On this page9
Online duty calculators give you a number in three clicks. The number is wrong when the inputs are wrong, and the inputs are where importers slip. Duty depends on a classification you have to get right, a customs value that is defined by law rather than by your invoice total, and a set of federal fees that apply on top. Here is the whole calculation, in order.
Step 1: classify the goods
Duty rates attach to a ten digit Harmonized Tariff Schedule number, not to a product name. Two similar articles can carry very different rates, and apparel is the classic case, which is why we wrote a separate guide on HS codes for clothing and textiles.
Until the classification is settled, everything downstream is a guess.
Step 2: establish the customs value
The primary basis is transaction value: the price actually paid or payable for the goods when sold for export to the United States. 19 CFR 152.103 sets what sits inside that figure.
| Included in customs value | Excluded when separately identified |
|---|---|
| Price paid for the goods | International freight to the US port |
| Packing costs incurred by the buyer | Insurance on the international leg |
| Selling commissions paid by the buyer | US inland freight after arrival |
| Assists, royalties and licence fees tied to the goods | Duties and federal taxes |
The United States values imports on an FOB basis, so ocean freight and insurance stay out of the dutiable value when they are shown separately. An importer who pays duty on a CIF total overpays on every entry by the freight and insurance amount multiplied by the duty rate.
Additions in detail
- Packing costs the buyer incurs for the imported goods are added.
- Assists are added at the buyer's acquisition or production cost. They cover materials, parts, tools, dies and molds that the buyer supplies to the producer free or at a reduced price. A tool that was used before is valued at its original cost adjusted down for that use.
- Royalties for patents covering the manufacturing process are dutiable. A royalty paid to a third party for US use of a trademark or copyright is a selling expense of the buyer and is not added. In each case the test is whether the buyer had to pay it as a condition of the sale for export to the United States.
- Resale proceeds that accrue directly or indirectly to the seller are added.
The commercial invoice is where these lines are shown or hidden, so a correct value starts with a correct invoice.
When transaction value cannot be used
CBP appraises merchandise in a fixed order under 19 CFR 152.101(b), and moves to the next method only when the previous one cannot be determined:
- Transaction value of the imported goods.
- Transaction value of identical merchandise.
- Transaction value of similar merchandise.
- Deductive value, worked back from the US resale price.
- Computed value, built from the cost of materials, fabrication and profit.
- A value derived from the other methods with reasonable adjustments.
Transaction value is not accepted when the buyer's use or resale of the goods is restricted beyond what law, geographic limits or an immaterial effect on value allow, or when the price depends on a condition whose value cannot be determined. A sale between related parties is accepted when the relationship did not influence the price. The invoice supports the first method, so its quality decides whether the value is accepted.
Step 3: apply the duty rate
Rates come in three shapes, and the freight glossary defines each of them. Ad valorem is a percentage of the customs value. Specific is an amount per unit, per kilo or per litre. Compound combines both. Additional tariff actions, where they apply to your origin and classification, stack on top of the base rate rather than replacing it.
Step 4: add the federal fees
Two fees apply to formal ocean entries.
- Merchandise Processing Fee: 0.3464 percent of the customs value under 19 CFR 24.23, paid by the importer of record when the entry summary is presented. The regulation sets a minimum of $25 and a maximum of $485 per entry, and CBP adjusts both for inflation under 19 CFR 24.22(k), so confirm the current figures before you model a year of imports.
- Harbor Maintenance Fee: 0.125 percent of the value of commercial cargo loaded or unloaded at a covered port under 19 CFR 24.24. It applies to cargo moving on a commercial vessel and not to air.
How the Merchandise Processing Fee caps
The fee is a percentage with a floor and a ceiling. At 0.3464 percent, a 5,000 dollar entry produces 17.32 dollars, which is below the 25 dollar minimum, so the fee is the minimum. A 200,000 dollar entry produces 692.80 dollars, which is above the 485 dollar maximum, so the fee is the maximum. Both figures are the regulation's base amounts before the annual adjustment. From 7,218 to 140,011 dollars of customs value, the percentage itself applies.
A specific and a compound rate
Rates in these illustrations are hypothetical. A specific rate of 0.50 dollars per kilogram on 8,000 kg is 4,000 dollars of duty, whatever the invoice value. A compound rate of 2 percent plus 0.10 dollars per kilogram on 8,000 kg valued at 20,000 dollars is 400 dollars plus 800 dollars, or 1,200 dollars. The unit of quantity in the tariff line, not the unit on the invoice, is the one that the duty is calculated on, so the invoice has to show weight or quantity in a unit that converts to it.
