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 Post subject: Gear Pyraminx - issues with customs
PostPosted: Mon Mar 12, 2012 5:56 am 
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Location: Germany, Siegerland
Hi!

I faced a problem with German customs and ask for advice from experienced people. Recently, Meffert sent me 15 Gear Pyraminx puzzles as a royalty. I did not pay him for them. The customs asked for an invoice and his people prepared a pro forma invoice with the single puzzle price $0.80 (let's say this was the ex-factory cost) so the total price was very little. But the customs employees made a research and found the Meffert's site with the price $36 (they even printed me a screenshot). So, now they want from me 106 EURO VAT duties. I would totally agree with this approach if I were a normal buyer who paid $36 for each puzzle. This would conform the value added tax meaning.
But in my case there was no value added - Meffert paid cost price $0.80 or something like that for each puzzle and sent them to me without adding value. Should I really pay VAT as if the puzzle price were $36?

Is it still possible to convince the customs to set my package free or should I better refuse to accept it (so that it will be returned back to HK) and let Mefferts send it to me again (customs does not always make an inspection - it was the very first time I had this problem).

Timur


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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Mon Mar 12, 2012 6:34 am 
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I think the issue is that the value of the shipment is not $0.80*15. I think (treating this as wholesale) Meffert would not sell his puzzles at ex-factory price to other sellers? Surely he'd want to make some profit? I am not sure what the cost to distributors is but it could be anything from $4 to $15, I'd say. Even though the value of your shipment is clearly not $36*15, it definitely is worth far more than $12 and you should be taxed for that.
Effectively it's payment in kind. You could treat this as Meffert paying you $200 in royalties and you then using that money towards buying the puzzles from him.
I suppose you could argue to customs that the $36 price does not apply and that you should use applicable wholesale pricing instead. However, that pricing will not be $0.80/puzzle.

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Mon Mar 12, 2012 7:24 am 
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I am no expert on the matter but this is how I see it-
If you argue that it's a payment then you may end up paying more. In the UK such a transaction would be liable for income tax which is higher than VAT.

UK tax law-
"Bartering is an exchange of property or services. You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else."

I assume people importing wholesale priced goods will have something set up in advance and necessary paper work would be included with the items. I don't think you can win this one.

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Mon Mar 12, 2012 9:26 am 
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Joined: Sun Feb 20, 2011 5:14 pm
Location: Hertfordshire, UK
I found that entering the UK plastic puzzles have a duty rate of 4.7% and a VAT rate of 20%. So on 15 puzzles calculated at a value of $36 each it came to a total import and duty tax of £22.81 ($35.62).

So how come the massive difference in amounts? Have I worked something out wrong there? I know that Timur is in Germany rather than the UK, but the difference couldn't be that big surely?

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Mon Mar 12, 2012 9:37 am 
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Location: Louisiana, US
I still don't think it is fair that you get royalty in puzzles rather than cash. And paying duty on those puzzles out-of-pocket is an insult. Puzzles are a hard sell if you don't have the infrastructure to sell them to people who want to buy, and eBay is a ripoff from what I heard. I don't see why Meffert's can't wire you the money to a bank account (or use Western Union or some other payment service). Your only obligation then would be to report the income for tax purposes. In the US, we are required by the government to submit yearly tax returns. I assume in Germany the paperwork is completely different but similar principals apply.

Now that customs knows you are receiving bulk shipments in goods, it is likely if you send the package back that customs will intercept future parcels to sent to you. You're kind of being stuck in a hard place, being forced to make payment for a "gift".

In the United States, import tariffs are small or non-existent in most cases. Under $200 is free, and between $200 and some larger value (over $1000) is a flat-rate $25 fee. Beyond this larger value, it is only a couple percent of the total value of the shipment (actually less than sales tax on domestic goods). I have had customs hold Shapeways shipments until I paid $25 for customs fees at the UPS warehouse because the declared value was over $200. The fees in Europe are huge in comparison.

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Tue Mar 13, 2012 12:00 am 
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Location: Bay Area, CA
stardust4ever wrote:
I still don't think it is fair that you get royalty in puzzles rather than cash. And paying duty on those puzzles out-of-pocket is an insult. Puzzles are a hard sell if you don't have the infrastructure to sell them to people who want to buy, and eBay is a ripoff from what I heard. I don't see why Meffert's can't wire you the money to a bank account (or use Western Union or some other payment service).
Because these are the terms of Meffert working with puzzle designers. For the first run of puzzles there is a risk he may never make back his money, so giving a few extra puzzles to the designer is a cost efficient option for him. All of the designers who work with him have the opportunity of not agreeing, but so far all of us seem to be fine with this. I certainly was, I would have wanted a number of my puzzles anyway, and the idea of paying full price for my own puzzle is a bit odd. Yet they do have value, so I don't think of it as being taken advantage of. In fact I hadn't bought many of Meffert's puzzles and used my "credit" as an opportunity to do a bit of shopping.
stardust4ever wrote:
In the United States, import tariffs are small or non-existent in most cases. Under $200 is free, and between $200 and some larger value (over $1000) is a flat-rate $25 fee. Beyond this larger value, it is only a couple percent of the total value of the shipment (actually less than sales tax on domestic goods). I have had customs hold Shapeways shipments until I paid $25 for customs fees at the UPS warehouse because the declared value was over $200. The fees in Europe are huge in comparison.
This bit of text is printed on a card given to IPP members:
IPP puzzle tariff card wrote:
As of 1995, all Puzzles (including parts and accessories) brought into the United States, for business or for personal collection, are DUTY FREE, under the U.S. Customs Service, Harmonized Tariff Schedule #9503.60.20.00.
The Harmonized System Tariff Classification code is also known as the Schedule B number in the U.S.
On the other side is:
IPP puzzle tariff card wrote:
All International Puzzle Party attendees who will go through U.S. Customs may wish to carry this card in their wallet. Present it politely to the U.S. Customs official or supervisor, only for informational purposes, if and when they begin to charge you customs duty on your puzzles.
Quite useful information, I keep it in my wallet at all times :)

Perhaps mention it next time you get a Shapeways shipment in.

Dave

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Tue Mar 13, 2012 3:43 am 
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Location: Germany, Siegerland
Hybrid424 wrote:
I found that entering the UK plastic puzzles have a duty rate of 4.7% and a VAT rate of 20%. So on 15 puzzles calculated at a value of $36 each it came to a total import and duty tax of £22.81 ($35.62).
How did you count? Don't you have to pay VAT?
$36*15 = $540;
$540*24.7% = $133,38 ~ €101 - about the same.
stardust4ever wrote:
I still don't think it is fair that you get royalty in puzzles rather than cash. And paying duty on those puzzles out-of-pocket is an insult.
Well it is not the only thing I get - I do receive royalties in cash, but to earn any more or less good amount, at least 1000 pcs. must be sold - an this takes long time. As for the puzzles, I can get them much earlier - as soon as the puzzles are released. Uwe does not attach great importance to the unsold puzzles, so I can actually ask for as many as I want - not only my puzzles, but anything that he produces. Isn't that good?

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Tue Mar 13, 2012 2:36 pm 
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Joined: Sat Mar 24, 2007 6:58 pm
Location: Louisiana, US
Timur wrote:
Hybrid424 wrote:
I found that entering the UK plastic puzzles have a duty rate of 4.7% and a VAT rate of 20%. So on 15 puzzles calculated at a value of $36 each it came to a total import and duty tax of £22.81 ($35.62).
How did you count? Don't you have to pay VAT?
$36*15 = $540;
$540*24.7% = $133,38 ~ €101 - about the same.
stardust4ever wrote:
I still don't think it is fair that you get royalty in puzzles rather than cash. And paying duty on those puzzles out-of-pocket is an insult.
Well it is not the only thing I get - I do receive royalties in cash, but to earn any more or less good amount, at least 1000 pcs. must be sold - an this takes long time. As for the puzzles, I can get them much earlier - as soon as the puzzles are released. Uwe does not attach great importance to the unsold puzzles, so I can actually ask for as many as I want - not only my puzzles, but anything that he produces. Isn't that good?
Free Puzzles = awesome! I was just under the impression that puzzles were the only royalty you were getting. Not sure what I would do with 15 or more though; one is usually enough... :wink:

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 Post subject: Re: Gear Pyraminx - issues with customs
PostPosted: Tue Mar 20, 2012 7:32 am 
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Joined: Mon Mar 22, 2010 7:00 am
Location: Germany, Siegerland
I have an update on this topic - I rejected this package and let it be sent back to the sender. In the meantime, Meffert sent me another package with the same contents. This time, it passed the customs without any problems, so I now have my Gear Pyraminxes :)

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Signed Vulcanos ($48), Pillow Pyraminxes ($22)
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