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How to Calculate Customs Duty Charge in Nigeria 2020

Filed in Articles by on April 9, 2020

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How to Calculate Customs Duty Charge in Nigeria 2020

Customs Duty Charge in Nigeria: The concern of every importer of goods is to know how much the entire process would take from the export cargo clearance to the import cargo clearance. They always ask questions on how much it will cost to calculate the profit margin on the shipments. This article is a response to their question, as it will look into How to Calculate Customs Duty Charge in Nigeria 2020.

How to Calculate Customs Duty Charge in Nigeria 2020

Most importers in Nigeria are always in confusion when it comes to the customs duties on the goods they will import to Nigeria. They always ask questions on how much it will cost to calculate the profit margin on the shipments.

Nigerian importers need to understand the requirement and the formula the Nigerian Customs service used to generate the total import duties and levies.

In the course of international shipping, be it from China, the United States of America or any part of the world, import duties and taxes are calculated on your shipment where necessary. Learn to calculate customs duty charge the easiest way possible.

Depending on the country, the calculations are done based on the type of item and its value.  Customs Duties and Taxes are probably one of the most complicated aspects of Freight Shipping to Nigeria or any part of the world.

It requires a prior understanding by both parties (Freight forwarder and the Customer) to avoid occurring and recurring challenges.

In this article, you will get a simple cracked-down understanding of how to calculate customs duty charges in Nigeria with an example.

Customs Duties or Import duty a tax charged on certain goods which are brought into a counter and taxes will be pending and need to be cleared while importing goods into Nigeria Either by a private individual or a commercial entity.

The import duty tax charged on certain goods which are brought into a counter and taxes payable is calculated on the complete shipping value, which includes the cost of the imported goods, the cost of freight and the cost of insurance.

Along with Import duty a tax charged on certain goods which are brought into a counter, import goods are also subjected to sales tax Known as VAT (Value Added Tax) in the UK.

Various Terms and Their Meanings

FOB (Freight on Board) – This refers to all costs incurred to bring the goods or items of import to the terminal for shipment.

To use the FOB figure in calculating duty charge, you first convert to Naira (If in Nigeria. Use other currency if you’re in other countries).

FOB = Total Ancillary charges + Total value of goods.

Freight – The cost of transporting the items of importation to the port of designation, either by Road, Sea freight or Airfreight. This is also converted to Naira (if in Nigeria. Use other currency if you’re in any other countries).

CIF – Cost of Imported items, Insurance value, and Freight Charge

To get your CIF, simply add the cost of the items imported to the insurance value (e.g 0.5% of Cost & Freight) and cost of transportation, which is Freight).

Note: Insurance doesn’t come as a standard fee as it depends on your insurance company. Usually calculated on the sum of the cost of goods and freight, e.g. C + F

Value Added Tax (VAT) is a tax imposed on the supply of goods and services. Under Nigerian law, the tax is charged at currently 7.5% of the value of the taxable goods and services.

VAT = 7.5% x (CIF + ID + Surcharge + CISS + ETLS). Where;

Surface Duty (ID): This is often commonly referred to as import duty. This is how the abbreviation (ID) came to terms. It is a duty based on the kind of item imported. The value depends on the HS Code – usually 5%, 10%, 20%, etc. of the CIF Value.

ID = x% of CIF Value. Import Duty is the tax collected on imported goods by customs.

Surcharge: is an additional tax levied on the importation of goods. It is meant for port development.

Formula:  7% x Import Duty (ID).

CISS is an acronym for the ‘Comprehensive Import Supervision Scheme’.

Formula: 1% of FOB value.

ETLS is an acronym for ECOWAS Tax Liberalization Scheme, also referred to as ECOWAS levy. It is the tax imposed on goods imported from ECOWAS non-member countries into ECOWAS member countries.

Example of How to Calculate Customs Duty In Nigeria

Mrs. Eze who lives in the UK would like to know the rough estimate of how much it costs to clear some pieces of flexible pipe meant for use in the clean-up exercise of Ogoni Land, with an overall cost of 170,000EUR.

Assuming Mrs. Eze has consulted Vagmon Integrated Services as its vendor, we shall demonstrate in a tabular form the Customs Duty payable by the client.

As part of the contract, Vagmon Integrated Services shall provide an insurance certificate, using its partner insurance company.

