Today’s guide will answer any question you have about import and export duty.
So, before you import from China, read this guide.
It will help you save time and money.
Keep reading to a better understanding of what you should do.
- What is Import and Export Duty?
- Why is the Import and Export Duty required for the Economy of a Country?
- What are the Duties and Taxes for Importing Goods in China?
- Is Import Duty and Customs Duty the same?
- What are the Types of Import Duty?
- Who Pays Import Duty?
- What is the Purpose of Customs duty on Imports/Exports?
- What is a Harmonized System (HS) Code for Shipping?
- Is Schedule B and HS Code the same?
- What is the Difference Between HS Code and Tariff Code?
- On what Commodities is Export Duty Levied?
- Why do you need HS/Schedule B Numbers, and How can you Find them?
- How do you Calculate Customs Duty?
- What is the difference between Import and Excise Duty?
- Is Import Duty Applicable to the Import of Services?
- What is the difference between Direct and Indirect Tax in the Import/Export Business?
- Who Pays Export Duty in International Shipping?
- Can you Import Goods without Custom Duty?
- Where do you Pay Customs Charges when Shipping Internationally?
- How can you Reduce your Import/Export Duty Costs?
- What’s a CBP 29 Form in Importing and Exporting?
- Can you Claim back Import Tax?
- What are the Features of Customs Duty?
- What is a Stamp Duty charge in International Shipping?
- What is Customs Clearance?
- How do you Clear Customs Clearance for Imports/Exports?
- What is Proof of Export, and Why is it Needed?
- How Long can Customs hold your Goods when Shipping Internationally?
- What Happens if you don’t Pay Customs Charges for Imports/Exports?
- Can you Clear Customs by Yourself?
- What are Clearance Documents in International Shipping?
- Do you need a Customs Clearance Agent during the Importation of Goods?
- What is the Import Process?
- Do Customs Seize Fake Goods?
- Is an International Consignment Note (CMR) Proof of Export?
- What are the Disadvantages of Import and Export?
- What Countries have NIL Import Duty?
- Who Regulates Import/Export Duties in International Shipping?
What is Import and Export Duty?
It refers to an indirect tax, which is often levied on a wide range of imported and exported goods.
In most instances, it is always known as customs duty.
This type of tax is a fundamental element in international trade.
The actual import/export duty often varies depending on several prevailing factors surrounding the trade.
In most instances, though, the customs duty is usually determined based on the assessable value for items, which duty is charged ad valorem.
Why is the Import and Export Duty required for the Economy of a Country?
Import and export duty is an integral element in international trade since it fosters growth and enhances this sector in several ways.
This type of duty is essential for the economy of any country, which imports or exports different types of commodities.
Some of the reasons it is critical for an economy of the particular nation include the following;
Protection of domestic industry – Ideally, most of the countries tend to have different categories of industries ranging from emerging to established.
Customs duty, therefore, helps to protect most of the infant industries from the aggressive completion from foreign nations.
In essence, it helps in controlling the growth of domestic manufacturers to establish and become formidable in the market.
Protecting job opportunities – Customs duty is also essential in ensuring a country secures job opportunities for its people.
This, of course, happens as a result of ensuring there is sufficient control and protection on emerging domestic industries from stiff international competition.
Source of fiscal revenue – Import/export duty is also a fundamental source of national fiscal revenue, specifically for the central government.
It serves as a component for national macro-control. Therefore, it plays a vital role in determining the GDP of a country.
Safeguarding the environment – This type of duty is also essential for a country since it helps it from possible environmental degradation.
Essentially, it controls the types of products allowed to get into a country hence ensuring prohibited goods are restricted from into and out of the country.
What are the Duties and Taxes for Importing Goods in China?
When importing or exporting goods with China, it is ideal to understand the specific types of duties and taxes your products will be subjected to.
The import/export duties and taxes in China tend to vary depending on the specific type of product, country, and means involved.
In many instances, there are three types of taxes for importing goods from China, which include the following;
Value-added tax-Currently, all the products imported to China are subjected to VAT of either 9% or 13%.
The 9% VAT tax is available for specific products categorized within the agricultural and utility items.
On the other hand, the 13% VAT applies to other items subject to this particular type of tax.
