining the amount of duties and taxes to be paid during the customs clearance of imported goods. This requires specifying certain factors related to the goods, such as type, origin, and tariff classification.

Determining the Customs Value

The customs value of imported goods is equal to the price of the goods plus all actual costs and expenses up to the port of import on the date of registration of the customs declaration. To calculate this, you need to summarize the following:

• The value of the goods written in the commercial invoice.
• The cost of shipping imported goods to the port or place of import.
• Loading, unloading, and handling fees associated with the transport of imported goods to the port or place of import.
• Costs of insurance of the goods.

Calculating the Duties

Once the customs value is determined, the duty rate is applied to it to calculate the actual duties. This rate can be found by looking up the HS code for the goods on the customs website of the importing country.

Important Factors to Consider When Calculating Customs Duties

Free Trade Agreements (FTA)

Check if a free trade agreement exists between the country of origin and the importing country. This could allow for tax breaks or deductions.

Payment Methods and Due Dates

Understand the methods of payment of customs duties and their due dates. While duties are usually paid upon entry into the importing country, extensions of the eligibility period may be granted in some cases.

Grace Period for Goods at the Port

Ensure your goods are allowed to be in the port for a specified period. Any additional time could result in fines and increased shipping costs.

Use of a Customs Broker

If calculating and paying customs duties is challenging, consider hiring a customs broker for assistance.