What Is Customs Duty, Why Does It Matter & How To Avoid Getting Stung
The cost of importing products into a country can be a lot more than most businesses imagine. Customs Duty adds a hefty price to your imports. But there are ways to cut it argues Arne Mielken from Customs Manager Ltd.
The cost of importing products into the UK, US or EU is usually a lot more than most people imagine. In fact, it can be so much that it puts many small businesses out of business before they even get started. Most countries like the US, EU (including countries like Germany and Ireland) ad the UK, impose a customs duty on imports. It's an import tax that you must pay when you bring items into your country from another country. Customs duty is applied to the value of the item you're importing plus any insurance and shipping costs.
This tax is applied to the value of the item, usually as well as any insurance and shipping costs.
When you ship an item that is valued at over a certain amount (this varies across the globe) you are required to pay customs duty. This tax is applied to the value of the item, usually as well as any insurance and shipping costs. Customs charges vary from country to country and from product to product.
When you import you usually have to pay customs duty for imports
Import duties are a government tax on imports. Whenever you import something, you have to pay for the duty that's been levied against it.
The amount of import duty you pay depends on whether or not your goods are domestic goods or not. The EU specifically calls this "goods in free circulation." Goods in free circulation are items that are already inside the Customs Union of the European Union (EU) and are therefore exempt from paying any additional taxes when they move from one EU country to another. This means that inside a customs union, you do not need to pay any customs duty and you can move from Dublin to Berlin without paying import duty (if you avoid the UK) just like you would move from Seattle to Washington D.C. without payment of duties and import taxes. If your imported goods don't fall into this category—if they're coming from countries outside a jurisdiction – like the U.S. or the Customs Union of the EU —you will likely have to pay some form of customs duty when you try to enter these “countries”.
How Customs Duty works
If you are importing items, a percentage is applied to the entire customs value of the item. In other words, it’s not just a flat rate that you pay. Customs duty is applied to the value of the item plus any insurance and shipping costs — so if your product costs $100 and has an additional $20 in shipping fees, then your total customs value would be $120.
The percentage depends on what country you live in. The rates are set by the jurisdiction in charge, e.g. the EU for the whole of the European Union, the U.S: for all 50 States etc. Customs Duty either levied as a fixed amount per physical unit (e.g., 1 Euro per kilogram) or ad valorem percentage rate (e.g., 5% of the value of the goods).
Customs Duty depends on the HS Commodity Code of your product and can vary.
You will need to pay Customs Duty on your shipment if its value exceeds the threshold. The amount of duty will depend on the HS Commodity Code of your product and can vary widely depending on what it is.
HS codes are used by governments around the world to classify goods in order to simplify customs procedures. They also help determine which products are subject to import tariffs and taxes, such as Customs Duty or Value Added Tax (VAT).
The cost can be anything between 5% to 85% of the product’s cost and even more. It is a big cost for businesses.
Customs Duties are big business for governments. Annually, they collect millions of customs duties from importers. This is a huge expense for businesses across the globe. That’s why internationally trading businesses are trying hard to reduce or eliminate these costs altogether such as through the WTO or by creating free trade agreements between nations
There are opportunities to reduce customs duty down to zero using Preferential Trade Agreements
This is why it is important to know that in some cases, you can reduce your import duty down to zero. For example, by using preferential trade agreements or Free Trade Agreements.
The most well-known examples are the 40+ EU free trade agreements such as with Japan and Canada (Note: The UK also has many trade agreements, e.g. with Australia and New Zealand, but these are separate from the EU). The U.S., for its part, has signed the USMCA - an agreement between Canada and Mexico that makes them more competitive in terms of producing goods that can be sold into America without paying tariffs on them. So if your business sells goods into any of these markets then you could save lots of customs duty by meeting their rules of origin requirements! We know how much this matters because we have helped many businesses cut their costs dramatically using these agreements over the years; if it sounds like something that would work for your company too - please get in touch!
Another Opportunity is the use of Customs Reliefs such as Customs Warehousing or Inward Processing to name just a few
In addition to the tariff rates mentioned above, there are several reliefs that can help you reduce your customs duty. They are:
● Customs warehousing
● Inward processing
● Outward processing relief
● Free Ports and Free Trade Zones
● Foreign Trade Zones (U.S Only)
● Duty Drawback (U.S. Only)
●
Have a Strategy
It is very important to have the right strategy to reduce customs duty and make sure you only pay what is really necessary. As an importer or exporter, you will have to pay a lot of money in customs duty every time your products cross borders. This can make all the difference between being profitable or not for your business.
You need to understand all the costs associated with importing and exporting goods in order to find out how much money you need from each shipment. The amount of customs duty paid depends on several factors:
● The value of goods being imported/exported; A higher value means higher taxes on imports, while a lower value means fewer taxes on exports;
● Which country is receiving/sending said goods; If one country has preferential trade agreements with another country then it has access to cheaper prices than non-preferential trade agreements countries do not have (example: Canada vs USA);
In order, there are many other factors that affect how much tax an exporter pays when they import goods into another country such as regional laws & regulations."
Customs Manager Ltd is a specialist consultancy in customs duty minimization. We have strategies to optimise your customs duty spent.
Customs Duty is a significant cost to businesses and organizations. Not only do you have to pay the duty, but you also incur additional costs in terms of time and resources spent on it. Customs Duty should be one of your top concerns as an importer because it add significant costs to your business if not managed pro-actively.
Customs Manager Ltd is a specialist consultancy in customs duty minimisation. We have strategies to optimise your customs duty spent. We have expertise in customs duty minimization. We have experience in customs duty minimisation. We have knowledge in customs duty minimisation – Contact us today for a free consultation
Conclusion
We know that this is not an easy topic and it can be quite overwhelming. However, we are here to help! We have strategies to minimize your customs duty spent. The key is to make sure you only pay what is really necessary. With the right support, you can do it too. Contact us