Consumption tax -This refers to the type of duty imposed on organizations or companies manufacturing, processing, selling, and importing taxable products.
The rate of consumption tax for goods in China often varies depending on a specific product.
In many instances, you can always figure-out the consumption tax by either using ad valorem or quantity-based method.
Some of the products taxable under China’s consumption tax include cosmetics, jewelry, alcohol, tobacco, and automobiles, among others.
Customs duty-It is arguably, the largest form of tax, which generates the highest amount of revenue for the economy of China.
It essentially includes import and export duties with a total of about 8600 items subjected to this tax.
Computation of customs duty based on either quantity or ad valorem criteria.
Nevertheless, the actual tax you pay as customs duty is dependent on the type or category of a particular product.
Is Import Duty and Customs Duty the same?
Not necessarily, but there is a formidable correlation between the two taxes.
Import duty ideally is a type of tax often charged on goods or products getting into the country from other nations or destinations.
The specific rate of import duty is dependent on various pre-existing factors, such as the type of product.
On the other hand, customs duty refers to a type of indirect tax, often levied on different kinds of products imported and exported to and from the country, respectively.
The difference here is customs duty is collective since it covers all goods getting in and out of the country.
On the other hand, import duty only covers the goods or products getting into the country.
What are the Types of Import Duty?
There are four major types of import duty, which include the following;
Basic duty-It refers to the type of duty imposed on the value of products at a specified rate since it is fixed on ad valorem basis.
It is relatively more or less the same as central excise duty.
Additional customs duty-It is the type of duty often levied on goods, which are imported from outside the country.
Its application varies from one country to another.
However, in many instances, it is usually equal to central excise duty on the same products if they are manufactured in the same country.
True Countervailing duty – It refers to the type of taxes typically imposed on goods, which have received government subsidies in the original country importing or exporting the same.
Anti-dumping duty – It is a type of customs duty on imports, which protects against the dumping of goods in a particular economic trade region.
The prices for this form of duty is usually a bit lower than the normal value of the product.
Who Pays Import Duty?
Import duty is the sole responsibility of the owner of the consignment or a customs broker.
In practice, import duty is charged the moment the shipment gets to the border of the destined country.
It, therefore, implies all the relevant file entry documents must be filled at the port of entry, thus the need for paying estimated duties to customs.
At this stage, it is either the consignment owner or the appointed broker who’ll ensure the duty is paid.
What is the Purpose of Customs duty on Imports/Exports?
Customs duty plays an integral role in imports/exports.
First, it serves as a key source of revenue for fostering the economic growth of a country.
In other words, it provides a source of income for governments to budge in different sectors of economic growth.
Originally, this was the main function of this type of duty on imports and exports.
However, with time it has become a passive function, especially for developed nations.
Secondly, this type of duty serves as a trade policy tool, which helps in protecting domestic industries.
It happens by ensuring it alters some specific conditions under which the goods compete in the local market.
For instance, you might find some authorities imposing low or zero duties to imports up to a specific volume.
Nonetheless, the same authorities may apply relatively high rates to imports, which surpass the quota level.
Thirdly, customs duty on imports/exports serve as a remedy to trade distortions.
And this is from the aspects of punitive function for the dumping of goods or products.
Significantly, this duty helps in regulating the particular products getting into the country, hence preventing prohibited goods.
What is a Harmonized System (HS) Code for Shipping?
It refers to a code designed by the World Customs Organization as a multipurpose international product classification describing the type of goods being shipped.
It is a necessary code in international trade since all the customs officials must ensure they use it for clearing any commodity, which crosses transnational borders.
Furthermore, the HS code facilitates the interpretation and synchronization of a wide range of customs procedures.
This code also conforms to the details of the Kyoto Conventions of 1974, which enhances efficient procedures and rules for implementation.
HS code structure
Is Schedule B and HS Code the same?
Not at all!
The schedule B code refers to a coding system administered by the Foreign Trade Division in the US census bureau.
It is specifically used in the US to monitor a wide range of exports.
Typically, the B code has a total of ten digits, the first six making up the HS codes.
The extra four digits are essential in identifying and classifying the goods.
On the other hand, the HS code refers to a six-digit standard, commonly known as subheading used in the classification of goods for taxes and duties.
The HS numbers are constant across the globe and are administered by the World Customs Organization.
