BUSINESS

A business is an organization involved in the trade of goods, services, or both to consumers.

Businesses are predominant in capitalist economies, where most of them are privately owned and
administered to provide service to customers for profit. Businesses may also be not-for-
profit or state-owned. A business owned by multiple individuals may be referred to as a company.

Basic forms of ownership

Although forms of business ownership vary by jurisdiction, several common forms exist:

 Sole proprietorship: A sole proprietorship is a business owned by one person for-profit. The owner
may operate the business alone or may employ others. The owner of the business has
unlimited liability for the debts incurred by the business.
 Partnership: A partnership is a business owned by two or more people. In most forms of partnerships,
each partner has unlimited liability for the debts incurred by the business. The three typical
classifications of for-profit partnerships are general partnerships, limited partnerships, and limited liability
partnerships.
 Corporation: A corporation is a limited liability business that has a separate legal personality from its
members. Corporations can be either government-owned or privately owned, and corporations can
organize either for-profit or not-for-profit. A privately owned, for-profit corporation is owned by
shareholders who elect a board of directors to direct the corporation and hire its managerial staff. A
privately owned, for-profit corporation can be either privately held or publicly held.
 Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business that can
organize for-profit or not-for-profit. A cooperative differs from a for-profit corporation in that it has
members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically
classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the
ideology of economic democracy.

Types of business entity

A business entity is a commercial, corporate and/or other institution that is formed and administered as
per commercial law in order to engage in business activities, usually the sale of a product or a service. There
are many types of business entities defined in the legal systems of various countries. These
include corporations, cooperatives, partnerships, sole traders, limited liability company and other specifically
labelled types of entities, e.g.:

≈ public limited company (UK) plc

≈ Ltd. (UK)
≈ limited partnership, etc.

However, the regulations governing particular types of entity, even those described as roughly
equivalent, differ from jurisdiction to jurisdiction.

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When creating or restructuring a business, the legal responsibilities will depend on the type of
business entity chosen.

Lithuania

 UAB (Uždaroji akcinė bendrovė): ≈ Ltd. (UK)

 AB (Akcinė bendrovė): ≈ plc (UK)
 VšĮ (Viešoji įstaiga): ≈ non-profit organization
 IĮ (Individuali įmonė): ≈ sole proprietorship
 TŪB (Tikroji ūkinė bendrija): ≈ general partnership
 KŪB (Komanditinė ūkinė bendrija): ≈ limited partnership
 MB (Mažoji bendrija) : ≈ small partnership

TAXES

A tax (from the Latin taxo; "rate") is a financial charge or other levy imposed upon a taxpayer (an individual
or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law.
Taxes are also imposed by many administrative divisions. Taxes consist of direct or indirect taxes and may
be paid in money or as its labour equivalent.

Taxes on income
Many jurisdictions tax the income of individuals and business entities, including corporations. Generally the
tax is imposed on net profits from business, net gains, and other income. Computation of income subject to
tax may be determined under accounting principles used in the jurisdiction, which may be modified or
replaced by tax law principles in the jurisdiction. The incidence of taxation varies by system, and some
systems may be viewed as progressive or regressive. Rates of tax may vary or be constant (flat) by income
level. Many systems allow individuals certain personal allowances and other nonbusiness reductions to
taxable income.

Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after
the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers
who have not paid enough during the tax year; and tax refunds from the government for those who have
overpaid. Income tax systems will often have deductions available that lessen the total tax liability by
reducing total taxable income. They may allow losses from one type of income to be counted against
another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax
systems may isolate the loss, such that business losses can only be deducted against business tax by
carrying forward the loss to later tax years.

Negative income tax

In economics, a negative income tax (abbreviated NIT) is a progressive income tax system where people
earning below a certain amount receive supplemental pay from the government instead of paying taxes to
the government.

