Tax & Tariff Rates, Credits & Exemptions

When governments are able to publish computational tax and tariff rules on the Internet in directly executable form, businesses and consumers will gain relief from the administrative burden of compliance. The following stories illustrate how Lichen will provide a way to consolidate consumption-side taxes and tariffs in a way that strengthens alignment to the core fiscal–efficiency criteria of simplicity, fairness, harmonization, consistency, convenience, neutrality, precision, reliability and public understanding. Conforming to global standards such as UBL and Tax XML, Lichen enables more efficient international, national, state/provincial, municipal and district systems for all transaction-related fiscal instruments, consistently across mobile, web, point-of-sale and other channels, using any commerce environment and payment method.

A Musician from Bamako Goes to Montreal:
Once it’s launched, Lichen can be used to simplify and expedite cross-border purchasing.

While in Montreal for the Jazz Festival, a musician from Bamako, Mali needed to quickly replace her damaged guitar. She purchased the new one from the original French musical instrument manufacturer’s direct sales website, and arranged for it to be sent by courier to her hotel in Montreal. Since the vendor’s e-commerce application runs Lichen, it automatically recognized her primary residence as being in Mali, even though the guitar was being shipped from France to Canada. Lichen correctly calculated and displayed the Mali import duty. To check the amount, she tapped on “Details” and saw there that the valuation method is CIF (Cost, Insurance and Freight), meaning that the duties payable are calculated on the complete shipping value, which includes the cost of the imported goods, the cost of freight, and the cost of insurance. Since Lichen is implemented directly in the e-commerce site, she could choose to pay the import duty automatically so that the shipment can be pre-cleared through customs, thus saving two days shipping time. She accepted the notification and proceeded with payment to both the vendor and Mali’s revenue agency. Since tax and duties were paid, the shipping manifest issued by the French vendor contained all the documentation required for the courier to have this item pre-clear Canadian Customs. As a result she received her replacement guitar in time for the concert. Using Lichen saved her the hassle of initially having to pay the Canadian GST of 5%, as well as Quebec’s QST of 9.98% in Montreal, attempting to claim back those amounts at Montreal’s airport prior to departure, and then paying the 20% sales tax upon arrival back at Bamako–Sénou International Airport.

Medical Diagnostics Components and Trade Agreements:
Once it’s launched, Lichen can be used to stay abreast of myriad changes in cross-border trade rules.

A medical-devices firm in Tochigi, Japan buys monthly supplies of various specialized diagnostic components from suppliers in Mumbai India, Vancouver Canada and Singapore. All of the suppliers’ e-commerce websites differ, but the medical-devices company implements Lichen on its own procurement site, through which it interfaces with the sites of those registered suppliers. The company’s use of Lichen ensures that all of its procurement operations remain up-to-date with ever-evolving customs rules. Before this was in place—for example in 2011 when Japan and Singapore concluded the Japan-Singapore Economic Partnership Agreement—the company’s purchasing manager in Japan and a sales manager in Singapore had to communicate for weeks with their respective countries’ trade officials to determine whether this particular category of imported components would be exempt from duties under the new agreement. More recently, when the Canada-Japan Economic Partnership Agreement came into effect in the Autumn of 2016, the company was confident that any change to applicable duties would be automatically updated in the enhanced purchase order. Furthermore, the Japanese firm benefits from the automatic implementation of trade incentives that the Japan External Trade Organization provides to reduce the duty that Japanese firms pay on imports that are destined for re-export as manufactured products. While making certain that the correct duties are automatically paid on all of its component imports and final product exports, the Japanese firm arranges to pre-clear shipments through customs, significantly reducing the risk of shipping delays.

Many Thousands of Rules, all in One Pass:
Once it’s launched, Lichen will automatically draw upon global standard codes for effortless trade facilitation.

A mid-sized home-furnishing retailer operating throughout Latin America and the Caribbean implements Lichen in the company’s e-commerce operations to automate both sales tax and duty rules in all transactions, whether these occur through a Web browser, a mobile app, a checkout kiosk, phone order, or a point-of-sale device in a physical store. Using Lichen, the retailer pulls in cross-border tariff rules directly from the WTO Tariff Download Facility, and also relies on a specialised tax company to validate transaction tax information drawn from the Internet of Rules. Together, these sources provide real-time compliance with the evolving fiscal rules amongst partially overlapping and unique tax jurisdictions within countries, and amongst commercial trade zones involving groups of countries. This makes it feasible for import/export companies of any size to deal with the complicated matrix overlapping tax jurisdictions and trade agreements at various stages of implementation. Lichen automatically recognises global product codes such as SPSC for product type, ISIC for industry type, and HS for customs classification. By processing such data during the final set-up of a customer’s purchase order, all applicable taxes and duties can be handled “in one pass” when the customer clicks to activate the transaction. This is great for sales, great for the customer, and it also dramatically simplifies operations overseen by the company’s accounting team. It increases compliance management as well, and improves data flow for performance analysis.