Why is shipping part of duty calculation?

| 31/10/2018 | 49 Comments

Ask Auntie, CNS Local Life, Caymanian statusI have been trying to find out why I keep getting charged customs duty on the shipping and insurance costs for personal goods I’m bringing into Cayman via a freight forwarder company. I’ve looked at the Customs Law and Customs Tariffs Law and cannot see anything about this. Is it even legal for Government to include duty for shipping and insurance costs as well as the goods themselves?


Auntie’s answer: While the laws you mention are very detailed and comprehensive, they are also very difficult to unravel. I have searched on more than one occasion for the information you seek and even when I think I might have come upon the relevant section, I still found it impossible to determine exactly what it was saying.

Fortunately, the Cayman Islands Department of Customs website is a lot easier to navigate and understand. I found the answer in the section on Import Entry.

According to the website, the value of duty on an item is, according to the law (and I have yet to find that in the document), “the cost of the goods (including insurance and freight) at the time the goods are entered”.

As to why that is the case, I cannot say, because it does seem counterintuitive to charge duty on the cost of shipping. So, if you decide you are not in a hurry to receive the item and you pay for a slow boat to Cayman instead of a fast plane, then the duty owed would be less. It is hard to see the sense in that. On insurance, I haven’t a clue.

There is one other point I want to make. You may be wondering why I didn’t ask the Department of Customs directly for the answer to your question. Well, some readers may recall that earlier this year I gave the department a “D” for not responding to numerous queries over an extended period of time (see Customs get ‘D’ for ‘disappointing’). Despite that track record, I nevertheless sent another question to them a few months later. Want to guess the result? No response, followed up by a second attempt, which also went unanswered.

Seems like the department has a ‘no reply’ custom.

The latest versions of the two laws mentioned can be found on the CNS Library

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Category: Ask Auntie, Customs Questions

Comments (49)

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  1. Anonymous says:

    I used to order, on a regular basis, contact lenses from a US vendor, who then mailed them to me in Cayman. They arrived in a small box which landed in my SMB mailbox. No problems there at all. Then around 2013 I started getting notices to pick up my contact lenses at the APO Post Office (and we know how much fun it can be dealing with that errand). Contact lenses are duty free, yet I had to pay CI$3.00 (CI$2.00 for some kind of package tax and CI$1.00 for customs handling) per box. Yes, I know they were just small amounts each time, but they felt like cheeky cash grabs by the CI Government.

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    • Ripped off says:

      I hear ya on that. Recently I had to pay $3 to pick up a certificate sent to me without my knowledge and request by my professional body. A certificate – not a parcel or a package. It came in a brown envelope with a card backing and there was a cheap pen inside too. Both items went straight in the trash.
      Last year I was also charged $3 to pick up some Christmas cards because my family had put 3 cards all in the same envelope making it a ‘package’ apparently.
      I suppose the Government has to pay for the port somehow (sarc)

  2. Anonymous says:

    Quite simple. Duty is charged on the total cost incurred to get the good or goods onto the wharf (or airport apron)- and that is made up of the first cost of the good or goods plus the cost of carriage. If you hav insured the good or goods, this too is a cost incurred. If you elect not to pay insurance on carriage, then you are not charged duty on it. If your good or good rode with you as checked baggage (freight) on the flight you came in on, you will not be charged on that carriage as it was ‘free’ as part of your flight ticket.

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    • Anonymous says:

      So then why is free shipping suddenly added and charged?

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      • Anonymous says:

        That is an excellent question and it seems to be completely illegal! Gov here thinks they have supreme rule to make up laws. None of the gov departments seem to comprehend they are creatures of statue and can only act in accordance with laws and regulations duly passed by the legislature.

  3. Anonymous says:

    “According to the website, the value of duty on an item is, according to the law (and I have yet to find that in the document), “the cost of the goods (including insurance and freight) at the time the goods are entered”.”

    Likewise I have never had a satisfactory response to my queries to the department on this. My view is at the time the goods enter the country the value of the freight is $0.00 because it has been used

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  4. Anonymous says:

    You pay duty on the landed value of the goods. Sec 40-43 of the Customs Law (2017) explains that this is the sellers price at the source plus the cost of shipping and insuring the goods to destination. It assumes the goods are worth what it costs to buy and deliver them to you. In commercial terms, this is equivalent to a sale on C.I.F. terms. (Cost, Insurance, Freight). It is the basis for duty everywhere in the world. If your import invoice is CIF, that’s the value you pay duty on. If the goods are sold C&F(Cost and Freight), then you have to add the actual marine insurance premium paid, or if uninsured, an amount equal to 1% of the C&F price. If the goods are invoiced FOB (Free on board, meaning sellers price includes loading cost), then you have to add the ocean freight plus the insurance. There may not be anyone at customs who can explain this to you, but any knowledgeable freight forwarder or commercial attorney could. Again, this is how it works everywhere, it is not a special Cayman-style rip off.

