In the current global economic downturn, many companies have been hit hard with falling orders and rising costs – a double whammy so to speak. For the immediate short term, there does not appear to be an end in sight to the bad economic news. Many companies are looking to reduce costs, but often neglect to review their international trade activities. There are certainly savings to be made here.
Customs duty and other import-related taxes can be manageable costs, if you assess your operations to determine the different elements. Many companies don’t know the true extent of their import duties and taxes, simply because they are often hidden in the Cost of Goods Sold account. For some companies, the true cost may be higher than the corporate tax cost, particularly during a downturn when profits are reduced.
You can start by looking at your cross border transactions for the past year, which will give you a good snapshot of your international trade activities and costs. Next, you can take proactive steps to determine if these costs can be legitimately reduced, and how best to accomplish it.
Here are a few key areas you may consider reviewing:
Many companies do not take full advantage of available bilateral and multilateral preferential trade agreements, due to concerns about liability for errors, complex qualification rules, increased compliance burden and risks, or just a lack of awareness of the opportunity. A well-structured claim for preferential tariff treatment can provide huge cost savings, particularly as the ASEAN rules have been amended to make qualification more straightforward and potentially simpler.
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