Help! Why did I have to pay so much import duty?
AS more and more people learn how to build a successful Import Export Business by trading profitably on international internet auction sites like eBay, there is a constant flow of new enthusiasts who are becoming importers for the first time. Auction site discussion forums regularly feature complaints from novice buyers about the unexpected import taxes they are expected to pay on the doorstep when that eagerly awaited parcel from abroad actually arrives. Many such people importing goods for the first time are surprised (and often shocked) at the amount of tax which they can be required to pay. Some buyers even try to claim these unexpected import charges back from the unfortunate seller, who could be on the other side of the world....
To help avoid these unpleasant surprises, below is an outline of how the UK (United Kingdom) and EU (European Union) import taxes are calculated. Notice that UK and EU import tax rates are now harmonised into one combined tariff - the TARIC. The UK import regulations outlined below are equally valid for all member states of the European Union.
Importing From European Union States
In order to know whether import tax is likely to be charged, you need to know which countries are currently members of the European Union, because imports from EU states into the UK are not charged import duty.
National Currencies and the Euro
Some of the EU member States have merged their individual currencies into a Single European currency - the Euro. However, the Euro is not yet a common European currency, as is sometimes assumed outside Europe. Membership of the European Union does not also mean automatic immediate membership of the common Euro currency.
EU members Denmark, Sweden and the UK have not adopted the Euro currency, and retain their own national currencies. Switzerland and Norway also retain their national currencies, because they are not members of the EU. Some fear sleepwalking into a European Superstate, and a loss of political and economic independence, particularly the ability to vary interest rates according to the current prevailing local economic conditions.
In order for international trade to operate as smoothly as possible, it is necessary for countries to agree a common set of trade standards and practices between them. A previous more loose arrangement called the General Agreement on Tariffs and Trade (GATT) has grown into the World Trade Organisation (WTO). International trade practices are in the first instance agreed between countries via the WTO, which is the only international organisation overseeing the rules of international trade. There are at present around 147 member countries. The WTO administers and polices free trade agreements, arbitrates in trade disputes between governments, and organises trade negotiations. Whereas GATT only regulated trade in merchandise goods, the WTO also covers trade in services, such as telecommunications and banking.. more...
In the volatile world of international commerce political tensions often give rise to trade disputes. It is possible that increased import duties and/ or sanctions may be in force between certain countries which may affect you as you read this. Check current trade disputes reports or with HM Revenue & Customs if substantial sums of money could be involved.
Import Duty and Excise Duty
All goods, new or used, imported into the EU from
outside the EU are subject to Customs Duty (Import
Duty or Import Tax) and VAT (Value Added Tax)
according to their value and import tax
classification. All goods imported into the UK
from outside the EU must be declared to HM Customs
& Excise and in most cases this includes goods
bought over the Internet.
"Import - Export"
...How to Get Started in International Trade!
by Carl A. Nelson
"....a beginner's guide to starting an import export business. It covers the basics, including choosing a product, making contacts, market research, market planning and pricing. It explains the intricacies of taxes, customs and tariffs and a new chapter examines e-commerce, outlining the ins and outs of importing and exporting online. Tips and success stories appear throughout the text..... Covers trading procedures for EU countries.. more..."
UK | US
Import Duty rates are set annually by the EU, and run from 1st January to 31st December. They are published by each EU country in a "Customs Tariff". The UK version is published in three large loose leaf binders, allowing for constant updates to be inserted or substituted.
The Customs Tariff groups all goods into various classifications in order to arrive at a rate of Duty. The broad classifications are divided into 21 sections, which are divided into 97 chapters. There are approximately 14,000 sub-classifications. Each classification is identified by a ten digit code number.. more...
Import Duty is usually percentage based. It averages at between about 5% and 9% - but with extremes in some cases between nil and 85%.
IF the consigment is liable to Customs Duty (see
the "Tax Free Allowances" section below) Customs assess the total amount of Customs Duty to be
paid based on the value of the goods, PLUS the
transport and insurance costs to the country of
destination. Other costs may be included such as
tools, dies, moulds, design work, royalties,
licence fees.. more... Note
that VAT (Value Added Tax)
is then added.
