What are customs duties?

Customs duties are fees that customs authorities require to pay for goods imported from other countries.
These are the most important reasons why customs tariffs exist:

• As a measure to protect the domestic market ensuring its competitiveness, increasing the prices of products imported from other countries.
• As a collection formula of the country that applies them.
• As a penalty formula to certain countries, applying higher tariffs on their products.
• In retaliation against those countries that apply higher tariffs (China-U.S. trade war, for example)

All goods imported from other countries in international trade operations must be declared at the customs office corresponding to their arrival.

Other documents to be submitted
Along with the declaration of the goods, some documents must be attached, such as the Bill of Lading, the packing list and the commercial invoice, as well as other documents that may be requested by the customs authorities.

The Bill of Lading is a document that serves as proof of the contract of carriage between the consignor and the shipping company. It is issued by the shipping company or its agent and it is stated that the goods have been received to be transported to the port of destination on board the indicated vessel, and under the conditions agreed between the seller and the buyer of the goods.

The Packing list, also known as a packing list or cargo list, is a list of the goods you will import or export, including the content, weight and measurements of each package.

The Commercial invoice is a legal document issued by the seller (exporter) to the buyer (importer) during the international trade operation. It is used as proof of sale between buyer and seller.

Import tariffs are an important factor in calculating the cost of transport in an international operation should not be underestimated during trade negotiation, as they can add a significant amount to the total cost of the operation.
In your import operations you must keep this cost in mind when setting the sales price of imported products.

Customs tariff and import tariff

The Chamber of Commerce defines the customs tariff as follows:

“The Customs Tariff is the official publication containing product descriptions in such a way as to allow all goods to be sorted and their corresponding tax rates determined […]
The Tariff is a tax required to be paid to foreign (non-Community) products when they are intended to be consumed (imported) in the European Union and the way to protect domestic – Community products from external competition from cheaper goods.“

The customs tariff applies, in particular, to goods entering a country, and therefore in practice the terms customs tariff and import tariff are used interchangeably.

However, tariffs may also apply to export operations. In these cases they apply in exceptional situations and on a non-permanent basis.

Payment of the customs tariff

The customs tariff is paid when the goods enter the country of destination, once they are under the control of the customs authorities. This customs tariff is paid by the importer, who must also complete and deliver the legal documentation required for the import operation.

The importer may be a natural or legal person. It is usually the buyer of the imported goods or the buyer’s agent in the destination country.

Import tariff rates

1. Tariffs or ad valorem duties
This is the most common type of tariff and is a percentage of the value of the imported goods, the value of the goods at customs or CIF value.

2. Specific tariffs
Tariff rate calculated based on the quantity of product imported taking into account the weight or number of units imported.

3. Mixed tariffs
Tariff rate consisting of the sum of an ad valorem tariff and a specific tariff.

4. Compound tariffs
A main tariff is established that can be ad valorem, specific or mixed, but the total payable is delimited with a minimum or maximum amount. It can also be a combination, that is, a range between a minimum and maximum.

The Common Customs Tariff and other tariff measures

There are additional tariff measures in addition to the common customs tariff aimed at protecting international free trade. Countervailing, anti-dumping and safeguard measures are the most common.

Please note that there may be other specific tariffs and measures applicable to your shipments.

Common Customs Tariff

The Common Customs Tariff is the basic tariff imposed on imported goods. Local governments decide whether to impose these customs duties as ad valorem duties, specific, mixed or combined.

Antidumping

Anti-dumping measures are designed to protect domestic industry, preventing companies from other countries from exporting at a lower price than they would in their own markets (known as dumping). Anti-dumping fees are an additional tariff applied on a type of good from a given country and added to the common customs tariff.

Safeguard measures

Safeguard measures are applied to imported products in such a large quantity that they could be considered a threat to domestic industry. They are imposed to protect a country’s national economy.

How to calculate the customs tariff

Customs debt is the official technical name that receives the amount to be paid by an importer to the customs authorities for the goods of its import operations.

