Re-Classifying to a Lower Duty Rate: Building Up
Alpha Limited makes excavators in the UK primarily for sale in the domestic market.
Alpha imports a wide range of components used in the manufacture of excavators from the Far East. The components attract various rates of duty between 1.7% and 6% giving rise to a customs duty bill of over £500,000 each year.
As a result of various multi lateral trade agreements, finished excavators are classified under a commodity code which is free from customs duty.
Therefore, the UK manufacturer is at a disadvantage to his overseas competitors because he has to build the customs duty into his selling price.
However, the customs regulations provide a solution to this issue by allowing the importer to classify his parts under the same heading as the finished excavator and therefore reduce his customs duty bill by £500,000 each year.
In order to realise these savings, Alpha applies for and obtains the appropriate authorisation and implements procedures to meet the underlying conditions of this special procedure. Taking these steps will cost a fraction of the amounts saved.