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Capital gains tax
Most jurisdictions imposing an income tax treat capital gains as part of income subject to tax. Capital gain is
generally a gain on sale of capital assets that is those assets not held for sale in the ordinary course of
business. Capital assets include personal assets in many jurisdictions. Some jurisdictions provide
preferential rates of tax or only partial taxation for capital gains. Some jurisdictions impose different rates or
levels of capital gains taxation based on the length of time the asset was held.

Social security contributions

Many countries provide publicly funded retirement or health care systems. In connection with these systems,
the country typically requires employers and/or employees to make compulsory payments. These payments
are often computed by reference to wages or earnings from self-employment. Tax rates are generally fixed,
but a different rate may be imposed on employers than on employees.Some systems provide an upper limit
on earnings subject to the tax. A few systems provide that the tax is payable only on wages above a
particular amount. Such upper or lower limits may apply for retirement but not health care components of the
tax.
Taxes on property
Recurrent property taxes may be imposed on immovable property (real property) and some classes of
movable property. In addition, recurrent taxes may be imposed on net wealth of individuals or
corporations. Many jurisdictions impose estate tax, gift tax or other inheritance taxes on property at death or
gift transfer. Some jurisdictions impose taxes on financial or capital transactions.

Property tax
A property tax (or millage tax) is an ad valorem tax levy on the value of property that the owner of the
property is required to pay to a government in which the property is situated. Multiple jurisdictions may tax
the same property. There are three general varieties of property: land, improvements to land (immovable
man-made things, e.g. buildings) and personal property (movable things). Real estate or realty is the
combination of land and improvements to land.

Property taxes are usually charged on a recurrent basis (e.g., yearly). A common type of property tax is an
annual charge on the ownership of real estate, where the tax base is the estimated value of the property. For
a period of over 150 years from 1695 a window tax was levied in England, with the result that one can still
see listed buildings with windows bricked up in order to save their owners money. A similar tax on hearths
existed in France and elsewhere, with similar results. The two most common type of event driven property
taxes are stamp duty, charged upon change of ownership, and inheritance tax, which is imposed in many
countries on the estates of the deceased.

In contrast with a tax on real estate (land and buildings), a Land Value Tax (or LVT) is levied only on the
unimproved value of the land ("land" in this instance may mean either the economic term, i.e., all natural
resources, or the natural resources associated with specific areas of the Earth's surface: "lots" or "land
parcels"). Proponents of land value tax argue that it is economically justified, as it will not deter production,
distort market mechanisms or otherwise create deadweight losses the way other taxes do.

When real estate is held by a higher government unit or some other entity not subject to taxation by the local
government, the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of
the foregone tax revenues.

In many jurisdictions, there is a general tax levied periodically on residents who own personal
property (personalty) within the jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax.
The tax is often designed with blanket coverage and large exceptions for things like food and clothing.
Household goods are often exempt when kept or used within the household. Any otherwise non-exempt
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object can lose its exemption if regularly kept outside the household. Thus, tax collectors often monitor
newspaper articles for stories about wealthy people who have lent art to museums for public display,
because the artworks have then become subject to personal property tax. If an artwork had to be sent to
another state for some touch-ups, it may have become subject to personal property tax in that state as well.

Inheritance tax

Inheritance tax, estate tax, and death tax or duty are the names given to various taxes which arise on the
death of an individual. In United States tax law, there is a distinction between an estate tax and an
inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the
beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; for example, if using
this terminology UK inheritance tax would be an estate tax.

Expatriation tax
An Expatriation Tax is a tax on individuals who renounce their citizenship or residence. The tax is often
imposed based on a deemed disposition of all the individual's property. One example is the United
States under the American Jobs Creation Act, where any individual who has a net worth of $2 million or an
average income-tax liability of $127,000 who renounces his or her citizenship and leaves the country is
automatically assumed to have done so for tax avoidance reasons and is subject to a higher tax rate.

