What is an ad valorem duty, who sets it, and how it is calculated + calculation example?

In this article, we will analyze what an ad valorem duty is, who sets it, and how it is calculated. Let’s give formula and make a calculation with the analysis of a specific example. And also consider the advantages and disadvantages of this fee.

What is ad valorem duty?

It is no longer a revelation to anyone that in the case of transporting products across the state border, it is necessary to reimburse the customs fee. There are several ways to calculate the rate of such a payment, including combined, specific and ad valorem, which will be discussed today.

The ad valorem method of calculating the indicated payment means determining its amount by establishing a certain percentage of the customs price of the supplied products.

A special formula is used to determine the amount of the fee. It resembles proportional taxation on sales. The ad valorem tax is collected within a single class, despite the fact that products may be of completely different quality.

When applying this duty, it is expected to pay the amount, which is set as a percentage of the customs value of the delivered cargo.

Who installs?

The rate of the specified fee is regulated at the level of legislation. It can vary from 0 to 30%. The fixed rate applies only to goods such as caviar, sugar, alcoholic beverages, as well as cars, the period of use of which has exceeded 5 years.

The state has the right to change the level of rates for this tax, which is associated with the desire to protect the interests of national consumers and promote the growth of exports of goods and services. Very often, this rate changes up or down for a very short period.

The assessment of imported or exported goods carried out at the customs border can have a significant impact on the level of mandatory payment, which is very subjective and may not correspond to reality.

However, the tax rate is directly affected by the current political and economic situation in the state.

If the prices of imported and exported goods fall, then the popularity of this method of calculating the tax falls.

The amount of ad valorem tax on the territory of the Russian state is calculated in Russian rubles.

Calculation order

The amount of ad valorem customs duty is a derivative of the customs value of the goods and the current rate.

When calculating the amount of payment, the rates that are relevant when accepting the customs declaration are used. An exception to this rule should be called the situation:

  • when the product is released before the declaration is submitted;
  • when the rates applicable for the carriage of goods by pipeline are used;
  • when goods are illegally transported across the border;
  • when accepted restrictions are violated in the production process.

The application of the designated method of calculating the customs duty occurs when export taxes are calculated, as well as import tariffs on goods. The only country where the application of such a duty is not practiced is Switzerland. In all other countries of the world it is popular. This is confirmed by the fact that 96% of all applicable rates are ad valorem.

Formula and calculation example

The formula for calculating this fee is as follows:

Ta \u003d TC x p \u003d (C x K) x p

In this case, Ta means the amount of the tariff used, CU is the customs value of the goods, C is its price, K is the quantity, and p is the ad valorem rate.

In order to more clearly consider how the indicated amount is calculated, it is necessary to analyze a specific example.

Assume that the unit price of the product to be supplied is $10. The batch size is 15,000 units. The current ad valorem duty rate is 5%.

In order to calculate the customs value of the delivery, it is necessary to multiply the cost of a unit of goods by the number of such units. In this case, TC = 10 x 15,000 = $150,000.

After that, the amount to be paid should be calculated directly: Ta = 150,000 x 5% = $7,500.

Thus, in this particular example, the ad valorem duty amounted to 7.5 thousand US dollars.

Advantages and disadvantages

The key advantage of this way of calculating duty is that it allows for fair tariff protection to be maintained during periods of high price fluctuations.

As other advantages of the ad valorem duty, experts call:

  • simplicity of the calculation formula;
  • compliance with basic foreign trade standards;
  • recommendation for its use by the WTO;
  • the possibility of ensuring stability in the domestic market during periods of strong price fluctuations;
  • an obstacle to the import of low-quality products;
  • minimization of losses in case of non-payment of payment.

In addition to the advantages of this duty, there are also disadvantages:

  • the possibility for the declarant to reduce the cost of goods transported across the border, which, accordingly, will reduce the amount of duty;
  • the amount of the duty will be included in the price of the goods, which will ultimately affect the wallets of end consumers.


In conclusion, I would like to add that the use of designated customs fees is very convenient from a practical point of view and allows you to take advantage of a number of existing advantages. Nevertheless, it is important here not to go to extremes and not bring the matter to the point where the indicated shortcomings begin to appear.

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