This guide covers all information you’re looking for about preferential duties.
So, if you have any question about preferential duties, you will find the answer right here.
Keep reading.
What Are Preferential Duties?
When the duty rate is lower than the value set on imports of a particular commodity line in an FTA member country, then we can call it a preferential duty.
The preferential duty rate is more formal and applies to certain trade terms.
For instance, when goods being imported from member countries are identified to meet the FTA requirements, it thus applies.
How Can You Claim Preferential Duty?
Claiming of a preferential duty rate is based on the free trade agreement set between the participating countries.
With or without a certified certificate of origin, claiming the preferential duty rate is still possible.
The difference comes in on the claiming procedures where they differ slightly.
With a certified certificate of origin for goods being imported at that particular period;
First, you have to indicate a valid reason for claiming the preferential duty rate.
This is done through TradeNet when making your In-payment permit.
Submission of your certificate of origin (CO) or self-certification alongside a permit comes second. Not forgetting a commercial invoice and bill of lading.
They all serve as supporting documents to your claim just to do away with the benefits of the doubt.
With a certified certificate of origin for goods bonded at a licensed warehouse;
You are required to submit a certificate of origin, a commercial invoice, and an In-Non payment permit.
Once these documents are processed, go further and declare an In-payment permit.
Without a certificate of origin or self-certification;
Here, the first step is to give a reason for claiming the preferential duty rate.
The process is done through TradeNet when handing in your In-payment permit.
Full payment of custom duty for your goods is a necessity.
Next, get a customs endorsement on your documents, thereafter submit a refund through TradeNet. This should be within the same year upon completion of duty payment.
Submit the documents to the customs.
What Are The Benefits Of Preferential Duties To Import-Export Business?
They have led to the promotion of economic integration to greater levels.
They have played a great impact on the development of regional and global networks.
Regular shipping of goods at lower costs has been made possible through preferential duties.
Global networks have led to reduced tariffs between partnering countries thus low production costs.
Maximum use of locally available resources and economies of scale.
How Do You Know If Your Imports Are Eligible For Preferential Duties?
The eligibility of imports is determined by the country of origin of the commodities.
Your state country has to be a member of tariff under the Free Trade Agreement and meet specific requirements as agreements vary.
Goods produced from this FTA partnering territories are therefore eligible to preferential Duties.
Are Preferential Duties Same As Bound Tariff Rate?
No, they defer regardless of the two falling under tariffs.
Bound Tariff rates are usually made by individual states that are members of WTO and are known to have the highest rate.
Their ideologies tend to be more specific on their kind of commitments.
In general, when you maximize your MFN tariff level of a certain commodity line, what you have on the table is a Bound Tariff.
The tariff does not necessarily rely on the applied rates but instead gives room for negotiations about bound tariff rates within member states of WTO.
This flexibility of increase or decrease of the tariff rates is allowed as long as it does not go beyond their set limits.
In case Bound Tarif rates of a member state exceed the limit, members come together and agree on settlement terms if not claiming compensation.
For preferential duty rate, the rate set by member states is usually lower when compared to the MFN rate.
Normally, they use Global Preferential Trade Agreement Database (GPTAD) to obtain details of several preferential details.
Preferential Trade agreements are found on this database where indexing is done with the help of classification consistency.
Classification is done based on the WTO criteria. The preferential duty rate is always zero for member states.
We have other benefits associated with it except that they defer between partner states based on the desired agreements.
This involves lowering the MFN tariff percentage for state members.
Developing countries do not meet these requirements. For that reason, they are given unilateral preferential treatment.
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