Therefore in this example the total Import Duty and VAT charges payable on importation of these goods would be £26.88 - or a tax rate of 26.88% on the original £100.00 price of the goods.
From this it can be seen that in most cases Value Added Tax will be the largest tax to pay on importation.
VAT: The rate of VAT is not the same in all member states of the EU. It is at present allowed to vary quite widely across the member states of the EU. Rates currently vary from about 15% to about 25%. At the time of writing, the UK rate is 17.5%.
Import Duty: The rate of Import Duty will vary according to the type of goods imported and/or the country of origin.
Customs Clearance Fees
Your courier, carrier, freight forwarder or import agent (including Royal Mail or Parcel Force) will also charge you fees to clear your products through customs. At the time of writing Royal Mail charges £4.00 and ParcelForce rates start at £8.00 per item, with a charge of £13.50 for high value items worth over 1,000 Euros.. more... There can be aditional charges for storage if items are held up in customs, late payment etc. Other commercial courier firms and freight forwarders tend to charge higher rates, and the bill may arrive some time after the parcel has been delivered to you - be prepared to be shocked. Parcel Force offers a Track & Trace service. See also more information at Postwatch.
The person receiving the shipment is legally obliged to pay Import Duty and VAT. Private individuals intending to buy goods on the internet from non EU countries should be particularly careful. The price advertised on the seller`s website will not include UK Duty and VAT but YOU AS THE IMPORTER WILL BE EXPECTED TO PAY THIS WHEN THE SHIPMENT ARRIVES IN THE UK.
You should be aware that
although the foreign sender may have completed the
Customs declaration form on the parcel, you are
regarded in law as: (a) the importer of the goods;
(b) responsible for the information on the Customs
declaration, and (c) responsible for any Customs
charges that may be due. This means that if you
purchase goods from non EU suppliers, and the
Customs declaration is found to be false or
misleading, for example falsely declared as a
gift, you may be liable for financial penalties or
criminal prosecution. Furthermore the goods
themselves will be liable to forfeiture. It is
therefore in your own interests to ensure Customs
declarations are completed properly...
Excise Duty is payable on certain goods such as wines, spirits, cigars, cigarettes and tobacco, and is in addition to Customs Duty. Any goods arriving in the UK on which Excise Duty has not been paid will be liable to seizure by Customs. If you receive alcohol or tobacco products by post on a commercial basis, this is known as distance selling, and there is liability to both UK Excise Duty and VAT. The sender should have made prior arrangements to account for these charges no later than the date of despatch. It is in your own interests to ensure these arrangements have been carried out, or your goods may be liable to forfeiture - see "Registered Excise Dealers & Shippers".. more...
If you are VAT registered you may be able to recover the VAT. But Duty and administration costs are not recoverable.
Current concessions and exemptions from Duty and VAT
A Guide For International Post Users (Hmrc Notice #143)
Foreign Currency Exchange Rates
The above value allowances are set by the European Union in Euros. As the UK does not use the Euro currency, the above £ allowances are the working equivalents of the Euro amounts.
** @ £1 = $US 1.80 This $US rate quoted above is a guide figure, and is not necessarily the current rate. Foreign currency market exchange rates are constantly changing, sometimes quite substantially. Check the current live foreign currency exchange rates on Bloomberg. The foreign currency exchange rates used by HM Customs are set monthly, and may vary slightly from the current rates. A rate is changed more frequently if it varies by more than 5% from the last published monthly rate. Check the current HM Revenue and Customs FX Rates.
Alcohol, tobacco products, perfume and toilet waters imported via post, courier etc. (i.e. not accompanying a personal traveller - see below) only qualify for customs relief if they are GIFTS - AND are within the following allowances:
Preferences and Reduced Rates
Preference and tariff quota arrangements: certain
goods which originate in a ‘preference’ country
may be imported into the European Union at a nil
or reduced rate of customs duty. The exporter must
provide you with evidence in the form of an
approved preference certificate issued by a
recognised competent authority to present to
Customs proving the origin of the goods. There may
be a limit on the total quantity of goods which
can be admitted at a preferential rate in a
specified period. You may also benefit from a nil
or reduced rate of duty on certain goods imported
from non EU countries if there is a temporary
suspension of Customs duty.
