How to Reduce Import Tax for Your Freight

Importing goods is essential, both for businesses to continue their work and for people to live their lives as they want. However, import duty taxes can be a significant expense for importers, even causing certain goods to be financially unviable to procure. Understanding how to reduce these taxes legally can save your business a substantial amount of money, opening up new avenues for growth. 

Reducing import taxes for global shipping can be tricky. But at Allegro Freight Forwarding, we make it seem simple with our global import and export services and specialist insight on the industry. In this article, we’ll help you understand how import tax affects your business, alongside methods you can take to reduce unnecessary expenditure on duty for the goods and materials you import. 

Contact us today to see how we can take shipping stresses off your shoulders. 

Import duty, or customs duty, is a fee that countries charge on goods brought in from abroad. This tax has two main goals: 

1. It raises money for the government as an additional source of tax revenue, helping to fund crucial societal mechanisms like public services or infrastructure. 
2. It helps local businesses by making products from other countries more expensive, leading to customers purchasing more products from the UK and promoting a healthy internal economy. 

However, as much as import tax is a necessary addition to global trade, it does come with its downsides for business owners trying to make a living with ever-changing profit margins on their goods and services. As such, understanding how to reduce import tax legally can give you additional support in growing your business and seeing a return on your investments. 

Reducing import tax legally involves strategic planning and understanding various mechanisms and agreements. Here are six different methods you can use – in isolation, or in tandem with one another – to reduce the tax you spend on the goods you import. 

1. Use Trade Agreements

Many countries have trade agreements that lower or eliminate import duties for specific products. Knowing about these agreements can help you save money on tariffs. 

Key Trade Agreements to Consider

• EU Trade Agreements: After Brexit, the UK has trade agreements with the EU that reduce tariffs on many products. These agreements cover various sectors, helping businesses save on import costs. 

• Preferential Trade Agreements: The UK has special trade agreements with many countries. These agreements lower tariffs for specific products. Examples include deals with Japan and Canada. 
• Generalised System of Preferences (GSP): The GSP scheme offers lower tariffs on imports from developing countries. This supports economic growth in those regions and provides savings for UK importers.

2. Classify Your Goods Correctly

 By ensuring your products are correctly categorised, you can benefit from lower duties. Classifying goods correctly includes a few steps. First, you need to understand HS codes. These numbers are used worldwide to identify different types of traded products. Each product type has a specific code, and using the correct code is essential. 

It’s also important to keep checking your product classifications. HS codes can change, and staying updated with these changes is necessary to follow the rules. 

3. Value Your Goods Accurately

To value your goods accurately, you must include all related costs when you declare their value. This means adding up the actual cost of the products along with any shipping and insurance expenses. 

Keeping detailed records is also a crucial part of the valuation process. You should keep all documents, such as invoices, shipping receipts, and insurance papers. These documents prove the value you declared for your goods, which is essential if any questions or customs need to be checked for the values you’ve declared. 

4. Apply for Duty Relief Schemes

The UK offers various duty relief schemes that can reduce or eliminate import duties under specific conditions. Consider using them to benefit from lower import costs.  

Popular Duty Relief Schemes

• Customs Warehousing: This scheme allows you to store imported goods in a customs warehouse without paying import duties. Duties are payable only when the goods enter the UK market.  

• Inward Processing: Goods can be imported for processing or repair and re-exported without paying duties. This is beneficial for businesses involved in manufacturing or repair services. 

• Temporary Admission: Goods can be imported without paying duties, provided they are not sold and intended for re-export. This is ideal for exhibition goods, commercial samples, or professional equipment. 

5. Optimise Your Supply Chain

You can save a lot of money by making your supply chain management more efficient. When you combine smaller shipments into bigger ones, you lower shipping costs and the need for multiple customs forms. This can lead to cheaper import duties because fewer shipments mean fewer fees and lower taxes based on the size of the shipments. 

6. Take Advantage of Duty Drawback Schemes

Taking advantage of duty drawback schemes can lead to significant savings for businesses, especially those that export goods after importing them. These schemes let companies get back the import duties they paid if they export the goods later, which can significantly reduce their costs. 

Keep accurate records and apply for duty drawbacks promptly. You must submit your claims within a certain period after exporting the goods. Knowing these deadlines and applying on time is essential to ensure you get all the refunds. 

Legally reducing import taxes requires strategy. You can cut your import duties and boost your profits by using trade agreements, classifying goods correctly, and valuing them accurately. You can apply for duty relief and optimise your supply chain. Other tricks include using free trade zones and duty drawbacks.  

We get it – there’s a lot to think about to get it right. At Allegro Freight Forwarding, we’re dedicated to helping you understand import taxes and bring them down while remaining compliant with customs and local taxes. We have extensive experience and a personal approach to ensure that your goods are handled carefully, and that they arrive on time. Let us take the stress out of your logistics needs – contact us today to learn how we can support your business and simplify shipping operations. 

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