The Hidden Costs
Import duties and taxes on trade show exhibits are a
sizeable cost of exhibiting abroad. In the absence of an effective temporary
import strategy to avoid these expenses, exhibitors will pay more than necessary
to exhibit overseas.
Pinpointing those costs can be challenging however, without
some basic knowledge about temporary imports. For instance, the cost of duties
and taxes to the exhibitor may not be transparent since they can be buried in
the fees paid to intermediaries such as shipping companies, freight forwarders,
customs brokers, trade show organizers and overnight delivery services.
From this starting place and armed with a basic knowledge of temporary import
methods, any international exhibitor can avoid paying import duties and taxes
and increase trade show ROI. In many cases it will be by using a uniform,
international customs document called an ATA Carnet which is discussed in more
detail below. For a deeper understanding of the costs and benefits of temporary
import methods, a brief lesson in temporary importation is necessary.
Temporary Imports in Brief
In general, goods over a minimum value that are imported,
even temporarily, into any country are dutiable and taxable. This would include
trade show exhibits and their associated tools, samples and equipment
if not for the use of each country’s temporary import duty preference
regulations or the international ATA Carnet Convention.
Duty rates range from 0% to 80% and import taxes range from
0% to 25%, depending upon the country (these are estimates only). Import duties
and taxes into South Korea, for example, would be an average of $17,900 on a
$100,000 trade show exhibit since VAT
is 10% and duties average 7.9%. This is what an exhibitor would pay at the point
of customs clearance if not using a temporary import method to avoid those
duties and taxes.
Fortunately, all countries have some type of temporary
import duty preference as an alternative to a permanent importation (also called
a consumption entry) and accompanying payment or deposit of duty and tax. The
benefit of each country’s temporary import duty preference is that, instead of
paying the duties and taxes, they are deposited with foreign
customs and exhibitors can apply to get the deposit returned. Once the goods are
properly re-exported a refund is requested which can take from 6 to 36 months to
In lieu of depositing the duties and taxes, many foreign
customs authorities also offer a foreign temporary import bond option. Here’s
how the foreign temporary import bond works and why it isn’t an ideal solution.
While the foreign customs authorities may agree to accept a temporary import
bond, the surety company issuing the bond may still require a cash guarantee of
the bond. The cash deposit will usually be in local currency. The cash deposit
assures that the foreign importer will pay the duties and taxes in the event the
goods are not re-exported timely, instead of the surety company or
customs broker. Such cash guarantees are most likely to be required of small and
medium sized enterprises (SME) that do not have a credit history in the country
of temporary importation. In the example of South Korea above, an exhibitor pays
the temporary import bond premium, in cash, and posts $17,900 cash
to collateralize the bond since the U.S. exhibitor is a foreign entity. If an
exhibitor uses a foreign customs broker to facilitate this transaction as some
countries require, they will also pay a fee to that broker. Again, once the
goods are properly re-exported an exhibitor can request that the bond be
cancelled and can hope to get their deposit back timely.
The Role of the Intermediary
In part because of these customs regulations and tax
requirements, most international trade show organizers partner with an
intermediary: a freight forwarder-customs broker. This intermediary will smooth
the way and handle the sticky customs clearance issues for the exhibitors – for
a fee. Therefore, the place to start to determine how to avoid unnecessary
payment of duties and taxes is with the intermediary.
Duties and taxes may or may not be listed as a line item on
the shipping company or freight forwarder-customs broker estimate or invoice.
This could be because the freight forwarder-customs broker is using their own
customs bond or guarantee and assuming the liability of the foreign duties and
taxes. The fee for that guarantee service may be lumped in with other freight
forwarder-customs broker services so it would not be readily identifiable. It
pays to probe into the fees to understand what is actually being charged for
duties and taxes or the use of a foreign broker’s customs guarantee.
Allowing an intermediary to select the temporary import
method this way is not a bad choice, however, it doesn’t give the exhibitor as
much control or provide as much value as possible. For example, using a foreign
broker’s bond is a recurring, variable cost in each country the exhibitor wants
to enter. An ATA Carnet export document can be used in more than one country for
a one-time fee.
How to Get More Value
The key to getting more value from this temporary import
document expense is to:
- Separate the temporary import method from the movement
of the goods and the ’ services provided by an intermediary,
- Take responsibility for selecting the temporary import
- Purchase any temporary import documents directly from
the document issuer to avoid the intermediary’s handling fees.
Exhibitors always have the option of using a freight
forwarder-customs broker as a one-stop-shop for the temporary import documents,
shipping and logistics. They simply have to request that the freight forwarder
secure an ATA Carnet, for example, on behalf of the exhibitor and use it as the
method of temporary importation. Carnet Specialists regularly consult with
freight forwarders as well as exhibitors regarding the specifics of a particular
An alternative to obtaining the ATA Carnet through an
intermediary is applying for the ATA Carnet directly with the ATA Carnet issuing
authorities in the U.S.
and then provide the ATA Carnet document to the intermediary. The exhibitor has
to complete the ATA Carnet General List
regardless of going direct or using an intermediary. Since the General List is
the most time-consuming portion of the carnet application, there is no
measurable benefit to using an intermediary to apply for the ATA Carnet. Either
way, Carnet Specialists consult with the applicant, whether exhibitor or freight
forwarder, to assure accuracy and regulatory compliance.
