Customs Duty Calculation

Introduction

This document outlines the ICS process for the calculation of customs duty.

The principal element that customs duty is derived from is the customs value. This value is a standardised representation of the invoice price supplied in import declarations based on recognised valuation rules.

A duty rate is selected and applied to the customs value. The duty rate selected is dependent upon the circumstances surrounding the importation and the nature of the goods. The basis for the selection is determined by the data supplied on the import declaration.

Therefore in order to calculate customs duty the customs value must be determined and a duty rate selected. The calculation of customs value, the method of duty rate selection and the calculation of duty are outlined below. Certain code lists and reference files are also referred to in the process and these are listed below.

Import Declaration Data

The import declaration data used in the duty calculation process is detailed below.

Import declaration header data:

Import declaration line data:

Code Lists and Reference Files

The code lists and reference files that are used in the duty calculation process are:

Customs Value

The object of this process is to calculate the customs value. The Customs Value (CVAL) is the value of the goods on which duty will be charged. Generally the value used is the free on board (FOB) value of the goods, which is the value of the goods excluding overseas transport and insurance. Depending on the invoice terms other charges may be included and excluded from the goods value to determine the customs value. Part VIII, Division 2 of the Customs Act 1901 should be consulted when determining what elements are to be included or excluded in the Customs value of imported goods. Much of the information required to determine the customs value is obtained from the invoice for the goods.

Data provided in the import declaration is used to derive the customs value. A valuation factor is derived to aid in the calculation of the customs value for each line of the import declaration.

The customs value is only determined for nature 10 and 20 import declarations. The importer provides the customs value for nature 30 declarations.

Currencies will need to be converted to standard units of measure prior to the calculation.

The customs value calculation process outlined below will produce the following:

Convert Amounts to Australian Dollars (AUD)

Calculate Valuation Factor

Calculate Line Level Customs Values

Calculate Total Customs Value

Customs Duty

Duty can be calculated from either a tariff classification or a treatment code.

On each import declaration line it is possible to have two tariff items and two treatment codes. Each tariff classification and treatment code can have different duty rates depending on the preference scheme. Every tariff classification and treatment code will have a general rate and may have other rates depending on the preference scheme.

If a tariff item or treatment code does not have a duty rate for the applicable preference scheme then the general rate will be used or another treatment code. A treatment code can be used for information purposes only and therefore not have an associated duty rate.

If a preference scheme has not been entered on the declaration line then the preference scheme for that declaration line is defaulted to the general rate.

Duty is required to be calculated for nature 10 and 30 import declarations.

The process of duty calculation involves determining a duty selection type, selecting a duty rate and finally calculating the duty itself.

Duty can be calculated on either customs value or quantities. Therefore quantities may need to be converted to the appropriate unit of quantity as determined by the tariff prior to the calculations being made.

Determining Duty Selection Type

There are seven possible duty selection types. The type selected is based upon the tariff classification and treatment codes provided on the import declaration. The table below outlines the valid duty selection type combinations.

The term ‘Yes’ indicates the data item has been supplied and the term ‘No’ indicates that it has not. With the treatment codes the term ‘Information’ indicates that there is no duty rate associated with the treatment code whereas the term ‘Rate’ indicates that there is a duty rate associated with the treatment code.

The highlight in the table below shows the duty selection basis for each duty selection type. Type one will be based upon tariff classification one, Type two on treatment code one and so on. Each of the seven cases will result in either a tariff classification or treatment code to be used to select a duty rate.

Select Duty Rate Based on Tariff Classification

Select Duty Rate Based on Treatment Code

Convert Quantities

Calculating Duty

Each duty rate has at least one set of Duty Rate Types. There are four Duty Rate Types, which are outlined in the following table. Duty Rate Types determine the import declaration data items that duty is calculated upon. The duty can be a calculated on one of these types or a combination. A duty rate can have multiple sets of Duty Rate Types.

Each duty rate also has a Duty Calculation Type. The Duty Calculation Type determines the calculation to be performed. The following table outlines the Duty Calculation Types and the corresponding duty calculation method to be employed.

V1.3 12 DEC 2005