How to Calculate Customs Duty Charge in Nigeria

In the course of international shipping, import duties and taxes are calculated on your shipment where necessary. Depending on the country, the calculations are done based on the type of item and its value. 

Customs Duties and Taxes is probably one of the most complicated aspects of Freight Shipping to Nigeria or any part of the world. It requires a prior understanding by both parties (Freight forwarder and the Customer) in order to avoid occurring and recurring challenges.

Improper preparation for customs duties and taxes can cause a lot of hindrances, such as holdups at customs, unexpected costs, ruins on the experience of customers, and consequently ruins on the relationship with clients/customers.

In this post, you’ll get a simple cracked-down understanding of how to calculate customs duty charge in Nigeria (with a typical example).

Various Terms And Their Meanings

FOB (Freight on Board) – This is the actual cost of the items imported without the handling charge or cost of transportation. 

To use the FOB figure in calculating duty charge, you first convert to Naira (If in Nigeria. Use other currency if you’re in other countries). 

Formula: FOB  x Exchange Rate (e.g. Nigerian exchange rate).

Freight – The cost of transporting the items of importation to the port of designation, either by Road, Sea freight or Air freight. This is also converted to Naira (if in Nigeria. Use other currency if you’re in any other countries).

CIF – Cost of Imported items, Insurance value and Freight Charge

In order to get your CIF, simply add the cost of the items imported, the insurance value (e.g 0.5% of Cost & Freight) and cost of transportation, which is Freight).

Note: Insurance doesn’t come as a standard fee as it depends on your insurance company. Usually calculated on the sum of the cost of goods and freight, e.g. C + F

Value Added Tax (VAT) is a tax imposed on the supply of goods and services. Under Nigerian law, the tax is charged at currently 7.5% of the value of the taxable goods and services. 

VAT = 7.5% x (CIF + ID + Surcharge + CISS + ETLS). Where;

Surface Duty (ID): This is often commonly referred to as import duty. This is how the abbreviation (ID) came to terms. It is a duty based on the kind of item imported. The value depends on the HS Code – usually 5%, 10%, 20%, etc. of the CIF Value.

ID = x% of CIF Value. Import Duty is the tax collected on imported goods by customs.

Surcharge: is an additional tax levied on the importation of goods. It is meant for port development. 

Formula:  7% x Import Duty (ID).

CISS is an acronym for ‘Comprehensive Import Supervision Scheme’. 

Formula: 1% of FOB value.

ETLS is acronym for ECOWAS Tax Liberalisation Scheme. Also referred to as ECOWAS levy. It is the tax imposed on goods imported from non-ECOWAS member countries into ECOWAS member countries. 

Formula: 0.5% x CIF.

How To Calculate Duty Charge And Taxes

We will use an Illustration of Mr Sodiq Adeleke, an eCommerce businessman who imports and sell Fabrics in Nigeria, for example. 

Sodiq ordered for Fabrics from Mumbai, India to the tune of $5,000. 

In determining the Customs Duty Charge, the first step is to request for the HS Code. This will help you to know the tax receivable by customs on importing the goods, otherwise referred to as Import Duty.

HS Code for Fabric is 5407, so its Import Duty is calculated at 10%

Assuming the cost of shipping item (Freight) is $1200

Then, CF = 5000 + 1200 

NB: Insurance is billed on both the Cost of goods and Freight. 

Therefore, assuming insurance charged by your insurance company on the goods is 0.5%. 

Then, Insurance = 0.005 x 6200 = $31 

CIF (Cost + Insurance + Freight) = 5000 + 31 + 1200

Now, we have CIF = $6231

Ideally, this is converted to Naira, using the official rate for duty, i.e. N328.00

CIF – $6231 x N328 = N2,043,768.00

Cost of Fabrics also to be converted to Naira 

Cost – $5000 x 328 = N1,640,000.00 (This is used as FOB)

Import Duty Rate: 10% of CIF = 0.1 x 2,043,768 = N204,376.8

Surcharge: 7% of Import Duty = 0.07 x 204,376.8 = N14,306.37

CISS: 1% of FOB (Cost) = 0.01 x 1,640,000.00 = N16,400.00

ETLS: 0.5% of CIF = 0.005 x 2,043,768.00) = 0.05 x 20,437.68 = N10,218.84

VAT: 7.5% x (CIF + ID + Surcharge + CISS + ETLS)

0.075 x (2,043,768 + 204,376.8 + 14,306.37 + 16,400 + 10,218.84)

VAT = 0.075 x 2,289,070.01 = N171,680.25

To calculate Customs Duty, all charges are summed up including VAT thus, 

ID + Surcharge + CISS + ETLS + VAT = Customs Duty. 