Methods of Temporary Importation (see attached chart)
Before I discuss the ATA Carnet in detail and compare it to
other methods of temporary importation, here is a list of all the temporary
import methods available for U.S. exporters:
- U.S ATA Carnet – Uniform, international customs
- Foreign Temporary Importation Under Bond (TIB)
– This is the foreign temporary import bond requiring collateralization and
described above. Bonds/guarantees vary by country.
- U.S. Customs Form 4455 Certificate of Registration
(CF4455) – Not a true foreign temporary import method, for re-entry of
American Goods Returned
to the U.S. only.
- Foreign Consumption Entry with full Payment of Duty
& Taxes & possibility of Duty Drawback – Duty drawback is a method of
recouping duties and taxes paid on consumption (permanent) entries although
100% of those payments may not be refundable.
- Foreign Customs Broker’s Entry Bond – As
described above, the liability for duties and taxes is assumed by the broker
and the exhibitor pays a fee for that service.
Comparing Methods of Temporary Importation
To evaluate which method is best for an overseas event, it
helps to review the functions of a temporary import document. The attached
comparison chart can help compare the 5 temporary import methods. The chart
answers the questions listed below for each of the methods and makes it easier
to see which option accomplishes each exhibitor’s objectives.
- Easily obtained? – Can the document/method be
readily obtained from a U.S. based source?
- Duty- & tax-free entry into foreign countries &
duty-free re-entry to the U.S.? – Will the document/method allow
re-entry the U.S. without paying duties and without additional
- Entry documents are issued prior to departure?
Can the documents be secured prior to departure to minimize surprises at the
border/port of entry?
- All fees, security deposits & premiums are fixed,
known and paid prior to departure? – Can it be known, in advance, the
costs to be assumed?
- Payment in U.S. dollars for fees, premiums, duty,
tax & deposits? – Can currency conversions be avoided by paying in U.S.
- Convenience & security of payment of fees,
deposits, duty or tax by credit card? – Can the costs be paid with a
credit card instead of cash and to avoid the risk of carrying large amounts
of currency while travelling?
- Unlimited use to more than one country for up to a
period of one year? – Is the document re-usable for multiple shows and
multiple countries? Can it be used to transit countries?
- Full refund of duty/tax deposit? – Will I get
full and timely refund of any deposits I post?
- Penalties for failure to re-export? – What are
the penalties if I fail to re-export?
I’ll tip you ahead of time, if you haven’t already guessed:
the ATA Carnet is the obvious choice when comparing the 5 methods. However,
other temporary import documents, import duty avoidance and tax refund vehicles
such as duty drawback, American Goods Returned, VAT Refunds
and the U.S. Registration of Goods have useful applications in certain
circumstances. They do not, however, provide the broad advantages of the ATA
Carnet for foreign trade show exhibitors, as can be seen in the comparison
The ATA Carnet
A carnet or ATA Carnet is honored by 83+ countries and
territories (see attached list). It is presented when entering a carnet country
with merchandise or equipment that will be re-exported within 6-12 months
depending upon the purpose of the visit.
It is sometimes called The Merchandise Passport for boomerang freightsm
which is always re-exported from the country of temporary importation.
Upon presentation, the carnet permits the exhibit and
equipment to clear customs without the payment or deposit of import duties and
taxes such as VAT or GST.
Payment is not necessary because the carnet guarantees to foreign customs that
the goods will be re-exported timely. Carnets also serve as the U.S.
Registration of Goods – CF4455 - so that the goods (American Goods Returned) can
re-enter the U.S. without payment of U.S. import duties.
One key benefit to using an ATA Carnet is that it is valid
for 6 months to a year and for multiple trips. Not only does it allow exhibitors
to enter foreign countries temporarily without paying duties or taxes, it allows
them to do so in 83 carnet countries and territories throughout the period of
its validity. Paying for an intermediary to handle the payment of duties and
taxes in multiple countries for multiple trips means that exhibitors pay the
duties and taxes in every country visited. With an ATA Carnet, exhibitors know
ahead of time the cost of all foreign and U.S. duties and import taxes.
Here are the steps to avoid paying import duties and taxes
on trade show exhibits travelling to foreign countries:
- Contact the Intermediaries: Find out from the
foreign trade show organizer, shipping company or freight forwarder how
foreign import duties and taxes are handled for each overseas event.
- Determine the Correct Temporary Import Method for
the Event: Review the itinerary, travel, and shipping requirements to
determine the best temporary import option for each event.
- Make Preparations: Contact the event freight
forwarder and/or an ATA Carnet Specialist to finalize the temporary import
documentation at least 2 weeks in advance of shipping a trade show exhibit
and other equipment out of the U.S.
For additional information online about ATA Carnets see
www.ATACarnet.com or contact a Carnet Specialist at the CIB Carnet
HelpLinesm : (800) ATA-2900.
Source: Customs Co-Operation Council, ATA Carnet
Handbook, Customs Convention on the ATA Carnet for the Temporary Admission
of Goods, 1st Edition 1973, Amending Supplement No. 11 – September
For additional information about this article contact:
Senior Vice President
boomerang carnets for
Corporation for Int'l Business / ATA Carnet
650-391-7759 CA direct
847-852-3103 IL direct
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Twitter: BoomerangFr8Gal & ATACarnetExpert