calculating customs duty

CALCULATING CUSTOMS DUTY; NIGERIA AS EXAMPLE

calculating customs dutyThe concern of every importer of goods is to know how much the entire process would take from the export cargo clearance to the import cargo clearance. To give this article a sharper focus, we shall begin with definition of all terms associated with calculating customs duty in Nigeria. So never mind I will give you a number of formulas, but an example shall clarify things.

Read Also: SHIPPING TERMS AND MEANING IN NIGERIA

CALCULATING CUSTOMS DUTY IN NIGERIA; TERMS AND DEFINITIONS

  1. FOB: this term which stands for free on board, refers to all costs incurred to bring the goods or items of import to the terminal for shipment. FOB = Total Ancillary Charges + Total Value of Goods. The pro forma invoice always states what the FOB value is.
  2. Freight Cost: this is the estimated cost of transporting item from the terminal in the supply country to the port in the destination country.
  3. Insurance: by this we mean the premium paid to the insurance company for issuing marine certificate or insurance certificate to the importer. Each insurance company has its premium rate, which must be agreed with the importer. Insurance = [FOB + Freight + 10% (mark-up)]*Premium rate. No worry about this, an example will clarify the matter just keep reading.
  4. CIF: this stands for Cost Insurance and freight. CIF = FOB Value + Insurance Value +Freight Value
  5. Surface Duty (ID): this is often commonly referred to as import duty, which is how the abbreviation – ID came about. Its duty based on the kind of item imported. The value depends on the HS Code – usually 5%, 10%, 20%, etc. of the CIF Value. ID = x% of CIF Value.
  6. Surcharge: this is an additional tax levied on importation of goods, and meant for port development. Surcharge = 7%*ID.
  7. CISS: this stands for Comprehensive Import Supervision Scheme. CISS = 1%*FOB Value.
  8. ETLS: This means ECOWAS Tax Liberalisation Scheme often referred as ECOWAS levy for short. It is tax imposed on goods imported from non-ECOWAS member countries into ECOWAS member country. The monies so raised is used to run the commission’s office and for community development. ETLS = 0.5%*CIF.
  9. VAT: Value Added Tax is tax for value addition or services rendered. VAT = 5%*(CIF+ID+Surcharge+CISS+ETLS).

CALCULATING CUSTOMS DUTY IN NIGERIA; EXAMPLE 

Mr Adamou who lives in UK would like to know the rough estimate of how much it costs to clear some pieces of flexible pipe meant for use in the clean-up exercise of Ogoni Land, with overall cost of 170,000EUR. Assuming Mr Adamou has consulted Vagmon Integrated Services as its vendor, we shall demonstrate in a tabular form the Customs Duty payable by the client. As part of the contract, Vagmon Integrated Services shall provide insurance certificate, using its partner insurance company.

CALCULATING CUSTOMS DUTY IN NIGERIA; ASSUMPTIONS

Form M/PAAR is already in place. Read Also: FORM M IN NIGERIA: HOW TO PROCESS AND OBTAIN IT

assuming freight cost as 7000 EUR

The Nigerian Import Duty Scheme requires that Form M detail be added to air waybill/bill lading as well as on the manifest before such manifest is sent to Nigerian Customs to help in the monitoring of the scheme.

MATERIAL: Flexible Pipe Material
Insurance Premium Rate: 0.12%
Duty Rate: 20% (based on the item HS Code)
Exchange Rate EUR/NGN: 361.06
PARAMETERFORMULAVALUE (NGN)
FOB170,000*361.0661,380,200.00
FREIGHT VALUE7000*361.062,527,420.00
INSURANCE[61380200+ 2527420+ 10% (mark-up)]*0.12%84,358.06
CIF61380200+84358.06+252742063,991,978.06
HS CODE3917399000
ID63991978.06*20%12,798,395.61
SURCHARGE12,798,395.612*7%895,887.69
CISS61380200*1%613,802.00
ETLS63991978.06*0.5%319,958.89
VAT(63991978.06+12798395.61+895887.69+613802+319958.89)*5%3,931,001.11
TOTAL12798395.61+895887.69+613802.00+319958.89+3931001.1118,559,045.30
TOTAL AMOUNT OF DUTY PAYABLE18,559,045.00

Clearing Costs

  1. Customs clearance – to be advised
  2. Terminal handling and storage charges – charged per outlay
  3. Shipping company local charges – charged per outlay
  4. Inspection charges – to be advised
  5. Quarantine/Fumigation – to be advised
  6. Delivery/Transport – to be determined

Read More about the Nigeria Customs here

CONCLUSION:

With this article, the importer of goods into the Nigerian space has an idea of what the import cargo clearance is in terms of duty payable. Thank you for making out time to read this article. Please contact us using the phone number: +2349075526276.

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4 comments

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