Import Duty

Import Duty Meaning

Import duty refers to the tax levied by the customs department on importing goods into the country. The tariff depends on many factors, such as the nature of the good, its value, its country of origin etc. Globalization has made import duties a major part of a country's revenue.

The government usually levies the import duty for three important reasons – as a source of revenue, to support local manufacturers and businesses by demanding import duty payment from importers, and finally, to counter the restrictions imposed by the imported goods' country of origin in case of strained bilateral relations.

• Import duty refers to an indirect tax or tariff imposed on goods brought into the country from a foreign nation. The importer can be a foreign party or a resident of the country. 
• Different shipping contract terms place the obligation of duty payment on different players – shipper, importer, or agent/ freight forwarder.
• Export duty is another tariff levied on goods exported to another country from a particular country.
• A country's customs department is responsible for collecting the import tariff and implementing rules and regulations concerning imports and exports.

Import Duty Explained 

Import duty payments form a significant portion of the government's revenue. In every country, the customs department is responsible for the levy and collection of import duties. Customs and Border Protection (CBP) plays this role in the United States. Also, they have the absolute authority to regulate the movement of goods into and out of the country. 

However, the taxes levied on each good are not random. It depends on several parameters, like the nature of the good, its commercial value, and the place of its origin. For example, the duty rates on precious metals might be higher than on textiles. But this might probably depend on the country. Further, the tariff rates on the same goods might differ depending on the trade relations between countries. 

The customs department publishes the import and export duty rates on all goods, which can be used for reference. Moreover, the United States International Trade Commission (USITC) publishes the Harmonized Tariff Schedule (HTS), which details the U.S. Customs import duty rates.

Example 

Here's news from July 2022, when the U.S. administration decided to ease some trade restrictions and reduce the tariffs imposed earlier by the previous administration. Senior U.S. and Chinese officials held discussions in the first week of July regarding economic sanctions and customs duty on Chinese consumer goods imported to the U.S. 

Some argue that the U.S. should continue with the tariffs, as it would give the former the upper hand over trade relations with China. In contrast, others believe that reducing the tariffs will help slow down the inflation of consumer goods, as customs import duty add up to the final price. Nevertheless, as of now, there has not been any official announcement.

Drawback 

Customs import duty drawback refers to the refund paid to importers when certain conditions are met. If found eligible, importers can avail of a refund of up to 99% of the duties or tariff paid. Mostly, importers can claim drawbacks in three cases – when the imported goods are used to manufacture goods in the country,y when the goods are re-exported without prior use, or when the goods are rejected.

It usually takes 12 to 16 months to receive the refund if the importer applies via a regular claim. However, they can opt for accelerated payments, in which case they will receive the refund within four to six weeks. Additionally, since the electronically submitted claims are given a preference, importers can apply via the automated broker interface (ABI) to further speed up the process.

Nevertheless, it should be noted that simply becoming eligible for a drawback doesn't imply that the importer can claim it. Therefore, the claimants should know the time limit, i.e., three years. Hence, the imported goods should be re-exported, destroyed, or released to customs custody (in case of rejected goods) within three years of the import date. This, along with proper documentation, will ensure that the importers receive the maximum refund quickly.

Import Duty vs Export Duty

The import duty, generally known as the customs duty, is levied on a particular good when it enters the country. In contrast, the export duty, also known as the excise duty, is collected when the good leaves the country. In addition, the import tariff is applicable on a good of foreign origin, whereas the export tariff is levied on a good of domestic origin. 

The import and export duties are usually not the same, even on identical goods. This is because the export duties are kept at a lower rate to encourage exports among domestic manufacturers. But on the other hand, the import tariff is somewhat higher, so it can discourage imports into the country. 

Frequently Asked Questions (FAQs)

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