When the duty is paid
The importer can file the entry summary with estimated duties at the time of entry, in which case the filing serves as both entry and entry summary. Otherwise the entry summary, with estimated duties attached, is due within 10 working days after the time of entry (19 CFR 142.12). The importer of record owes the duty, and a customs bond secures it. Our guide to single versus continuous customs bonds covers that side, and the glossary explains the customs entry.
A worked example
Take a shipment of woven cotton shirts sold at 40,000 dollars FOB, with 3,200 dollars of ocean freight and 250 dollars of marine insurance shown separately on the invoice.
- Customs value: 40,000 dollars. Freight and insurance are separately identified and stay out.
- Duty at the rate for the classification, say 16.5 percent: 6,600 dollars.
- Merchandise Processing Fee: 0.3464 percent of 40,000 dollars is 138.56 dollars, which sits between the 25 dollar minimum and the 485 dollar maximum before the annual adjustment.
- Harbor Maintenance Fee at 0.125 percent of 40,000 dollars: 50 dollars.
- Total landed cost adds duty and fees to the goods, the freight, the insurance, terminal charges and delivery.
| Line | Amount (USD) |
|---|---|
| Goods, FOB | 40,000.00 |
| Duty at 16.5 percent | 6,600.00 |
| Merchandise Processing Fee | 138.56 |
| Harbor Maintenance Fee | 50.00 |
| Ocean freight | 3,200.00 |
| Marine insurance | 250.00 |
| Subtotal before terminal charges and delivery | 50,238.56 |
Had the freight and insurance been bundled into a 43,450 dollar CIF figure, the duty base would rise by 3,450 dollars and the duty by 569.25 dollars (16.5 percent), the Merchandise Processing Fee by 11.95 dollars and the Harbor Maintenance Fee by 4.31 dollars.
Change the classification by one heading and the 6,600 dollars moves by thousands. That is why classification, not the calculator, is where the effort belongs.
What calculators cannot see
They cannot see whether a trade agreement applies, and preference depends on rules of origin that look past the country of assembly. They cannot see antidumping or countervailing duty orders, which are product and producer specific and can exceed the value of the goods. They cannot see quota, licensing or partner government agency requirements. And they cannot see whether your invoice contains assists or royalties that belong in the value.
A customs broker checks all of that on the entry. Getting the same answers before you commit to a purchase order is cheaper.
Where the freight side touches the duty side
The commodity data on your entry has to agree with the manifest data your carrier filed, or the container waits. The connection runs through the AMS filing and the importer's own ISF. Keep the descriptions and classifications consistent across all three and clearance is uneventful.
The Incoterm in the sales contract fixes which costs are inside the price. Under FOB terms the invoice price excludes international freight, and under CIF it includes freight and insurance, so the contract term decides whether the invoice needs a freight line to be split out. Incoterms for China to Caribbean imports walks through the terms.
FAQ
How do I calculate customs duty in the US?
Classify the goods to a ten digit HTS number, establish the customs value on an FOB basis, apply the duty rate to that value, then add the Merchandise Processing Fee of 0.3464 percent and, for ocean cargo, the Harbor Maintenance Fee of 0.125 percent.
Is duty charged on shipping costs?
Not when international freight and insurance are separately identified on the commercial invoice. The United States values imports on an FOB basis.
What is the Merchandise Processing Fee?
A CBP fee of 0.3464 percent of the customs value on formal entries, with a per entry minimum of $25 and maximum of $485 before the annual inflation adjustment under 19 CFR 24.22(k).
Do I pay duty on samples?
Yes, unless a tariff provision exempts them. Declare a realistic value: marking a shipment "no commercial value" does not remove the obligation, and US invoice rules require a value for each item even when there is no purchase.
Who pays the duty?
The importer of record. The Incoterm you agreed decides who is contractually responsible, but CBP looks to the importer of record on the entry.
When is the duty due?
With the entry summary. If the importer does not file the summary at the time of entry, it is due within 10 working days after entry, with estimated duties attached.
Want the landed cost worked out before you buy? Send us the invoice and the lane and we will price the freight and flag the customs questions.
Ready to ship your freight?
