Customs Valuation and Classification

 

“The Harmonized Commodity Description and Coding Systems generally referred to as "Harmonized System" or simply "HS" is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It comprises about 5,000 commodity groups; each identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification.

 

HS codes are used by Governments calculate customs duties; implement local regulations and collect trade statistics. “Tawasol” or Asycuda World is the system used by Palestinian customs department to arrange the customs declaration form, valuation, calculate duties and store customs historical data.

 

Tariff Book

 

The Tariff Book is an important collection of numerical codes used by governments, and importers and exporters of a given country. While the coding system used in the tariff book is internationally recognized, countries are permitted to adapt their tariff books to individual requirements.

 

Following Paris protocol and the fact that Palestine and Israel are under the one customs envelop, both tariff books are the same in terms of classification codes, rules and tax rates, no matter when searching or trying to classify an item to use either of the books, maybe one difference is the accuracy of information, when searching the Israeli book it may display the most updated classification of items.

 

You can use these links to use tariff books:

 

English: http://62.219.95.10/TaarifEnglish/TaarifList.aspx

Hebrew: http://62.219.95.10/TAARIFCUSTOMSEXPORT/TaarifList.aspx

 

Types of duties:

1.      Tariffs

A tariff is a duty imposed on goods when they are moved across a political boundary. Tariffs are usually associated with protectionism, the economic policy of restraining trade between nations. For political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods.

 

There are various types of tariffs:

  •  An ad valorem tariff which is a set percentage of the value of the good that is being imported.
  •  A specific tariff which is a tariff of a specific amount of money that does not vary with the price of the good.

Example on the ad valorem and the specific tariff:

A carpet follows the HS code: (57 01 1000) of section 11, the tax to be paid is:

4% + 10.66 per M3 but no more than 22%

So, 4% is the ad valorem tariff

10.66 NIS per M3 is the specific tariff as we can see below:

  •  A protective tariff is intended to artificially inflate prices of imports and protect domestic industries from foreign competition especially from competitors whose host nations allow them to operate under conditions that are illegal in the protected nation, or who subsidize their exports, the Tama is being applied for some kind of imported goods to Palestine, as example below for imported Alcohol under HS code: (20 08 3020):

 

 

Other types of tariffs but are not widely used to Palestine and Israel trade.

  •  A revenue tariff is a set of rates designed primarily to raise money for the government. A tariff on coffee imports imposed by countries where coffee cannot be grown, for example raises a steady flow of revenue.
  •  A prohibitive tariff is one so high that nearly no one imports any of these items.
  •  An environmental tariff, similar to a 'protective' tariff, is also known as a 'green' tariff or 'eco-tariff', and is placed on products being imported from, and also being sent to countries with substandard environmental pollution controls.

Tariffs’ Calculation

Calculation of the Duties is based on the wholesale price of domestic products and on the Cost, insurance and freight (CIF) landed value plus "Tama”. It can be through any of the following ways:

  • Percentage, (e.g. 12% Customs), some goods are subject to a specific percentage of customs.
  • Weight, (e.g.1.66 NIS/KG), goods like TUNA FISH, subject to 12% customs OR according to KG which is (lower or higher), specific amount (1.66 NIS/KG)
  • Piece: Percentage or specific amount per piece
  • Liters, Fixed Amount /liter: Percentage or Specific amount per Liter
  • Power (Air Conditions), Customs + Fixed amount / BTU: Percentage or specific amount per Power unit
  • Selling Price (cigarettes): Percentage of selling price + specific amount per unit

While VAT is to be calculated for Value of Goods + all other duties for import shipments.

2. Customs duty:

Customs duty is a kind of indirect tax which is realized on goods of international trade. In economic sense, it is also a kind of consumption tax. Duties levied by the government in relation to imported items are referred to as import duty. In the same vein, duties realized on export consignments are called export duty.

 

3.TAMA & Purchase Tax:

Governments imposes tax’s on some products, primarily luxury and consumer items.

  • Purchase tax is imposed on a long list of products, whether imported or local manufactured. On some products the rates are quiet high.
  • The Tama system was designed to artificially raise the declared value of an imported product for purposes of calculating purchase taxes. The uplift assessment (TAMA), which increases the CIF value (cost, insurance and freight) to a "wholesale value" for the imposition of a Purchase Tax, even when no tariff applies. This acts somewhat like an import surcharge.
     

4.      Value Added Tax (VAT)

A tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer.

 

Classification of goods: