Import duty is a tax on internationally shipped items. The government imposes it through customs authorities, aiming to generate more revenue. The tax increases the overall price of the product by a certain percentage. Thus, the government uses it to discourage imports and encourage people to consume locally-made items.
Keep reading to learn more about import tax and shipping duties.
How Import Duty Works
You’ll likely pay import duty when buying goods from another country. The tax depends on the value of the items you purchase and remains the same for the products of the same category. For instance, the tax on clothes can be 25%, while the tax on automobiles can be 35%. The amount of import tax is dependent on the following factors:
- The type and value of the item
- The country of origin of the item
- The destination country
The tax should be low for goods or items the country doesn’t manufacture, as the level of imports is expected to be high. However, the import duty for goods readily available in the country could be high to discourage imports.
If you plan to ship any products from abroad, be mindful of the tax to know the total costs you will incur to buy and ship the product.
Types of Import Duty
Basic Customs Duty
This is the basic import duty imposed on all products. It comes at a flat fixed rate for items under the same category. For instance, the basic customs duty for a certain car type may be the same on all platforms. The main purpose of this duty is to help generate revenue in the country.
Protective Duty
Protective duty is a unique import tax imposed at specific periods when the country wants to protect its locally produced goods. For instance, a country with an excess supply of groceries could impose a protective duty for a certain period to stop the locals from importing more of the product.
Anti-Dumping Duty
Anti-dumping duty is a tax imposed on imports to cover the price difference a country incurs when its exports are at very low prices. This duty is seasonal, as it’s only applicable when a country has an excess supply of certain products that it’s exporting at a very low rate, similar to dumping.
The anti-dumping duty raises the costs of imports so that the country recovers the loss it incurs through its exports.
Countervailing Duty
Countervailing duty is similar to anti-dumping, except that it neutralizes government subsidies on certain items. If the government has been subsidizing specific items for some time, it imposes this duty to help recover the costs.
Understand Import Duty before Shipping
Import duty helps generate government income and discourages people from importing products they can locally get in their country. The tax is collected from specific imports; the buyer pays for it before shipping.
It comes in many forms, usually higher on luxury items like cars, clothes, and shoes. If you intend to ship goods internationally, understand the import duty first and the additional shipping costs you may incur to make well-informed decisions on the purchase.