Transfer tax
Historically, in many, countries, a contract needed to have a stamp affixed to make it valid. The charge for
the stamp was either a fixed amount or a percentage of the value of the transaction. In most countries the
stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares
and securities, the issue of bearer instruments, and certain partnership transactions. Its modern
derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions
involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by
decreasing liquidity. In the United States, transfer tax is often charged by the state or local government and
(in the case of real property transfers) can be tied to the recording of the deed or other transfer documents.

Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities),
and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a
percentage of the net worth exceeding a certain level. The tax may be levied on "natural" or legal "persons".
An example is France's ISF.

Taxes on goods and services

Value added tax (Goods and Services Tax)

A value added tax (VAT), also known as Goods and Services Tax (G.S.T), Single Business Tax, or Turnover
Tax in some countries, applies the equivalent of a sales tax to every operation that creates value. To give an
example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the
purchase price, remitting that amount to the government. The manufacturer will then transform the steel into
a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the
VAT on the higher price, but will remit to the government only the excess related to the "value added" (the
price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the
retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the
distribution mark-up to the government. The last VAT amount is paid by the eventual retail customer who
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cannot recover any of the previously paid VAT. For a VAT and sales tax of identical rates, the total tax paid is
the same, but it is paid at differing points in the process.

VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has
been charged (referred to as input tax) and VAT it has charged to others (referred to as output tax). The
difference between output tax and input tax is payable to the Local Tax Authority. If input tax is greater than
output tax the company can claim back money from the Local Tax Authority.

Sales taxes
Sales taxes are levied when a commodity is sold to its final consumer. Retail organizations contend that such
taxes discourage retail sales. The question of whether they are generally progressive or regressive is a
subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate
sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities
from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so
such exemptions make the tax more progressive. This is the classic "You pay for what you spend" tax, as
only those who spend money on non-exempt (i.e. luxury) items pay the tax.

A small number of U.S. states rely entirely on sales taxes for state revenue, as those states do not levy a
state income tax. Such states tend to have a moderate to large amount of tourism or inter-state travel that
occurs within their borders, allowing the state to benefit from taxes from people the state would otherwise not
tax. In this way, the state is able to reduce the tax burden on its citizens. The U.S. states that do not levy a
state income tax are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas, Washington state, and
Wyoming. Additionally, New Hampshire and Tennessee levy state income taxes only on dividends and
interest income. Of the above states, only Alaska and New Hampshire do not levy a state sales tax.

Excises
Unlike an ad valorem, an excise is not a function of the value of the product being taxed. Excise taxes are
based on the quantity, not the value, of product purchased. For example, in the United States, the
Federal government imposes an excise tax of 18.4 cents per U.S. gallon (4.86¢/L) of gasoline, while state
governments levy an additional 8 to 28 cents per U.S. gallon. Excises on particular commodities are
frequently hypothecated. For example, a fuel excise (use tax) is often used to pay for public transportation,
especially roads and bridges and for the protection of the environment. A special form of hypothecation
arises where an excise is used to compensate a party to a transaction for alleged uncontrollable abuse; for
example, a blank media tax is a tax on recordable media such as CD-Rs, whose proceeds are typically
allocated to copyright holders. Critics charge that such taxes blindly tax those who make legitimate and
illegitimate usages of the products; for instance, a person or corporation using CD-R's for data archival
should not have to subsidize the producers of popular music.

Excises (or exemptions from them) are also used to modify consumption patterns (social engineering). For
example, a high excise is used to discourage alcohol consumption, relative to other goods. This may be
combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by
alcohol abuse. Similar taxes may exist on tobacco, pornography, etc., and they may be collectively referred
to as "sin taxes". A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as
petrol, diesel-fuel, jet fuels, and natural gas. The object is to reduce the release of carbon into the
atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle ownership.

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INSURANCE

Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment.

An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the
person or entity buying the insurance policy. The amount of money to be charged for a certain amount of
insurance coverage is called the premium. 