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  5. Anonymous says:

    I was wondering about the same thing as I got a custom bill of
    CI$ 60 for a AUD 220 bill (incl shipping) which is roughly CI$135. ……so either someone didn’t make a currency conversion or I am paying almost 50% import duty….

    I don’t have a problem paying my fair share, but if you are ordering goods which are not available on Island and if you have approached a couple of local businesses to bring it in for you and you don’t even get a response from them and then you are being screwed on duty…..that’s just wrong!

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  6. Richard Wadd says:

    The ORIGINAL reason for charging Duty on Shipping was to protect ‘local manufacturers’ from cheaper imported goods and encourage support for local industry in the process. In a country where we HAVE no choice but to Import everything, charging Duty on shipping is not only Counter-productive to economic growth, but downright IMMORAL!
    Eliminating Duty on shipping has a positive impact on both the economy AND Government coffers as it lowers the Cost of living significantly, which in turn creates more savings and disposable income in the general population. The are a few countries that don’t, and the statistics support this.

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  7. Anonymous says:

    Business as usual in the Cayman Islands haha. No income tax helps because if I had to pay that I’d be packing my bags tomorrow.

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    • Anonymous says:

      Exactly. Duties are a pay-as-you-go tax. I much prefer them over income (and other) taxes. As to the duties on shipping, think about the “value” of an item being its replacement cost. That replacement cost would include the shipping. That IS the entire value.

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  8. Anonymous says:

    We just pass all these costs onto the consumer , if you wish to live in Cayman , so be it . Otherwise , there are a bunch of other countries you can move to . In those countries , you should be prepared for state and federal taxes , sales tax / GST , taxation on your income and capital gains , did I mention taxation on your house/s & property/s? For this , you will be rewarded with a national health insurance system that actually functions , for next to zero cost ,[ removes the U.S. from this list]. A retirement plan that will work for you , free education for ALL your children , a military for when the bad guys come ashore and you can ride on trains , yes… TRAINS.!

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  9. Anonymous says:

    Actually I can see where they are coming from with regards to duties on the Shipping. I am not sure why they would include the insurance cost though. You see, there is a term called Fair Market Value here in Cayman when one is considering to purchase a vehicle or in general any other item. So, that Fair Market Value(that is the price the average person will be willing to pay for the item) is built up not only of the monetary value of the item but the cost to ship it here. I.e if you bought a brand new car for $1,5000 and then pad to pay duties to bring it in, which then ran the cost up to $21,000. Whilst the car values $15,000 in the other country it would now value $21,000 here. Ask you self this: would I then try to sell back the car for the same $15,000 or would I also include the shipping cost to recoup in event that I wanted to immediately resell?

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  10. Anonymous says:

    While I agree that the charges are a bit crazy, I would still rather pay inflated import duty over income taxes.

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  11. Anonymous says:

    They’re even fleecing us in the US now. I got this on the bottom of my email from Deluxe

    P.S.S. Notice:
    Effective September 23, 2018 thru January 6, 2019, a Peak Season Surcharge will apply to all shipments from the Continental United States to the Cayman Islands.
    Lcl: $0.09 P.S.S. / 20’ FCL: $75.00 per unit P.S.S. / 40’ FLC: $150.00 per unit P.S.S.

    I have no idea what that means other than I’m going to get stung even more

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  12. Anonymous says:

    The same reason there is a Dormant accounts law. After ONLY seven years someone’s money shamelessly become CIG’ money.

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  13. Anonymous says:

    Count your blessings kids…not long ago, we used to have to line-up buy a triplicate duty form for KYD$0.25 cash. If you screwed up your duty form document or calcs, your ballpoint busted out, or you crossed something out, or they didn’t like the cut of your jib, back you’d be sent to line up to pay another $0.25 and start all over – and you had better be charming and polite while doing so!

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  14. Anonymous says:

    The argument they’ve made to me in the past is that the value of the item imported is what it cost you, i.e. purchase price + tax, shipping and insurance costs all together. I’ve had a $3 item from China shipped to me (shipping cost of about $120) and you can guess what the import fees were on top of that. It has a interesting twist in the sense that it makes it a deterrence to order stuff from anywhere other than the USA (or other countries close by).

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  15. Anonymous says:

    “Tailgating”

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  16. Anonymous says:

    Great question, no reasonable answer! Why? Because the process is designed to gouge the importer! Simple! There is no reasonable reason why one should pay a % on any cost except the actual cost of the item. There should be no % charge on shipping and definitely not on insurance. BTW, please note, 1% of the item’s cost is added as insurance to all imports by Customs regardless if the importer has already paid shipping insurance to the shipper. Double whammy? It’s a pure rip-off. Government is not in the insurance business and this could possibly be challenged legally. While it is the law, what is preventing the law itself from being flawed?

