Import duties

 

The level of the import duties on imported goods in the EU, depends on:

  • The customs value of the good
  • The sort of good
  • The country of origin of the good

  

Customs value

The customs value of a product that is imported is determined by a number of factors that are mentioned in the Community Customs Code chapter 3 arts. 28 up to 36 inclusive. The starting point is constituted by the sales price. But that sales price must be corrected on the basis of the following:

  • Transport costs. Whether a good is sold ex factory or free domicile matters a lot. For that reason a correction of the transport costs must be made on the sales price. If goods are for example sold ex factory in Japan, then the transport costs from Japan to the European external border must be added up. It doesn't matter by which way of transport the goods enter the EU, making competition between (air) ports in the EU in this field useless. For airfreight in fact is exactly stipulated which part of the airfreight must be included in the customs value. 
  • Insurance costs. Just like for the transport, the insurance costs of the transport need to be divided between the part of the transport route within the EU and the part outside.
  • Royalties, sales commissions etc. If on top of the sales price additional royalties or commissions must be paid, then these must also be added to the sales price. 
  • Connection between buyer and seller. When goods are sold from the USA to the EU, it can be that the companies involved in the purchase and sale are connected, for example because they are part of the same multinational. This may influence the sales price. Precisely to avoid high import duties the sales price can be set extra low. In the import declaration, the declarant must then declare if there is a connection between buyer and seller. Dependent on this information customs can control this kind of transactions more severely for the correct application of the customs value.
  • Etc.   

Sort of goods 

All thinkable goods can be classified in the Harmonised System (look at TARIC). This Harmonised System (HS) is also called the goods nomenclature. All customs agents are familiar with the goods nomenclature. 

The first 4 digits of the Harmonised System are equal worldwide. A large number of countries have also adapted the positions 5 and 6 to each other. To classify the goods generally in order to determine the tariff always 8 positions are necessary. The other positions are only necessary in special cases. Maximum a good can be determined up to 22 positions. This particularly applies to excise goods.

The rules for determining the correct goods code are stated in the Dutch customs handbook at the subject 'Classification rules'. To determine the correct goods code is on the one hand difficult, but also very important. The good must be classified correctly, to be able to correctly set the percentage of import duties. In order not to have any disagreement with customs about the correct classification, you can request a ‘Binding Tariff Information' (BTI). Customs then determine the goods classification and can in principle not deviate from it. A BTI is valid for 3 years.

Declarants are familiar with the classification of goods in the goods nomenclature. Still it remains a tough job, because the declarant must rely on the information on the invoice. To be sure that the correct goods code is used, it is wise to state it on the invoice. In case a declarant has any doubts, he shall contact the client in order to establish the goods code in mutual consultation. To prevent later discussions it is wise when one is doubtful to lay down in correspondence which goods code has been selected in mutual agreement. In principle no binding consultation with customs about the classification can take place beforehand. If need so, a BTI can be asked. If during the verification of a declaration customs are not sure of the correct goods code, they will take a sample and let the customs laboratory rate the goods.

Country of Origin / Preference / Documents of Origin

Import duties are an instrument of the trade policy. They can be used to protect the own economy against cheap import. By assigning preferences to specific countries of origin, the suppliers from certain countries can be favoured over suppliers from other countries. That makes that on the import of car parts from South Africa no import duties need to be paid. Over the same products from the USA import duties have to be paid. A tariff preference can make sure that less or no import duties at all have to be paid at the import in the EU.

A Certificate of origin must prove the origin of a good. This is a declaration that is issued by or on behalf of the government of another country about the origin of a specific lot of goods. Such a Certificate of origin is therefore valuable. Documents of origin are:

  • Form A: countries such as China, Japan and many developing countries mostly use this.
  • Certificate of Origin: This is mostly used for goods of which for reasons of trade policy, the origin must be proved (for example textile), but to which no preference applies.
  • EUR Certificate. Countries such as Switzerland, Norway, Israel, South Africa, and Mexico etc use this. Companies with a special permit are allowed to replace EUR-Certificates by a declaration on their invoice that the goods have a preferential origin.

Certificates of origin must always be stamped by the customs in the country of origin. The customs organisations of the various countries trust that the certificates have been issued correctly.

Tariff import duties

When the customs value of the goods, the goods classification and the origin of the goods are determined, also the percentage of the import duties can be established. Most import duties are determined as a percentage of the value. Those are called ad valorem duties.

There are however also import duties that can be determined per kilo, by the piece or per square meter. Those are called specific import duties.

When the import duties are finally determined, there are still situations in which the payment of import duties can be avoided. Read more about it in this Customs Encyclopaedia at the subjects:

Download examples:

To pay import duties

Import duties can be paid by the customs agent on behalve of the importer.

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