Tariff and Tax Information
Understanding Tariff and Tax Related Terms and Who Pays
Who Pays Customs Charges?
It is very important to consider the effects of tariffs, taxes, port handling fees and other miscellaneous customs charges when determining your product's final cost. Depending on your product and country of destination, customs charges will effect the price your buyer is willing to pay for your product. Typically, the importer (buyer) is responsible for paying these charges. However, the responsibility for paying customs charges ultimately depends on how you define the "terms of sale" with your buyer.
Incoterms
Incoterms (international commercial terms) have been designed to provide guidance to buyers and sellers in determining who is responsible for paying the fees associated with foreign trade.
Understanding Tariff and Tax Related Terms
Ad Valorem: According to value.
CIF: Cost + Insurance + Freight: A pricing term indicating that the cost of goods, insurance, and freight are included in the quoted price.
FOB: Free on Board: Cost of the product + all transportation costs from the manufacturer to the port of departure + costs of loading the vessel.
Duty-Paid Value: CIF or FOB value + duty.
VAT: Value added tax (similar to a sales tax). Generally applied on duty-paid value.
HS Number: Harmonized System (HS) Numbers are used to classify products for customs purposes. Typically 6-10 digits long, the first 6 digits are standardized internationally. To get a duty rate one needs to have the individual product number used in the importing country.
Schedule B Numbers: Numbers used to classify exported products in the United States. The Schedule B system is based on the international HS system and must be provided on the Shippers' Export Declaration or Automated Export System (SED or AES) submission, on which U.S. export statistics are calculated. Schedule B numbers can be an approximate classification for determining duties but may not be exact.
HTS Number: Harmonized Tariff Schedule (HTS) Numbers are based on the HS international nomenclature. The 10-digit HTS numbers are used on U.S. import documentation and to obtain U.S. tariff rates.
Tariff & Duty: (interchangeable terms): A product-specific tax imposed on imports by the customs authorities of a country.
Taxes: Charges applied in addition to duty.