However, the B code is used solely in the US and administered by a body known as Census Bureau’s Foreign Trade Division for export statistics.
Another difference is for schedule B codes must be reported to shipments valued at more than $2500, or when consignment requires an export license.
HS codes, on the other hand, are used mostly in commercial invoices and other international export documentation.
What is the Difference Between HS Code and Tariff Code?
A tariff code refers to a product-specific code conforming to Harmonized System and maintained by the World Customs Organization.
This type of code is available in almost every product, which is involved in international commerce.
Ideally, a complete tariff code can be up to 10 digits but not less than six digits.
On the other hand, HS code, also known as HTS code, is used for classifying and defining products, which are traded globally.
On what Commodities is Export Duty Levied?
Ideally, this is entirely dependent on a particular country.
There are specific export products, which are duty levied in one country and exempted for such duty in another country.
Therefore, the export duty levy on a commodity is entirely dependent on a specific country.
Why do you need HS/Schedule B Numbers, and How can you Find them?
It is always important to know and have HS/schedule B numbers as an international trader because of the following reasons;
- It is vital when it comes to determining all the applicable import tariff rates. While at it, it makes it possible for you to figureout whether the product is eligible for preferential tariff, especially under the Free Trade Agreement.
- To assist in completing shipping documents, which include a certificate of country of origin, among others.
- To file the electronic export information in Automated Export System.
How do you Calculate Customs Duty?
To determine the precise customs duty, you ought to pay for a certain product; you find the sum of different elements.
These elements include freight, value, insurance, and other additional costs.
Once you find this total, you’ll then multiply it by the duty percentage rate.
Most importantly, it is to understand different countries tend to calculate customs duty based on several aspects.
It is thus vital to ensure you confirm with your country customs office, website, or your carrier to determine the specific percentage.
What is the difference between Import and Excise Duty?
Import duty is merely the levy a particular commodity is subjected upon arriving at the port of entry from a foreign country.
On the other hand, excise duty refers to the tax levied on the act of manufacturing an excisable commodity.
Primarily, excise duty is subjected to products manufactured locally.
So the major difference in this aspect is a levy simply based on the origin of the commodity.
Is Import Duty Applicable to the Import of Services?
Ideally, what is often referred to as Basic Customs Duty or BCD will always be taxed on the import of goods besides IGST.
With respect to import of services, the service recipient will be liable to pay duty on the service.
This is if the same is offered by an individual who is a foreigner or resides outsides the country.
What is the difference between Direct and Indirect Tax in the Import/Export Business?
Direct tax refers to the type of duty paid directly to the government either by an individual or an organization.
On the other hand, indirect tax is collected by a third party in the supply chain on behalf of the government.
Primarily, the consumer pays this type of tax by paying more on a commodity given the tax is already added to the product’s price.
The other notable difference here is a direct tax is charged on income and related activities conducted.
Indirect tax, on the other hand, is levied on products and services.
Direct tax is often paid upon the income getting into the hands of a taxpayer.
However, in indirect tax, the payment is made before the commodity gets into the hands of a taxpayer.
It is relatively difficult to transfer the burden of tax in case of direct tax.
On the contrary, it is quite easy to shift the burden of tax for indirect tax.
Tax collection indirect tax is somewhat a bit difficult.
It all depends on the goodwill of the taxpayer to remit the levies.
It requires proper structures to ensure all loopholes are completely sealed.
However, indirect tax is quite easy to collect since the levy is already pegged on the commodity.
Therefore, you only need to collect it immediately;the customer pays for the product.
Who Pays Export Duty in International Shipping?
It is dependent on several factors.
The major aspect determining the payer of the export duty, in this case, is the shipping agency.
Some agents will dictate the exporter as wholly responsible for paying the export duty.
In some cases, it is the importer who is responsible for paying this levy.
Additionally, there are some agents where a third party pays export duty for international shipping.
In other words, there is no definite party responsible for paying export duty.
It depends on several prevailing factors, as well as the various policies of a shipping agency.
Can you Import Goods without Custom Duty?
But this depends on the specific type of commodity you are importing.
Understandably, there are some products, which are exempted from customs duty.
Such products could be donations, or foodstuff depending on the customs policy of a country.
