Australian Customs Service

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Customs Duty Calculation

Introduction

This document outlines the ICS process for the calculation of customs duty.

The principal element that customs duty is derived from is the customs value. This value is a standardised representation of the invoice price supplied in import declarations based on recognised valuation rules.

A duty rate is selected and applied to the customs value. The duty rate selected is dependent upon the circumstances surrounding the importation and the nature of the goods. The basis for the selection is determined by the data supplied on the import declaration.

Therefore in order to calculate customs duty the customs value must be determined and a duty rate selected. The calculation of customs value, the method of duty rate selection and the calculation of duty are outlined below. Certain code lists and reference files are also referred to in the process and these are listed below.


Import Declaration Data

The import declaration data used in the duty calculation process is detailed below.

Import declaration header data:

Import declaration line data:


Code Lists and Reference Files

The code lists and reference files that are used in the duty calculation process are:


Customs Value

The object of this process is to calculate the customs value. The Customs Value (CVAL) is the value of the goods on which duty will be charged. Generally the value used is the free on board (FOB) value of the goods, which is the value of the goods excluding overseas transport and insurance. Depending on the invoice terms other charges may be included and excluded from the goods value to determine the customs value. Part VIII, Division 2 of the Customs Act 1901 should be consulted when determining what elements are to be included or excluded in the Customs value of imported goods. Much of the information required to determine the customs value is obtained from the invoice for the goods.

Data provided in the import declaration is used to derive the customs value. A valuation factor is derived to aid in the calculation of the customs value for each line of the import declaration.

The customs value is only determined for nature 10 and 20 import declarations. The importer provides the customs value for nature 30 declarations.

Currencies will need to be converted to standard units of measure prior to the calculation.

The customs value calculation process outlined below will produce the following:

 

Convert Amounts to Australian Dollars (AUD)

  1. Get Exchange Rate reference file.
  2. Locate currency and valuation date.
  3. If no currency for the given date then select currency from the latest available date.
  4. Read exchange rate.
  5. Amount in AUD = amount / exchange rate (rounded to 2 decimal places).
  6. Repeat for invoice total and all header valuation elements.

 

Calculate Valuation Factor

  1. The valuation factor is based on entry header data only.
  2. All amounts should already be converted to AUD.
  3. Refer to Valuation Type code list for an explanation of valuation types.
  4. If Invoice Term = EXW, FCA, FAS or FOB then
    Header customs value = ITL + (FIF + PCT + COM +OTA) - (LCH + DIS + OTD)
  5. If Invoice Term = CPT or CFR then
    Header customs value = ITL + (FIF + PCT + COM +OTA) - (OFR + LCH + DIS + OTD)
  6. If Invoice Term = CIF, CIP, DES, DEQ, DDU or DDP then
    Header customs value = ITL + (FIF + PCT + COM +OTA) - (OFR + ONS + LCH + DIS + OTD)
  7. Valuation factor = customs value / ITL (rounded to 8 decimal places).
  8. In the header customs value formula above the value of ITL is the value in Australian Dollars (AUD).
  9. In the valuation factor formula above the value of ITL is the value actually provided in the declaration.

 

Amount Type Codes

This represents a small subset of this code list, the full code list may be found here.

ITL = Invoice Total
FIF = Foreign Inland Freight
PCT = Packing Costs
COM = Commission
OTA = Other (Additions)
OFR = Overseas Freight
ONS = Overseas Insurance
LCH = Landing Charges
DIS = Discount
OTD = Other (Deductions)

 

Calculate Line Level Customs Values

  1. convert price and adjustment amounts to AUD
  2. Line customs value = (price * valuation factor) + adjustments (rounded to 2 decimal places)

 

Calculate Total Customs Value

  1. Total customs value = header customs value + sum of all adjustments

Customs Duty

Duty can be calculated from either a tariff classification or a treatment code.

On each import declaration line it is possible to have two tariff items and two treatment codes. Each tariff classification and treatment code can have different duty rates depending on the preference scheme. Every tariff classification and treatment code will have a general rate and may have other rates depending on the preference scheme.

If a tariff item or treatment code does not have a duty rate for the applicable preference scheme then the general rate will be used or another treatment code. A treatment code can be used for information purposes only and therefore not have an associated duty rate.

If a preference scheme has not been entered on the declaration line then the preference scheme for that declaration line is defaulted to the general rate.

Duty is required to be calculated for nature 10 and 30 import declarations.

The process of duty calculation involves determining a duty selection type, selecting a duty rate and finally calculating the duty itself.

