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Import Duties & Taxes for International Trade Shows:
How to Avoid These Hidden Costs



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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[1]. 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[2] 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[3] 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 receive. 

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[4]  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: 

  1. Separate the temporary import method from the movement of the goods and the ’ services provided by an intermediary,
  2. Take responsibility for selecting the temporary import method, and
  3. Purchase any temporary import documents directly from the document issuer to avoid the intermediary’s handling fees[5].

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 carnet shipment. 

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.[6] and then provide the ATA Carnet document to the intermediary. The exhibitor has to complete the ATA Carnet General List[7] 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: 

  1. U.S ATA Carnet – Uniform, international customs document.
  2. Foreign Temporary Importation Under Bond (TIB) – This is the foreign temporary import bond requiring collateralization and described above. Bonds/guarantees vary by country.
  3. U.S. Customs Form 4455 Certificate of Registration (CF4455) – Not a true foreign temporary import method, for re-entry of American Goods Returned[8] to the U.S. only.
  4. 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.
  5. 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. 

  1. Easily obtained? – Can the document/method be readily obtained from a U.S. based source?
  2. 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 documentation?
  3. Entry documents are issued prior to departure? Can the documents be secured prior to departure to minimize surprises at the border/port of entry?
  4. All fees, security deposits & premiums are fixed, known and paid prior to departure? – Can it be known, in advance, the costs to be assumed?
  5. Payment in U.S. dollars for fees, premiums, duty, tax & deposits? – Can currency conversions be avoided by paying in U.S. dollars?
  6. 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?
  7. 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?
  8. Full refund of duty/tax deposit? – Will I get full and timely refund of any deposits I post?
  9. 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[9] 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 chart. 

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.[10] 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.[11] 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[12].  

Summary

Here are the steps to avoid paying import duties and taxes on trade show exhibits travelling to foreign countries: 

  1. 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.
  2. 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.
  3. 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 1989 

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For additional information about this article contact: 

Leslie Levy August
Senior Vice President
boomerang carnets for
Corporation for Int'l Business / ATA Carnet

www.ATACarnet.com

650-391-7759 CA direct
847-852-3103 IL direct 

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[1] In some cases, there may be a prearranged duty and tax waiver negotiated with the customs authorities by the trade show organizers.

[2] Giveaways, printed materials, swag and consumables that will be left behind are not considered temporary imports but may not be dutiable and taxable for trade show purposes.

[3] Value Added Tax

[4] There are a few countries that will accept credit cards but they are not the majority.

[5] This is a viable option if the documents are issued by U.S. organizations.

[6] If a company is shipping exhibit booths from countries outside the U.S., ATA Carnets may also be available. There are 83 carnet countries.

[7] The General List of the ATA Carnet is a complete list of the goods and equipment being shipped abroad.

[8] American Goods Returned are goods that are products of the U.S. or have previously been assessed U.S. customs duties and were entered into the commerce of the U.S.

[9] VAT refunds are not addressed here since it is not a temporary import method. However, VAT refunds can be an effective way to recover overseas business travel costs other than duties and taxes.

[10] Goods for Trade Shows and Exhibitions are generally limited to a minimum of 1 month after the trade show to a maximum of 6 months however there are exceptions to this regulation.

[11] Goods and Services Tax

[12] This assumes goods are not travelling to a non-carnet country. That is a special circumstance that should be addressed directly with a Carnet Specialist.

 
 

©2013 by Lesle Levy August