Here is the introduction to import duty from USA. You will get the 5 most important things to remember in order to avoid delays and extra costs, so you are well equipped when importing goods from USA to UK.
Import duty when shipping from the USA
Import duty is an amount you have to pay when importing goods into the European Union (EU) and thereby the UK. It is, therefore, a good idea to know the basics of rules and regulations regarding import duty when shipping from the USA in order to know the total price of importing your goods. Are you shipping goods inside the EU, you do not have to pay customs duty on most items – read more about imports from EU to the UK here.
How much you have to pay in import duty is depending on the type of goods you are importing, its value, and the country of origin.
1. Importing from the USA requires registration
When importing goods into the EU, and when the goods are intended for commercial sale or part of a commercial or promotional activity for your business, your business must have an Economic Operator Registration and Identification (EORI) number. Failing to have this, it will not be possible to file an import declaration in your companies name, hence the goods will be blocked by customs authorities, until such time that you have received your EORI number. Any costs associated with this delay will be for your account, and usually, include storage under customs bond and potential rent of equipment, in case your cargo is stored in a container not returned to the carrier within agreed free time.
Registering for EORI is a simple process which usually takes no more than three working days. There are three different forms, depending on whether your company is VAT registered in the UK. Once registered, you will receive your EORI number by email.
If your company is VAT registered in the UK, you may already have an EORI number. To check this, you can use the EORI number validation tool provided by the European Commission. Your EORI number would, in this case, be ‘GB’ followed by our nine digit VAT number followed by three zeros, for example, GB987654321000. If you find that you are not registered, you should complete this registration by HMRC.
If your company does not have VAT registration in the UK when importing from the USA, you must register using this form offered by HMRC. This could either be because your activities are below the threshold requiring VAT registration or because your company is VAT registered in another EU country. In both cases, you will still require registering for the EORI number before you can have your goods cleared and pay import duty from USA.
If the above two cases, you will receive an EORI number that you can pass to you designated freight forwarder or customs broker declaring your imports. Should you decide to declare your own imports, and not use a broker or a freight forwarder, you need to submit a bit more information in your EORI number application. In this case, you must use this form. It is, however, very few companies doing their own import declaration because the process requires some experience and the service is quite reasonably priced from a forwarder or a customs broker when bought together with the transportation from the USA.
In some instances, you may also need to acquire an import licence when importing goods that are qualified as ‘restricted goods’, for example certain textiles or firearms and ammunition. Read more about getting the right licences for international trade.
2. Declare your imports to customs
When importing from USA, or other non-EU countries, most businesses use a courier or freight forwarder to make the customs declarations for them and to handle the import duty from USA. This insures, in most cases, that forms are filled out correctly, which can prevent delays in the importing process. It is possible to make your own customs declarations, but the process is more complicated and only recommended for more experienced importers.
The role of the freight forwarder or courier, in this respect, is to identify the commodity code of the cargo you need to pay import duty from USA on and to complete the customs declaration on your behalf. That being said, as imported, you have the ultimate responsibility for the accuracy of the import declaration. If imports are declared with a wrong commodity code, you have the responsibility for advising HMRC of the error. In addition, you have the risk of have penalties (up to GBP 2,500 per error), and perhaps having paid too much in duty.
Finding the right commodity code is regretfully not always easy. The first place to start is with the exporter. The commodity codes also referred to as classification codes, HS codes or TARIC codes, is a nearly global standard. As the manufacturer or reseller of the product, the exporter would usually be aware of the commodity code, which has also been filed with US customs. If your supplier cannot provide you with the code, you can search for it in the Trade Tariff. Once you find your commodity code, you open the import tab to find the import duty from USA (and VAT) applicable to your goods.
To establish the amount of VAT and import duty from USA on your goods, in addition to the commodity code, the courier or forwarder will submit the value of the goods imported. For imports, the duty is calculated based on the purchase value of the goods, and the VAT is calculated based on the purchase value including duty and shipping costs. For example, if you buy a product in the US for the equivalent of GBP 3,000 which you shipped to the UK for GBP 200, and the duty rate on this particular product is 3%, and we assume the VAT is 20%, the calculations look as follows:
Duty: GBP 3,000 * 3% = GBP 90
VAT: 20% * (GBP 3,000 + GBP 90 + GBP 200) = GBP 658
So total duty and taxes for importing this product are GBP 748, and the total landed cost of the product, in this case, is GBP 3,000 + GBP 200 + GBP 658 = GBP 3,858. As you will read later, however, you can reclaim the VAT if you are VAT registered in the UK.
