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Duty calculation methods

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Customs duty calculation methods 

If you have ever sent or received goods to or from another country, you’re likely familiar with paying import duty. But have you noticed that the duties that you pay are different depending on what and where you’re importing/exporting? That’s because different countries have different duty rates based on the type of products being imported, the Harmonized System (HS) code, and other factors. The ways different countries assess duty are called calculation methods. This guide will outline the following:

  1. What are the different duty calculation methods?
  2. Which countries use which calculation method?
  3. Where can I learn more about the duty calculations of individual countries?

What are the different duty calculation methods? 

There are four ways in which countries calculate duties:

  • Ad valorem based on CIF (cost, insurance, and freight) - Method for calculating import duties where the tax is calculated on the cost of the order plus the cost of freight, insurance, and seller's commission
  • Ad valorem based on FOB (free on board) - Method for calculating import duties where the fees are calculated only on the cost of the goods sold. FOB is not calculated on the shipping, duty, insurance, etc.
  • Weight - Method for calculating import duties based on how much the goods weigh
  • No Duties Assessed (free port) - Not necessarily a method per se, but rather when countries do not assess duties at all, i.e. imports are duty-free

Here is an example of the 4 methods

Assumptions:

  • Item Cost: 100 USD
  • Weight: 5 KG
  • Shipping: 25 USD
Calculation MethodDuty FormulaEquation and result
Ad valorem 10% CIFduty rate * (item cost + shipping cost)10% * (100 USD + 25 USD)= 12.50 USD
Ad valorem 10% FOBduty rate * item cost10% * 100 USD = 10 USD
Weight-based 5 USD per kgduty rate * weight5 USD * 5 KG = 25 USD
Free 0no duties calculated or applied0

Which countries use which calculation method? 

Now that you have a basic understanding of the duty calculation methods and what they entail, let’s break down the methods by country.

Duties calculated based on FOB:

Country CodeName
ASAmerican Samoa
AUAustralia
BWBotswana
CAcanada
GUGuam
HTHaiti
LSLesotho
NANamibia
NZNew Zealand
SZSwaziland
USUnited States
VIVirgin Islands
ZASouth Africa

Duties based on weight:

Country CodeName
CHSwitzerland
LILiechtenstein

No duties:

Country CodeName
HKHong Kong
KIKiribati
MOMacao
SGSingapore

Duties based on CIF:

All other countries (any country not in one of the lists above) use the CIF calculation method. It is the most widely used duty calculation method.

Where can I learn more about the duty calculations of individual countries? 

Duty can be a complex topic. Zonos technology handles calculations involved with importing goods and we always take into account the variation by country. Our global trade content analyst team specializes in country-specific data which we use to produce country guides that go into detail about not only duty, but tax rates, landed cost examples, and specific info about restrictions, trade agreements, paperwork, and more.

Don’t see a country guide you’re looking for? Send your requested country to docs@zonos.com and we will put that country at the top of our country guide priority list!