Understanding Customs Duty Calculation

To record customs duties, you must first define tax components, tax dependency codes, tax calculation codes, and set up the tax determination. After you have set up your customs duties structure, the system will calculate and record customs duties.

Methods for Calculating Customs Duties

For each customs duty component you define the method to use for calculating customs duties. Define the calculation method on the Tax Calculation Code page. Three methods exist for customs duties:

Term	Definition
Percentage	The customs duty is a percentage of the customs duty assessable value of the item. Customs duty assessable value is the total of: CIF value of item in local currency. This is the sum of total FOB item value, freight, insurance, and other charges. Landing charges. This is 1 percent of the CIF item value. The user can change this amount on the BOE. Any previously applied customs duties.
Amount	The customs duty is a flat amount. Enter the flat amount to be applied to the PO schedule line in the Tax Amount field on the Tax Calculation Code page.
Quantity	The customs duty is a unit price multiplied by the number of units. Enter the unit price in the Tax Amount field on the Tax Calculation Code page. To calculate the customs duty, the system multiplies the tax amount by the item quantity on the transaction.

Term

Definition

Percentage

The customs duty is a percentage of the customs duty assessable value of the item.

Customs duty assessable value is the total of:

CIF value of item in local currency.
This is the sum of total FOB item value, freight, insurance, and other charges.
Landing charges.
This is 1 percent of the CIF item value. The user can change this amount on the BOE.
Any previously applied customs duties.

Amount

The customs duty is a flat amount. Enter the flat amount to be applied to the PO schedule line in the Tax Amount field on the Tax Calculation Code page.

Quantity

The customs duty is a unit price multiplied by the number of units. Enter the unit price in the Tax Amount field on the Tax Calculation Code page. To calculate the customs duty, the system multiplies the tax amount by the item quantity on the transaction.

Applying Customs Duties to the PO

The system applies the customs duty tax calculation code to the correct purchase order schedule line by using the tax determination and the tax calculation.

Recoverable and Nonrecoverable Customs Duties

Each customs duty can be split into the recoverable and nonrecoverable parts based on the recoverable tax percentage defined on the Tax Calculation Code page for the customs duty. The recoverable portion is posted to an expense account. The system calculates the nonrecoverable percentage by subtracting the recoverable percent from 100 percent. The nonrecoverable portion is added as a landed cost to the item's inventory value in Inventory. For example, if the item value is 10,000 INR, the tax rate percentage is 3 percent, and the recoverable tax percentage is 90 percent, then the 30 INR is applied to the cost of the item in inventory, as follows: (10,000 INR * .03) * .10 = 30 INR. When you record the related voucher for customs duties in Payables, any change in the nonrecoverable customs duty can be applied to the item cost using PeopleSoft's landed cost feature.

Multiple customs duty components can be applied to the item's cost as a lump sum or individually by using one or more cost elements for customs duties.