Calculating duty & tax

Information needed for calculation

Customs agencies typically require the following details to calculate import duty, sales tax, and any additional taxes:

• Ship from country
• Ship to country
• Country of origin
• Commodity details – description, HS code, units of measurement, and declared value
• Shipping and insurance costs

With this information, customs can determine the correct tariff and the total amount payable.

How do you calculate duty & tax?

1. Calculating duty.

Duty is calculated in one of three ways:

1. Ad valorem – a percentage of the Customs Value (CV) (for example: 10% of the cost of goods).
2. Measure based – a fixed amount per unit (for example: US$5 per kg).
3. Combination – both a percentage of CV and a fixed amount per unit.

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How CV is determined:

• Cost, Insurance & Freight (CIF): goods + shipping + insurance
• Free on Board (FOB): goods only

Formulas:

• Ad valorem: Duty = % × CV
• Specific rate: Duty = Fixed amount × Units
• Combination: Duty = (% × CV) + (Fixed amount × Units)

2. Calculating sales taxes (e.g. VAT, GST, PST, etc.).

Sales taxes are usually a percentage of: Customs Value + Duty Payable

Some countries also include additional taxes in this calculation.

Example:

• Customs Value: $100
• Duty Payable: $10
• Sales Tax Rate: 10%
• Sales Tax = 10% of $110 = $11

3. Calculating additional taxes.

Many countries apply extra taxes on imports. These may be calculated like duty - as a ad valorem, measure based or a combination of both. Additional taxes may also apply below the de minimis threshold.

Example: Importing a laptop into Australia

Step 1 – Product, shipping, and insurance costs

• Laptop price: AU$1,500.00
• Shipping & insurance: AU$120.00

Step 2 - Determine the Customs Value (CV)

Australia uses the Free On Board (FOB) method to calculate CV, which includes only the cost of goods (not shipping or insurance).

CV: AU$1,500.00

Step 3- Check the duty threshold

Australia’s duty de minimis threshold is AU$1,000.00. Since AU$1,500.00 exceeds this, duty could apply. However, laptops have a 0% ad valorem duty, so:

Duty Payable: AU$0.00

Step 4 - Calculate sales tax (GST)

Australia’s GST is 10%, applied to Product + Shipping + Insurance + Duty

GST Payable: AU$162.00

Step 5 - Calculate additional taxes

Australia applies an Import Processing Charge (IPC) on imports valued over AU$1,000.00. For this example, it is: AU$90.00

Step 6 - Final breakdown

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Note: Carriers may also charge extra handling or clearance fees.