Duty can be calculated on either customs value or quantities. Therefore quantities may need to be converted to the appropriate unit of quantity as determined by the tariff prior to the calculations being made.

 

Determining Duty Selection Type

There are seven possible duty selection types. The type selected is based upon the tariff classification and treatment codes provided on the import declaration. The table below outlines the valid duty selection type combinations.

The term ‘Yes’ indicates the data item has been supplied and the term ‘No’ indicates that it has not. With the treatment codes the term ‘Information’ indicates that there is no duty rate associated with the treatment code whereas the term ‘Rate’ indicates that there is a duty rate associated with the treatment code.

The highlight in the table below shows the duty selection basis for each duty selection type. Type one will be based upon tariff classification one, Type two on treatment code one and so on. Each of the seven cases will result in either a tariff classification or treatment code to be used to select a duty rate.

Duty Selection Type
Tariff One
Treatment One
Tariff Two
Treatment Two

1

Yes

No

No

No

2

Yes

Rate

No

No

3

Yes

Rate

No

Information

4

Yes

Information

No

No

5

Yes

Information

No

Rate

6

Yes

Information

Yes

No

7

Yes

Information

Yes

Rate

 

Select Duty Rate Based on Tariff Classification

  1. Get Tariff Rate Period Snapshot reference file for the first duty rate set.
  2. Get Tariff Rate Period Additional Duty Calculation reference file for subsequent duty rate sets if any.
  3. Select subset of data based upon desired tariff classification
  4. Select data based upon preference scheme if provided
  5. Select data based upon tariff rate number if provided otherwise default to 01
  6. Select duty rate sets based upon effective duty date
  7. Read the four duty rate types for each duty rate set.
  8. Read duty calculation type from the first duty rate set.
  9. Read "unit of quantity 1" and "unit of quantity 2" from the first duty rate set

 

Select Duty Rate Based on Treatment Code

  1. Get Treatment Rate Period Snapshot.
  2. Get Treatment Rate Additional Duty Calculation reference files for any subsequent duty rate sets if any.
  3. Select subset of data based upon desired treatment code
  4. Select data based upon preference scheme if provided
  5. Select data based upon tariff rate number if provided otherwise default to 01
  6. Select duty rate sets based upon effective duty date
  7. Read the four duty rate types for each duty rate set
  8. Read duty calculation type from the first duty rate set.
  9. Read "unit of quantity 1" and "unit of quantity 2" from the first duty rate set

 

Convert Quantities

  1. Where quantity codes differ apply quantity conversion factor
  2. Get Quantity Code Conversion Factor code list
  3. Locate quantity code and read new quantity code and the conversion factor
  4. New quantity = quantity * conversion factor (truncated to 5 decimal places)
  5. Repeat for both quantity 1 and quantity 2

 

Calculating Duty

Each duty rate has at least one set of Duty Rate Types. There are four Duty Rate Types, which are outlined in the following table. Duty Rate Types determine the import declaration data items that duty is calculated upon. The duty can be a calculated on one of these types or a combination. A duty rate can have multiple sets of Duty Rate Types.

Duty Rate Type
Description

Customs Value Rate

Expressed as a percentage of the Line Customs Value

Quantity One Rate

Expressed as an amount per Quantity One

Quantity Two Rate

Expressed as an amount

Other Duty Factor Rate

Expressed as an amount per Other Duty Factor

 

Each duty rate also has a Duty Calculation Type. The Duty Calculation Type determines the calculation to be performed. The following table outlines the Duty Calculation Types and the corresponding duty calculation method to be employed.

Duty Calc Type
Calculation Method

Info

There is no actual duty rate and the treatment code linked to this apparent duty rate is for information purposes only.

Free

The duty is zero.

Calc

This is the most common method employed to calculate duty. In this case there will only be one set of duty rate types. The duty is calculated by the following method:

  • customs value * customs value rate (rounded to 5 decimal places)

  • quantity one * quantity one rate (rounded to 5 decimal places)

  • quantity two * quantity two rate (rounded to 5 decimal places)

  • other duty factor * other duty factor rate (rounded to 5 decimal places)

  • sum above amounts (truncated to 2 decimal places)

  • if duty is negative then set duty = zero

Incalc

The duty cannot be calculated and the duty must be manually entered.

Lower

In this case there will be two or more sets of duty rate types. Each set is calculated using the Calc method and the lowest value is selected as the duty.

Higher

This is similar to the Lower method but instead of taking the lowest result the highest result is used.

V1.3 12 DEC 2005