In this case, you need to specifically, confirm with the customs authority of your country before you import duty-free goods.
Where do you Pay Customs Charges when Shipping Internationally?
Ideally, most countries have established different departments within the customs authority.
It is the responsibility of the customs authority to ensure the customs charges are paid by the importer, exporter, or the third party.
Therefore, the taxpayer has to ensure they pay the customs duty at the specific designated customs offices.
How can you Reduce your Import/Export Duty Costs?
Customs duty in international trade is indispensable and inevitable.
However, it is always necessary to ensure you reduce these duties for your business for optimum profitability.
Even so, it is understandable the nature of international business involves a significant number of forms and paperwork.
It can be tiresome, but it is necessary to determine the best ways possible of reducing the costs of customs duty.
Some of these ways include the following;
Determine the tariff differences between countries – In most instances, different countries often create new tariffs whenever an order is raised.
It is thus necessary to ensure you confirm the specific customs duty for each country and avoid assuming the tariffs are similar across the countries.
Scrutinize the information – Ideally, rates and taxes are always subject to change depending on various prevailing factors.
You should, therefore, ensure you confirm the duty rates often and also determine whether or not the information is updated.
Never be complacent to rely on older rates every time.
Use tariff codes – Ensure you use the right tariff codes for the commodity and the country.
Look at each product on your catalog individually and make sure the right code applies.
It could be a bit time consuming but eventually, might be worth it in saving you a few expenses.
International tariff code
Determine the regulated products – In several countries, some specific products must be in line with the customs duties.
In some cases, you may incur additional costs on commodities with special regulations, which is often costly.
The best thing to do in this case as a way of avoiding such instances is figuring out the regulated commodities for a particular country.
Importing the right way – In as much as paying customs duty is inevitable, it is always necessary to ensure you use the proper channels in this business.
You can save a substantial amount of money by using the right channels and agencies rather than seeking short-cuts.
What’s a CBP 29 Form in Importing and Exporting?
Sample CBP Form
It refers to the Customs and Border Protection form given to the importer or exporter as a notice of the action.
Ideally, this form is used as a tool for communicating the assessment of CBP’s additional tasks and the commencement of the liquidation process.
Secondly, it is also used in alerting the importer or exporter of the CBP’s intention to evaluate additional duties.
Technically, when the CBP 29 is proposed as an action, as in importer, it implies you have about 20 days from the date of issuance to provide your response.
Failure to respond to the notice within 20 days, it is assumed by the customs you agree with the proposed action.
Can you Claim back Import Tax?
It is quite possible to claim back import tax, which was either paid erroneously or in excess.
Even so, it is vital to understand different countries have varying stipulations in regards to the refund process of import tax and interest.
It can be relatively involving depending on the nature, quantity, and country of origin of the commodities.
In general, though, most stipulations surrounding refund on import duty stipulates the possibility of claiming back the tax.
It provides for either a person who pays the duty in pursuance to order or evaluation or a person who has borne the tax.
What are the Features of Customs Duty?
Customs duty is unique but serves almost the same purpose in all countries across the world.
It mainly helps in regulating control of domestic businesses, environment, jobs, and industries, among others.
Several factors determine the basis of which customs duty is calculated.
Some of these factors include material of the product, the origin of commodities, weight, and dimensions of goods as well as the place of acquisition, among others.
The customs duty structure varies from one country to another.
The common denominator in the structure is the central government.
Others within the structure depend on the number of tiers of government in a specific country.
It is the customs authority in a particular country that is in charge of collecting customs duty.
What is a Stamp Duty charge in International Shipping?
It refers to a tax levied on single property purchases or documents.
The stamp charge is based on the nominal rates or value of the transaction on particular financial instruments.
Some of the property purchases and documents subjected to stamp duty include receipts, cheques, land transactions, and commission receipts, among others.
Ideally, the actual stamp duty varies from one country to another.
The modalities used in determining the definite stamp duty also vary depending on the nature of the transaction.
What is Customs Clearance?
It primarily refers to the process of taking commodities through the customs authority or office.
The essence of this act is to facilitate the movement of consignments from the foreign country of export into the country of import.
It is usually a demanding process since it entails verification of quite a number of aspects, including the goods and the documents.
Customs clearance can as well indicate the issuance of documents by the customs authority to a shipper.
