Customs Duty

What is a Customs Duty?

Customs Duty is a tax or tariff applied to goods being transported internationally and protects each country’s economy, residents, jobs, environment, etc., by controlling the flow of goods into and out of the country. Dutiable are the articles to which a Customs Duty must be paid. Each article has a specific duty rate that is determined by the origin of the acquisition, where it was made, and what it’s made of. Additionally, any items that were not in your possession when you left the US must be “declared.” American Goods Returned (AGR) does not have to be declared, but you must prove the articles are AGR or pay Customs Duty.

What is a Customs Duty Rate?

Customs Duty Rate is a percentage determined by the total purchased value of any article(s) in a foreign country regardless of quality, size, or weight. U.S. Customs and Border Protection uses the Harmonized Tariff System of the United States Annotated (HTSUS) to provide applicable duty rates and statistical categories for all merchandise imported into the U.S.

There are articles sold in Customs duty-free shops but they are only free for the country where that shop is located. Any articles that exceed your personal exemption/allowance in addition to the articles purchased in a Customs duty-free shop, whether in the United States or abroad, will be subject to a Customs duty upon entry to your final destination. Even articles purchased in an American Customs duty-free shop are still subject to U.S. Customs duty if you bring them into the United States.

How are Customs Duties Determined?

A flat duty rate applies to articles that are dutiable but cannot be included in your personal exemption even if you had not exceeded your exemption. A joint declaration, which is a Customs declaration, can be made by family members who live in the same household and are returning to the United States. They can pay a combined flat duty rate if they combine their purchases regardless of who owns a specific item. Thus, the combined flat duty rate for a family of four traveling together is $4,000 and purchase totals are rounded to the nearest dollar amount.

Types of Customs Duties

There are five different types of Customs Duties:

  • Basic Customs Duty (BCD)
  • Countervailing Duty (CVD)
  • Additional Customs Duty or Special CVD
  • Protective Duty
  • Anti-dumping Duty

What is a Protective Duty?

A Protective Duty is a tariff applied to foreign goods to protect domestic industry.

What is a Duty Drawback?

Duty Drawback is a refund for import duties that have been paid towards goods that are being re-exported out of the country.

What is an Import Duty Recovery?

Import Duty Recovery is a refund that importers can claim when excess duties have been paid, but possess caveats and restrictions where importers must be able to prove that they have overpaid.

What are Countervailing Duties?

Countervailing Duties are special duties and tariffs granted by the International Trade Commission after an investigation. These duties are applicable to goods that come from countries where governments may be providing aid and assistance to domestic industries in the form of subsidies and/or tax exemptions. Government aid helps these industries export their products for lower prices but can also potentially damage domestic industries for the importing country.

What are Anti-Dumping Duties?

Anti-Dumping Duties are duties that a domestic government imposes on foreign goods or products that are sold in local markets lower than what is considered “fair” under ordinary market conditions. This duty is used to offset the “dumping,” which is calculated by the difference between the cost of production and/or price of the country of origin and the price the goods are being sold for in the importing country.

Customs Duty vs. Tariff vs. a Tax

Customs Duties and tariffs are taxes imposed on imported goods while taxes are imposed on a taxpayer. Customs Duty is an indirect tax applied to consumers of imported goods. Tariffs are direct taxes levied on imported products from one country to another, as a result, the cost of goods sold in a country takes into consideration the cost of the tariff. A tax is a cost placed on all purchases and individuals within a country.

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