Customs Duty

Customs duty is a tax imposed by a government on goods imported into the country. In the United States, these duties are assessed by U.S. Customs and Border Protection (CBP) based on the product’s classification under the Harmonized Tariff Schedule (HTS), its declared value, and its country of origin. For e-commerce sellers importing inventory for Amazon FBA or direct-to-consumer fulfillment, customs duties represent a significant and unavoidable cost that directly affects product margins.

How Duty Rates Are Determined

Every product entering the U.S. is assigned a 10-digit HTS code. This code determines the applicable duty rate, which can range from 0% (for many raw materials and goods covered by trade agreements) to over 25% for certain finished products. The duty is calculated as a percentage of the product’s customs value, which includes the cost of the goods, insurance, and, in some cases, freight charges depending on the Incoterm used in the transaction.

For example, a shipment of polyester backpacks classified under HTS 4202.92 carries a duty rate of 17.6%. On a $20,000 declared value, the duty owed would be $3,520. Misclassifying those same backpacks under a different heading could result in overpayment, underpayment, or penalties from CBP.

Types of Customs Duties

The standard duty assessed on most imports is called an ad valorem duty, meaning it is calculated as a percentage of the product’s value. Other types include:

Specific duties are charged per unit of measurement rather than by value. Certain textiles, for instance, carry duties expressed as cents per kilogram.

Compound duties combine both ad valorem and specific rates. A product might face a 5% ad valorem duty plus $0.12 per unit.

Anti-dumping and countervailing duties are additional charges applied to goods from countries found to be selling below fair market value or receiving government subsidies. These can add 20% to over 200% to the base duty rate.

Section 301 and Section 201 Tariffs

Beyond standard duty rates, many products from China face additional Section 301 tariffs of 7.5% to 25%. These tariffs were layered on top of existing duties starting in 2018 and have been periodically modified. Sellers sourcing from China must account for both the base HTS duty and any applicable Section 301 surcharge when calculating landed cost.

Payment and Customs Bonds

Duties are typically paid at the time of entry or within 10 working days of the entry date. Importers must have a customs bond on file to guarantee payment. For shipments valued over $2,500, a bond is required by law. Single-entry bonds cover one shipment, while continuous bonds cover all imports for a 12-month period. Most regular importers use continuous bonds, which cost approximately $500 to $1,000 per year for standard risk levels.

Duty Drawback and Free Trade Zones

Importers who re-export goods or use them in manufacturing for export may qualify for duty drawback, a refund of up to 99% of duties paid. Foreign Trade Zones (FTZs) offer another option: goods can be stored, assembled, or processed within an FTZ without triggering duty payment until the goods enter U.S. commerce.

Impact on FBA Sellers

For Amazon sellers, miscalculating duties leads to two problems. Underpaying results in CBP penalties and potential shipment holds. Overpaying erodes margins on products that already compete on thin pricing. Accurate HTS classification, proper valuation, and working with a licensed customs broker are the most direct ways to manage duty costs effectively. Sellers importing regularly should review their classifications annually, as HTS codes and duty rates change with trade policy shifts and new rulings from CBP.