MATERIAL: Flexible Pipe Material
Insurance Premium Rate: 0.12%
Duty Rate: 20% (based on the item HS Code)
Exchange Rate EUR/NGN: 361.06
PARAMETERFORMULAVALUE (NGN)
FOB170,000*361.0661,380,200.00
FREIGHT VALUE7000*361.062,527,420.00
INSURANCE[61380200+ 2527420+ 10% (mark-up)]*0.12%84,358.06
CIF61380200+84358.06+252742063,991,978.06
HS CODE3917399000
ID63991978.06*20%12,798,395.61
SURCHARGE12,798,395.612*7%895,887.69
CISS61380200*1%613,802.00
ETLS63991978.06*0.5%319,958.89
VAT(63991978.06+12798395.61+895887.69+613802+319958.89)*5%3,931,001.11
TOTAL12798395.61+895887.69+613802.00+319958.89+3931001.1118,559,045.30
TOTAL AMOUNT OF DUTY PAYABLE18,559,045.00

Assumptions on How to Calculate Customs Duty in Nigeria

Form M/PAAR is already in place, and then assume freight cost as 7000 EUR.

The Nigerian Import Duty Scheme requires that Form M detail be added to air waybill/bill lading as well as on the manifest before such manifest is sent to Nigerian Customs to help in the monitoring of the scheme.

Custom Duty Charge Clearing Costs

  • Customs clearance – to be advised
  • Terminal handling and storage charges – charged per outlay
  • Shipping company local charges – charged per outlay
  • Inspection charges – to be advised
  • Quarantine/Fumigation – to be advised
  • Delivery/Transport – to be determined

Things to Know About Duties & Taxes

When shipping something internationally, your shipment may be subject to import duties and taxes. These additional charges are calculated based on the item type and its value. Every country taxes items differently – see how duties are applied in Nigeria.

  • Duties & Taxes – Guaranteed

Don’t let unknown duties and taxes be a barrier for shipping worldwide. Easyship automatically calculates these figures so you and your customer know all costs upfront.

  • Decide Who Pays for Taxes

Choose to deliver shipments with duties pre-paid (DDP) or with duties unpaid (DDU) with a click of a button. If duties are pre-paid, they will not be subject to additional or unexpected customs fees and will pass through customs quicker.

  • Avoid Issues at Customs

Knowing all costs upfront and communicating with your customers how it will be paid will result in a smoother shipping experience.

Customs Import Duty Payment

The importer shall continue to pay an administrative charge of 1% of the FOB value of all imports based on the exchange rate on the approved e-Form “M”.

All imports shall continue to be assessed for duty at the C. I. F. value of the goods using the rate of exchange on the approved e-Form “M”.

It shall be the duty of the importer’s bank through which the e-Form “M” was processed to collect the amount of import duty as assessed if it is a Designated Bank.

However, for e-Form “M” transactions processed by a non-Designated Bank, payment of import duty shall be at any of the Designated Banks, while a copy of the duty payment receipt shall be made available to the processing bank by the importer.

For transactions in respect of dutiable personal effects payment of duty can be made at any preferred Designated Bank.

The Designated Bank will match printed assessment notice with the electronically received assessment notice for the Single Goods Declaration (SGD). If the information tallies, the bank will receive payments and issue a signed Bank receipt.

The designated bank shall send an e-confirmation message to NCS acknowledging receipt of duty and taxes in respect of the SGD.

All payments shall continue to be electronically transferred daily by Designated Banks to the respective pool accounts with CBN. Failing this will mean necessary sanction shall apply.

To enhance the monitoring of the import duty scheme, Shipping lines and Airlines are requested by law to always state the Form M Number for each consignment on the ship’s/aircraft’s manifest and on the Bill of Lading or Airway bill for all import shipments into Nigeria before such manifests are submitted to the Nigeria Customs Service.

Improper preparation for customs duties and taxes can cause a lot of hindrances, such as holdups at customs, unexpected costs, ruins on the experience of customers, and consequently ruins on the relationship with clients/customers.

We believe this information on How to Calculate Customs Duty Charge in Nigeria 2020 is helpful to you? Why not share it with your friends out there by clicking on the share button on this website. You can as well subscribe to be updated for further information concerning this topic.

CSN Team.

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