Customs, and what should we really be charged?

As a regular private purchaser of DVD's from overseas, and in my work a freight agent who works primarily with imports and customs clearances, it's always been interesting to me to hear stories of people who have their private shipments of DVD's brought to them (say by the Royal Mail, Parcelforce, or whoever) and the delivery person will announce that they owe them X amount for duty on them.

Some time ago with the customs resouces I have at my disposal at work, I looked into this and at that time found that DVD's were not subject to Customs Duty, but of course would always be subject to VAT at the prevailing rate and since then have been waiting for the time when it becomes my turn for the postman to ask me for money so I can tell him exactly how much I think I should owe them, as I believed we were being ripped off.

Last month my wife bought my birthday gift, a large amount of DVD's from the USA, and sure enough, the postman called and announced he would not let her have the package until she coughed up £11.46 which luckily she had on her. Unfortunately I was not there to argue the case. However, my wife allowed me to see the invoice (from in order that I could make the correct calculations to see if the Post Office had got their sums right.

I have checked the current HM Customs tariff, and it would now appear customs have cottoned on to the fact that there are a heck of a lot of imported DVD's because they have now introduced a Duty rate of 3.5%. This is very specific to DVD's with something on them - blank unwritten discs are different and not subject to Duty.

OK, so lets take you through the mathematics:-

Duty is calculated on what is known as the CIF value of the goods - that is Cost, Insurance and Freight. So you take the value of the DVD, add the postage cost and insurance if there is any. In my wife's case the whole amount came to US$68.41

This has to be converted at the HMCustoms exchange rate (available to anyone who cares to look on the customs website) which changes monthly. Last month it was 1.573, so we have a CIF value of £43.49

3.5% duty is therefore £1.52

VAT is calculated on the CIF value PLUS duty (yes, you pay VAT on DUTY!!!) plus a nominal amount for transport of the goods to their destination which for this exercise we will ignore as it would add just a few pence to the final outcome.

So we have a new CIF+Duty value for VAT of £45.01 which at 17.5% is £7.87 (or £7.88 if we round up).

Add the VAT and Duty together and you get £9.40

So, you're saying to yourself, I am quibbling over £2, and to be honest I am not because I suspect the Post Office would claim the £2 would go toward administration charges. It all seems fair enough, and in my job, you don't want to be arguing with HM Customs anyway.

However, although I do not work for a courier or the Post Office, I do know that such organisations have a very different way of Customs Clearing the vast quantities of cargo that they carry daily. They are batched, so your one little pack of 3 DVD's will be cleared along with hundreds or thousands of other little consignments in one go. This vastly reduces said "admin" costs. Some slip through the net (and we all feel glad that we didn't have to pay VAT or Duty on our DVD's) but others obviously don't and I am worried that people are paying too much in so called duties without question or asking for written calcuations - after all, most goods like this are shipped with an invoice inside the package which a courier or the Post Office will never see, so how do they know what to charge or what the goods are worth to customs? How do they even know it's a written DVD but rather a blank DVD which is not liable to Duty at all? I notice many websites have disclaimers about local taxes, but I think it is important to raise awareness of the actual figures and calculations involved.

I don't expect people to be stood on their doorstep arguing with the postman, but I do think after they receive their goods and if they have had to pay duty/VAT that they might do well to do the calculations themselves to see if they have paid too much. Or maybe we should just ask the DVD exporters to mark everything as "Unwritten DVD's"!

Gavin Kagan

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