Unit III. Customs duties

✔ Why do you think the government gets involved in the way businesses create and manage their finances?

✔ The opening of a new business is a proud moment for entrepreneurs. What dreams might entrepreneurship turn into reality in your life? How can customs facilitate/hinder one’s business?

✔ What are some reasons a company might not have enough cash reserves?

Text a. Customs duty

I. Read the article and give Russian equivalents for the words and phrases in bold.

A duty is a kind of tax, a payment due to the revenue of a state, levied by force of law. It is a tax on certain items purchased abroad. Properly, a duty differs from a tax in being levied on specific commodities, financial transactions, estates, etc., and not on individuals; thus it is right to talk of import duties, excise duties, death or succession duties, etc., but not of income tax as being levied on a person in proportion to his income.

Customs duty is a kind of indirect tax which is realized on goods of international trade. In economic sense, it is also a kind of consumption tax. Duties levied by the government in relation to imported items is referred to as import duty. In the same vein, duties realized on export consignments is called export duty. Tariff which is actually a list of commodities along with the leviable rate (amount) of Customs duty is popularly understood as Customs duty.

Calculation of Customs duty

Calculation of Customs duty depends on the determination of what is called assessable value in case of items for which the duty is levied ad valorem. This is often the transaction value unless the Customs officers determines assessable value in accordance with Brussels definition.

However, for certain items like petroleum and alcohol, Customs duty is realized at a specific rate applied to the volume of the import or export consignments.

H. S. Code

For the purpose of assessment of Customs duty, products are given an identification code that has come to be known as the Harmonized System code. This code has been evolved and assigned by the World Customs Organization based in Brussels. H. S. Code may be from four to ten digits. For example 17.03 is the H. S. Code for molasses from the extraction or refining of sugar.

Introduction of H. S. Code in 1990s has largely replaced what used to be known as SITC or Standard International Trade Classification, though SITC remains in use for statistical purposes. In drawing up the national tariff, the revenue departments often specifies the rate of Customs duty with reference to the H. S. Code of the product. In some countries and customs unions, 6-digit HS codes are locally extended to 8 digits or 10 digits for further tariff discrimination: for example the European Union uses its 8-digit CN (Combined Nomenclature) and 10-digit TARIC codes.

The national authority that is the task of realizing taxes on international trade is often referred to as Customs department. Normally the Customs department operates under a national law and is authorized to examine the cargo in order to ascertain actual description, specification volume or quantity, so that the assessable value and the rate of duty may be correctly determined and applied.

Duty-free goods

Duty-free is the term that is often used to describe goods bought at ports and airports that do not attract the usual government taxes and customs duties. Some countries impose allowances in order to restrict the number of Duty-free items that one person can import into the country. These restrictions often apply to tobacco, wine, spirits, eau de toilette, gifts and souvenirs. Often foreign diplomats and UN officials are entitled to Duty-free goods. Duty-free goods are imported and stocked in what is called Bonded warehouse.

Customs Duty allowances

Customs Duty is only payable on goods from outside the EU over a certain value. This value depends on whether you’re bringing the goods in yourself, or they’re being sent by post. If you’re a traveller arriving from outside the EU, you only have to pay Customs Duty if you exceed your duty free allowance.

Customs Duty is charged as a percentage of the total value of the goods - that is the sterling equivalent of the price paid abroad.

To work out the percentage, each type of product is given a 'commodity code'. This tells you what the Customs Duty rate percentage is for that particular product, based on whether it’s being imported or exported.

There are around 14,000 different classifications. The duty rate percentage for each may vary according to the country the goods come from. The average percentage is between 5 and 9 per cent, but it can be as low as 0 per cent or as high as 85 per cent.