Not sure how to calculate import duties on your incoming shipment from China? Read this article, to learn how you can make an accurate customs duty estimation, find the right customs value for your country and HS code for your product.
You will also learn how, and when, to declare import duties to your local customs authorities – and why it’s a really bad idea to undervalue your goods for the sake of paying a lower duty rate.
How do I calculate the import duties?
Two factors that decide the amount of import duty you must pay are the following
a. Import duty rate (%)
b. Customs value
The import duty rate depends on the product and its assigned HS code. The customs value, on the other hand, depends on the target market.
Below follows an overview:
|Country / Market||Customs Value||Comment|
|United States||FOB||Only the product cost is included|
|European Union||CIF||Includes product and freight cost|
|United Kingdom (EU)||CIF||Includes product and freight cost|
|Canada||FOB||Only the product cost is included|
|Australia||FOB||Only the product cost is included|
|New Zealand||FOB||Only the product cost is included|
|Singapore||CIF||Includes product and freight cost|
|Hong Kong S.A.R (PRC)||None||No import duties|
In many markets, the customs value also includes the cost of samples, tooling and any services provided by the foreign supplier.
However, the customs value never include services generated domestically, such as forwarding from the port of loading to your address.
Note: Read this article about Incoterms to learn more about FOB (Free on Board) and CIF (Cost Freight Insurance)
How do I find out which HS code and duty rate apply to my product?
An HS (Harmonized System) code is a 10 digit code that classify products. While HS codes are international, they have different duty rates assigned in each country or market.
In many cases, the duty rate also depends on the origin country, as some countries have formed customs unions, such as the EU, or trade agreements enabling preferential duty rates.
Follow these links to find out which HS code and duty rate apply to your products:
- United States: Harmonized Tariff Schedule
- Canada: Tariff Chapters
- UK / European Union: Trade Tariff Look Up (UK)
- Australia: Tariff classifications of goods
- New Zealand: NZ Duty Calculator
- Singapore: Singapore Trade Classification, Customs & Excise Duties (STCCED)
How can I reduce the amount of import duties I need to pay?
There is no legal way to reduce the customs value, from which your import duties are calculated.
That said, the lower the customs value, the less you pay in import duties. Hence, you can apply one or more of the following strategies:
1. Don’t buy customized molds and other tooling that will add upon the customs value
2. Buyer small volumes, or reduce the quantity per shipment
3. Buy design services, lab tests, quality inspections and other services from local agencies, instead of through the supplier
4. Buy directly from factories, and avoid traders, wholesalers and other middleman that offer few if any extra services. Only work with agents that charge fixed costs (i.e., not on top of the factory price), as this may not need (depending on the market) to be included in the customs value.
Do I need to pay import duties and other taxes in China?
No, normally you don’t need to pay any duties or other taxes in China.
Some scammers use this an excuse, and pretend that the victims shipment has been stopped by the Chinese customs – who will only release the shipment for export once a tax or fee has been paid.
That is only a scam. The Chinese customs never require overseas Buyer’s to pay any form of export tax.
How do I declare and pay my import duties?
There are a few different ways to declare and pay import duties. For example, you can use a customs broker or the freight forwarder to help you with the customs clearance.
That said, in many markets, you can simply download the documents and submit the paperwork yourself.
Normally, you need to declare the following:
- Company (Importer)
- Product type
- HS code
- Net weight
- Country of origin
- Unit cost
- Freight cost (if applicable)
- Support documents: Commercial Invoice, Bill of Lading, Packing list, Country of Origin Certificate (If applicable)
In many countries, you can also declare the import duties online, which can save you a lot of time.
How will the authorities verify that the import duties are correctly declared?
The truth is that the system is based on trust between the importer, and the customs authorities. The customs officials don’t have the resources to verify the customs value of every single shipment that enter their borders.
Instead, it’s up to you, as an Importer, to correctly declare the HS code and customs value.
That said, they do spot checks, meaning that they require additional documentation to support the declared customs value.
Such documents include the following:
- Commercial invoice
- Bill of Lading
- Packing List
- Country of Origin Certificate
That said, it’s not completely random. The customs authorities have tools that give a red light if a shipment is undervalued – in which case they will also request additional documentation that supports the declared value.
Yet, it is rare that the customs authorities actually go as far as checking bank transactions made to suppliers.
Then again, if your company is ever audited by the tax authorities (audits are normally not performed by the customs), they will quickly find out whether your import duty declarations are correct or not.
Do I need to pay import duties when buying product samples?
In many countries and markets, there are minimum value thresholds that must be reached before a shipment is taxed with import duties.
In many cases, product samples value below the threshold.
As such, you may not need to pay import duties on the product samples.
That said, the cost of the sample, and the tooling (i.e., injection molds) must be included in the customs value of your first shipment.
Generally, product samples are not classified as a separate category, when it comes to import duties.
Do you need help with shipping and customs?
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a. Tutorials, Video Walkthroughs and Task Lists that guide you step-by-step through the entire shipping and customs process
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