204,376.8 + 14,306.37 + 16,400 + 10,218.84 + 171,680.25 = N416,982.26

The custom duty and other applicable taxes and levies in favour of the Federal Government of Nigeria is N416,982.26 payable by Mr. Sodiq Adeleke for the imported item.

The total to be spent all together which include CIF would now be Customs Charge + Cost of items to be landed in Nigeria, thus

N2,043,768.00 + N416,982.26 = N2,460,750.26 

For proper monitoring of the import duty, shipping lines and airlines are requested by law to always state the Form M which entails M Form and BA numbers for each consignment on the ship’s/aircraft’s manifest, bill of lading or airway bill, as well as on all shipping documents for all import shipment to Nigeria before such manifest are submitted to the Nigerian Customs Service Department

Let’s Guide You Through The Process

Call Funmi on +2348186078330 or have a Chat with us via WhatsApp on 08147068472.

Our lines are open during business hours. You can also send an email to info@bowagateglobal.com.

You can leave your business in our hands, be it Import, Export, Freight Forwarding, Clearing/Customs Duty Brokerage, Groupage Freight, Warehousing, Consolidation, Air Freight Consolidation, Shipping Globally, Door to Door Freight Shipping, etc.

Request a Quote HERE. For more information, write to us HERE. To have a chat with us directly via Whatsapp, click HERE.

China Extends Lunar New Year Date Due to Coronavirus Outbreak

In a bid to fight the Coronavirus, the China LNY Holiday has been extended further till 2nd of February 2020. Shanghai date extends further till 9th February 2020. The world biggest port is located in Shanghai, China.

The coronavirus first surfaced in 2019 and has since gradually spread into towns and cities in China. It has overtime injected fear as other countries make serious preventive steps to curb or restrict it from reaching or crossing the border.

A Call To Pay Attention To General Hygiene

The recent outbreak of respiratory illness reportedly caused by a Novel Coronavirus spreading across China, has as at the time of this post, claimed the lives of about 170 people while over 300,000 have been infested, so far.

Coronavirus is contagious and it spread from person to person. It was first recorded in Wuhan, China but now spreading across provinces in the country.

Coronavirus is any of a group of RNA viruses that cause a variety of diseases in humans and other animals. In the case of human, coronavirus causes respiratory infections, which includes common cold.

Taking Preventive Measures More Seriously

Although the spread is not dominant in Nigeria yet, serious measures are expected to be in place by relevant Government Agencies like the Nigerian Maritime Administration and Safety Agency, the Ports health as well as the Immigration Service.

Their role is basically to ensure that seafarers coming to Nigeria undergo a serious screening process, as these are the first point of contact.

With the recent record of the latest positive test reported in Cote D’ Ivoire, evidence points to the fact that Africa is still invulnerable notwithstanding.

Arguably, with the speedy spread to over 16 countries, there is a need to ‘hold caution in the hands.’

Read About: Importing from China to Nigeria

Health Tips To Avoid The Virus

To observe the Virus, the following are the symptoms to watch out against.

1.     runny nose,

2.       headache,

3.       cough,

4.       sore throat,

5.       fever,

6.       a general feeling of being unwell.

Have you seen: How to Process and Obtain Form M.

While the Federal Government in Nigeria is expected to take appropriate precautions and preventive actions before we have an epidemic in Nigeria, please be advised to watch out for symptoms and report any slight suspicion to your Doctor immediately.

According to CDC, “the best way to prevent infection is to avoid being exposed to this virus.” However, as a reminder, CDC always recommends everyday preventive actions to help prevent the spread of respiratory viruses, including:

•    Wash your hands often with soap and water for at least 20 seconds. Use an alcohol-based hand sanitizer that contains at least 60% alcohol if soap and water are not available.
•  Avoid touching your eyes, nose, and mouth with unwashed hands. 

•  Avoid close contact with people who are sick.
• Stay home when you are sick.         
•   Cover your cough or sneeze with a tissue, then throw the tissue in the trash.

•   Clean and disinfect frequently touched objects and surfaces.
•   Take more fluid to keep your throat in a moist state. Drink more clean warm water
•   Avoid fried or spicy food
•   Take vitamin C as prescribed by the Doctor, etc.

Credit: cdc.gov

You may like to see our other post on Exporting Farm Produce from Nigeria to the USA.

Based on the above, BowaGate Global China Warehouse remains closed, to fully continue business on 10th February 2020. In case of any emergency, contact us for prompt attention.

