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Import and export businesses have to deal with so many more rules and regulations than domestic businesses. The intricacies can be hard to understand for new businesses but that is why we are here to help. Today we are going to review some of the most important terms that often get confused. Today we will point out the differences between customs duties, taxes, and tariffs.
According to the U.S. Customs and Border Protection a customs duty is a tariff or tax imposed on goods when transported across international borders. The reason there are customs duties is to protect each country’s economy, residents, jobs, environment, etc., by controlling the flow of goods, especially restrictive and prohibited goods, into and out of the country. Customs duties are based on product characteristics. Anytime you import a product into a country, you will incur a duty fee. These fees are fixed by the government to determine how freely a product can be let into the country.
Taxes are fixed and calculated on the total value of the product imported into the country. Import taxes are based on the standard percentage, defined by the government, of additional cost added to any imported product coming into the country. Some countries call it a Value Added Tax (VAT). Taxes and procedures vary across markets and regions.
Tariffs are most commonly confused with duties. To clarify, tariffs are fees applied to specific products from specific countries for specific times. Tariffs can be changed quickly and are determined by the whim of the government. Governments determine tariffs based on how they want to impose restrictions from certain foreign countries. Right now, the U.S., Mexico, and Canada have a trade agreement (USMCA) that states that there are no tariffs. But with China there is a blanket tariff given to any products imported into the U.S.
Understanding the different terminology is a huge part of running a successful import or export business. Use this information and these explanations to help educate yourself on what each term means to your business. If you have questions please reach out to your experts here at Duty Calc.
Duty Drawback Software | Import Export Consulting | Processing Filing | Full Service
If you want to import and/or export as part of your business one of the first things you might have to do is obtain a license. Determining whether or not a product requires a license involves careful research and can be a lengthy process so give yourself enough time. If you find that your product does require a license, you must apply for the license through a government agency that has oversight over that product.
Some of the common agencies to check with for import licensing requirements include the Food and Drug Administration (FDA), U.S. Department of Agriculture (USDA), U.S. Consumer Product Safety Commission (CPSC), and Animal and Plant Health Inspection Services (APHIS). When researching you should know all of the information you need. Things like the country of origin of the product and its manufacturer, product composition, intended use of the product, and pricing and payment information regarding sales to determine the value of the shipment. Knowing this critical information will help guide you to the needed agency to apply for the license.
Obtaining an export license also entails working through specific federal agencies but fortunately most exports do not require a specific license. If your product does happen to require a license for export it will probably involve goods, software, or technology with uses in commercial and military or proliferation appliances. The process requires a series of steps through different agencies. Basically, products are overseen by the Export Administration Regulations (EAR). Commodities that fall under EAR will appear on the Commerce Control List (CCL) and be assigned an Export Control Classification Number (ECCN). All shipments requiring an export license must have a Destination Control Statement (DSC) which declares that the goods are only being exported to the country or buyer indicated on official shipping documents. Once all of these steps are completed, only then will you get your export license. As mentioned before, only a small percentage of products require an export license so most of the time this process is not required.
Before you decide to start importing or exporting know that steps like obtaining a license is required. Part of your strategy and business plan should include time and effort designated towards things like this. If you have questions regarding an import or export license please reach out to us here at Duty Calc.
