Duty

Duty is a tax imposed by a government on goods imported into the country. In the United States, import duties are assessed and collected by Customs and Border Protection (CBP) based on the product’s classification under the Harmonized Tariff Schedule of the United States (HTSUS), its declared customs value, and its country of origin. Duties are one of the largest variable costs in an importer’s landed cost calculation, and for products subject to additional tariffs (such as the Section 301 tariffs on Chinese-origin goods), they can represent 25% to 50% of the product’s value.

Types of Duties

Ad valorem duties are calculated as a percentage of the customs value. An HTS code with a 4.8% duty rate applied to a shipment valued at $50,000 yields a duty of $2,400. Most consumer goods entering the U.S. are subject to ad valorem rates.

Specific duties are charged per unit of quantity rather than as a percentage of value. For example, a duty of $0.12 per kilogram means the charge is based on the weight of the shipment regardless of its declared value. Some agricultural products, textiles, and chemicals carry specific duties.

Compound duties combine both methods: an ad valorem percentage plus a specific rate. A product might be subject to 5% ad valorem plus $0.08 per unit.

Anti-dumping duties (AD) are additional charges imposed when CBP determines that a foreign manufacturer is selling goods in the U.S. at below fair market value, harming domestic industry. Countervailing duties (CVD) offset government subsidies in the exporting country. AD/CVD rates can be severe, sometimes exceeding 200% of the product’s value for specific manufacturers or product categories.

How Duties Are Calculated

The duty amount depends on three inputs: the HTS classification, the customs value, and the country of origin. The HTS classification is a 10-digit code that identifies the product and its corresponding duty rate. Correct classification is the importer’s responsibility, and misclassification (even unintentional) can result in penalties, interest, and retroactive duty assessments. The customs value is typically the transaction value: the price the buyer actually paid for the goods, adjusted for certain additions (packing costs, assists, royalties) and deductions (international transport and insurance costs, depending on the Incoterm). The country of origin determines whether preferential trade agreement rates apply (such as USMCA rates for qualifying Mexican or Canadian goods) or whether additional tariffs are in effect.

Section 301 Tariffs

Since 2018, the U.S. has imposed additional tariffs on Chinese-origin goods under Section 301 of the Trade Act of 1974. These tariffs apply on top of the normal duty rate and cover several “lists” of products. List 1 through List 4A products carry additional tariffs of 7.5% to 25%. Many common Amazon product categories fall under these lists: electronics accessories, home goods, textiles, plastics, and consumer products. A product with a normal duty rate of 3.9% plus a Section 301 tariff of 25% faces an effective duty rate of 28.9% on its customs value. For a $100,000 shipment, that is $28,900 in duties, significantly affecting pricing strategy and margin calculations.

Duty Payment and Bonds

Duties are paid at the time of customs entry (or within 10 working days of entry under the periodic monthly statement process). The importer must have a customs bond on file with CBP guaranteeing payment. A single-entry bond covers one shipment and is set at the value of the goods plus estimated duties. A continuous bond covers all imports for a 12-month period and is typically set at the greater of $50,000 or 10% of the prior year’s total duties, taxes, and fees.

Duty Drawback

If imported goods are subsequently exported, the importer may be eligible for duty drawback, a refund of up to 99% of the duties originally paid. This applies to goods that are re-exported in the same condition, used as inputs in manufactured goods that are exported, or substituted by commercially identical goods that are exported. The drawback process requires detailed recordkeeping and filing with CBP but can recover significant costs for businesses that both import and export.

For FBA sellers, duties are a fixed cost that must be factored into product pricing from the sourcing stage. MeisterPrep works with sellers who import through various ports of entry, and while the company does not handle customs brokerage directly, its proximity to port facilities means goods can move quickly from customs clearance to the prep center, minimizing the time between duty payment and the start of sales that generate revenue to offset that cost.