Guide To Customs Duty

Introduction

Here is a definitive guide that explains all you need to know about Customs Duty. When shipping goods abroad, your shipments may be subject to duties and taxes imposed by the customs officials of the home or destination country. Therefore, it is vital to understand customs duty before shipping your items internationally.

What is Customs Duty?

In this section, you will learn what is customs duty and excise duty, why they are applied, and how SFL Worldwide can help you calculate duties and taxes on your shipment.

Excise Duty is a kind of tax imposed on goods produced within your country and charged in addition to other indirect taxes. Customs Duty is an indirect tax, also known as import duty, that is levied on import and export goods sent or received through international shipping. These charges vary from country to country and depend on the specified country's local customs rules and regulations.

Our team of shipping experts at SFL Worldwide uses U.S. Customs Duty Calculators to calculate the potential charges incurred on your shipments and compile the necessary documentation for customs clearance in the United States and several other countries. Failure to comply with these customs regulations can result in penalties and seizure of goods.

Rate calculator for Customs Duty

Customs duty rates is calculated based on the value of goods shipped, the purpose of shipment, HS Code, and manufacturing information related to the item. All goods and commodities are classified based on product type with the HS Code or Harmonized Commodity Description and Coding System. These codes are essentially a list of numbers used to organize products and simplify the calculation process.

The Customs officials use the information provided in your documentation and commercial invoice when using the U.S. Customs Duty Calculator to levy the correct duties and taxes.

When describing the purpose of the shipment, define clearly the reason for sending or receiving a shipment. The intended purpose can be for gifting, personal use, commercial sale, or an international move. Whatever the reason, the purpose of the shipment needs to be explicit and verifiable, where applicable, in your documentation.

Failure to submit the correct HS code and information could result in an incorrect tax application on your shipment and possibly even delay your shipment. At SFL Worldwide, we have a team of experts to guide you through the process of compiling documentation for customs clearance.

Import Duties and Taxes

The terms 'duties' and 'taxes'are often confused, especially in shipping. Before we try to understand Customs Duty, let's first understand the difference between duties and taxes.

Factors to keep in mind when calculating duties

There is no direct way to avoid paying customs duties levied on your shipments. However, there are things you can do legally to pay lower customs and excess fees.

• Buy and sell items that include duties in the invoice at the time of purchase. Many sellers these days will take responsibility for customs charges to make things less complicated for their customers.
• Work with an efficient shipping provider. Doing so is crucial for your reputation as a retailer. Shipping carriers like SFL Worldwide seamlessly handle customs duties on behalf of retailers and customers without the customer or retailers having ever to lift a finger.
• Include accurate, verifiable information. Any misinformation can lead to excess customs duties on your package.
• Communicate if the item is purchased for personal use to the seller as import duties are not applied to personal items. There may be some exceptions.
• Use Transfer of Residence in case of moving or planning an extended stay overseas to gain some relief from customs charges.

The Customs Clearance Process & Documentation Requirements

Before preparing your shipment, you must ensure the necessary documentation is in order. Your customs declaration form needs to include information on items being shipped, the purpose of shipment, and some supporting documents like the ones mentioned below -

• Commercial Invoices must include Incoterms, the item's value, country of manufacture, and product classification.
• Packing list of the imported goods
• A Bill of Lading
• An Arrival Notice

Your shipper will advise on additional forms you must submit depending on the destination country. These documents must be attached externally so the customs officials can view them for examination. The customs authority will collect the customs duties from you, the individual, or the shipping carrier before releasing the goods from customs.

What are Incoterms?

Incoterms are, in simple words, the terms and conditions that clearly state who does what in the shipment process. Commercial businesses prefer including them for their cross-border transactions. They have information on costs associated with bringing goods to the port, insurance charges, import duty, additional transportation costs incurred, warehouse charges, and FOB Incoterms.

You can learn about the 11 updated Incoterms from the International Chamber of Commerce website here.

Additional Costs to Keep in Mind

When shipping goods internationally, please remember that there may be more to your shipping costs than the actual shipping price. This shipping cost is known as “landed cost,” which is the actual cost of shipment that includes all charges such as insurance, surcharges, fees, etc., from the point of departure to the destination.

The costs associated with your shipment can include -

• ●Shipper's fees - Cost of shipping from point A to point B. Some shippers include all additional costs in their service package. Opting for an all-inclusive service is ideal if you prefer completing your shipment in fewer steps. SFL Worldwide takes care of everything you require for shipping from your door to your destination.
• ●Broker Fees - Cost paid to a customs broker for paying duties and clearing items from customs on your behalf. Your shipping provider may include this in their service. Check with your shipping provider before hiring a customs broker.
• ●Insurance - For any damage or loss in transit. You can purchase insurance individually or through your shipping provider.
• ●Surcharges - Additional costs incurred due to the nature of goods shipped and handled, such as dangerous items.

Frequently Asked Questions About Customs Duty