    Glad someone is finally publicly questioning, I get into it with Customs officers every time I import anything. Pure thievery! Just like the repatriation fee on work permits for domestic helpers, which Immigration Department charges!

    It’s about time we question and challenge these unfair charges which service only to drive up the cost of living in Cayman! There are many “illegal” laws and approved public processes on our books. Why? Morons in charge!

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    • Anonymous says:

      What lawyer and firm will take this up? I’d add my name to the suit as I feel I’ve been defrauded out of money just for shipping in items that couldn’t be purchased here.

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    • Anonymous says:

      Simple answer really.

      Duty is levied in the full cost (including purchase price, shipping, etc) to get the product to the Cayman border.

      Nothing unusual here.

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      • Anonymous says:

        They double dip on the shipping ALL THE TIME. I get items shipped in which has shipping included in cost then have to pay duty on the shipping included cost PLUS whatever Customs magically calculates shipping to be. So a $40 item can end up having duty on $120 when they include their port, package, and insurance fees. Everyone knows it’s a racket. They charge warehouse fees even though items come straight from plane to me because they’re pre-cleared.

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  17. Anonymous says:

    I once shipped an item to the port of Miami via US inland freight and was charged duty on that and the shipping from Miami

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    • Anonymous says:

      Yep, that’s the way it works. This is only controversial because you live on an island and people import stuff individually to avoid the high prices. You don’t notice it when you buy Chinese tools at Home Depot in the US, but it is there.

  18. Anonymous says:

    M-O-N-E-Y!

  19. Anonymous says:

    Why then is it that when the cost of shipping is free by the vender, you are still taxed based on a fictitious amount?

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    • Anonymous says:

      Not sure there is a legal answer to that.

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    • Anonymous says:

      Good question. I would like to know more.

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    • Anonymous says:

      Ditto fictitious insurance!

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    • Anonymous says:

      That doesn’t happen to me. When I get free shipping, I pay zero duty on the shipping amount. It’s why I watch Cabela’s and Duluth Trading for their yearly ‘free shipping’, because they are two U.S. companies that extend it to us down here.

    • Anonymous says:

      I got charged 100USD shipping for a 120USD item that shipped free from the US. This is via DHL. They say it’s what the normal cost would be if it did not ship free so basically they are ignoring the free shipping offered by the US shop.

  20. Anonymous says:

    The REAL reason is that it’s a money spinner for CIG! If they didn’t charge duty on freight & insurance they’d have to put the duty rates up. They’ve got to find SOME way of paying for all the advertising for the piers and other stuff (like fancy, expensive travel) they want so badly – even though the rest of us DON’T want them! It’s the old saying – “Out of the public’s pocket – into the politicos pocket.”

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  21. Fed up with Fedex says:

    What annoys me is that you get charged duty on the shipping element twice. I recently ordered an item sent by Fedex. The item including shipping to Cayman cost $150. Shipping by Fedex cost $70. So I was charged duty on the invoiced cost of the item being $150 and then also on the cost of the shipping of $70 again. So I paid duty on $220 for a $80 item. I complained to both Fedex and customs dept and got no where.
    It’s robbery!

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    • Ron Ebanks says:

      Fed up with Fedex , you could have went to Miami had a vacation and buy the thing and came back paying less . You just watch those kinda things .

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    • Anonymous says:

      Why did you ship Fedex if the seller was paid to ship?

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      • Fed up with Fedex says:

        The seller shipped the item Fedex included in the price I paid. But then Fedex charged me duty on the $150 AND on the shipping cost on top again, effectively charging duty on the cost of shipping twice.

    • Anonymous says:

      Our customs department is absolutely useless. No one there, that I have dealt with, has any common sense, nor customer service skills. Franky the just do not want to help at all. All they want is to be right, even when they are clearly wrong.

      I have spent weeks trying to reason with them, they have no logic, zero, zip, nada.

      You are penalized if you are honest, and they have a chip on their shoulders. They are myopic, anti-business and completely incompetent. They are a disgrace.

  22. Anonymous says:

    Clearly the department’s attitude is they make the rules.

    Unfortunately they do not understand that they work for the people of Cayman, and not the wasteful government.

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  23. Anonymous says:

    Because the number is higher, duh.

  24. Anonymous says:

    My favourite part is that if the goods are NOT insured they still charge you duty on what the insurance would have been if insured.

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  25. Q says:

    It’s standard practice in the shipping industry, known as CIF – Cost, Insurance and Freight. The reason is because if shipping was not included in the duty calculation that would allow room for evading the tax by moving value from the goods to the shipping.

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    • Anonymous says:

      In theory yes, but how many companies would actually manipulate invoices this way for customers? I recently bought something which included free worldwide shipping in the price I paid. But customs then added the actual cost of the shipping onto what I paid before charging duty on it, so I effectively paid duty on the shipping cost twice.

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