How to Cut Duty Cost and Increase Profit as an Importer

Import duties continue to be significant elements in the cost of international trade. Yet many companies and businesses still pay more duties than the law requires ? which impacts adversely on landed cost and ultimately on business profitability. A planned approach to managing customs duty costs would look to eliminate, reduce and delay payment of customs duties.

How to reduce customs duties in your business

There are many ways to reduce customs duties. The amount of duties paid depends on four "whats". Managing the impact of any of these "whats", will improve business profit.

1 What the goods are, (i.e. their nature and characteristics) determines tariff code and therefore the duty rate

2 What the origin of the goods is, (i.e. where dug up, grown, farmed, further manufactured or processed NOT just shipped from) determines whether preferential, standard or additional duties are payable

3 What the structure of the transaction is (i.e. whether sale, leased, loaned, free of charge, under warranty or repair arrangement), determines customs value

4 What happens to the goods once imported (i.e. sold, further manufactured, repaired and returned, stored and re-exported) determines whether various reliefs are available.

How to use a key opportunity in customs valuation planning

A major under utilised approach to reducing duties is to look at the customs valuation. A key provision in both US and EU customs law permits the customs value to be based on any earlier sale of the same goods in a chain of transactions prior to importation. For this reason it is variously described as the "prior sale", "earlier sale" or "chain of sales" opportunity. They all mean the same thing, i.e. lower duty!

How does this work? For example, if goods are sold by a manufacturer in the US for $60 to a US export company which, in turn, sells them to an importer in the EU for $100, duty can be paid on a value of $60, providing certain conditions are met. The savings achieved are the difference between duty on the ?100 and the duty on $60. Savings of up to 40% on the duty costs are possible.

What are the benefits? The chief benefit of the approach is to save customs duty by excluding the costs and profits attributable to the non-manufacturing activities undertaken in the country of export from the customs value declared at import in the destination country (US or EU).

The approach also uncouples the value of the imported goods for customs valuation purposes from their inventory value for corporate income tax purposes. That's good because tax and customs values are often in tension. Tax authorities tend to favour a low import value (i.e. more profit to tax), whereas customs favour a higher import value (more import duty to collect.) Using an earlier sale approach, the price paid by the importer is no longer relevant for customs purposes, so that any increase in that price will not cause an increase in the amount of customs duty.

Who can benefit? Any company or business importing goods into the EU or US can benefit from the opportunity providing there has been an earlier sale and the exporter is willing to provide the relevant invoice relating to the earlier sale. Since this involves disclosure of margins by the exporter, the approach is more attractive to international groups of companies where such disclosure is not an issue and to industries where margins are already widely known. However, exporters can still realise the benefits by importing goods into the US and EU on their own account.

About The Author

? Philip Brigstock-Bates 2004

Philip Brigstock-Bates manages Tariff AXe Services www.tariffaxe.com providing customs duty compliance and consulting advice to global companies, mid markets and start ups involved who import or use/sell imported goods in their businesses.

Professionally qualified in tax and import fields, he was previously he was with Ernst & Young and PricewaterhouseCoopers advising on duty planning reduction, compliance assurance and risk management for importers.

www.tariffaxe.com

executive chauffeured services Bradford .. Madison to Airport car
In The News:

Getting virus alerts on your iPhone? Tech expert Kurt “CyberGuy" Knutsson helps you learn how to handle fake scam alerts and boost security.
Tech expert Kurt “CyberGuy" Knutsson says opening emails is safe, but risks arise from interacting with links, attachments or HTML content.
Tech expert Kurt “CyberGuy" Knutsson reveals four signs of compromised Social Security numbers and offers five steps to protect yourself.
Tech expert Kurt “CyberGuy" Knutsson discusses how MAB Robotics' Honey Badger 4.0, a versatile robot, now walks underwater with amphibious skills.
An updated Android trojan called FakeCall hijacks bank calls. Tech expert Kurt “CyberGuy" Knutsson says Android phone manufacturers and Google need to step up their game on security.
The Massimo Modular E9 is a sleek, smart and comfy tiny home in 409 square feet. Tech expert Kurt “CyberGuy" Knutsson takes a closer look at what the future of housing might look like.
Every stock trader should consider a virtual private network to safeguard their trading, according to tech guru Kurt "CyberGuy" Knutsson.
Apple recently announced its new lineup of Macs and rolled out Apple Intelligence, its latest artificial intelligence-powered feature for its products.
A Swiss-engineered robot can climb ladders, showing why it's at the cutting edge of autonomous robotic solutions for harsh industrial settings.
Kurt "CyberGuy" Knutsson presents the cities targeted most by robocalls, why this is happening and what you can do about it to protect your privacy.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents
Kurt "CyberGuy" Knutsson shares tips and suggestions for how to get the best use out of the updated Calendar app available with the latest iOS update.
Your Social Security number, your unique identifier used for many purposes, has likely been leaked on the Dark Web; here are some steps you can take to protect yourself.
Researchers have developed a new technology that creates strong, sticky fibers capable of lifting objects and capturing things from a distance.
Smart rings track the same things that smartwatches do, including steps, sleep and a general overview of your overall health, and they tend have more battery life than smartwatches.
Researchers have developed a robotic finger that can perform routine medical exams like those conducted by doctors, helping to address the growing shortage of trained professionals.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Insurance administrative services company Landmark Admin reported that a data breach from a May cyberattack affected over 800,000 people.
Sotheby's will auction the first artwork created by Ai-Da, the world's first robot artist created in 2019 by British gallerist Aidan Meller.
More than 250 million users of the Verizon Messages app will have to switch to another app. Verizon is shutting down Messages in the next month.
Tech expert Kurt “CyberGuy" Knutsson provides a list of 10 celebrities who are the most targeted by deepfake scams, including Tom Hanks.
Tech expert Kurt “CyberGuy" Knutsson discusses how Vast's Haven-1, launching in 2025, transforms space living with human-centric design.
UnitedHealth confirms over 100 million Change Healthcare users had their data stolen. Kurt “CyberGuy" Knutsson reveals what happened and what caused the breach.
Tech expert Kurt “CyberGuy" Knutsson explains how iOS 18 brings new text formatting and animated effects to the Messages app.
Whether you're a social media veteran or novice, Facebook friend request scams are common. Kurt the CyberGuy provides tips to keep your account safe.

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

10 Tax Tips to Reduce Costs and Increase Income

No one likes paying tax. Everyone understands that tax is... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

Electronic Commerce Taxation and Pakistan

Assume a buyer in Pakistan downloads software from the Internet... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

Know A Tax Cheat? Get Paid To Tell The IRS

According to the IRS, taxpayers underpay their taxes by some... Read More

Taxation of Isle of Man Companies from April 2006

At the present time a company incorporated in the Isle... Read More

Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform... Read More

Back To School ? Educators Deduct School Expenses

As teachers and students head back to school following a... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

Get Uncle Sam To Pay $36,000 For Your Childs Education!

Let's assume that you would like to begin saving for... Read More

Home Business Tax Tips

If you have recently started an Internet or home business,... Read More

Tax Reform, My Way

We need real tax reform and we need it now.... Read More

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business,... Read More

How to Cut Duty Cost and Increase Profit as an Importer

Import duties continue to be significant elements in the cost... Read More

The Tax Man Cometh... To Search

You're at your office, or home, and the doorbell rings... Read More

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

Where to Find Tax Breaks for Your Home Based Business

April 15th looms in front of most people every year... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

What Is Tax Law?

The federal tax code is complex. This complexity generally arises... Read More

Organizing Your Taxes

Does this scene sound familiar? It's April 7. You haven't... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

O'Hare Chicago prom limo ..