This is to indicate all duties surrounding the consignments have been paid, and the shipper’s commodities are thus cleared for export.
How do you Clear Customs Clearance for Imports/Exports?
This process starts immediately; you submit all the relevant documents to the customs clearance officer.
The official will look into your shipment paperwork to verify their authenticity and whether they match the consignment.
All international shipments must have a commercial invoice.
It is a document, which lists both the shipper’s and receiver’s information, including contact.
It also contains details regarding the consignment, such as description and value, among others.
The next step in the process entails the clearance officer determining the specific duty and taxes applicable to your shipment.
Of course, this is dependent on the types of consignment, value as well as regulations of the importing country.
This allows the clearance officer to figure out whether all the applicable duty and taxes have been paid before approving for the next step.
Once every clearance detail is clear and all the documents presented match the shipment, it is then released and dispatched to its final destination.
At this point, you’ll have to deal with your broker to help to facilitate shipping of the goods to the respective destination.
The clearance process is as simple as such.
The most important element in the entire process is making sure all the paperwork is done correctly.
It enables you to stay away from trouble with the clearance officers and also prevents unnecessary inconveniences.
What is Proof of Export, and Why is it Needed?
It primarily refers to documentary evidence indicating the goods are exported and not necessarily used for indigenous consumption.
In other words, it is a combination of various documents corresponding to the details of the exporter and consignment.
It can take various forms depending on various aspects revolving the shipment.
For instance, if the shipment went through the customs clearance process in the exporting country, the document would suffice.
There is also a need for an ocean lading bill, which indicates the items were loaded on a specific outgoing vessel.
And this is specific when the consignment left via ocean, and in some instances, the document can be negotiable.
If you are shipping the consignment via air, the air waybill number is the proof of the document.
This document is non-negotiable since the waybills are often issued prior to loading of the goods on the aircraft.
The essence of proof of export is to enhance the efficiency of shipping the goods from the country of origin to the destination port.
This document prevents the fraudulent process of sneaking goods in an export process.
Moreover, it comes in handy to avert cases of confusion when it comes to a specific shipment.
It also helps to enhance clearance process at the customs department, thus making it ideal in preventing unforeseen inconveniences.
How Long can Customs hold your Goods when Shipping Internationally?
Generally, this is quite dependent on a wide range of factors.
The reasons might also vary from one customs department in a country to another one.
Even so, the customs can hold the shipment for as long as they deem it necessary.
For instance, if they are awaiting specific additional information regarding the shipment, it can as well take several days up to weeks until they confirm receipt of the same.
It is also the same thing, which happens if the shipment has issues surrounding paperwork and payment of customs duty.
Additionally, if the goods do not meet the criteria stipulated by the customs department of a particular country, they can hold it for as long as possible.
And it is the reason it is always advised to ensure you verify whether or not the specific commodities you are importing to the country are acceptable.
In a nutshell, there is no definite duration, which customs can choose to hold your goods.
It depends on many aspects surrounding the consignment itself.
What Happens if you don’t Pay Customs Charges for Imports/Exports?
You can never take possession of any import/export consignment unless you pay for customs charges.
In most instances, any import/export is often subjected to payment of customs duty within a specific period.
And if you fail to pay the levy within the period, the customs department has a right to auction the shipment and recover the duty and other expenses owed.
Also, the goods can be processed for disposal after a particular period.
The other likelihood is the consignment is transshipped to rental warehouses where they are stored until the duty is paid, be it in full or partly.
Also, in some instances, the carrier will inquire from the shipper whether to leave the package at the destined port or ship it back.
Can you Clear Customs by Yourself?
It is quite possible to clear any shipment yourself, but you have to be physically present at the customs office.
However, you need to understand all the processes involved to make your work easy.
Moreover, you also need to present all the documents and ensure the paperwork is appropriate.
What are Clearance Documents in International Shipping?
Ideally, the types of documents required for customs clearance are dependent on the commodity being shipped.
Also, the required documents may vary based on the country of origin and destination.
That notwithstanding, there isa specific set of documents involved in international shipping.
They include the following;
Customs invoice – It is a critical document, which contains useful information regarding the consignment, such as description, freight insurance, and weight. It also provides details such as selling price, quantity, delivery, and payment, among others.
