Customs value forms the basis for import taxes, whether of any goods coming from another country. It is only after the customs value at the clearance stage that the foreign product is considered imported.
Understanding what the customs value is is interesting, particularly for those who order large batches of foreign goods for their company or for the common consumer who also pays tax on what comes from abroad.
When thinking about it, you probably ask yourself: What is the customs value, anyway? How is it calculated? What factors make up and affect? What do I need to pay for customs value? What happens if you don’t pay? These are some of the questions when it comes to customs and import values. So, continue reading to better understand and be aware of this type of tax.
What this article covers:
What is customs value?
While importation is the entry of foreign goods into the destination territory, the customs value is the calculation of all values that make up this process.
The customs value, therefore, is the calculation of the Import Tax. Clearly, this includes charging based on the value of the goods, insurance, international freight and the so-called Terminal Handling Charge (THC). All of them form the CIF (acronym for “Cost, insurance and freight”).
As Brazil is a member of Mercosur, the collection of import tax, with the customs value included, is done according to the organization’s tax process. But the customs value, after all, also has its value defined as we will see below.
How is the customs value calculated?
The customs value is calculated based on what the Customs Valuation Agreement (the AVA-GATT) and the Federal Revenue says. Basically, it determines that the customs value must be that of the transaction cost – just apply the actual value of the product you will pay.
And the amount of Import Tax?
According to what determines the Mercosur Common Nomenclature (NCM), the Import Tax (II) has the customs value on the product. Here in Brazil, we have both the federal and the state.
Therefore, for the federal tax, the tax is calculated about industrialized product (IPI), PIS and Cofins. While the state is the ICMS itself, and the rate changes for each state.
The calculation of the customs value, that is, the basis for arriving at its value is exactly the II, PIS and Cofins together. In short, just apply the rate. As for the IPI, you can add the customs value to the II. Finally, ICMS takes into account the entire chain of expenses from the tax process to customs clearance.
What are the factors that affect customs value?
As in every purchase process, the customs value also considers factors in its calculation. In other words, we say that the customs value is made up of the CIF value.
CIF is the term you will see in every international negotiation to clarify the responsibility that the seller will have with freight, cargo and transportation costs to the port. Finally, the customs value to be paid comprises:
- The real value of the merchandise;
- Transport value from abroad to customs;
- International insurance (if any);
- Extra handling cost within the port (Capatazia).
There is a somewhat conflicting point between the Valuation Agreement and what happens at the port facilities, such as the movement of goods (transport, opening volumes, handling, and others).
This is because the Foremanship is not seen as a cost to be included in the customs value.
The Forwarding policy is that extraordinary activity in which merchandise is manipulated for inspection or to be loaded.
What are the consequences of not paying the customs value?
In addition to the customs value and taxes included, there may be charges on your imports. Sometimes, the purchase is more expensive because of this, which leads to the decision not to pay for it.
Failure to pay the applied import tax will simply result in the merchandise being returned to the country of origin. In this case, the property purchased becomes the property of the Union, which is in charge of deciding what to do with it, such as destroying it, donating it, putting it up for auction or even incorporating it into public property.
If you make international purchases for your own consumption or because your company works with foreign trade, you now understand better that the customs value is part of the costs. Stay up-to-date with us to understand the most important finance terms in addition to customs value and import tax.