Goods entering another EU country before the UK
If you import your goods to another EU country, other than the UK, and after that, ship your goods to the UK, your supplier, or the business responsible for the transport, must use an ‘Entry Summary Declaration’ in that country. You should, however, always check that this step is done correctly because you as the receiving business can be held responsible for it.
3. Paying import duty from USA
You normally have to pay VAT and import duty from USA on goods imported (i.e. from non-EU countries) when they are first brought into the EU (i.e. UK). Failing to pay your duty and VAT promptly, you are likely to incur additional costs for storage until the goods are released upon receipt of your full payment.
Usually, the freight forwarder responsible for filing your import declaration will contact you once submitted, and inform you of the amount of duty you need to pay. You are then required to pay the amount to the freight forwarder, who in turn will pay HMRC on your behalf. Your goods will not be released by customs until HMRC has received your full payment of duty and VAT. Some freight forwarders take a fee for handling this payment.
For frequent importers, it is possible to set up a deferment account with HMRC, so you only need to settle your duty and VAT once per month. It does, however, require that you can provide a Customs Guarantee from a bank, building society or insurance company, which is usually not feasible for smaller businesses.
Exceptions on import duty from USA
In some instances, you may be able to apply for a reduced or zero rate duty for goods from specific countries. It requires that you can prove their origin and that you apply for tariff preferences.
In certain cases, if the products you are importing from the US will only remain temporarily in the UK, if you are processing the goods then re-exporting them or importing for onwards supply in EU, you might have the option to reclaim duty charges and the VAT or postpone payments.
There is a scenario where you do not have to pay customs duty or VAT when importing from the USA. As long as your goods stay in a customs warehouse, you are exempt from paying because these warehouses are places where duty and VAT are suspended. For example., if you ship goods from the USA, store them temporally in a customs warehouse in the UK and ship them to a customs warehouse in France, in which case you would not be required to pay duty and VAT in the UK.
As a rule of thumb, duties and VAT are only to be paid when your goods are moved into free circulation inside the European Union.
4. Don’t pay sales tax, reclaim your VAT
When you buy products from your US supplier, you must ensure that sales tax is not added to the invoice. You supplier can issue an invoice without sales tax, as long as the address of the buyer is outside the US. Should it happen that you pay sales tax to your US supplier, it can be next to impossible to get that payment refunded.
When you import your goods from the USA, VAT is charged by HMRC at the same rate as if you bought the goods in the UK, and the rate is calculated based on the cost of the product, including bringing it to the UK. In fact, VAT is calculated based on the price stated on the commercial invoice, the duty and an estimated transportation cost from the US to the UK border. The latter is determined based on your actual shipping cost, but instead of using the full door-to-door cost, it is an estimate of the door-to-port cost.
The logic for the VAT calculation is simple. When you buy goods outside EU, you are not charged sales tax or VAT by your supplier. But if you buy the same products in the UK, you would have to pay VAT. To make a level playing field, you are therefore required to pay the duty of the products you import from the US, in the same way, as if you had bought them in the UK. And to make it comparable, the basis must be the cost of the product and the cost of bringing them to the UK. You should not pay more in VAT if your company reside far from the port, and hence you have a large shipping cost, why it is only the transportation to the port or airport, which is considered.
Once you have paid your import VAT, HMRC will send you a certificate (called form C79) as evidence. If your EORI number used for the customs declaration is linked to your UK VAT number, you can reclaim the VAT on your normal VAT return. This resembles the situation if you had bought the same goods in the UK and paid VAT. The C79 is not issued for every shipment, but rather on a monthly basis. You should expect to receive it on the address registered for your VAT number around the 20th of the month following your import. If you have misplaced your form C79, you can make a request for a replacement to HMRC, VAT Central Unit, Microfilm Section, where records are held for 6 years. Expect processing time of 2-3 weeks.
5. Check for anti-dumping duty
Anti-dumping duty is imposed to protect domestic production in the UK against foreign companies ‘dumping’ their products in the UK market at lower prices than they would in their local markets. The reason for such ‘dumping’ could be excess inventory which needs to be cleared out before a new season, and which cannot be sold locally because it will damage the demand for new products. The reason we mention anti-dumping separate to other duties is that it can be targeted at very specific products and levied at a very high rate (could be more than 50% of the product cost). So it is worth investigating if your products are subject to anti-dumping duty before you import.
The way to check and anti-dumping duty is to find your product in the Trade Tariff where you will find measures and restrictions for specific countries under the import tab. At the time of writing, for example, there is an anti-dumping duty on biodiesel import from USA of EUR 115 per tonne. Trading at EUR 650 per tonne, that is a significant cost to take into consideration in planning the import.