Reasons Why You need a Freight Forwarder for your Business

According to https://invoice.ng, “Nigeria is one of the world’s leading business locations on the African continent. But when it comes to doing business in Nigeria, several challenges confront a typical Nigerian business”.

A lot of businesses are strangled already, trying to increase growth amidst heavy challenges involved in importing and exporting their goods from one country to the desired destination.

Little wonder why so many companies lately, have considered outsourcing some angles of their businesses to agencies to manage. In order to ease the burden on financing, personnel management, logistics, procurement, importation, exportation, etc.

On a quick note, a Freight Forwarder is someone who handles the exportation and importation of goods from the country of origin to the destination country. They use the various mode of transportation, adopt best industry practice and have their duties in shouldering other people’s shipping concerns to maximum satisfaction.

Read Also: Why Air Freight is Best Considered Transportation Mode

In this post, we share some reasons why you should contact a Freight Forward for your business, immediately.

Table of Contents

·         You need a Hassle-Free Movement of your Consignments

·         You need a Master of the Game to negotiate for best rates

·         You need professional advice on consolidation

·         You Need Insurance to protect your goods

·         You need proper Inventory Management

·         you need someone prepared to handle emergency

·         Let’s Guide You Through The Process

You Need A Hassle-Free Movement Of Your Consignments

Right from the point of documentation, customs clearance, arranging and booking cargoes space for your consignments, to the point of negotiating rates or charges, etc, a Freight Forwarder will have you covered.

Can you Imagine your goods flying around the globe while you are all relaxed? That’s the feeling when a reliable Freight Forwarder shoulders your shipping concerns.

Read Also: Top Facts About Container Shipping

You Need A Master Of The Game To Negotiate For Best Rates

Negotiating the rate is one, but getting the best is another. These are two separate understandings. Every business wants to cut costs, one way or the other. And not every business has an established relationship with authorities in charge of incoming shipments.

You need a Freight Forwarder who has an established relationship with carriers and the Customs. This way, you are assured of getting a great rate for your shipments.

A Freight Forwarder and Licensed Customs Agent like BowaGate Global Limited takes advantage of a high volume of goods to reduce costs of transportation through consolidation, being in a very good relationship with major key players in the logistics sector.

BowaGate Global offers a very reduced freight rate while offering very fast delivery.

Check out ourrecent Promo, still on-going.

You Need Professional Advice On Consolidation

With the consolidation of your goods, you are sure of a considerably reduced cost of transportation of the goods. A Freight Forwarder will work in combining your smaller shipments to make a large one. By implication, you pay less the amount you would have paid, for having a bulky package, because of the increased volume.

 You Need Insurance To Protect Your Goods

The Freight Forwarder’s duty is to prepare Cargo Insurance on your goods. So in the event of losses or damages, you are indemnified. So, whether you having your shipment traveling by Road, Sea, or Air, you have little or nothing to worry about it.

Read About: The Cheapest Alternative shipping Method

You Need Proper Inventory Management

It is true that most large scale businesses have warehouses. They manage their inventories all by themselves. It is also true that small scale businesses might not have that capability. 

Some Freight Forwarders provide the storage, handle the goods, package them and also distribute when necessary. Proper management of your inventories is as important as properly managing your business in the sense of growth.

You Need Someone Prepared To Handle Emergency

Sometimes, due to offloading delays by a carrier, or natural calamities such as climatic change or any other forms of calamities, your shipment might be routed to a different port to save situations.

There is usually the unforeseen circumstance that may weigh in panic, but a Freight Forwarder who is always prepared to handle such an emergency would have you covered.

If not for anything else, you surely need a Freight Forwarder to handle such challenges with ease.

You Need Insurance To Protect Your Goods

The Freight Forwarder’s duty is to prepare Cargo Insurance on your goods. So in the event of losses or damages, you are indemnified. So, whether you having your shipment traveling by Road, Sea, or Air, you have little or nothing to worry about it.

Read About: The Cheapest Alternative shipping Method

You Need Proper Inventory Management

It is true that most large scale businesses have warehouses. They manage their inventories all by themselves. It is also true that small scale businesses might not have that capability. 

Some Freight Forwarders provide the storage, handle the goods, package them and also distribute when necessary. Proper management of your inventories is as important as properly managing your business in the sense of growth.

You Need Someone Prepared To Handle Emergency

Sometimes, due to offloading delays by a carrier, or natural calamities such as climatic change or any other forms of calamities, your shipment might be routed to a different port to save situations.

