The purpose of the notice is to
- Provide advice for importers about the calculation of overseas freight and insurance for customs valuation purposes, when the amounts for overseas freight and insurance are unknown at the time of importation
- To explain the impact of an additional option when determining the value of the taxable importation (VoTi, allowed by the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 (the amending Act), which received Royal Assent on 5 May 2016.
Calculating Customs Value
Customs value is used as the basis for calculating customs duty. The amending Act does not affect the way customs value is calculated or the information. Including the overseas transport and insurance amounts, that the Department requires for determining customs value in accordance with the Customs Act.
This is of significance for
- Cost Insurance Freight (CIF)
- Cost and Freight (CFR)
- Similar contracts where the overseas freight and insurance amounts are included in the contract price.
For Free on Board (FOB) contracts, the invoice does not include the cost of overseas freight and overseas insurance.
What if the importer does not know the overseas freight and insurance amount for customs valuation purposes?
The Department recognises that in some circumstances the amount paid or payable for overseas freight and insurance
- Will not be known at the time the import declaration is prepared
- May never be known
In these circumstances, owners may choose to use an estimate.
An estimate needs:
- To be soundly based
- To closely approximate the amount paid or payable
- In circumstance where amount paid or payable is unknown, the importer or agent must demonstrate reasonable efforts were made to obtain these amounts
If/once information about the actual overseas and freight insurance is received by the owner, or their authorised agent, and the estimate turns out to be incorrect to a material extent, and amended import declaration must be made.
- The owner is entitled to an input tax credit in relation to the importation
- The owner is approved for GST deferral
- The owner’s underpayments are ‘offset’ by overpayments
Examples of when an estimate may be used:
- The supplier of the transport or insurance does not issue an invoice until a later date
- The owner will not pay the amount of transport charged by a subcontracted transport provider because the owner’s service provider will add its own service charge
- Another entity is responsible for pay the transport costs (eg. CFR and CIF contracts) and the amount paid or payable is commercially confidential.
VoTi is used as the basis for the levying of Goods and Services Tax (GST) for imported goods.
VoTi is the sum of the customs value of the goods, the amount of overseas transport and insurance, any customs duty payable and any wine equalisation tax payable.
Declaring Transport and Insurance
The amending Act provides an alternative to providing actual transport, insurance and ancillary costs for imported goods for the purposes of calculating the VoTI. The amending Act came into force on 1 October 2016.
From 1 October 2016, GST registered importers or their agents may, when calculating the VoTi, use actual freight and insurance amounts or used a specified percentage (10 percent from 1 October 2016) of the customs value as the freight and insurance amount of an import declaration, when goods are imported under an FOB contact, or any other contract which does not include overseas freight and insurance in the contact price.
When using a specified percentage, a GST-registered importer or their agent will have the option of apportioning the 10 percent between the freight and insurance fields on an import declaration.
If the actual freight and insurance amounts become known after the specified percentage has been used, the import declaration will not require amendment.
Contracts other than FOB Contracts
The amending Act does not change how importers or their agents report the overseas freight and insurance amounts for goods imported under CIF, CFR or another contract in which the overseas freight and insurance amounts are included in the contract price in the contract price. Importers or their agents are required to declare the actual amounts paid or payable for freight and insurance if they are available.
The Department through its operational arm, Australian Border Force (ABF), will continue to undertake compliance activities in accordance with policy settings described above, to ensure overseas freight and insurance is declared appropriately.
Where overseas freight and insurance has not been declared in line with the amendments, appropriate treatments will be applied. Treatments can range from education and awareness, a demand for payment of outstanding duty and taxes, to issuing of infringement notices and prosecution.
There is much to learn when importing goods to Australia and engaging a knowledgeable customs broker is crucial to saving time and money. Seabridge offers the services of an in-house customs broker who can, on your behalf prepare the required documentation and/or electronic submissions and calculate (and facilitate payment of) taxes, duties and excises. Call Seabridge today on 1800 727 195 to guarantee compliance and avoid delays and possible further costs.