When importing items for personal use, customs duties are likely the first thing that comes to mind for many people.
If you import without sufficient knowledge, you might end up facing unexpectedly high billing at customs.
Therefore, in this article, we would like to explain customs duties in a simple yet detailed manner so that even beginners can easily understand.
Furthermore, we will introduce some lesser-known customs rules that are beneficial to know to save money.
Since the explanations on the official customs website can be difficult to understand, we have summarized the main points, so please use this as a reference.
What Exactly Are the Customs Duties We Often Hear About?
First, we would like to briefly explain what customs duties actually are.
If you feel you already know enough about this, feel free to skip ahead and continue reading the rest.
A simple explanation of customs duties is as follows.
- Important source of tax revenue for Japan
- Money required when importing products from overseas
- The amount varies depending on the country of purchase, the type of product, and the price
Basically, when an individual makes a small international shipment, it is free in most cases. However, when importing a full container, for example, customs duties and consumption taxes can sometimes exceed two million yen.
Why Customs Duties Are Necessary
So, why are customs duties necessary?
There are two main reasons why customs duties are necessary.
- To generate national revenue for Japan
- To protect domestic industries in Japan
Without customs duties, cheap products from overseas would be continuously imported, which would make it difficult for Japanese domestic products to sell.
While there is certainly the benefit of generating tax revenue for Japan, customs duties exist primarily to protect domestic industries.
Therefore, tariff rates often differ completely depending on whether the product is from a developing country or a developed country.
Tariff Rates Differ Between Personal and Commercial Use
For products purchased for personal use, the customs duty percentage is applied to 60% of the overseas retail price.
Since taxes are not applied to the shipping costs of the products, the tax rate will be cheaper than you might imagine.
On the other hand, for products purchased for commercial use, no price adjustment can be made to the product, so the customs duty percentage is applied to 100% of the purchase price.
Furthermore, customs duties are also added to the shipping costs of the products, resulting in a duty amount that is about twice as much compared to personal use.
How to Save on Customs Duties for Personal Imports
In the case of commercial use, it is common to lower customs duties by taking measures such as reducing shipping costs and purchasing prices.
On the other hand, for personal use, you can save money on customs duties by using the following methods.
Tax Exemption for a Total Dutiable Value of 10,000 Yen or Less
By utilizing this tax exemption rule, you can obtain products with zero customs duties.
Since the dutiable value for personal use is calculated at 60% of the product price, doing the math backward means that products priced at 16,666 yen or less are eligible for tax exemption.
Therefore, the first countermeasure is to keep the purchase amount within 16,666 yen and split the shipments into multiple deliveries.
Though there are many cases where people get lucky and end up paying no tax even if the product price is much higher. (lol)
For international shipping, there are methods that can keep costs significantly lower compared to standard shipping options like USPS.
For this reason, when calculating customs duties and consumption taxes, it is quite often cheaper to split the shipments into multiple times to stay within the tax exemption rule.
On the other hand, please be aware that some products are excluded from this tax exemption rule.
Let us introduce some of the most well-known examples.
- Rice
- Leather goods (bags, shoes, wallets, etc.)
- Clothing (T-shirts, suits, underwear, etc.)
- Sugar and processed sugar products
- Processed milk products
- Processed meat products
If your items do not fall under these categories, and if they are not expensive or frequently imported, utilizing the tax exemption rule is a highly viable option.
Simplified Tariffs for Products Under 200,000 Yen
There is also a system called “simplified tariffs,” which differs from the standard customs tariff rates.
Tariff rates are actually determined in great detail, meaning they differ for every single product, such as a certain percentage for raw items, another for roasted items, and yet another if sugar is used.
However, with a massive volume of products being imported, customs officers would not be able to keep up with their work if they had to process all of them individually.
Therefore, the simplified tariff system has been established for items that are not very expensive.
It is a system that applies the most appropriate tax rate out of seven categories based on the characteristics of the imported item.
It is predetermined that if a product is of a certain type, a uniform tax rate will be applied.
This applies as long as the value of the imported product is 200,000 yen or less, which is classified as “small-value imported freight.”
Unless it is for commercial use, most people’s personal imports will not exceed 200,000 yen, so customs duties will not become as high as you might worry.