Plastic manufacturing has always been an industry of excellence for China as numerous businessmen choose to import plastic products from the country to sell traditionally or via online in exchange of good profit. The biggest advantages in purchasing plastic products from China has to be quality, manufacturing experience and cheap prices. However, a lot of plastic business owners get caught off-guard by custom duties for importing plastic products and they end up paying more than what their budget suggests.
It is basic for plastic businesses to get a quote prior to purchasing imported plastic products. The quotation from the supplier usually do not include import duties and customs charges which adds up to the landed cost of the product upon importing it. You have to be well versed with custom duties for importing plastic products from China before entering this type of business. This article will help you learn how to calculate custom duties when importing plastics from China.
Knowing the actual landed cost of imported plastic products from China cannot be automated. There are no instant tools out there which can solve the calculations for plastic business owners. Even though the formulas involved in the process are all constant, there are a lot of variables involved as well which makes the entire calculation difficult to automate. Calculating custom duties is a tedious and complicated process for business owners most especially newbies that depend on the origin of the goods and the importing country. Importing plastic for recycling to China and other Asian countries has gotten a lot of attention recently, but this article is about new plastic products that end to be exported from those countries.
Landed Cost of the Plastic Product
The product’s landed cost is the total product shipment cost a buyer has to pay for a product ordered from the manufacturer’s warehouse up to the buyer’s doorstep. All components such as original product cost, inspection fees, logistics fees, shipping costs, import duties, customs tax, tariffs with plastic products, miscellaneous fees, taxes, currency conversion, delivery costs, warehousing fees, banking fees, handling fees and other costs are all incorporated into the landed cost of the product.
Landed cost is a trade term used in the manufacturing industry and not only with plastics. It is always printed in the quote sheet and invoice of suppliers and custom manufacturers to clearly communicate and be transparent to their clients and customers the amount they need to pay for the ordered products.
Custom Duties for Importing Plastic Products
As a plastic business owner, your initial concern has to be the custom duties and tariffs for plastic products in your destination market. You need not worry much about China’s customs taxes since your supplier or manufacturer will most likely guide and inform you about the following (they will do all customs paperwork and get their value added tax (VAT) back if you do FOB). Here is a step by step process of things you need to do to calculate custom duties for importing plastic products.
1. Determine the HS Code of your Plastic Product
The Harmonized Commodity Description and Coding System or simply known as HS Code is a standard international product classification system which customs offices around the world use to locate products among various catalogs. Each product category is associated with a specific custom duty. HS Codes are also referred to as import/export codes, tariff codes, customs codes to name a few. HS Codes could range from 6 up to 10 digits to represent each product. Plastics are categorized in a single category with several sub-categories to differentiate them based on material and other factors.
HS Codes vary for each country along with the custom duties associated with it. It is important to determine the right code of your plastic product to make sure your importing process goes smoothly and there will be no delays at the customs office which could incur additional expenses for penalties and fees. This article can help for basic plastic product HS codes.
2. Declared Product Value
Customs value is always based on the declared product value on the official receipt. The standard formula for calculating import duty is;
Import duty = Duty rate x Customs value
Countries such as US, Canada & Australia follow the FOB value while the European Union group base it on the CIF value.
However, custom duties and import tax will not apply if the total declared value of the product is less than the De Minimis value set by the destination country. De Minimis value varies for each country and here are a few examples;
- Australia: 1000 $AU
- Canada: 20 $CA
- European Union: 22 EUR
- Japan: 130 $US
- New Zealand: 308 $US (incl. freight)
- Russia: 10000 RUB
- Singapore: 307 $US
- South America: 50 $US
- United Kingdom: 15 GBP
- United States: 800 $US
Be noted that the following values mentioned above change from time to time and that some of the values may have already changed upon publishing of this article. Simply keep in mind De Minimis values do not change drastically and will only slightly change.
3. Import Customs Duties
All countries charge custom duties based on the origin countries and is usually divided in different levels. Let us take US as an example, the first level is the “Most Favored Nation” wherein an origin country with the MFN tag will minimal to medium customs duties from the US. China is tagged as an MFN country by the US which means it would be an ideal setup for plastic businesses importing from China to the US. Other levels include special programs for developing nations or coverage by free trade agreements.
Most countries welcome imports and they charge low custom duty rates which could be minimal or down to 0%. However, if plastics is a big player in your destination country’s industry, then expect to pay expensive custom duties since these products come a direct competitors.
You also have to take note custom duties only apply once the products pass the customs office. Custom duties are no longer added on to the market price of your plastic products once they are sold within the destination country. Only importers pay for tariffs with plastic products and it would be up to them to adjust the final product price accordingly.
4. Shipping Cost and Other Custom Duties
The shipping cost of your imported plastic products is most of the time a separate cost from the usual custom duties and import taxes. However, there are instances wherein undeclared custom duties are being added on top of the shipping cost which is why you need to check the distributed costs of your shipping fee simply to see to it if there are other custom duties to be paid for as part of the shipping fee.
There are also times when you have already paid for such custom duty at the customs office and it is being redundantly charged as part of the shipping cost. You can simply present all the receipts you have paid at the customs office beforehand and chances are this other custom duty will be considered paid and removed from your shipping cost.
5. Calculating the Landing Cost
As mentioned above, the landing cost of your plastic product is the total cost the buyer has to pay for the product including custom duties, import taxes, shipping costs and other components involved in the transaction. Since you are now aware of all the tariffs with plastic products when importing from China, it would be easy for you to calculate the landing cost simply by summing up all the components’ costs.
Calculating import duties is surely intimidating and can be confusing at times most especially with newbies in the importing business and manufacturing. However, acquainting yourself with custom duties along with legalities will make it easier and eventually get the hang of it all. You simply have to be updated of changes within the customs office but that doesn’t happen way too often. Supply chain analytics and help from logistics companies can make your life much easier, since they can quote you in advance.