There is usually the unforeseen circumstance that may weigh in panic, but a Freight Forwarder who is always prepared to handle such an emergency would have you covered.

If not for anything else, you surely need a Freight Forwarder to handle such challenges with ease.

Let’s Guide You Through The Process

Call Funmi on +2348186078330 or have a Chat with us via WhatsApp on 08147068472.

Our lines are open during business hours. You can also send an email to info@bowagateglobal.com.

HOW TO SELECT THE BEST LOGISTICS SERVICE PROVIDER IN NIGERIA

 

No doubt, selecting the best logistics company in Nigeria to mediate between your goods and the suppliers can be intimidating. 

As an entrepreneur or business owner in Nigeria, you want to find a good company to transport or ship your goods; do proper research about them; determine which one best fits your expectations, and select the best logistics company in Nigeria for freight shipping, clearance and other logistics needs.

Much more than not, to find one, however daunting, requires considering a list of qualities relative to the demands of your business. 

This is so that you do not get doubled-crossed by fraudsters; fall into the tricks of incompetent hands, or close any deal with unregistered or unqualified ‘self-acclaimed-agencies’. 

To select the best logistics service provider for your business in Nigeria is, however, strictly personal as satisfaction is relative. So you need to exercise absolute carefulness. 

Now you want to lift your cargo, either via air freight, sea freight, land freight, you are advised to consider these 5 points.

Table of Contents

·    Check on their Capabilities & Competencies 

          Find out about the Company Stability

·         Study the Customer Service/Relations

·         Check the Reputation of the Company

·         Check their Ability to Manouveur to the proper Rates

Check On Their Capabilities & Competencies 

Be sure to find out that the prospective logistics provider is capable of handling specific service areas that meet your company’s expectations. Remember they must have a set of abilities to satisfy both short-term and future needs.

As widely placed as Logistics Business is, so there are a lot of areas of expertise to accomplish in order to boast of having it all in any type of trade. 

So, that a company is an expert in one area does not completely indicate that they can manage your requests without making recourse to other ‘experts.’ 

This may be fine, but how would you predict the unforeseen or have direct access to the other experts to know of their unique capabilities? 

Find Out About The Company Stability

How long has the company been in existence? 

The stability of a prospective logistic company is as important as the growth of your own business. Quite a lot of unpredictable factors can mar a company’s stability due to many other factors avails, therefore bring down their wings.

In spite of the daunting factors, there are a few logistics companies that have endured the test of time and have been in existence for decades. BowaGate Global, for example, prides its over 2 decades old stability of saving time and money for her clients, in the industry and has continuously recorded successes with various types of client daily.

So, whether you are running a simple or complex supply chain, to avoid falling in wrong hands, ensure that the best logistics provider is considered, by also determining the provider’s stability in the industry. 

Selecting a stable logistics company is a key factor in guaranteeing an enhancing solid business relationship between you and the provider. 

 Study The Customer Service/Relations

The Customer Service section of every business is responsible for upholding the corporate image of every business. They solve various problems by providing adequate timely information, effective communication and are very responsive to the core.

The question to ask is as follows, what is the priority level of the logistics provider’s customer service or relationship. Do they have adequate responsiveness, excellent communication lines, or what is their level of efficiency in solving clients’ problems? 

By prioritizing customer service or our customer relationship with our clients, we have built a formidable wall of defence that has enhanced our relationship growth (both clients and us). 

This area is as important as the other aspect to look into when considering the best logistics company in Nigeria for your business. 

Check The Reputation Of The Company

•        How long have they been in business? 
•       What type of reviews do they have online or offline?
• .     How do they treat their staff, suppliers and employees?

Building a positive reputation takes years of consistent excellent reports. It requires the satisfaction of clients to the point of trust.

The integrity of your prospective Logistics Provider must be tested as quickly as possible. This might not be easy to get unless you give it time for proper investigation. 

Investigate the customers, suppliers and even the employees to know whether the provider has a good, bad or ugly reputation. 

Choosing the best logistics service provider in Nigeria requires, among other things, patience. To eventually stand convinced that you are not dealing with the wrong persons or company, you want to be attentive to the entire processes.

Check Their Ability To Manoeuveur To The Proper Rates

There is absolutely nothing like a one-price-fit-all concept in the logistics business. Prices vary from one company to another, depending on the needs of the customer. 

A good logistics service provider would understand the shifting needs of her customers and proffer the best rate for you. 

Some times, the rate may be higher than you literarily expected. In that case, it might only mean that you have not provided adequate information or documentation needed for that consignment to be shipped down.

