Understanding the intricacies of import taxes and duties in the US is crucial for any export business. Countries levy import taxes and duties when importing international goods to their land.

The purpose of imposing customs duties on countries is to maintain the receiving country’s economic stability, by monitoring and controlling the flow of goods, either general or prohibited.

Commercial or private entities are charged specific amounts in taxes and customs duties, which necessitates a comprehensive understanding of the types of taxes, customs duties, rates and more issued in the U.S.

What are U.S Import Taxes and Duties?

Taxes and customs duties are assigned to every article of product imported into the country, which in turn, is assigned an HTS code.

This code determines the amount of customs duty owed to them, depending on the country of export. HTS or Harmonized Tariff Schedule code is a unique 10-digit number that determines the classification of products and calculates the amount of tariff or duty incurred while importing them to the U.S.

When exporting products, tariffs and taxes increase the cost of products to foreign buyers and can affect the company’s position in the market.

Hence, determining the final cost of the products becomes essential before they reach the buyers.

Companies can provide an estimate to the buyers via email, phone or pro forma invoice and provide the tariff during the customs clearance in the foreign port.

De Minimis Value The de minimis value is the minimum cost of importing products required to be eligible for charging import duty and taxes.

In the U.S, the de minimis value is $800, and anything below that would not be charged for import tariffs and duty.

Free Trade Agreement The U.S provides a free trade agreement (FTA) between 20 countries regarding the import of goods. FTA is a pact between two or more countries that entails an import and export of little to no barriers such as tariffs, quotas, subsidies and prohibitions. Below mentioned are the countries that the U.S has an FTA with :

Which Goods are Subject to Duties and Taxes when Imported into the U.S?

Goods with a value of above $800 are generally subject to taxes and duties. However, this threshold applies to only certain goods. However, there are certain exceptions for products not liable for custom tariffs.

For example

  • Personal commodities like jewelry, clothing and other equipment being used for more than a year are exempted from customs taxes and import duties.

  • Furniture and tools and other household items being used abroad for more than a year or are not intended for any sale.

  • E-commerce purchases below $1,600 that are shipped or mailed to the U.S are granted a duty-fee entry. Other exceptions, such as shipment from the insular possession (IP) countries and Caribbean Basin Initiative (CBI) countries or Andean countries, are free of any duty charges.

Commodities bought in customs duty-free shops may also require US customs duty charge when brought back to the US.

For example, if a liquor bottle is bought in a US customs duty-free shop before entering another country and then brought back to the US, the beverage is charged with customs duty and Internal Revenue ServiceTax (IRT).

What is the Amount of Import Tax and Duties to be Paid?

When importing products, the amount of import tax and duties are determined by the country the products are imported from.

Duty tax rates typically range between 0 to 37.5% at the typical rate of 5.63%. Furthermore, a 3% flat rate applies to e-commerce purchases that exceed the threshold limit of U.S import tax.

A flat duty rate applies to articles that are dutiable. Dutiable articles are of four types; intoxicating liquor, tobacco products, motor vehicles and petroleum products and biodiesel blends.

Suppose one returns from a country with $200 worth of purchases that include two liters of liquor. In that case, one liter of the liquor will be duty-free under returning resident personal exemption. The rest will be dutiable at a 3% flat rate.

What are the Additional Taxes Required to Import into the US?

U.S Customs and Borders Protection (CBP) collects other taxes and fees on goods imported into the U.S. It collects other federal taxes and fees under the Consolidated Omnibus Budget Reconciliation Act (COBRA) on behalf of federal agencies. The additional taxes applied on the commodities is dependent on the goods being imported.

Federal Excise Tax A Federal Excise Tax is charged on imports of liquors and tobacco products. CBP collects the additional taxes established by the Internal Revenue Service, and exports can inquire about these additional taxes by contacting the import specialist at the entry port through which the commodities enter the U.S.

Merchandise Processing Fee (MPF) Apart from levying duty and excise tax, the CBP also collects user fees on imported goods depending upon the mode of transportation and type of entry in the U.S, i.e., formal or informal entries.

Formal and informal entry by CBP

Harbor Maintenance Fee (HMF) If the imported goods are transported via a ship, then CBP collects the Harbor Maintenance Fee (HMF). Exporters exporting via a ship have to pay 0.125 percent of the value of the cargo shipped through the identified ports. This fee is not applicable to the cargo imported via mail or air.

How are Import Taxes and Duties Calculated?

The Customs Duty Rate is calculated via a percentage determined by the total purchased value of the commodities paid in a foreign country. This percentage is devoid of factors like size, quality and weight of the commodities.

CBP utilizes Harmonized Tariff System (HTS), a reference manual providing duty rates for virtually all existing merchandise.

This HTS of the United States Annotated (HTSUS) provides applicable tariff rates and statistical categories for all commodities imported into the US.

How to Pay U.S Import Taxes and Duties?

To pay duty tax, exporters must adhere to the following:

  • Duty tax must be paid in the U.S currency only via a personal cheque in the exact stated amount, drawn on the US bank and made payable to the US Customs and Border Protection.

  • Exports must present an identification document such as a US driver's license or passport during the time of payment. CBP will not accept a check bearing a second-party endorsement.

  • If the duty owed is less than $50, then exporters can pay via government check, money order or traveler’s check.

  • It should be noted that some locations in the U.S allow payments via credit card.

Which Items are Prohibited/restricted in the U.S?

Prohibited items are those which are forbidden by law to enter the US. Items prohibited in the U.S include, but are not limited to, dangerous toys, bush meat, cars lacking protection in a crash and illegal substances like rohypnol and absinthe.

Restricted items require permits and licenses from federal agencies before exporting to the U.S. Some restricted items include certain fruits and vegetables, firearms, animal products and some animals.