Duty

In economic terms, duty or customs duty is a form of indirect tax levied on products that are traded internationally. Almost every nation imposes customs duty on imports, but export duty is a rare phenomenon.

What is Import Duty?

Import duty is the tax which an importer is obliged to pay to the government for the import of foreign manufactured products into the residing nation.

The government imposes duty on imported items in order to equate or hike their prices vis-à-vis domestic products. Import duty differs on products based on their price, product category, manufacturing country, quotas and other trade laws valid in the importing country, such as anti-dumping laws. On some of the high-priced products, such as luxury cars, the import duty can exceed 100% of the declared price.

An individual can pay import duty through a licensed customs broker or directly to the customs department. Failure to pay import duty can lead to legal action against the importer and the confiscation of the imported goods.

Import Duty: Types

The practice of imposing import duty differs among nations. However, the most basic forms practiced in almost all the countries are:

• Estimated import duty: It is an approximation of the actual import duty. An individual is required to pay the estimated import duty when an imported product enters the country.
• Liquated import duty: It is the finalized import duty that the customs department calculates. Liquated import duty can be equal to or more than the estimated duty.
• Anti-dumping duty: Governments can levy anti-dumping duty if the imported product is priced below its market value. It is a counter-effective measure to resist low-priced products from flooding the domestic market, adversely impacting an industry in the country. The US levies countervailing duty as well on the import of goods from countries that provide subsidizes for exported items.

Import Duty: Exemptions

Some imports are exempted from duty. These commonly include:

• Household products for personal use
• Import of items exported for repair
• Equipment temporarily employed overseas and returned within a stipulated timeframe
• Domestic animals exported for a limited period

Although rules governing import duty are rigid and difficult to understand, they are highly standardized by domestic laws and international trade agreements.