Regarding Import Duties
Import duties continue to be significant elements in the cost of international trade. But, several companies and business still pay greater duties compared to what the law requires, which affects adversely on landed cost as well as on business income in the long run. A planned approach to managing customs duty costs would look to eliminate, reduce and delay payment of customs duties.
How to reduce customs duties in your business
There are a lot of ways in reducing customs duties. There are four “what” with regards to the amount of duties paid. Handling the influence of any of such “what” is going to boost the profit of business.
1. What the products are (for example its nature and characteristics) identifies the tariff code and hence the duty cost
2. What the origin of the goods is, (ie where dug up, grown, farmed, further manufactured or processed NOT just shipped from) determines whether preferential, standard or additional duties are payable
3. What the system of the purchase is, for example if it was sale, leased, loaned, for free, under warranty or repair arrangement, identifies customs value
4. What occurs to the items the moment they are imported, for instance further manufactured, repaired and returned, stored and then re-exported, establishes whether different reliefs are available
How to utilize a major opportunity in planning the worth of customs
A major under utilized approach to reducing duties is to look at the customs valuation. In both Us and EU, a major provision in customs law enables the worth of customs to be based on any previous sale of similar products in a chain of transactions before importation. Because of this, it is described in many ways like “prior sale”, “earlier sale” or “chain of sales” opportunity. All of these mean similar thing which is decreased duty.
How does this function? For instance, when items are sold by a manufacturer in the US which cost $60 to an export company there, which in turn sells them to an importer in the EU costing $100, duty could be paid with a worth of $60, as long as specific conditions are met. The savings achieved are the difference between duty on the 100 and the duty on $60. Savings reaching 40% on the duty rates are possible.
What are the benefits? The chief benefit of the approach is to save customs duty by excluding the costs and profits attributable to the non-manufacturing activities undertaken in the country of export from the customs value declared at import in the destination country (US or EU).
The approach also uncouples the value of the imported goods for customs valuation purposes from their inventory value for corporate income tax purposes. That’s good because tax and customs values are often in tension. Tax authorities tend to favor a low import value, whereas customs favor a higher import value.
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