Shipping bill – It is a report, which documents a measurable record.
Pro forma invoice – It is a document that illustrates the intention of the exporter to sell a specific quantity of commodities.
Packing list – This document entails all the items enclosed in the shipment and can be matched against the pro forma invoice.
COO certificate – It refers to a declaration provided by the exporter verifying the commodities being exported have been manufactured and acquired from the specific country.
Bill of lading – It is issued by the carrier to the shipper and acts as contractual evidence for the transportation of commodities as outlined by the carrier.
Export license – It is a document, which enables the shipper to export shipment to an international destination. It is a necessary document to issue at the customs for clearance of exported goods.
Bill of exchange – It is more or less of a promissory note, which allows an importer to clear payments for goods, be it on-demand or at a fixed rate.
Warehouse receipt – It is a document often generated after clearance of all applicable export duties and freight charges.
Bill of sight – It is a declaration document, which allows the receiver of commodities to verify the content before making payments towards applicable duties.
Purchase order – It is a letter often from the creditor, assuring the importer will honor the payment to the exporter as a way of completing the particular transaction.
Health certificate – It is applicable in instances where the commodities involved are food products, be it of animal or non-animal origin.
It merely certifies the product is fit for consumption and has undergone all the necessary tests and standard checks prior to exportation.
Do you need a Customs Clearance Agent during the Importation of Goods?
The entire process of customs clearance of shipment is usually hectic and can be tiresome.
It is thus recommended always to have a registered customs clearance agent to assist you in this entire process.
Ideally, a clearing agent is mandated to process the various documents involved in importation in the customs systems.
This agent also ensures your shipment is cleared and released from the customs.
What is the Import Process?
It refers to the procedures involved in purchasing and shipping of goods or commodities from a foreign country.
This process usually differs from one country to another based on several aspects, such as statutory requirements, import, and customs policy.
The import process often involves several stages, which include the following;
- Trade enquiry
- Procuring import license and quota
- Obtaining foreign exchange
- Order placement
- Dispatching the purchase order
- Obtaining applicable import documents
- Customs formalities and clearance
- Making payment
- Closing transaction
Do Customs Seize Fake Goods?
The customs departments have put in place stringent mechanisms, which help in seizing counterfeit products.
It is a criminal offense to import or export fake commodities, and the due process will be followed to ensure the culprits are brought to book.
There are specific fines, penalties, and forfeitures imposed on the culprits, and in some cases, punitive measures are taken towards the perpetrators.
Is an International Consignment Note (CMR) Proof of Export?
Yes, to a certain extent!
This document primarily acts as evidence of the identity of the contracting parties when they are transported by road.
It provides confirmation the carrier is in receipt of the consignment, and a contract of carriage exists between trader and carrier.
Even so, there is a need for ensuring the CMR captures all the important information for it to be a legible proof of export.
What are the Disadvantages of Import and Export?
International business is quite demanding and hence presents a fair share of shortcomings, which include the following;
- It requires a relatively significant investment to start the business. This can be a bit of a challenge, especially to budding importers and exporters.
- There are several bureaucracies involved in obtaining the relevant license for imports and exports. This can be frustrating and tiresome and, at the same time leading to unnecessary inconveniences.
- Import business tends to affect the economy of a country adversely since it increases unemployment and ruining local manufacturing.
- Exportation depletes natural resources of a country hence leading to loss of such valuable resources that can hardly be replenished.
- It increases exposure to several elements such as foreign diseases, which can easily be transmitted through the consignments.
What Countries have NIL Import Duty?
There is no country which has nil import duty of commodities.
What happens is this is dependent on the specific product you are importing from a particular country.
Ideally, the amount of chargeable duty is determined by import tariff classification of a commodity, country of origin, and country of import.
For instance, a commodity brought into country X from country Y may have nil duty.
However, the same product with the same tariff classification imported to country X from country Z may be subjected to a certain rate of duty.
Who Regulates Import/Export Duties in International Shipping?
The tariffs of foreign trade and international shipping are based on the International Harmonized System product classification.
However, there are regional trading blocs in different parts of the world, which provide a framework for international trade and shipping amongst its member states.
That’s it – everything you need to know about import duty and export duty.
For questions or enquiries about these taxes, contact Bansar team now for assistance.