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How To Calculate Car Importation Duty In Nigeria

So long as you are bringing in a car from outside the shores of Nigeria, wherever the country is, say Thailand, USA, China, Cotonou, etc, you have to face the customs authorities. Customs authorities are those who are in charge of clearing goods, including cars at a country’s borders or ports. Customs duty is also called Import duty.

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One important question at the heart of any importer of cars, especially if you are just starting out, is how to calculate car import duty. If this is you, or you are just curious about how they do, you are on the right page. Keep reading and you will learn how to.

Calculating Customs Duty In Nigeria; Terms And Definitions

To calculate Customs Duty, all charges are summed up including VAT thus, ID + Surcharge + CISS + ETLS + VAT = Customs Duty.

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FOB:


This term which stands for free onboard refers to all costs incurred to bring the goods or items e.g cars of import to the terminal for shipment.

Freight Cost:

Freight refers to the cost of transporting the car to the designated point of discharge. Transporting the car can be via sea, air or road. Simply put, it’s the cost of transportation.

Insurance:

This means the premium paid to the insurance company for issuing a marine certificate or insurance certificate to the importer. Each insurance company has its premium rate, which must be agreed upon with the importer. The insurance cost is always a percentage of the FOB * Freight

Also Read:

CIF:

This stands for Cost Insurance and freight. CIF = FOB Value + Insurance cost +Freight cost

Surface Duty (ID):

This is often commonly referred to as import duty, which is how the abbreviation – ID came about. Its duty is 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.

HS CODE:

HS Code meaning ‘Harmonized System is a coding system created by the World Customs Organization is used by customs authorities around the world to identify the duty and tax rates for specific types of products that allow the defining, classification, varying, and classifications of commodities in international trades. HS Codes differs from commodity to commodity.

Surcharge:

This is an additional tax levied on importation of goods. This tax is usually meant for port development.

Surcharge = 7% * Surface Duty

CISS:

This stands for Comprehensive Import Supervision Scheme.

 CISS = 1% * FOB Value.

ETLS:

This means ECOWAS Tax Liberalisation Scheme often referred as ECOWAS levy. It is a tax imposed on goods imported from non-ECOWAS member countries into ECOWAS member countries.

The money raised is used to run the ECOWAS commission’s office and for community development.

 ETLS = 0.5% * CIF.

VAT:

Value Added Tax is tax for value addition or services rendered.

VAT = 5% * (CIF+ID+Surcharge+CISS+ETLS).

Calculation of The Custom Duty For 2020 Honda Cr-V

Now, let’s put those formulas to work.

Let’s say you are an importer and you want to know the customs duty for a 2020 Honda CR-V shipped from the USA, the first thing is to know the cost of the car. Note that though the cost is in dollars, you have to convert to naira. The cost is $26,550. Your transportation cost is $1,000

FOB: $26,550.

 In naira $26,550 * 381.54= N10129887

Freight: $1000

  In naira $1000 * 381.54= 381540

Total of FOB and Freight = N 10511427

Recall that insurance is always a percent of FOB and Freight.

Insurance cost = 0.6% of FOB and Freight

  0.6%*10511427 = N6346.482

CIF = FOB + Insurance + Freight

  N10129887 +381540 + N6346.482 = N10517773.482

Import duty with HS code 5407 indicates an import duty of 10%

Import duty = 10% of CIF

  10% * N10517773.482= N 105177.3482

Surcharge = 7% of Import duty

7% * 105177.3482= N 73624.414374

CISS = 1% of FOB

1% * N10129887 = N101298.87

ETLS= 0.5% of CIF

  0.5% * N10517773.482= N52588.86741

VAT = 7.5% X (CIF + ID + Surcharge + CISS +ETLS)

7.5% * (N10517773.482 + 105177.3482 + 73624.414374 + N101298.87 + N52588.86741)

= 0.075 * 10850462.982

= N 813784.72365

Customs duty= ID + Surcharge + CISS + ETLS + VAT

105177.3482+ 73624.414374 + N101298.87 + N52588.86741 + 813784.72365

= 1146474.2236 approx N1146474

CONCLUSION

Hence, the customs duty you would be paying for the Honda CR-V is over a million naira. Dollar to naira conversion varies from time to time, this will always have an effect on the amount you have to pay for customs duty.

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