When importing products from foreign countries, their cost can be increased by the customs barrier, that is, by the set of external import duties levied to protect national or European products. The importing country applies the duties by putting an indirect tax on the value of all products coming from abroad.
The main effect of customs barriers is that of raising the price of the product sold abroad to protect the goods and services related to the same type of products in the importing state from competition.
Duties have ancient origins: traces of them can be found in documents from over 2,000 years ago. Yet for a long time now, states have tried to avoid the application of penalizing duties, to avoid retaliation on their own products, and there are also many trade agreements, which eliminate or greatly reduce these indirect taxes. In the European Union, for example, the free movement of goods, which involves the abolition of any duty between the member states, is in force.
How much customs duties are
Duties vary depending on the product you want to import. In general, when dealing with goods that are not manufactured in Europe, the duties are low. While they tend to rise when the products are part of important industrial sectors present in Europe, as well. Here are some examples:
- Watches: 4.5%
- Tablets: 0%
- Solar panels: 0%
- T-shirts: 12%
- Electric bikes: 6%
- LED lamps: 4.7%
- Peanuts: 12.8%
How customs duties are calculated
Customs duties vary according to the type of goods imported and are calculated based on the declared value. The calculation of duties is one of the most complex operations, because there are many categories and sub-categories of products.
To find out the customs duties, that is the duty and VAT to be applied on a certain product category, you must consult the Customs Tariff for integrated use page. Here you can enter the name of the product you want to import in the search field in order to find out what type of indirect taxes will be levied upon it on its entry in the EU. The duties are always calculated on a percentage of the declared value: the higher the value of the goods, the higher the customs duties will be.
Who calculates customs duties
When the goods reach customs, VAT and duties are calculated. Customs is a body responsible for the control of imported goods and the collection of customs duties (duty and VAT). Customs operates through two types of facilities:
- The border offices, located along the national border
- The internal offices, located throughout the nation.
The duty percentage varies according to the type of goods, while VAT in Italy is set at 22%. It is important for imported goods not to be copyrighted or patented; otherwise we enter the realm of illegal imports.
Who pays customs duties
Who pays the export customs duty? It is always the buyer.
At customs control, agents apply the taxes based on the type of goods declared on invoice and its value. Whoever purchased the goods must therefore pay the tax to the customs office when they receive them: either by paying the courier directly or by settling with customs.
How customs controls work
Upon arrival of the goods, the customs offices carry out random checks. It is important to know that:
- Low value products are not considered by customs. Amounts of less than 50 euros will most likely not require the payment of a customs duty.
- If the product is reported as suspected of false declaration (invoice value lower than the real value of the goods), customs blocks the shipment and carries out inspections by opening the package and verifying its real value. In this case, additional costs of goods storage and inspection costs may be required.
How long it takes for a product to go through customs
When a product comes from abroad and has to go through the Customs Office, it is necessary to consider that it will take some time before reaching its destination. In addition to the days required to send the goods to Italy, the package must, in fact, be evaluated by the competent customs office, which can take from 7 to 10 days to carry out the necessary checks.
Free trade agreements that abolish customs duties
Within the European Union, as mentioned above, goods circulate freely between Member States, without the application of duties. However, there are other free trade agreements.
The GATT, the General Agreement on Tariffs and Trade, has existed since 1947. It is an international agreement originally signed by 23 countries (now there are 120) to favour the deregulation of world trade. Since 1995 the WTO, the World Trade Organization, whose aim is precisely that of the abolition or reduction of customs barriers, has replaced GATT.
Many other free trade treaties exist; the latest signed by the European Union is CETA, with Canada.
The consequences of Brexit on customs duties
On January 2021 Brexit i.e. the United Kingdom’s exit from the European Union trade agreements, including the free movement of goods took place. The agreement avoids the imposition of duties and quotas, therefore we continue to trade freely with London, even if customs controls will return, so there will be much more bureaucracy and paperwork, which will undoubtedly weigh everything down.
In 2019 the exchange of goods between Italy and Great Britain amounted to about 30 billion pounds (33 billion euros), with our exports accounting for 20 billion and imports ten (a largely positive balance).
The Tariff War
Trump’s United States and that of Bush before him, have implemented protectionist policies in recent years (introducing customs duties) to “protect US workers and companies”. The most famous tariff war unleashed by the United States dates back to 1930, when the Smoot Hawley Tariff Act was approved. This act took the duties on the main products imported into the United States to 40% and in the following years even above that.