Duties

Duties are a form of tax that is levied on a product that is imported into a country. All products have a specific classification code that is assigned to them. Duty rates vary based upon a number of factors: Rates may vary based upon the specific classification code that is assigned; the country of origin of the product (see post “Certificate of Origin”); whether the country of origin has a free trade agreement with the importing country; or whether the product and the country of origin of the product is subject to any anti-dumping legislation. Duties are paid by the Importer of Record (see post “Importer of Record”).

If a supplier is importing the product for sale by a local subsidiary, the duty they pay will be based upon the declared value, which will be the transfer price of the product in the sale of the product to the subsidiary (see post on Transfer Price) . If the buyer is importing the product the duty they pay will be based upon the declared value, which will be the purchase price. This means that the amount of the duty paid will usually be different depending upon who imports the product. If the supplier is the importer and is selling to Delivered, Duty Paid at their location they pay duty on the transfer price. If a supplier is selling it through a distributor, that distributor will be buying the product and importing it and they will be paying duty based upon the declared value that will the price less their discount. In negotiating the price, don’t assume the supplier or distributor will have paid the same amount of duty as you would have to pay to import the item.

Where duties become a major issue is with warranty returns or out of warranty repairs. Some countries have high import duties and may charge import duties on repaired or replaced product that have been returned under warranty or returned for repair. They may provide exceptions to that duty if the product has a serial number and you can prove that they product that was exported for repair is the exact same product and serial number that is being re-imported, Manufacturers that have significant business within these types of countries will frequently establish a repair center within that country or contract with a company in that country to perform local repair to manage the cost. For example, if you had a piece of equipment that was defective they only thing you may need to import would be a part rather than the equipment or a subassembly and they high duty would only be paid on that part.


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