International merchants frequently ship goods across borders. Imported goods consignments must pass through customs authorities.
Customs authorities charge customs duty, fees ortaxes based onthe customs value you declare for your goods. Determining the customs value isalso needed toclaim shipping insurance should your shipment besubject toany damage orloss.
This article ataglance
Customs authorities use customs value toassess the value ofimported goods, thus determining the duties and taxes the merchant isobligated topay. Traders must declare the correct customs value for their shipments orface penalties. Using the six methods ofthe customs valuation method todetermine customs value can save alot oftime.
What isacustoms value?
Customs value isthe total value ofyour goods asassessed bycustoms authorities. Itdetermines the level ofcustoms duties levied onthe items you import into another country.
Ifyou want more detail, check out the World Trade Organisation’s Customs Valuation Agreement— anoutline ofthe principles ofits customs valuation requirements. It’s auseful tool for customs purposes.
What isthe declared value for customs?
Customs value ishow much the sender calculates their goods are worth. Inessence, the commercial value. Declaring the correct amount when you calculate customs isvital for three reasons:
What doIhave todeclare atcustoms?
Atcustoms, you must declare:
TheHS code, or Harmonised System, isaglobal product identification system that indicates tariff lines and rules for each product. Customs officials and economic operators identify goods by6-digit numeric codes.
How toprepare avalue declaration letter for customs?
FedEx’s Shipping Channel gives adecent summary ofhow you must prepare avalue declaration letter for customers.
Asaresult, customs authorities can see who bears the risks and costs ofyour shipment based onthe Incoterms. This isimportant for insurance purposes, ensuring you know who has maximum liability for any damage orloss tothe goods.
All ofthis will ensure asmoother process onthe part ofcustoms, who can determine the correct import duties.
Adeclared value for customs calculation: transaction value method
Todetermine the declared value ofyour imported goods for customs, you want toinclude costs incurred inthe manufacturing process, container costs, packing costs, delivery costs, selling price, and the cost ofraw materials.
This iscalled the 'transaction value method' - the way towork out the ultimate transaction value ofthe shipment. Ensure this isall calculated atafair market value.
Adeclared value for customs calculation example:
Crystal GmBH, aGerman company, bought 3 tons ofEpsom salts from its supplier, Salt Inc., India, on ExWorks (EXW) Incoterms.
Cost ofEpsom salts €6,000 Sales commission €600 Cost oftransport tothe port ofexportation €200 Handling and processing fees atthe port ofexportation €100 Cost ofsea freight €200 Cost ofshipment insurance €50 The customs value (orthe transaction value) isthe total ofall these costs, which is €7,150.
Ifyou’re unable towork out the transaction value ofyour imported goods, you could work out the transaction value ofidentical goods.
This iscalled the identical goods method. Inthe UK, for example, they must beproduced inthe same country, ofasimilar characteristic and quality (for example, the same component materials), and exported totheUK atthe same time. Minor differences inlook and feel aren’t important.
Where doIstate the value ofmycustoms declaration?
You state the customs value onthe commercial invoice ofthe customs declaration.
How docustoms assess the value?
Sonow your shipment isatthe customs office. Customs calculate the value ofgoods based onthe World Trade Organisation’s Customs Valuation Agreement (CVA). Customs duties are based onsix methods— the six methods ofthe CVA. This allows them tocalculate how much import duty istobe paid.
Any ambiguity regarding the amount declared would delay the shipment ofyour products. Undeclared orundervalued items may result inafine orthe items tobeseized. Therefore, itiscrucial todeclare anaccurate customs value ofyour goods.
Which value doIdeclare onmycommercial invoice?
Declare the actual price you paid for your goods. Ensure that you have the corresponding proof oftransaction for your customs value declaration.
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