5 Steps To Optimize Duties & Taxes in Your Cross-Border Supply Chain Operations

When sending things across borders, it’s really important to calculate the total cost to make sure you’re considering all the expenses. For most companies, the biggest cost in international shipping is the freight, but there’s also a significant amount spent on duties and taxes. In today’s world, companies are exploring new markets and expanding their supply chains globally, so it’s crucial to look for ways to optimize and save money on duties and taxes,

A lot of companies miss out on potential customs savings. This article will highlight various programs that can help reduce customs duties effectively:

1. Free Trade Agreements (FTA): 

With the increase in Free Trade Agreements worldwide, there are more business opportunities. Examples include agreements like the European Union–Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). FTAs can reduce customs duties upon importation. Regularly reviewing suppliers and adjusting product contents under FTA provisions can lead to significant financial savings.

2. Local Incentive Schemes for Tax Rebates: 

Many governments in emerging markets introduce economic policies to attract foreign investment and boost the local economy. These schemes include tax holidays, duty exemptions, and VAT/GST exemptions. Examples include customs bonded warehouses, Free Trade Zones (FTZ), Export Processing Zones (EPZ), and Special Economic Zones (SEZ). Companies in international supply chains should research and redesign their supply chain to benefit from these incentives.

3. Tariff Concession: 

Some countries, like Australia and New Zealand, have a Tariff Concession System that removes import duties for certain goods. This is often for goods used for social, humanitarian, or industry assistance purposes. Importers must apply to the government agency to get duty-free status for specific goods entering the country.

4. Duty Drawback: 

Traders can apply for duty drawback if imported goods are used to manufacture products exported from the country. Unused imported goods can also apply for duty drawback when re-exported to other countries. Traders must meet specific requirements to be eligible for a refund of import duties.

5. Additional Cost Reduction Opportunities: 

In addition to eliminating customs duties, some governments implement measures to reduce business costs. Duty deferment schemes allow traders to delay duty and tax payments at the point of import, easing cash flow. This is available in various forms, such as consolidated monthly payments. Duty Suspension is another scheme for industries like aerospace and high-tech, allowing businesses to import and store expensive parts duty-free for maintenance.

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