Have you ever heard about a Customs Debit Note or ever being issued a notification of duty underpayment by the Nigeria customs? We explain in this post how to avoid customs debit note.

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 yourself the troubles. Save our contact (+2348147068472), and either call or drop a message on WhatsApp anytime for a free consultation. With adequate professional guides, we hope to help you escape any error during cargo clearance, thereby reducing the customs clearance cost of the imported item(s).

Let’s dive in. You will learn what a customs duty is, who collects it and why it is being collected, what a customs debit note is, what to do to escape a penalty issued through the customs debit note.

Understanding what a Customs Duty is.

Customs Duty is an official and compulsory amount of money an importer pays to the Nigerian government for importing goods into the country. According to Financial Express, ‘Customs Duty is levied when goods are transported across borders between countries. It is the tax that governments impose on export and import of goods.’

In international shipping, your shipment is subject to import duties and taxes. These additional charges are calculated based on the item type and its value, which depends on the HScode of the goods amongst other determinants. 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.

Understanding what a 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.

How to Avoid Customs Debit Note

We use Mr. Hanson’s case for example. This is for illustrative purpose only.

Mr. McHanson the Spare Parts Importer: Case Study

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 of items of shipment not only affected the cost of the consignment but also the quantity he stated and as a result, on the rate of duty as well. 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 either by presenting a wrong HScode or merely trying to cut corners.

Customs issue a customs 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.

What you should know about Duty Underpayment

Duty underpayment

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 a transaction value of identical goods (Rule 4). (ii) (Comparative Value Method – Comparison with a 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 was it an error from the supplier of the goods, the penalty stands.

Read Also: How to process PAAR

How to determine Customs Duty Payable

To avoid duty underpayment, we encourage 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

Read How to calculate customs duty charge

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. 

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