How to Save Money on Customs Duty Rates When Importing Goods

Customs duty rates are the taxes that you pay when you import goods from another country. They are based on the value, type and origin of the products you buy. Customs duty rates can vary significantly depending on these factors, so it is important to know how to calculate them and how to reduce them legally. Here are some tips to help you save money on customs duty rates when importing goods.

1. Know the Harmonized Tariff System (HTS) code of your products

The HTS is a global system of nomenclature that classifies products into categories and subcategories. Each product has a specific HTS code that determines its customs duty rate. You can find the HTS code of your products by using the online database of the U.S. International Trade Commission (https://hts.usitc.gov/) or by contacting a customs broker or a classification specialist from the U.S. Customs and Border Protection (CBP) (https://www.cbp.gov/trade/programs-administration/determining-duty-rates).

2. Compare the customs duty rates of different countries of origin

Depending on where you source your products from, you may be eligible for lower or zero customs duty rates under various trade agreements or preference programs. For example, if you import products from Israel, you can benefit from the United States-Israel Free Trade Area Implementation Act of 1985, which eliminates customs duty rates on most products originating in Israel. Similarly, if you import products from certain African countries, you can take advantage of the African Growth and Opportunity Act (AGOA), which provides duty-free treatment for eligible products. You can check the list of trade agreements and preference programs that the U.S. has with other countries on the CBP website (https://www.cbp.gov/trade/free-trade-agreements).

3. Choose the best valuation method for your products

The customs duty rate is calculated as a percentage of the value of your products. However, there are different methods to determine the value of your products, such as the transaction value, the deductive value, the computed value or the fallback value. The transaction value is the most common method and it is based on the price that you actually pay for your products. However, in some cases, you may be able to use a different method that results in a lower value and thus a lower customs duty rate. For example, if you import products that are identical or similar to other products sold in the U.S., you may be able to use the deductive value method, which is based on the price of those products in the U.S. market minus certain expenses. You can learn more about the different valuation methods on the CBP website (https://www.cbp.gov/trade/valuation).

4. Claim any exemptions or exclusions that apply to your products

Some products are exempt from customs duty rates or subject to reduced rates under certain conditions or circumstances. For example, if you import products for personal use or as gifts, you may be exempt from customs duty rates up to a certain amount ($800 per person per day). If you import products for research, education or humanitarian purposes, you may be eligible for reduced or zero customs duty rates under certain provisions of the HTS. If you import products that are temporarily imported for repair, alteration or exhibition, you may be able to claim a temporary importation bond (TIB) that suspends the payment of customs duty rates until the products are re-exported. You can check the list of exemptions and exclusions that apply to your products on the CBP website (https://www.cbp.gov/trade/basic-import-export/exemptions).

5. Seek professional advice from a customs broker or a lawyer

Customs duty rates can be complex and confusing, especially if you import multiple products from different countries or if your products have special features or functions. To avoid mistakes, penalties or delays, it is advisable to seek professional advice from a customs broker or a lawyer who specializes in international trade law. They can help you find the correct HTS code, valuation method and applicable exemptions or exclusions for your products. They can also help you prepare and file the necessary paperwork and documentation for your imports and deal with any issues or disputes that may arise with CBP or other authorities.

By following these tips, you can save money on customs duty rates when importing goods and make your international trade more profitable and efficient.

The Impact of Custom Tariff Rate on Global Demand

Custom tariff rate is the percentage of tax that a country imposes on imported goods from other countries. It is one of the tools that governments use to regulate international trade and protect domestic industries from foreign competition. However, custom tariff rate also affects the global demand for goods and services, as it influences the price, quantity and quality of the products available in the market.

How Custom Tariff Rate Affects Price

One of the most direct effects of custom tariff rate is on the price of imported goods. When a country imposes a high tariff on a certain product, it increases the cost of importing that product from another country. This means that the domestic consumers have to pay more for the imported product, or switch to a cheaper domestic substitute. For example, according to the World Tariff Profiles 2021, the average applied tariff rate for animal products in the European Union was 14.4% in 2020, which made imported animal products more expensive than domestic ones.

On the other hand, when a country lowers its tariff on a certain product, it reduces the cost of importing that product from another country. This means that the domestic consumers can enjoy lower prices for the imported product, or switch to a better quality foreign substitute. For example, according to the U.S. Customs and Border Protection, the United States eliminated tariffs on most industrial and consumer goods from Canada and Mexico under the North American Free Trade Agreement (NAFTA), which made imported goods from these countries cheaper than domestic ones.

How Custom Tariff Rate Affects Quantity

Another effect of custom tariff rate is on the quantity of imported goods. When a country imposes a high tariff on a certain product, it decreases the demand for that product from foreign suppliers, as they face lower profits or losses from exporting to that country. This means that the domestic producers can increase their market share and output, as they face less competition from abroad. For example, according to the International Trade Centre, China imposed an additional 25% tariff on soybeans from the United States in 2018, which reduced the U.S. exports of soybeans to China by 74% in 2019.

On the other hand, when a country lowers its tariff on a certain product, it increases the demand for that product from foreign suppliers, as they face higher profits or gains from exporting to that country. This means that the domestic producers can decrease their market share and output, as they face more competition from abroad. For example, according to the World Trade Organization, Japan reduced its tariffs on beef from Australia under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which increased Australia’s exports of beef to Japan by 10% in 2019.

How Custom Tariff Rate Affects Quality

A third effect of custom tariff rate is on the quality of imported goods. When a country imposes a high tariff on a certain product, it discourages innovation and improvement from foreign suppliers, as they have less incentive to invest in research and development or quality control to compete in that country. This means that the domestic consumers have to settle for lower quality products, or pay more for higher quality products. For example, according to the European Commission, the European Union imposed anti-dumping duties on solar panels from China in 2013, which reduced the variety and quality of solar panels available in the European market.

On the other hand, when a country lowers its tariff on a certain product, it encourages innovation and improvement from foreign suppliers, as they have more incentive to invest in research and development or quality control to compete in that country. This means that the domestic consumers can benefit from higher quality products, or pay less for lower quality products. For example, according to UNCTAD, India eliminated tariffs on information technology products under the Information Technology Agreement (ITA), which increased the availability and quality of information technology products in India.

Custom tariff rate is an important factor that affects global demand for goods and services. It has different effects on price, quantity and quality of imported goods depending on whether it is high or low. Therefore, governments should carefully consider the costs and benefits of imposing or lowering tariffs on different products based on their economic objectives and social welfare.

References:

https://core.ac.uk/download/pdf/6958854.pdf

https://www.cbp.gov/travel/international-visitors/kbyg/customs-duty-info
https://www.trademap.org/
https://ec.europa.eu/eurostat/statistics-explained/index.php/International_trade_in_goods_-_tariffs
https://unctad.org/system/files/official-document/ditctab2019d5_en.pdf

https://www.cbp.gov/travel/international-visitors/kbyg/customs-duty-info

https://hts.usitc.gov/

https://www.cbp.gov/trade/programs-administration/determining-duty-rates

https://www.cbp.gov/trade/free-trade-agreements