How to Calculate Import Duty for Freight

Importing goods can be a complex process, especially when calculating import duty. This guide will walk you through the steps to accurately determine the import duty for your freight, ensuring a smooth and cost-effective shipping experience. Whether new to importing or looking to refine your process, we’ll give you the knowledge you need. 

At Allegro Freight Forwarding, we make it easy for you to navigate these complexities. Our expert team guides you through every step, ensuring your shipments are smooth and cost-effective. With over forty years of combined experience, we offer personalised service to help you understand and manage import duties so you can focus on growing your business. 

Contact us today to see how we can simplify your importing process. 

Import duty is a tax that a country charges on goods that come in from other countries. This tax is important as it helps protect local businesses by making goods from other countries more expensive, meaning local products – which are generally better for the environment – can compete better, leading to more money circulating inside local communities and the economy. Additionally, import duties provide money to the government, which is used for things like public services and improving infrastructure. 

Calculating import duty for freight goes hand-in-hand with calculating its overall price. Here is a step-by-step guide on calculating import duty for your freight, and how that feeds into the total cost of your shipment. 

1. Determine the Tariff Classification of Your Goods

 When you import goods into the UK, each item gets a Harmonised System (HS) code based on the type of goods it belongs to. This code is essential because it determines what duty and tax is applied to your goods. You can find the correct HS code using the UK Trade Tariff tool. This online tool provided by the UK government allows you to input a description of your goods and suggest possible codes.  

2. Identify the Customs Value of Your Goods

Next, you need to figure out the customs value of your goods. This is the total amount used to calculate the import tax. It includes the invoice value, the price you paid for the goods, the freight costs, the cost to transport the goods to the UK, and the insurance costs during shipping. When you add these up, you get the total customs value. 

For more information about customs in freight, see our article on customs compliance > 

3. Apply the Correct Duty Rate

You can work out the import duty after you know the HS code and customs value. Once you have the HS code, you can use the UK Trade Tariff tool again to find out the specific duty rate. It’s also good to check for trade agreements with other countries like the EU, North America, or the Asia-Pacific region. These agreements might lower or even remove the import taxes on some goods, which could reduce your overall costs. 

4. Calculate the Import Duty

Now that you have all the necessary information, you can calculate the import duty using the following formula:  

Import Duty = Customs Value × Duty Rate 

For example, if the customs value of your goods is £10,000 and the duty rate is 5%, the import duty would be: 

£10,000 × 0.05 = £500 

5. Consider Additional Costs

 One crucial extra cost is the Value Added Tax (VAT). VAT is added to the total cost of the customs value, the import duty, and other importing costs.  

Another cost you need to consider is the excise duty. This is especially important for items like alcohol and tobacco, which have both excise and import duties.  

Also, there are customs handling fees. These fees pay for processing and taking care of your goods when they arrive at the port of entry. They help ensure your goods are processed properly and move through customs without problems, making the import process smoother.  

Example Calculation

Let’s walk through a practical example to illustrate the process. In this scenario, you are a tech firm in the UK importing miscellaneous electronic goods from a supplier in an EU country.

1. Tariff Classification: The HS code for this type of electronic goods is 8542 3190 00.

2. Customs Value:  

• Invoice value: £8,000 
•  Freight costs: £500 
•  Insurance costs: £100 
• Total customs value: £8,600

3. Duty Rate:  

• In this scenario, we’ll assume the duty rate is 5%. 

4. Calculate Import Duty:  

• Import duty = £8,600 × 0.05 = £430 

5. Additional Costs:  

• VAT = (Customs value + Import duty) × 20% 
• VAT = (£8,600 + £430) × 0.20 = £1,806 

6. Total cost of import (excluding handling fees): £8,600 + £430 + £1,806 = £10,836 

In this example, the total cost of duty is £516, which includes its VAT value. 

You can use a few helpful strategies to manage and lower your import duty costs. First, take advantage of trade agreements between the UK and other countries. These agreements often provide lower duty rates, reducing your costs significantly. Also, you can save money by choosing better shipping methods. Think about grouping your shipments. This reduces the number of times you have to pay for imports. Or, use carriers that cost less. 

It’s also essential to classify your goods correctly. Use the right Harmonised System (HS) codes to prevent paying too much in duties. Using the wrong codes can result in paying higher taxes or facing possible fines. 

Finally, getting advice from experts like customs brokers or freight forwarders is very helpful. They know a lot about the import rules and can guide you well. Using these tips, you can better control your import duty costs and make your import process smoother. 

Calculating import duty for freight is a vital aspect of the importing process. By understanding the steps involved and utilising available resources, you can ensure accurate calculations and avoid unexpected costs. 

At Allegro Freight Forwarding, we understand that importing goods can be complicated, especially when dealing with duties. With over forty years of combined experience, our dedicated team is here to make the process simple and cost-effective. Whether you’re importing electronics, textiles, or other goods, working with us will help you stay informed and compliant with UK import regulations. Let us take care of the details so you can focus on your business. Contact us today to see how we can streamline your importing process! 

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