How to Save Money on Import Duty Rates by Country: A Complete Guide
If you are an importer or exporter, you know how important it is to understand the import duty rates by country. Import duty is the tax that you have to pay when you bring goods into a country. It can vary significantly depending on the type, origin, and value of the products you import.
Import duty can affect your profit margin, your cash flow, and your competitiveness in the global market. That’s why you need to know how to calculate it accurately and how to reduce it legally. In this article, we will explain what import duty is, how it is determined, and how you can save money on it.
What is Import Duty?
Import duty is a type of tax that is levied by the customs authorities of a country on goods that are imported into the country. It is usually based on the value of the goods, the weight or volume of the goods, or a combination of these factors.
The purpose of import duty is to protect the domestic industries from foreign competition, to generate revenue for the government, and to enforce trade policies and agreements. Import duty can also be used to discourage the import of certain goods that are considered harmful, illegal, or unethical.
How is Import Duty Determined?
The amount of import duty that you have to pay depends on several factors, such as:
The Harmonized Tariff System (HTS) code of the product. The HTS code is a 10-digit number that identifies the product category and subcategory. It is based on the international Harmonized System (HS) of product classification, which is used by most countries in the world. The HTS code determines the applicable tariff rate for the product.
The country of origin of the product. The country of origin is the country where the product was manufactured or where it underwent its last substantial transformation. The country of origin determines whether the product qualifies for any preferential tariff treatment under any free trade agreements or special trade programs that the importing country has with other countries.
The value of the product. The value of the product is usually based on the transaction value, which is the price paid or payable for the product when sold for export to the importing country. However, if the transaction value is not available or acceptable, other methods of valuation may be used, such as the deductive value, the computed value, or the fallback value. The value of the product affects the amount of ad valorem duty, which is a percentage of the value.
The weight or volume of the product. The weight or volume of the product affects the amount of specific duty, which is a fixed amount per unit of weight or volume.
To calculate the import duty, you need to multiply the tariff rate by the value or weight/volume of the product, depending on whether it is an ad valorem duty or a specific duty. For example, if you import a product with an HTS code of 6204.62.40 (Women’s or girls’ suits of cotton) from China into the US, you have to pay an ad valorem duty of 16.5% on its value. If you import it from Canada under NAFTA (North American Free Trade Agreement), you don’t have to pay any duty.
How to Save Money on Import Duty?
There are several ways that you can reduce your import duty costs legally and ethically, such as:
Choose a lower-tariff product category
If your product can be classified under more than one HTS code, you may want to choose the one that has a lower tariff rate. However, you have to make sure that your product meets all the requirements and specifications of that category and that you have sufficient documentation to prove it.
Choose a preferential country of origin
If your product can be sourced from more than one country, you may want to choose the one that has a free trade agreement or a special trade program with your importing country. This way, you can benefit from lower or zero tariff rates for your product. However, you have to make sure that your product meets all the rules of origin and that you have a valid certificate of origin to prove it.
Choose a lower-value method of valuation
If your transaction value is not available or acceptable for customs purposes, you may want to use another method of valuation that results in a lower value for your product. For example, you may use the deductive value method, which is based on the resale price in the importing country minus certain expenses and profits. However, you have to make sure that you follow all the rules and procedures for using that method and that you have sufficient documentation to prove it.
Claim any exemptions or reliefs
Depending on your importing country and your product type, you may be eligible for certain exemptions or reliefs from import duty. For example, you may be exempt from import duty if your product is for personal use, for temporary import, for re-export, or for repair. You may also be eligible for duty relief if your product is for humanitarian aid, for educational purposes, or for research and development. However, you have to make sure that you meet all the conditions and requirements for claiming these exemptions or reliefs and that you have the necessary permits and certificates to prove it.
Import duty is a significant cost factor for importers and exporters. However, by understanding how it is determined and how to reduce it legally, you can save money and increase your profit margin. You can also use online tools and services, such as Wise, to help you with your international payments and currency conversions.
How Import Duty Rates Affect Global Demand in the Industry
Import duty rates are taxes levied on imported goods, capital and services. They are a form of protectionism that aims to shield domestic producers from foreign competition. However, they also affect the global demand for products and services, as they influence the prices, availability and quality of goods in different markets. In this blog post, we will examine how import duty rates vary by country and how they impact the global demand in the industry.
The Variation of Import Duty Rates by Country
According to the World Bank, the weighted mean applied import duty on all products in 2018 ranged from 34.63% in Palau to 0.01% in Singapore. The average weighted import duty in some important economic areas was 3.39% in China, 2.45% in Japan, 1.69% in the European Union and 1.59% in the United States. However, these figures do not apply to countries with which free trade agreements have been concluded, which may lower or eliminate tariffs on certain products or sectors.
The level of import duty rates depends on various factors, such as the economic development, trade policy, political stability and strategic interests of each country. Some countries may impose higher tariffs on certain products to protect their domestic industries, such as agriculture, manufacturing or services. Some countries may also use tariffs as a tool to retaliate against trade disputes or sanctions imposed by other countries. For example, in 2018, the United States imposed additional tariffs on steel and aluminum imports from several countries, which triggered countermeasures from China, Canada, Mexico and the European Union.
The Impact of Import Duty Rates on Global Demand
Import duty rates affect the global demand for products and services in several ways. First, they affect the price of imported goods, which may increase or decrease the demand from consumers and businesses. Higher tariffs make imported goods more expensive, which may reduce their demand and encourage consumers to switch to domestic or cheaper alternatives. Lower tariffs make imported goods cheaper, which may increase their demand and discourage consumers from buying domestic or more expensive alternatives.
Second, they affect the availability of imported goods, which may create or limit the opportunities for consumers and businesses. Higher tariffs may restrict the supply of imported goods, which may create shortages or lower quality in some markets. Lower tariffs may expand the supply of imported goods, which may create surpluses or higher quality in some markets.
Third, they affect the competitiveness of domestic and foreign producers, which may stimulate or hinder their innovation and productivity. Higher tariffs may protect domestic producers from foreign competition, which may allow them to maintain or increase their market share and profits. However, this may also reduce their incentives to improve their efficiency and quality, as they face less pressure from rivals. Lower tariffs may expose domestic producers to foreign competition, which may force them to lose or defend their market share and profits. However, this may also increase their incentives to improve their efficiency and quality, as they face more pressure from rivals.
Import duty rates are an important factor that influences the global demand for products and services. They vary significantly by country and product, depending on the economic, political and strategic objectives of each country. They affect the price, availability and competitiveness of imported and domestic goods, which may have positive or negative effects on consumers, businesses and producers. Therefore, it is essential for industry players to monitor and analyze the changes in import duty rates and their implications for global demand.
References:
http://www.cbp.gov/linkhandler/cgov/newsroom/publications/trade/iius.ctt/iius.pdf
https://www.wto.org/english/res_e/booksp_e/tariff_profiles19_e.pdf
https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf
http://fita.org/countries/us.html?ma_rubrique=selling_and_buying
https://web.archive.org/web/20200414172506/https://www.cbp.gov/sites/default/files/documents/Importing%20into%20the%20U.S.pdf
https://web.archive.org/web/20200412004114/https://www.wto.org/english/res_e/booksp_e/tariff_profiles19_e.pdf
https://en.wikipedia.org/wiki/List_of_countries_by_tariff_rate
https://wise.com/us/import-duty/
https://worldpopulationreview.com/country-rankings/list-of-tariffs-by-country
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