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of
payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the
case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details
the conditions and circumstances under which the insured will be financially compensated.

History of insurance

In some sense we can say that insurance appears simultaneously with the appearance of human society.
We know of two types of economies in human societies: natural or non-monetary economies (using barter
and trade with no centralized nor standardized set of financial instruments) and more modern monetary
economies (with markets, currency, financial instruments and so on). The former is more primitive and the
insurance in such economies entails agreements of mutual aid. If one family's house is destroyed the
neighbours are committed to help rebuild. Granaries housed another primitive form of insurance to indemnify
against famines. Often informal or formally intrinsic to local religious customs, this type of insurance has
survived to the present day in some countries where a modern money economy with its financial instruments
is not widespread.

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance
is part of the financial sphere), early methods of transferring or distributing risk were practiced
by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese
merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the
loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the
famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a
merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for
the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.

Types of insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims
are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which
are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy
may cover risks in one or more of the categories set out below. For example, vehicle insurance would
typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising
from an accident). A home insurance policy in the US typically includes coverage for damage to the home
and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for
medical expenses of guests who are injured on the owner's property.

Business insurance can take a number of different forms, such as the various kinds of professional liability
insurance, also called professional indemnity (PI), which are discussed below under that name; and the
business owner's policy (BOP), which packages into one policy many of the kinds of coverage that a
business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a
homeowner needs.

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Auto insurance

A wrecked vehicle

Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle
they own, such as in a traffic collision.

Coverage typically includes:

 Property coverage, for damage to or theft of the car

 Liability coverage, for the legal responsibility to others for bodily injury or property damage
 Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral
expenses
Most countries, such as the United Kingdom, require drivers to buy some, but not all, of these coverages.
When a car is used as collateral for a loan the lender usually requires specific coverage.

Gap insurance
Gap insurance covers the excess amount on your auto loan in an instance where your insurance company
does not cover the entire loan. Depending on the companies specific policies it might or might not cover the
deductible as well. This coverage is marketed for those who put low down payments, have high interest rates
on their loans, and those with 60 month or longer terms. Gap insurance is typically offered by your finance
company when you first purchase your vehicle. Most auto insurance companies offer this coverage to
consumers as well. If you are unsure if GAP coverage had been purchased, you should check your vehicle
lease or purchase documentation
Health insurance
.Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance
protects policyholders for dental costs. In the US and Canada, dental insurance is often part of an employer's
benefits package, along with health insurance.

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Accident, sickness, and unemployment insurance

Workers' compensation, or employers' liability insurance, is compulsory in some countries

 Disability insurance policies provide financial support in the event of the policyholder becoming unable to
work because of disabling illness or injury. It provides monthly support to help pay such obligations
as mortgage loans and credit cards. Short-term and long-term disability policies are available to
individuals, but considering the expense, long-term policies are generally obtained only by those with at
least six-figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a person
for a period typically up to six months, paying a stipend each month to cover medical bills and other
necessities.
 Long-term disability insurance covers an individual's expenses for the long term, up until such time as
they are considered permanently disabled and thereafter. Insurance companies will often try to
encourage the person back into employment in preference to and before declaring them unable to work
at all and therefore totally disabled.
 Disability overhead insurance allows business owners to cover the overhead expenses of their business
while they are unable to work.
 Total permanent disability insurance provides benefits when a person is permanently disabled and can
no longer work in their profession, often taken as an adjunct to life insurance.
 Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying
medical expenses incurred because of a job-related injury.

Casualty

Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad
spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers
compensation, and some liability insurances.

 Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from
the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses
arising from theft or embezzlement.

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 Political risk insurance is a form of casualty insurance that can be taken out by businesses with
operations in countries in which there is a risk that revolution or other political conditions could result in a
loss.
Life
Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may
specifically provide for income to an insured person's family, burial, funeral and other final expenses.

