Ad valorem duty

An ad valorem duty is set as a percentage of the customs value of the goods. The more expensive the consignment, the higher the duty. The name comes from the Latin ad valorem: “according to value”.

How it differs from other rates

A specific duty is charged as an amount of money per unit: per kilogram, liter or piece. A combined duty joins both methods: a percentage of the value is charged, but not less than a set amount per unit. Which rate applies to the goods is determined by their TN VED code and country of origin.

How it is calculated

The formula is simple: the customs value multiplied by the rate. The difficulty lies in the customs value itself. It includes the contract price and the costs of delivery to the border: transport, loading, insurance. Which of these are already in the price depends on the delivery terms. Under CIF, freight and insurance are included in the seller’s price; under EXW they are added separately.

The duty also affects other payments. The base for import VAT is the sum of the customs value, the duty and the excise tax, if any. A mistake in the duty leads to a mistake in VAT.

What to watch for

• TN VED code. A wrong code means a wrong rate and additional charges.
• A complete customs value. Freight or insurance left out will be found during an audit.
• Proof of origin. Without it, the preferential rate for the country does not apply.
• Consistent data. The amount and currency in the contract, the invoice and the payment documents must match.

The last point also applies to payment. If the supplier was paid in installments or through an agent, customs and the bank check the amounts against the contract and the invoice. So it is worth collecting the payment documents right away. In a deal through a broker, the payment order and the agent’s report are drawn up using the invoice details, and we put together the currency control package.