Customs Duties and Customs Clearance

February 3, 2023

Customs duties are taxes that are imposed on the importation of goods (and possibly certain exportations). The customs duty due is usually based on the value of the imported goods. Subject to the Incoterms used, generally the importer is responsible for paying the customs duty.

The rate of customs duty due will depend on the type of goods, the correct associated HS commodity code/tariff code, the origin of the goods and the value.

The amount of customs duty due can be legitimately reduced or removed using Customs reliefs and suspensions. The type of relief applicable will depend on how the goods are to be used, for example for testing purposes, temporary import/export or for processing/manufacture prior to re-export.

Customs duty rates also depend on whether there are trade agreements between countries or groups of countries. For example, there is a Trade and Cooperation Agreement (TCA) between the EU and the UK where a preferential zero duty rate may apply if goods moving between the UK and EU have originated in the UK, or in a vice versa scenario.

It is important for businesses to understand the total landed cost of their products when importing goods to different countries, thus understanding the margins and costs of customers. Through visibility of these costs, an importer can understand if the amount of customs duty due can be reduced through the use of reliefs and other planning opportunities. This may include the review of supply chains to ensure double-duty is not being incurred and the optimum amount of customs duty is paid at importation.

Customs clearance is also a very important consideration in ensuring the process of importing occurs without delay. The compliance and administrative obligations in each country of import and export also need to be understood. For example, the EU’s customs legislation requires an import declarant to be established in the EU, a requirement mirrored by the UK. This in turn leads to a need to consider the type of customs agent being appointed or in some cases to set up an establishment where goods are imported.

Issues associated with clearing customs are common, this includes a lack of instructions provided to customs clearance agents by the importer, which can result in misunderstandings and incorrect import declarations submitted to the customs authorities. Another area that can result in issues is the contractual terms between a supplier and customer and the agreed shipping terms, i.e. “Incoterms” and understanding which party within the contract is responsible for which element of the import/export activity and payment of any customs duties.

We have custom and duty tax specialists in our Kreston Global network of firms that are present in 115 countries around the world. We would be delighted to discuss your business issues and requirements.

Key contacts

Rupert Moyle

Rupert Moyle

Chair, Global Indirect Taxes and VAT & Duty partner at Kreston Reeves

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Eduard Pavel 

Regional Director, Europe, Kreston Romania SRL

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Geoff Christian

Regional Director, North America, CBIZ MHM

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Luc Heylens

Global Technical Director, Kreston VDN

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Further reading

indirect taxation on digital services

The exposure to indirect taxation on digital services

Indirect tax obligations as a digital service can be complicated, but Kreston Global indirect tax expert, Rupert Moyle, advises.