Customs duty is a levy imposed by a country’s customs authority on imported products and merchandise. It is frequently used for a variety of purposes, some of which overlap.

• To govern foreign trade.
• To tax foreign products to encourage or protect the domestic sector.
• To raise cash for the local government.
• To penalize a specific country by imposing higher taxes on its products
• The present trade war between the US and China stems from retaliation against rising duties on their products.

Any imported goods from an international trade that is conveyed by ocean freight, land, or air must be declared on arrival. It must be accompanied by supporting documentation such as the bill of lading, packing list, and commercial invoice. Here, in this import custom duty guide, we explain everything you must know.

Customs duty, import duty rates, and the customs clearance process are all important factors to consider when calculating international shipping expenses, and they should not be overlooked during business conversations because they can add up to a significant amount. As an importer, you may want to consider this while pricing your goods for resale through a customs brokerage. A good logistics company in UAE can support you with all complicated tasks.

Definition of Customs Duty 

While customs duty is sometimes known as import duty, tax(es), or tariff(s), there is a subtle difference between a duty and a tariff. Tariffs are frequently the appropriate percentage rate, whereas duties are the amount of money that’s due.

Customs Duty Payment

Customs duty is paid promptly upon release to both the importing country and the local customs officials. It is paid by the importer of record, who is also in charge of filing the necessary legal papers for the import. Unless otherwise indicated, the importer of record might be a firm or an individual and is typically the merchandise’s owner, buyer, seller, or destination agent.

Types of Customs Duties

Customs duties vary widely around the world. In this import custom duty guide, we will go over the most typical customs duties you may face. Additional duties may apply to your shipment. Check with your freight forwarder or customs broker to ensure that you are paying the correct duties.

Basic Customs Duty

The fundamental customs duty, as the name implies, is the basic duty levied on imported products. It can be evaluated on an ad valorem basis or at a fixed rate (more on that later), as established by the local authority.

 

Countervailing Duty (CVD)

Countervailing duties are placed on subsidized imports from other countries. Foreign governments occasionally grant subsidies and tax breaks to their manufacturers, allowing them to sell their products at a lower price. In such cases, importing countries levy countervailing taxes to prevent imports from gaining an edge in the local market by selling at a lower price, putting locally produced items at a disadvantage. Countervailing duties are typically equivalent to subsidies provided by the foreign government to level the playing field.

Anti-dumping Duties

Anti-dumping duties, like countervailing duties, are made to defend local industries. It is paid on items that are considered to have been imported at a very low price (below the market rate).

This could be done with the objective of selling them for a lower price than the market rate in order to get an unfair advantage or get rid of excess stock. Anti-dumping duties are imposed on certain items to compensate for the discrepancy and maintain fair competition. Anti-dumping and countervailing duties vary depending on the place of origin and type of imported products.

Safeguard Duty

Safeguard taxes are evaluated on products that are believed to have been imported into a country in growing quantities, potentially endangering the local sector. It is enforced to preserve the local economy and is frequently estimated using the potential financial losses incurred by local industries.

How to Determine Customs Duty

In order to understand how to calculate customs duty, we must first understand how duty rates are established. The two most frequent methods are called ad valorem and specific. Ad valorem duties are calculated as a percentage of the value of imported goods. Specific duties are calculated based on the weight or amount of imported items. 

Other methods to calculate customs duty rates include:

• Mixed duties: The greater of a specific and ad valorem duty.
• Compound duties: A mix of ad valorem and specific duties.
• Rate quotas: Rates are increasing on a scale. The less you import, the lower your rate, and vice versa.

When acquiring a container shipping quotation from your logistics company in UAE with services including the customs clearance process, always ensure that customs duty is included in the quote provided. 

Factors Impacting Customs Duties

In order to calculate the amount of customs tax you need to pay for your item, consider three primary factors:

• The applicable customs duty rates
• The customs or commercial value of things.
• The origin of good

What is the Harmonized System (HS)?

The World Customs Organization established the Harmonized System, a versatile and universal nomenclature for harmonizing and classifying products based on codes. All members of the World Trade Organization accept and use these codes, often known as HS codes. The code associated with a particular commodity sets the appropriate customs duty rate.

Check the database of the importing nation to ensure that you have allocated the correct code to your goods. Any misassignment may create delays in your shipment’s customs clearance.

Different countries and regions may adapt the Harmonized System in their own ways, although all modifications are based on the original six-digit HS code listed in the Harmonized System and are used to further categorize commodities. Examples include the HTS (Harmonized Tariff Schedule) code used in the US and the TARIC code used by the EU, among others.

Calculate the Customs Value of Declared Goods

The World Trade Organization (WTO) has established six regularly used methods for customs officials worldwide to calculate the value of imported commodities. The transaction value method is the most prevalent of the six options. 

The customs value of items is determined by the amount paid by the customer to the seller for the merchandise. This includes any costs associated with getting the item to the point of import. Nonetheless, the value of a certain good can vary depending on the incoterm selected and agreed upon by the importer and exporter. In general, to determine the customs value of a commodity, you must add the following:

• Value of items as stated on the commercial invoice
• Commissions
• Royalties or license fees
• Proceeds the seller may receive from resales
• Processing or assembling costs
• Cost of goods preparation including boxes and packing material
• Cost of land transportation
• Cost at origin
• Cost of maritime transport
• Cost of Insurance

Customs Duty Calculator

You can figure out customs duty yourself by searching up the commodity code of the products you’re importing and determining the relevant duty rate.

What to Consider When Calculating Duties

FTAs, De Minimis Threshold (DMT), payment methods, and customs brokers.

US Customs Duty Rates

If you are delivering to the United States, pay close attention to this area. The US Congress determines customs import duty rates. While other countries base customs tax rates on the price of the commodities, insurance expenses, and freight costs, the United States bases them only on the value of the articles.

Despite widespread perception, the DMT for products entering the US is $800, not $2,500, as stated by certain sources. This means that goods worth more than $800 are subject to customs duty. Shipments priced at more than $2,500 must file for a customs bond in order to be cleared. A customs bond guarantees that all necessary duties will be paid. US customs duty must be paid in US dollars and may be paid by check. Some ports of entry support credit cards.

HTS Codes

The US employs a variant of the Harmonized System known as the Harmonized Tariff Schedule or HTS. The US International Trade Commission (USITC) publishes it annually, and Customs and Border Protection (CBP) enforces it.

The HTS is based on the HS code but divided into more specific product categories. For example, an HS code contains six digits, whereas an HTS code has eight to ten digits, with the first six being HS codes. You can find your item’s HTS code on the USITC site.

US Trade Agreements

Imports from nations with which the US has international trade agreements may result in lower customs tax rates. These include neighboring Canada and Mexico, both of which are members of the North American Free Trade Agreement, or NAFTA. 

In this ultimate import custom duty guide, we hope you got a clear idea about the import duty rates, customs clearance process, etc. You can seek the support of a top logistics company in UAE and leave all complicated tasks to them.