Tariffs on exports and how FTAs can have an impact

Imports and Exports | | MIC Customs Solutions |

Selling goods abroad is likely to attract tariffs, but how do you calculate them? Here, we'll take a look.

Selling goods abroad can be a great way for businesses to expand their ambitions and grow their markets.

However, it's essential to keep on top of the legal requirements at play, including determining what tariffs will need to be paid on those products once they reach their final destination.

If you're considering branching out abroad, let's take a look at how you will be able to work out the tariffs relevant to you and keep within the law.

Is there a free trade agreement in place?

One thing that could have a big impact when exporting is a free trade agreement (FTA). That's because, as part of the negotiation process, the countries that sign them aim to reduce tariffs on particular products if they want to facilitate simple, seamless trade.

If you are selling into a country with which yours does not have an FTA, then the chances are you will be operating under World Trade Organisation rules.

This means WTO members must not grant any other country preferential treatment, for example, by putting less favourable tariffs in place than have been set for the 'most favourable nation'.

Without an FTA, your goods will have no better a tariff situation than those coming from any other nation in a similar situation and are likely to incur higher tariff costs.  

Indeed, the difference between FTA and non-FTA rates can be significant depending on what products you want to export, and can lead to your business seeming less competitive than your counterparts operating in FTA-governed countries.

Essentially, your tariff depends on your product and your home nation and could make the difference between deciding to sell in a country or opting out of that market.

For example, companies within the NAFTA and CETA FTA boundaries will be treated as national as opposed to international when trading with each other, and so will benefit from much lower tariffs on particular products.

How to work out tariff charges

It is difficult to lay out a 'one size fits all' guide to calculating tariff fees because, as we have mentioned above, they will depend on what you want to export and where you are.

However, to provide just one example, the UK works like this:

1. Work out the Harmonised System code of your product and its product classification number.

2. Confirm the code through your customs broker.

3. Check your target market's tariff schedule.

In order to find the codes you require for your own nation, there are a number of tariff look-up tools. For instance, the WTO has a Tariff Database, while New Zealand also has a downloadable Tariff Classification Rates document.

Wherever you are in the world, the chances are that similar resources will be available to you.

Remember, though, that although such tools aim to provide the most accurate tariff rate estimates, the final call on the actual charges will be determined by the importing country's customs department.

You may also wish to look into the software provided by MIC, including the Central Classification System (MIC CCS). This offers a solution for the determination, assignment and validation of customs tariffs and export control classifications.

It includes functions such as cross-country mass re-classification of multiple articles too, should you wish to send to several locations.

Tariff charges might seem complex, but there are measures in place to help you work them out and even reduce them. So, don't let them put you off - see what markets you could expand into today.