What Are Customs Duties and Their Types

Article content: 

1. What Is a Customs Duty.
2. Types of Customs Duties.
3. Import Customs Duty .
4. Export Customs Duty.
5. What Are the Risks of Evasion or Fraud When Paying Duties.

Customs payments are an integral part of the business process, and their amount directly affects the final price for the consumer. Almost all goods are subject to them upon import, and some — upon export. Let’s find out what types exist and why duties are necessary — a useful article for entrepreneurs who import or sell abroad.

What Is a Customs Duty

A customs duty is a mandatory payment charged by the customs authorities of a state or union (for example, the European Union) when goods cross a customs border. There are also two other taxes — value-added tax (VAT) and excise tax (for some categories such as alcohol, tobacco, and vehicles).

Why are duties necessary? They serve three main functions:

• replenish the state budget;
• protect the domestic market from an influx of cheaper imported goods;
• regulate exports (to prevent the outflow of raw materials).

Each country sets its own import and export rules for individuals and businesses. Therefore, when engaging in international trade, it’s important to know the types of customs duties, how they are calculated, and which goods they apply to.

Types of Customs Duties

Let’s look at a detailed classification of these payments.

By direction of movement:

• Import duty (inbound) applies to most products that cross the border.
• Export duty (outbound) is much rarer and applies to limited product groups.

By rate type, i.e., calculation method:

• Ad valorem — charged as a percentage of the customs value.
• Specific — a fixed tariff per unit, liter, meter, or piece regardless of cost.
• Combined — combines the above types, usually applying the higher value, e.g., 10% of the value but not less than €2 per kg.

By purpose, applied in special cases:

• Anti-dumping. Introduced when a foreign product is priced below its normal value in the exporter’s market, preventing dumping that threatens the importer’s economy.
• Special. Applied when import growth harms domestic producers.
• Countervailing. Imposed on goods produced with subsidies or incentives in their country of origin. These products are significantly cheaper than local ones, and the countervailing duty “levels” the market price.
• Punitive. Extremely high tariffs due to hostile actions, discrimination, or trade disputes. A striking example — duties on Chinese goods imported into the U.S., which can exceed 100% of the product’s value.

Some types, such as transit customs duties, are no longer used because they complicate international logistics. For Ukrainian businesses, it’s useful to know about preferential tariffs.

These are reduced or zero rates applied to goods originating from certain countries or under trade agreements.

To apply the preferential rate, you must provide certification (for the EU, this is EUR.1) proving that the goods were manufactured or processed in a country eligible for the preferential regime.

Import Customs Duty

Import duties are the main control tool in trade policy. Features of import tariffs:

• Calculated based on the customs value, which includes delivery and insurance costs.
• Rates are determined by HS codes (commodity nomenclature codes).
• Increase the price of imported goods, often making local products more competitive.

Duties are charged in local currency. Special attention should be paid to HS codes, which are very detailed — by product type, material, and characteristics. For example, cotton and synthetic women’s T-shirts have different codes.

For customs clearance during import, businesses benefit from customs brokerage services.

A broker prepares documents for customs. Some of them (invoice, contract, waybills, etc.) are provided by the cargo owner. Others — permits, licenses, and certificates — are issued additionally. The specialist fills out and submits the declaration, calculates all payments, and represents the declarant’s interests.

Export Customs Duty

Export tariffs on certain products (most often natural resources and raw materials) are applied by only a few countries. Here are the key features:

• Usually charged on raw materials (wood, minerals, oil).
• The main purposes are fiscal — to generate additional budget revenue, and regulatory — to encourage manufacturers to process raw materials locally.
• Established at the national level.

Countries that export agricultural products and raw materials often use export quotas. High tariffs are applied only when the export volume exceeds the set quota.

What Are the Risks of Evasion or Fraud When Paying Duties

At customs, the cargo undergoes strict inspection, sometimes with a physical examination and detailed document review. The regulations also provide for a simplified import procedure if the shipment raises no concerns.

Violations entail administrative (and in some cases — criminal) liability. Penalties depend on the severity:

A fine does not exempt the declarant from paying duties, so it’s best to entrust the paperwork to professionals. Even the smallest mistake in the declaration can lead to significant financial losses and serious problems.

DiFFreight provides brokerage services for cargo shipped by sea (in containers) or by air in any direction.

Why you should delegate customs clearance:

• Reduce the risk of fines or confiscation.
• Speed up customs control thanks to timely and accurate documentation.
• Optimize costs — no need to hire intermediaries or maintain an in-house broker.

Our brokers will prepare all the necessary documents for declaration, provide reports, and simplify clearance — especially useful for beginner entrepreneurs.