Introduction
One of the questions most frequently asked by importers and exporters is how much import duty they or their customers will have to pay. It would be convenient if there were an import duty calculator but unfortunately I haven’t found a reliable one yet! However, if you follow these steps you should have the information you need to calculate import duty to within a very small margin.
Commodity code / HS Code / HTS Code
There are many names for the code that identifies a product because each customs territory has its own tariff and code variations. In the UK we refer to the commodity code or HS code, in the USA it’s the HTS code and in the EU member states, Ireland, Belgium and the Netherlands for example, the Taric refers to the Goods code.
In Australia they use the Australian Harmonized Export Commodity Classification (AHECC). Regardless of which countries you are exporting from and importing to, the first 6 digits should always be the same as determined by the World Customs Organisation.
Origin
The next most important factor in determining the rate of import duty is the origin of the product. Another way of thinking about it is the economic nationality of the goods. There are several rules of origin that may apply, the commodity code will dictate which one depending on which country you’re importing from or exporting to.
It’s a confusing subject as there are so many variables to consider but as far as import duty is concerned, origin is most important when the two countries involved, for example the UK and one of the EU member states such as Ireland, Belgium or the Netherlands, have a free trade agreement (FTA). The terms of the free trade agreement will set out which rule of origin applies to each commodity code and what the rate of import duty is if the product meets the criteria of that rule.
It’s important to understand that importing a product from the USA or Australia and carrying out minor processes are not sufficient to change the origin to UK. As such, having paid import duty when it arrived in the UK, if it is then exported to the EU, import duty would be payable again by the customer there.
For a comprehensive explanation of rules of origin you can watch the webinar The Intertrade Services Groups was engaged to provide for the Department of Business and Trade (or the Department for International Trade as it was then) Webinars – The Intertrade Services Groups
Value
Because import duty is a percentage of the value of the goods that are being imported, it’s essential to declare the value accurately. As with so many things in international trade, customs value is not as straightforward as you might think. There are 6 methods for working out the correct customs value for an import and the incoterms and cost of things like insurance need to be factored in too.
Determining a fair value for goods that are being imported temporarily for demonstration purposes or as samples often causes lively debate…. For more information on this check out the FAQs section of our website.
Useful links
Once you’ve identified the correct HS code and the origin of the product and worked out the correct value you can consult the tariffs in the importing country to get an idea of the import duty that will be payable. Bear in mind that there are sometimes additional local charges on top of the base rate of import duty that don’t show up in the tariff, however, you will have a good idea of the minimum import duty to be paid.
EU Tariff : TARIC Consultation (europa.eu)
USA Tariff: Harmonized Tariff Schedule (usitc.gov)
Australia Tariff: Australian Harmonized Export Commodity Classification (AHECC), 2022 | Australian Bureau of Statistics (abs.gov.au)
One last thing….
Export sales are 0% VAT rated so you don’t need to charge your customer UK VAT as you would do a domestic customer. However, if you’re selling to a customer in a country that applies VAT or an equivalent they will have to pay the VAT at their local rate (assuming you are using any Incoterms except DDP in which case the exporter is liable for this tax). So in Ireland VAT is set at 23% and in Belgium and the Netherlands it’s 21%.
In the USA they do have a sales tax which varies from state to state and it’s only paid by the final consumer rather than at each stage in the supply chain as with VAT. The VAT equivalent in Australia is the Goods and Services Tax (GST) which is generally 10%.
We’re here to help
If you haven’t found the information you were looking for in this blog or via the links get in touch today and we’ll be happy to help.