Customs duty is not the same as surface duty. Many, especially the first time Importers confuse many terms in the clearing and forwarding business. Some see Customs duty as the surface duty. Others think that Customs duty is payable to Customs Brokers or Agents. Yet, others are confused how to generate import duty. Worst yet, there are those who do not understand why import duty in the first place.
Read Also; COST OF CLEARING IN NIGERIA; HOW TO DETERMINE IT
WHAT IS CUSTOMS DUTY?
Firstly, Customs is an Authority or Agency of government, saddled with responsibility to monitor flow of goods across borders. Additionally, Customs collect duties and taxes for goods across borders on behalf of the government. In Nigeria, the Customs is directly an Agency of the federal ministry of finance.
Customs duty is taxes payable to Customs or Government for moving goods across international borders. The movement of goods are either for import or export reasons. In straightforward terms, the duty is required on import and export of commodities or products. The public authority utilizes this obligation to raise its incomes, shield homegrown businesses, and control development of products.
WHAT DETERMINES CUSTOMS DUTY?
There are lots of misunderstanding around the subject of how much exactly is Customs duty for a product. Most first-time Importers and Exporters often go into the logistics business ill prepared. As a result, many have incurred untold debts or suffered some heartaches. Some have in worst cases abandoned import goods for Customs. Just recently, the Nigeria Customs announced intent to auction such import cars at the various terminals.
Consequently, in this article, we will present some imported goods on different container sizes for enlightening the public. We will present detailed duty estimates for goods with VAT and the one without VAT.
SAMPLE DUTY FOR POWER GENERATORS IN A 20 FEET CONTAINER, HSCODE – 8502399000
In Nigeria, the factors that determine overall duty are:
- The commercial name of the product itself.
- In addition, the tariff code (same as harmonized system code).
- Equally, the price of the goods in the open market.
- Similarly, the quantity plays a role like the nature and size of the container
- Also, the Customs benchmark or rating of the product.
- Finally, the exchange rate plays a role on overall duty.
Let us now look at the generator as stated above. Below are the financial details for the container.
FOB (Total Cost of goods as in the invoice) = USD40,000.00
FREIGHT (transportation cost from China to Nigeria) = USD7500.00
Exchange Rate Dollar to Naira = USD1 to NGN408.77
Hence, FOB in Naira = NGN16,350,800 (40000*408.77)
By the same conversion, Freight cost in Naira = NGN3,065,775 (7500*408.77)
The sum insured, or insurance value for this shipment under cargo clause C is NGN21,358,232.50 (FOB + Freight cost)*110%
The marine or cargo insurance premium (on clause C) for this shipment is = NGN18,154.50 (Sum insured*premium rate, which in our case is 0.085%).
Recommended for you; MARINE INSURANCE IN NIGERIA: HOW TO PURCHASE ONE
CUSTOMS DUTY ESTIMATION FOR GENERATING SET BASED ON GIVEN INVOICE
Therefore, the following are the parameters gotten so far for the generator in a 20 feet container.
FOB (C) = NGN16,350,800
Freight (F) = NGN3,065,775
Insurance Premium Value (I) = NGN18,154.50
CIF = NGN19,434,729.50
ID (surface duty) = NGN971,736.48
Surcharge = NGN68,021.55 (7%*ID)
CISS = NGN163,508
ETLS = NGN97,173.65 (0.5%*CIF)
VAT = NGN0.00 (HSCODE is not with VAT)
Total Duty Payable = NGN1,300,434.00 (ID+SUR+CISS+ETLS+VAT).
For clearer understanding of the terms FOB, surcharge, etc. read also; CALCULATING CUSTOMS DUTY; NIGERIA AS EXAMPLE.
TOTAL CLEARANCE COST FOR SAMPLE GENERATORS IN A 20 FEET CONTAINER, HSCODE – 8502399000
As seen above, total duty payable = NGN1,300,434.00. In this section, we will list other charges and expenses to clear the container.
SON Product certificate and SONCAP = NGN400,000.00
Shipping company local charges = NGN150,000.00 (estimated)
Terminal Handling Charges = NGN150,000.00
Clearing Agency Service Charge = NGN150,000.00.
Therefore, total clearance cost for the 20 feet generating set container is the summation of total duty and all other charges. Total Cost = NGN2,150,434.00.
CUSTOMS DUTY ESTIMATION FOR BISCUITS BASED ON A GIVEN INVOICE AND FIGURES
Let us now look at an item with an HSCODE that requires VAT – Digestive Biscuits in a 40 feet container.
HS CODE: 1905310000
DUTY: 35%, 7.5% VAT
FOB = USD35,000 (NGN14,306,950.00)
FREIGHT = USD9000 (NGN3,678,930.00)
Marine Insurance Premium Value (I) = NGN16,816.80
CIF = NGN18,002,696.8
ID (surface duty) = NGN6,300,943.88
Surcharge = NGN441,066.07 (7%*ID)
CISS = NGN143,069.50 (1%*FOB)
ETLS = NGN90,013.48 (0.5%*CIF)
VAT = NGN1,873,334.23
Total Duty Payable = NGN8,848,427.00 (ID+SUR+CISS+ETLS+VAT)
TOTAL CLEARANCE COST FOR SAMPLE BISCUITS BASED ON A GIVEN INVOICE AND FIGURES
As seen above, total duty payable = NGN8,848,427.00. In this section, we will list other charges and expenses to clear the container.
SON Product certificate and SONCAP = NGN400,000.00
Shipping company local charges = NGN250,000.00 (estimated)
Terminal Handling Charges = NGN250,000.00
Clearing Agency Service Charge = NGN200,000.00.
Therefore, total clearance cost for the 40 feet sweet biscuits container is the summation of total duty and all other charges. Total Cost = NGN9,948,427.
CONCLUSION
Customs duty entails the whole lot than just surface duty. It is the summation of surface duty and other applicable charges. We are writing this article because we believe that a well-informed client is far easier to work with than a novice is. Some goods require VAT payment, others do not, and still some goods are levied. Consequently, an excellent Agent or Broker seeks to know the HS code classification before making lump sum clearance quotation for goods. Lastly, feel free to reach us via our contact us page for hassle free cargo handling.