What exactly is a tariff?
Tariffs are a common tax in international trade, which refers to a tax levied by a country's customs on imported and exported goods passing through its borders in accordance with its laws and regulations. The purpose of tariffs is multifaceted, such as increasing national fiscal revenue, protecting domestic industries, regulating the national economy and foreign trade, and exerting political or economic influence on another country. There are also various methods for levying tariffs, such as ad valorem, volume based, compound, and sliding. This article will introduce the basic concepts and calculation methods of customs duties.
Basic concepts of customs duties
Customs duties refer to a type of tax levied by customs on imported and exported goods, which is the main form of customs taxation. The basis for the collection of customs duties is the customs tariff schedule, also known as the tariff rate table. It is a regulation for a country to levy tariffs on imported goods and a column table for systematically classifying taxable and duty-free imported goods. Customs tariff generally includes two parts: one is the rules, regulations, and explanations for customs duties collection; The second is the tariff rate table. The tariff rate table consists of columns such as tariff code, commodity name, and customs tax rate.
The objects subject to customs duties are imported and exported goods, which can be divided into the following categories:
Imported goods: Refers to goods transported from overseas into China, including goods transported from overseas into special supervision areas such as bonded zones or bonded warehouses within China.
Export goods: Refers to goods that are shipped out of China or abroad, including goods that are shipped out of special supervision areas or into non special supervision areas within China.
Transit goods: refers to goods that pass through the territory or airspace of China but do not stay or transit within the territory of China.
Transit goods: Refers to goods that are transported from one country or region to another through China.
Domestic sales goods: Refers to goods transported from special supervision areas to non special supervision areas within the country for sale or use.
The standard for customs duties is the dutiable value, which refers to the price of imported and exported goods approved by the Chinese customs as the basis for calculating the taxable amount. There are several methods for determining the dutiable value, including:
Ad valorem dutiable value: refers to the dutiable value determined based on the landed price (import) or offshore price (export) of imported and exported goods approved by customs.
Quantitative dutiable value: refers to the dutiable value determined based on measurement units such as quantity, weight, capacity, length, and area of imported and exported goods.
Composite dutiable value: refers to the dutiable value determined by a combination of ad valorem and volume based methods for import and export goods.
Special dutiable value: refers to the dutiable value determined in a specific manner based on the import and export goods, such as sliding dutiable value, minimum dutiable value, etc.
The calculation formula for customs duties is:
Taxable amount=dutiable value x applicable tax rate
Among them, the applicable tax rate refers to the specific value or range applicable to a certain type of imported and exported goods determined according to customs collection regulations and relevant agreements. The applicable tax rates can be divided into the following categories:
Most Favored Nation (MFN) tariff rate: applicable to goods imported by countries or regions that have signed an agreement on the principle of most favored nation treatment with China or have joined the World Trade Organization (WTO) and recognized China's full market economy status.
General (GEN) tax rate: applicable to goods imported from countries or regions that have not signed a most favored nation treatment principle agreement with China or have not joined the WTO.
FTA tariff rate: applicable to goods imported from countries or regions that have signed free trade agreements or other trade agreements with China and enjoy tariff preferences in accordance with the agreement.
Provisional (TP) tax rate: applicable to temporary tax rates lower than MFN rates implemented on some imported goods in China for the purpose of promoting imports, expanding openness, and regulating supply and demand.
Preferential Tax Rate (PRF): Applicable to China's implementation of preferential tax rates lower than MFN or tax-free for some imported goods in order to support the economic development of developing countries or specific regions.
Export (EXP) tax rate: applicable to the export tariffs levied by China on certain exported goods.