HOW TO CALCULATE CHARGEABLE WEIGHT

Whether you are an importer or exporter, or a freight forwarder, you might have come across terms like actual weight, volumetric weight or dimensional weight and chargeable weight among a host of others, when issued quotes or invoices. That informs you should understand how to calculate chargeable weight appropriately.

First-time exporters and importers are enjoined to ensure proper understanding of how to calculate chargeable weight.

We’ve had some complaints from entrepreneurs or business owners about being unclear on how their freight charges were determined.

Although, some have expressed little or no attention to details on the mathematics computed to arrive at the chargeable weight. But while some do, they, however, feel ripped-off of their hard earnings, notwithstanding. Quite a number, out of improper information, see the charged rate as uncalled for as they expected a ‘reasonable’ rate.

As a business owner, knowing how to calculate chargeable weight is as good as your overall intent to keep your business yielding more gains. This is important as any form of change or adjustment may affect freight bills, anytime and anywhere.

So, do you ever wonder how these charges are calculated or determined?

Table of Contents

·         What to expect at the end of this post

·         What is Chargeable Weight?

·         Illustration for Clarity Purpose

·         How we Calculate the Chargeable weight (using a typical Quote).

What To Expect At The End Of This Post

In this post, we would be shedding light on what chargeable weight is, and most especially how you could calculate the chargeable weight of your shipments.

First, the term actual weight refers to the exact weight of the product + the packaging of the product. It is the combined weight of the packaging materials, including the content kept inside.

On the other hand, dimensional weight is calculated as the length of package x height of package x width of the package divided by Dimensional divisor.

That is;

(L x H x W)/Dimensional divisor

Dimensional weight can help save a lot of money as consolidation and repackaging can be done which would cut shipping cost.

What Is Chargeable Weight?

Chargeable weight is the actual (gross) weight or volumetric weight (also referred to as dimensional weight) of the shipment, whichever one is greater.

According to the IATA policy, whichever weight is higher (actual or dimensional) would be charged upon.

The estimated weight of a package or consignment is calculated based on its dimensions, i.e. length, width and height of the package (L x W x H).

Have you ever heard that no matter the weight, the size does matters!?

So, when you have a package of particular weight to ship, as important as the weight is, the size matters much more and must be put into serious consideration.

It is important to know that in some cases, whether the Volume weight is higher than Gross weight or Gross Weight is higher than Volume Weight, the greater is taken as chargeable weight.

This is according to IATA rule of whichever is lower on rate and whichever is higher on Weight. In order to establish the chargeable weight, it is calculated as 1 metric ton = 6 cubic meters.

Read Also: Why Air Freight is Best Alternative

Illustration For Clarity Purpose

For clarity, in order to define chargeable weight and at what condition a shipment is charged for, we are going to use an illustration.

This is a small box which weighs 10kg, and this is a big box weighing 10kg as well.

In extent, the cost of shipping the big box will be typically charged on the size. While the cost of shipping the smaller box will be charged on the weight.

This is so because every vehicle, aircraft, and container have a weight capacity and size capacity.

So, the big box might occupy the capacity of the aircraft or container or maybe the van (as the case may be), but will barely touch the weight capacity, unlike the small box. Since typically, large items with a lightweight take up more space than the small, yet heavy items.

On the other hand, the smaller box will reach the weight capacity of the transport mode, but may not occupy the entire space. That’s why the Airlines charge according to Chargeable Weight.

Carriers have therefore calculated weight to volume conversion to take into consideration. But how is this calculated? Isn’t it rather complicated? Especially that the charges vary on the different method of transport and the carrier used.

Volumetric Weight Measurement of Air, Sea and Road Freight

1cbm = 167kgs for air freight, sea freight it is 1cbm = 1000kgs and road freight 1cbm = 333kgs

How We Calculate The Chargeable Weight (Using A Typical Quote).

We usually work out the chargeable weight by taking whichever is the greater of the gross weight and the volumetric weight. The chargeable weight is used a lot in forwarders’ quotes and invoices.

It is important to remember that transport prices based on weight are almost always calculated using chargeable weight. Only a few air freight surcharges are still based on gross weight but these are becoming fewer and far between.

We must not forget that as the formula for calculating volumetric weight changes with the mode of transport, when our consignment uses more than one mode of transport, different chargeable weights will have to be calculated to work out the overall cost.

Example: chargeable weight calculation in multi-modal transport

A typical quote might include, among other things, the following items:
Sea freight: 45 USD W/M
BAF: 15 USD W/M
Collection: 0.05 EUR / Kg (*)
Handling: 12 EUR t/m3
Clearance: 65 EUR.