Burial insurance
Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses,
such as the cost of a funeral. The Greeks and Romans introduced burial insurance c. 600 CE when they
organized guilds called "benevolent societies" which cared for the surviving families and paid funeral
expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly
societies during Victorian times.

Property
Property insurance provides protection against risks to property, such as fire, theft or weather damage. This
may include specialized forms of insurance such as fire insurance, flood insurance, earthquake
insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may,
like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are
listed below:

US Airways Flight 1549 was written of after ditching into the Hudson River

 Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger
and third-party liability.Airports may also appear under this subcategory, including air traffic control and
refuelling operations for international airports through to smaller domestic exposures.
 Boiler insurance (also known as boiler and machinery insurance, or equipment breakdown insurance)
insures against accidental physical damage to boilers, equipment or machinery.
 Builder's risk insurance insures against the risk of physical loss or damage to property during
construction.
 Crop insurance may be purchased by farmers to reduce or manage various risks associated with
growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage,
insects, or disease.
 Earthquake insurance is a form of property insurance that pays the policyholder in the event of
an earthquake that causes damage to the property. Most ordinary home insurance policies do not cover
earthquake damage. Earthquake insurance policies generally feature a high deductible. Rates depend
on location and hence the likelihood of an earthquake, as well as the construction of the home.

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 Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of
fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest
acts of its employees.

Hurricane Katrina caused over $80 billion of storm and flood damage

 Flood insurance protects against property loss due to flooding. Many insurers in the US do not provide
flood insurance in some parts of the country. In response to this, the federal government created
the National Flood Insurance Program which serves as the insurer of last resort.
 Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated
in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's
home. In some geographical areas, the policy may exclude certain types of risks, such as flood or
earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's
responsibility. The policy may include inventory, or this can be bought as a separate policy, especially
for people who rent housing. In some countries, insurers offer a package which may include liability and
legal responsibility for injuries and property damage caused by members of the household, including
pets.
 Landlord insurance covers residential and commercial properties which are rented to others. Most
homeowners' insurance covers only owner-occupied homes.
 Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland
waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and
the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo
for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier
or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in
such policies, which extends the indemnity to cover loss of profit and other business expenses
attributable to the delay caused by a covered loss.

CUSTOMS
Customs is an authority or agency in a country responsible for collecting and safeguarding customs
duties and for controlling the flow of goods including animals, transports, personal effects
and hazardous items in and out of a country.

Depending on local legislation and regulations, the import or export of some goods may be restricted or
forbidden, and the customs agency enforces these rules. The customs authority may be different from the
immigration authority, which monitors persons who leave or enter the country, checking for appropriate
documentation, apprehending people wanted by international arrest warrants, and impeding the entry of
others deemed dangerous to the country.

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In most countries customs are attained through government agreements and international laws. A
customs duty is a tariff or tax on the importation (usually) or exportation (unusually) of goods. In the Kingdom
of England, customs duties were typically part of the customary revenue of the king, and therefore did not
need parliamentary consent to be levied, unlike excise duty, land tax, or other forms of taxes.

Commercial goods not yet cleared through customs are held in a customs area, often called a bonded store,
until processed. All authorised ports are recognised customs area.

Red and Green channels

Customs procedures for arriving passengers at many international airports, and some road crossings, are
separated into Red and Green Channels. Passengers with goods to declare (carrying items above the
permitted customs limits and/or carrying prohibited items) should go through the Red Channel.

Passengers with nothing to declare (carrying goods within the customs limits only and not carrying prohibited
items) can go through the Green Channel. Passengers going through the Green Channel are only subject to
spot checks and save time. But, if a passenger going through the Green Channel is found to have goods
above the customs limits on them or carrying prohibited items, they may be prosecuted for making a false
declaration to customs, by virtue of having gone through the Green Channel.

Australia, Canada, Ireland, New Zealand, the United Kingdom, and the United States do not officially operate
a red and green channel system; however, some airports copy this layout.

