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Customs Clearance: What is Import Duty?

Posted On Wednesday, 29 December 2021 20:22
Customs Clearance: What is Import Duty?

If you are going to be buying goods from another country there’s a fair chance that you will be asked to pay import duty as part of the total price.

In simple terms, government tax authorities aim to collect taxes on goods that are coming and going out of the country, and one of the ways they do that is by applying import duties.

If you are importing goods into Melbourne, for instance, it could be a smart move to search customs broker Melbourne to find a professional who understands what can be a complicated charge so that you don’t have any delays or issues to contend with.

As well as using a customs broker to smooth the process, you might want to know a bit more about what import duty is and how it is calculated.

Confusion between duties and taxes

One of the most common problems you will face is trying to work out the difference between duties and taxes.

The major difference between duties and taxes is that duties describe a specific type of tax that is applied on goods entering or leaving the country. In contrast, taxes are charges applied to virtually all purchases. These taxes are usually paid by the importer.

Import duties are much more variable and that means they can be harder to calculate as each country has a different set of rules.

Different duties to pay

The big question is what type of duties will you have to pay?

The list of different types of duties is extensive and varies depending on which country your goods are going to be entering at the end of their journey.

Typical examples of duties would be trade tariffs, anti-dumping taxes, and excise duties. These duties tend to be rolled into a total figure that becomes the import duty payable when goods enter a country.

The HS code

There is a global system in place that is used to classify a product so that you can calculate what customs officials will be charging in duties.

The Harmonized Commodity Description and Coding System (HS code) is the universal system that customs authorities use to understand what is being shipped so that they can apply the appropriate regulations, taxes, and duties.

Every item you import will most likely have an HS code and that will prove to be the key that unlocks what sort of import duties need to be paid.

Other factors

Using an HS to classify the product that is being imported is not the only factor to take into consideration.

Other factors that are also relevant include the value of the goods being imported and whether there is an international trade agreement that means your product is actually exempt from import duties.

You might also see mention of “Incoterms”, which sets out commercial terms as to who has agreed to pay duties and taxes on the shipment.

As you can see, the concept of import duties is relatively simple, but calculating the correct amount and keeping it on the right side of the authorities is not always straightforward.

Now you can see what many people use a customs broker to navigate their way around the tricky subject of import duties.

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