The following are take into account when calculating customs debt:

• The value of the goods at customs
• The applicable tax rate or tariff
• The origin of the goods

1. .The customs value of the goods

The customs value of a good is a fundamental element in the calculation of the costs of international transport, since it is the basis on which the taxes of an import operation are calculated. Both import VAT and customs duties are determined by customs value.

How the customs value of a good is calculated

There are six methods for calculating the value of an import used by customs authorities around the world and recognized by the World Trade Organization (WTO), but the main method is the so-called ‘transaction value’ method.

Calculating the value of an import based on ‘transaction value’

The customs value is based on the quantity that the buyer has paid the seller for the goods, including all costs involved in transporting the goods to the point of importation. Thus, the value of the goods may vary depending on the incoterm agreed in the international contract of sale between the importer and the exporter.

The base incoterm used to determine the customs value is the CIF (Cost, Insurance & Freight) incoterm. That is, the customs value is estimated by adding up the value of the sale, insurance and international freight.

In practice, the customs value is calculated by making a few small adjustments, depending on the incoterm that has been chosen.

• If the CIF incoterm has been chosen, no adjustments will be required.
• If the CFR incoterm has been chosen, the insurance must be added.
• If the FOB incoterm has been chosen, the freight and insurance must be added.

You must not make the mistake of taking the price at which you will put the goods on sale as the value of the goods. In that case the customs value will be higher and you will pay more tariffs and taxes.

The ‘transaction value‘ method is that it is applied in most import operations, but in some cases it may not be the most appropriate.

If you want to know more about other methods for calculating customs value, you can visit the WTO customs valuation page or consult with your customs agent.

2. The applicable tariff

The tariff applicable to an imported product depends on the harmonized system.

What is the harmonized system?
The harmonized system is an international nomenclature developed by the global customs organization to classify products using a set of codes.

The so-called HS codes are called the harmonized system and are accepted and used by all world trade organization member countries.

The HS code for each product determines the tariff rate to be applied.

Always make sure that the HS code of your product is correct, any errors in these codes can cause delays during the customs clearance of your goods. The harmonized system is used worldwide, but there are adaptations in different countries and regions.

How are customs duties calculated?
You can calculate the tariffs yourself by searching for the HS code of the product you are importing.[ Tariff tax rate for an HS code ] x [ CIF value of the goods ] – [ Customs tariff ]

However, the value of the final import tariff you will pay is decided by the customs authority of the importing country.

3. The origin of the goods

Depending on the country from which you import your goods, import restrictions and tariffs may be different.
You should check for preferential agreements between the country of origin and the country of destination to facilitate the entry of imported goods.

The European Union, for example, enjoys preferential agreements with Switzerland, Iceland, Norway, Faroese Islands, Mexico, Chile, Tunisia, Syria, Morocco, Lebanon, Jordan, Israel, Egypt, Algeria and South Africa

Other things to consider when calculating the customs tariff

Free Trade Agreements (FTA)
Free trade agreements or TLCs are agreements to facilitate trade between two countries. Before you do an import operation, you should check if any of these treaties exist between your country and the country of origin from which you are importing.
Although some goods are exempt from tariffs, they must always be declared at customs.

Minimum thresholds
Each country sets the minimum threshold from which customs taxes and duties must be paid.
SMEs often benefit from these thresholds due to lower import volumes.

Payment of customs duties
They usually have to be paid as soon as the goods enter the country, but sometimes the payment period can be extended.
You must ensure that customs duties are paid so that there are no customs delays or penalties and to avoid the risk of entering a list that would expose you to more frequent customs inspections in the future.

Customs agent
The customs agent at destination who can help you with the calculation and payment of customs taxes and duties and with all customs management.

StarCargo, as a cargo agent we have presented to Customs our guarantees, which allows us to carry out the formalities on our behalf, without having to go to an intermediary which would make the costs more cost- We handle many products that by their nature or urgency require special procedures for their processing, which makes us highly specialized in any procedure that we need to carry out.