Airports within the European Union (EU) also have a Blue Channel. As the EU is a customs union, travellers
between EU countries do not have to pay customs duties. VAT and Excise duties may be applicable if the
goods are subsequently sold, but these are collected when the goods are sold, not at the border.
Passengers arriving from other EU countries should go through the Blue Channel, where they may still be
subject to checks for prohibited or restricted goods. In addition, limitations exist on various tobacco and
alcohol products being imported from other EU member states and use of the Blue Channel if those
limitations are being exceeded would be inappropriate. Luggage tickets for checked in luggage within the EU
are green-edged so they may be identified. UK policy is that entry into a particular Channel constitutes a
legal declaration.

Privatization of customs

Customs is an important part of the government involved in one of the three basic functions of a government,
namely, administration, maintenance of law, order and justice and collection of revenue. However, in a bid to
mitigate corruption, many countries have partly privatised its Customs. This has occurred by way of
engagement of Pre-shipment Inspection Agencies who examine the cargo and verify the declared value
before importation is effected and the nation Customs is obliged to accept the report of the agency for the
purpose of assessment of leviable duties and taxes at the port of entry.

While engaging a preshipment inspection agency may appear justified in a country with an inexperienced or
inadequate Customs establishment, the measure has not really been able to plug the loophole and protect
revenue. It has been found that evasion of Customs duty escalated when pre-shipment agencies took over. It
has also been alleged that such involvement of such agencies has been causing delays in the shipment
process. Privatization of Customs has been viewed as a fatal remedy.

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European Union
The basic customs law is harmonized across Europe. This includes customs duties and restrictions.
Customs tax from 150 €. For example:

Germany
Up to €22 there are no taxes (it is free). From €22 up to €150, it is necessary to pay VAT (EUSt in Germany)
which is 7 or 19%, depending on the goods. From €150 it is necessary to pay VAT and customs.

USA
The United States imposes tariffs or "customs duties" on imports of goods.: 3% on average. The duty is
levied at the time of import and is paid by the importer of record. Individuals arriving in the United States may
be exempt from duty on a limited amount of purchases, and on goods temporarily imported (such as laptop
computers) under the ATA Carnet system. Customs duties vary by country of origin and product, with duties
ranging from zero to 81% of the value of the goods. Goods from many countries are exempt from duty under
various trade agreements. Certain types of goods are exempt from duty regardless of source. Customs rules
differ from other import restrictions. Failure to properly comply with customs rules can result in seizure of
goods and civil and criminal penalties against involved parties. United States Customs and Border Protection
(“CBP”) enforces customs rules. All goods entering the United States are subject to inspection by CBP prior
to legal entry.

Customs broking

Customs broking or Customs brokerage is a profession that involves the "clearing" of goods

through customs barriers for importers and exporters (usually businesses). This involves the preparation of
documents and/or electronic submissions, the calculation and payment of taxes, duties and excises, and
facilitating communication between government authorities and importers and exporters.

Custom brokers may be employed by or affiliated with freight forwarders, independent businesses,

or shipping lines, importers, exporters, trade authorities, and customs brokerage firms.

European Union

For customs brokers and clearing agents operating within the European Union, there is no licensing system.
The onus is firmly on the importer or exporter to ensure that any party acting on their behalf is in possession
of the facts to do so.

Article 5 of the current customs code (Council Regulation 2913/1992) deals with representation, a key
concept. This provision allows an importer or exporter to appoint a third party to act on their behalf. The
importer or exporter can appoint the third party to act in two capacities, i.e., as a direct representative or as
an indirect representative. A direct representative will act on behalf of the importer/exporter but will have no
responsibility for the customs debt arising from their actions, whereas an indirect representative will have a
joint and several liability for the customs debt. In almost all cases, the third party will elect to provide
brokerage services on a direct representation basis. As a result the importer or exporter is fully exposed to
the risk or error and omission by the customs broker.

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