Customs Debit Note

Have you ever heard about a Customs Debit Note or being issued a notification of underpayment? In this post, we show you how to avoid customs debit note and consequently save cost.

A customs debit note usually come to fore during customs clearing processes where there is an inappropriate presentation of consignment values, non-application of the right rate of duty and also a discovery of excess in the quantity stated in the parking list.

Ever wondered why whenever you import consignments into Nigeria, you pay compulsory import duty and taxes to the Government through the Nigerian Customs Services? This stage usually requires 100% correctness and sincerity on the part of the importer in the declaration of appropriate CIF value. 

In case you are not conversant with the processes of customs clearance in Nigeria, you may want to seek help from a qualified customs agent, and save self the troubles. You may reach us by putting up a call on +2348147068472. BowaGate Global Limited was created with the goal of providing adequate professional guides to help you against any error during cargo clearance, thereby reducing clearance costs

What is Customs Duty?

Customs Duty is an official and compulsory amount of money an importer pays to the Nigerian government for importing goods into the country.

When shipping something internationally, your shipment is subject to import duties and taxes. These additional charges are calculated based on the item type and its value. Every country taxes items differently.

The Nigerian Customs services depend on the importer’s invoice value to determine the duty chargeable on a consignment. An Assessment notice (customs debit note) being issued by the Customs services shows clearly the total amount of duty payable to the Nigerian Government through its agency. This, they calculate using an international standard. 

In this case, the Cost of the consignment, Insurance and Freight cost are summed up and compared. The total of these three amounts to what is referred to as CIF Value.

It is imperative to understand what a debit note is. In this post, you’d learn about how to avoid been issued a debit note (DN). You will also understand why cutting corners in order to reduce costs is a dangerous adventure. Moreover, you’ll see reasons why a debit note is issued, when they are issued, and on who do they.

What Customs Debit Note is.

A custom debit note is a notice of duty underpayment; a document by Nigerian Customs Service showing the shortfall in total chargeable duty accrued an importer to pay on shipped consignment.

It usually serves as a penalty instrument issued an importer in the event of a false declaration (under-declaration) of consignment values and other reasons as stated earlier. The note is a document used to receipt underpayment.

Under-declaration by owners of shipment details is a dangerous game. It may be carried out in order to reduce or roll-off some of the cost of customs duty at the point of clearance. 

Have you ever been issued a Debit Note (DN)? Kindly use the comment box below this post to share your experience with us and how you managed the situation and your opinion on how to avoid a DN. Feel free to ask any question too.

Why Customs necessarily Issue Debit Note

All items of the shipment have a rate of duty an importer must pay before goods are cleared at the customs checkpoint. Customs expect an importer to declare the right values of their shipped consignment. This includes the CIF value, the quantity (through the parking list) and the appropriate rate of duty. 

Contrary to this, there will definitely arise a need to query any form of difference in the declaration note.

Mr. Mc Hanson the Spare Parts Importer: Case Study

Let’s illustrate with a case study for clarity. 

Mr. McHanson, a Spare Parts Dealer, shipped in over 5 containers of Spare Parts into Nigeria. In the course of summing up, his invoice value declared 2 containers at a value of $20,000 instead of $50,000 worth of 5 containers.

This under-declaration, not only effected on the cost of the consignment but also on quantity he stated as well as on the rate of duty. Worse of all, this happened to reflect on the insurance cost as well as, or maybe on freight costs as well. 

Read Also: RoRo Freight Shipping to Nigeria.

At the point of clearing the goods, the discrepancies were discovered by the customs officer in charge. A notification of underpayment was issued to cover up for the discrepancy, making up the difference in order to arrive at an appropriate CIF value. The total, therefore, attracting a penalty sum for the difference.

So, whether the difference stated in the invoice value versus actual value was an error or an intentional act, is not the government’s concern. This is considered as been a deliberate attempt by the importer to bypass the appropriate dutiable charge. 

Customs issue a debit note to cover up for any shortfall or the difference in order to compel the importer to pay the appropriate duty. Mr. McHanson was made to pay the exact duty expected on the invoice value, including a compulsory penalty fee, contrary to which his goods remain uncleared. 

If he had consulted the right professional for advice, he might not have fallen prey. More so, a professional freight forwarder could defend and win in the case where the under-declaration was an error and they were probably directly involved from the onset.

Read Also: Airport Customs Clearing in Nigeria

Why pay Customs Duty and Taxes?

Simply put, Customs Duty is a tax imposed on imports and exports of goods. Customs Duty and Tax are levied for the following reasons.

  1. Important source of revenue by the Government.
  2. Controlling the smuggling. 
  3. Protection to the domestic industry. 
  4. Reduce deficit in the balance of trade and the balance of payment. 
  5. Reducing export
  6. Saving foreign exchange

The above listed are all in accordance with principles set to safeguard or protect our economy, jobs, environment, etc. This is made possible when the in-and-out movement of goods, especially prohibited and restrictive goods from a country, are regulated. 

International Guiding Rules and Regulations for Duty Rate Issuance

Rate of duty is based on the value of goods imported or exported according to the standard customs tax rules & regulation. 

“Rule 3(i) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 states that the value of imported goods shall be the transaction value adjusted in accordance with the provisions of its Rule 10.”

“If objective and quantifiable data do not exist with regard to the valuation factors, if the valuation conditions are not fulfilled, or if Customs authorities have doubts concerning the truth or accuracy of the declared value in terms of Rule 12 of the said Valuation Rules, 2007, the valuation has to be carried out by other methods in the following hierarchical order: (i) Comparative Value Method – Comparison with transaction value of identical goods (Rule 4); (ii) (Comparative Value Method – Comparison with transaction value of similar goods (Rule 5); (iii) Deductive Value Method – Based on sale price in importing country (Rule 7); (iv) Computed Value Method – Based on cost of materials, fabrication and profit in country of production (Rule 8); and (v) Fallback Method – Based on earlier methods with greater flexibility (Rule 9).”

Import duties are generally of the following types: 1. Basic duty; 2. Additional Customs duty; 3. True Countervailing duty or additional duty of customs; 4. Anti-dumping duty/Safeguard duty. – 

Since the objective behind levying customs duty is to safeguard each nation’s economy, jobs, environment, residents, etc., the regulation is carried out strictly. Therefore, whether a projected value was intentional or an error from the supplier of the goods or not, the penalty stands.

Read Also: How to process PAAR

How to determine Customs Duty Payable

The CIF value i.e. Consignment Cost + Insurance Cost + Freight Cost is used by the customs to determine the duty payable. 

Formular below:

CIF Value x Rate of Duty = Duty Payable

Why you need a Professional Agent for Advice

The ability of the Nigerian Customs to issue an underpayment is not absolute power. As a professional customs broker well-grounded, vast and highly experienced in Customs Brokerage, we have the right to put up an argument as to the acceptability of the underpayment.

In most cases when the superior argument prevails in favour of a professional freight forwarder, the underpayment note can be cancelled.

Please note, a debit note is only a query that a professional freight forwarder should be able to respond to and put up a good defence where necessary. 

We are Experts in other Areas. See them

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Contact Bowagate Global Limited Today

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