Restricted and Prohibited Goods
Visitors to the UK should note that many items are subject to import and/or export control or complete ban, including the following: controlled drugs* (heroin, cocaine, etc.); counterfeits and fakes; weapons; firearms; indecent material; live animals (except importing cats and dogs which meet the conditions of the Pet Passport Scheme); items which could be a threat to health and the environment, i.e. certain plants, meat, meat products and products of animal origin e.g. hides, skin, poultry, eggs, milk and dairy products.
The UK has severe penalties for drug smuggling.
Drug traffickers may try to trick travellers into
helping them import illegal drugs. If you are
travelling to the United Kingdom, never carry
luggage or parcels in or out of customs control
points for someone else.. more...
Alcohol and Tobacco Products
Travelling to the UK from EU Countries
Since the introduction of the European Single Market in 1993 and the associated relaxation of border controls, goods for personal use on which tax or duty has been paid in an EU country do not attract further UK tax or duty on importation into the UK.
However although duty is paid on the goods in the EU country where they are bought, it is usually at much lower rates than in the UK. Travellers have been allowed to bring substantial quantities of attractively priced alcohol and tobacco into the UK from other EU states... but if these alcohol and tobacco goods are brought into the UK, they must be for the personal use of the traveller who is bringing them into the country.
There are in fact no limits on the amount of duty
paid alcohol and tobacco products which travellers
from other EU countries can import into the UK for
their own use - including goods intended as gifts.
This is a fundamental freedom of the Single
Market. However travellers cannot bring back goods
for commercial purposes without following the
appropriate commercial procedures.
Excise Dealers & Shippers (Hmrc Notice
Consequently any alcohol or tobacco you bring in must be for your own use and transported by you. "Own use" includes goods for your own consumption and gifts. If you bring in goods for resale, or for any payment, even payment in kind, they are regarded as being for a commercial purpose. If you bring back large quantities, Customs officers may ask you about the purposes for which you hold the goods. You are particularly likely to be asked questions if you have with you more than the following guideline amounts:
You cannot bring back tobacco and alcohol goods
for payment or resale - and you may be breaking
the law if you sell the goods that you have
bought. The goods will be taken from you, and for
serious offences you could get up to up to seven
Alcohol and Tobacco Taxes: the UK v. the EU
"Floating off-licence" detained: A "floating off-licence", anchored 13 miles off the North East coast of the UK, has had its cargo detained by Customs and Excise officials. The 72ft-long yacht was moored in international waters off the coast of Hartlepool, and was selling cut price alcohol and cigarettes.. more... (BBC News)
"Booze cruise" legal threat to UK. Stocking up on alcohol in France is a popular British custom. The EU has accused British Customs of disproportionate tactics in tackling people bringing excessive amounts of alcohol and tobacco into the UK.. more... (BBC News)
Travelling to the UK from Countries outside the EU
There are stricter limits when returning to the UK from outside the EU. "From outside the EU" here means also from Gibraltar, and (for VAT and Excise Duty) the Canary Islands and the Channel Islands - see the EU Special Member Territories above. (See also Cyprus* below). In this case you can only bring in, for your own use only, the following lower amounts into the UK without paying UK tax or duty:
You are entitled to these allowances only if you travel with the goods and do not sell them. If you are under 17 years of age, you are not entitled to the alcohol and tobacco allowances.
*Cyprus: At the time of writing, due to the complicated political situation on the island, goods imported from Turkish controlled areas of Cyprus are treated as imports from outside the EU, but.. "the forbidden fruit of Northern Cyprus is set to appear on European supermarket shelves as the EU prepares to bring the territory in from the cold.." more...
Guide for Travellers Entering the
What rate of duty will I have to pay?
You can check the rate of import duty on your product by consulting the EU Taric (Integrated Tariff of the European Communities) internet database.
Remember that Customs rules and duty free allowance amounts are subject to change. You can check for the latest regulations with:
HM Revenue & Customs National Advice Service
Check the latest EU
news in trade, business and legislation
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