Text c. Trade, volume, early payment and cash discounts

I. Read the articles and render them in Russian.

I. Typically, the invoiced total is already net of trade discounts, volume discounts or other quantity sales incentives. Early payment discounts and cash discounts have also usually been subtracted. However, customs officials will disregard any discounts that the exporter provides to the importer after the shipment is delivered.

Buying Commissions

Any buying commission or bonus that the exporter pays to the importer must be deducted from the amount payable for the imported products.

Rights to Distribute

Where the importer pays the exporter a fee for the right to distribute the exporter’s products, the amount paid for distribution rights are eligible deductions from the invoice total. In contrast, the importer must ensure that the invoice total includes any royalties, copyright fees, licensing fees and trademark fees.

Advertising and Promotion

The importer can incur expenses to advertise or promote the exporting company. Valid expenditures are eligible for deduction when calculating the transaction value amount on which duties and taxes are based.

Example of Importer Cost Savings

Consider the following example in which bicycles from Taiwan are subject to a 13% tariff, a 10% excise tax and the importing country’s 5% General Sales Tax (GST). An invoice total for 1000 bicycles that cost $100 each is $100,000. Using Canadian calculation methods, this will result in an additional $13,000 in customs duties (13% of $100,000) plus $11,300 in excise taxes (10% of $113,000) plus $6,215 for GST (5% of $124,300). Therefore, the transaction value is $100,000. The importer has to pay an additional $30,415 in duties and taxes.

If the importer has to pay $20 to assemble each bike after delivery, as well as $5,000 for the rights to distribute the product plus $5,000 on advertising and promotion, these eligible deductions amount to $30,000. The transaction value becomes $70,000 ($100,000 minus $30,000) and the importer has to now pay:

$9,100 for customs duties (13% of $70,000)

$7,910 for excise taxes (10% of $79,100)

$4,351 for GST (5% of $87,010).

This amounts to $21,361 in duties and taxes. By reporting eligible deductions to customs officials, the importer saves $9,055 in importing charges ($30,415 minus $21,361).

II. What is a Customs Bond?

The U.S. Customs Service require customs bonds of importers to guarantee payment for imported shipments. If an importer does not post the required bond, their shipments will not clear U.S. Customs. There are numerous different U.S. Customs bond types. The two most common are Immediate Delivery Bonds and Consumption Entry Bonds.

There are two types of Customs Bonds: the Single Transaction Bond (Single Entry Bond or SEB) and the Continuous Bond. As the name implies, the Single Entry Bond guarantees a single import transaction. SEB bond amount requirements are decided by the limits of liability set by U.S. Customs. Continuous bonds are the second customs bond type. A Continuous Bond covers all transactions by an importer. Continuous bonds are typically 10% of yearly duties. The minimum amount permitted for a Continuous Bond is $50,000. If you plan on having multiple imports per year, it will likely save money to obtain a continuous bond.

Shipments under $2,000 may not require a bond at all. It is important to find out whether a bond is required as the first step.

Current Market: You may quickly find that there are not many agencies that know how or where to write U.S. Customs Bonds. They are not the typical commercial surety bonds that most agents are familiar writing. Therefore, a knowledgeable agent is extremely important. Rates are determined by the use and description of the imports. Rating codes are applied to the goods along with the bond rate. Some of the more common differences to be considered are whether they require FDA approval and whether they are to be stored in a warehouse or if they are only temporarily imported.

Bonding rates are determined by the description of the goods and/or the use of the goods. Rates and requirements vary for each rating code. For example, goods entered for temporary importation vs. goods being delivered to a bonded warehouse vs. goods subject to FDA approval, to name just a few of the classifications. To be sure you are paying the appropriate rate and hence, the lowest premium available for that specific classification, requires extensive knowledge in this area.

III. Using the vocabulary and the information from the articles role play a dialogue. Imagine you live in the 25^th century. You should discuss the method of import payment for: imported exotic animals/rare raw materials/air/Marsian goods (you may make your own list of goods) with your business partners from Mars.

TEXT D. CUSTOMS IMPORT DUTY