Customs duties: everything you need to know to manage them more effectively
Do you import or export goods for your company? Do you want to understand how to optimize your customs costs and avoid unpleasant surprises? This article is for you!
Customs duties are an essential component of international trade. Yet they are sometimes misunderstood by companies, leading to unforeseen costs and bottlenecks in the supply chain. In this article, we explore how they work, the different types that exist and the best strategies for optimizing them.
What are customs duties and why do they exist?
Customs duties are taxes imposed by a state on goods crossing its borders. They serve several purposes:
- Protecting the national economy: By making certain imports more expensive, states encourage the consumption of local products.
- Generate revenue: These taxes are an important source of funding for governments.
- Regulating international trade: Tariffs can be used to influence trade relations between countries.
The different types of customs duties
There are several categories of customs duties, each with a specific impact on your import costs:
1. Ad valorem rights
These duties are calculated as a percentage of the customs value of the goods. For example, if a company imports computers worth €10,000, and the applicable customs duty is 5%, it will have to pay €500 in customs duties.
2. Specific rights
These duties are set according to a unit of measurement, such as the weight or quantity of the goods. For example, a specific duty of €2 per kilo of imported textile means that a shipment of 1,000 kg will be taxed at €2,000.
3. Anti-dumping duties
Dumping occurs when a company exports a product to another country at a price lower than its normal value. Normal value is generally the price at which the product is sold on the exporter's domestic market or, in some cases, the price charged in a third country.
The aim of dumping is to flood the import market with low-priced products in order to eliminate local competition. Once competition has been eliminated, the foreign company can raise its prices and take advantage of its dominant position.
How do anti-dumping duties protect you?
Anti-dumping duties are additional customs duties imposed on dumped imported products. Their aim is to re-establish a level playing field between local and foreign producers.
4. Preferential rights
Some free trade agreements allow us to reduce or even cancel customs duties on products from certain partner countries.
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How are customs duties calculated?
The amount of customs duties depends on three main factors:
1. Customs valuation
The customs value is generally determined by the transaction value, i.e. the price paid to purchase the goods. However, certain additional costs, such as transport and insurance, may be included in the calculation.
2. Tariff classification
Each product is identified by a specific tariff code, determined according to the customs nomenclature in force. This code determines the applicable rate of duty. An error in this classification can lead to significant additional costs or penalties.
3. Origin of goods
The origin of goods has a direct impact on customs duties. Certain free-trade agreements allow you to benefit from reductions or even exemptions, provided you meet certain conditions.
The impact of Incoterms on customs duties
Incoterms (International Commercial Terms) define the responsibilities of seller and buyer with regard to transport and customs. Here are a few examples:
- DDP (Delivered Duty Paid): The seller bears all costs, including customs duties, until delivery to the buyer.
- EXW (Ex Works): The buyer assumes all costs as soon as the goods leave the seller's factory.
How to optimize customs duty management?
To reduce costs and avoid mistakes, here are a few best practices:
- Properly classify your products: the wrong tariff code can lead to additional costs.
- Take advantage of free trade agreements: Check if your products benefit from reduced duties.
- Mastering special customs regimes: active perfection, bonded warehousing, etc.
- Automate customs operations: specialized software, such as Nabu, helps optimize declarations and avoid errors.
- Call in the experts: A customs broker or freight forwarder can help you manage your imports and exports.
ABOUT NABU:
In the complex landscape of customs operations, Nabu is the solution that enables companies to be more efficient, fast and competitive. By centralizing, unifying and controlling shipping data, Nabu simplifies processes and ensures that every system and stakeholder has the right information, in the right format, at the right time.
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How can I find out what rate of duty applies to my product?
You need to consult the current customs nomenclature and identify the tariff code corresponding to your product.
How to avoid errors in tariff classification?
The use of customs databases and expert advice are recommended.
How to optimize the cost of customs duties?
By using special customs regimes, optimizing Incoterms and making sure your products are properly classified.
Can customs duties be waived?
Yes, under certain conditions, especially if your product benefits from a free trade agreement.
What impact will the Brexit have on customs duties?
The Brexit has reintroduced customs formalities between the UK and the EU. Certain goods are subject to customs duties.
Are transport costs included in the calculation of customs duties?
Yes, in many cases, transportation costs to the border of entry are included in the customs value.
Optimize your customs processes with Nabu.
