In addition to product costs and shipping costs when importing from China, there is also a cost that cannot be ignored, that is, taxes.

Especially since the start of the Sino-US trade war, the US government has continuously increased tariffs on Chinese products. As of now, the product lists of imposing an additional 25% tariff on imported Chinese goods under the US-China trade war have gone through 4 different stages. The products covered are very broad.

This has had a serious impact on Chinese exporters and US importers, and buyers have to pay higher taxes and fees, which has led to an increase in purchasing costs.

Some buyers are completely ignorant of the tariffs they should pay when buy from China. We have seen many buyers on the Internet accusing Chinese suppliers did not tell them that they had to pay such high tariffs when place an order.This has caused buyers’ purchase costs to far exceed their budgets.

But in fact, most Chinese sellers don’t understand foreign tax policies at all, and they don’t know how much tariffs buyers should pay for their orders.

Chinese suppliers are usually only responsible for the fees that buyers should pay in China, so it is necessary for buyers to understand the calculation of import tariffs.

Reading this article, you will understand that whether you need to pay import taxes for your products? How to calculate import duties? Will the Sino-US trade war affect your business? This will help you decide whether to buy from China and what products to import.

What’s tariff and import duty?

While importing from China to US, you have to know two words tariff and import duty. It is confusing for most of the buyers.

The tariff is the percentage of tax on an imported item while the import duty is the actual amount of total tax. If you are importing a bicycle then the tariff rate is 10% and if the total worth of bicycles is $10000 then import duty is $1000.

Do I have to pay import tax for my products?

On February 24, 2016, the then President of the United States Obama signed the Trade Facilitation and Trade Enforcement Act of 2015, increasing the amount of import tax exemption from US$200 to US$800.

This bill was implemented by the U.S. Customs and Border Protection (CBP) on March 10, 2016.

Simply put, most items shipped into the United States with a value of less than US$800 are exempt from formal customs declaration or payment of import duties.

The following types of shipments will not be applicable to this tax regulation:

* Products containing alcohol, perfumes containing alcohol, cigars and cigarettes

* Cargo regulated by the U.S. Fish and Wildlife Service

* Medicines and medical equipment (including glasses and sunglasses)

* Other goods over US$200 regulated by the U.S. Food and Drug Administration

What are import taxes and how are they calculated?

Import duties are the main part of the import tax that importers must pay to US Customs. The tariff rate is a specific or ad valorem basis based on the value of the goods, depending on the HS code of the product and the country of origin.

Taxes also include other additional but relatively small special tariffs, such as Merchandising Processing Fee (MPF), and Harbor Maintenance Fee (HMF).

The Merchandise Processing Fee (MPF) is a U.S. Customs charge assessed for most imports into the United States. The MPF is charged at 0.3464% of the entered value declared on the commercial invoice, with a minimum of $27.23, and a maximum of $528.33 per entry.

If the goods are shipped by sea, you also need to pay HMF fees, which is an ad valorem fee of 0.125% of the value of the goods. HMF is not charged for air cargo.

The calculation of MPF Fee and HMF is very simple, the following is a guide for calculating the import tariffs.

How to calculate import duty? A step by step guide.

Get the product HTS Code

The tariff rate depending on the HS code of the product and the country of origin.

HS stands for International Harmonized System and is administered by the World Customs Organization.

The first 6 digits HS code for one product category is the same in all countries. Each country can modify by adding another two or four digits without changing the first 6 digits. 

The U.S. import, HTS classification system, and export, Schedule B classification system, expand their scope to 10 digits. 

C:运营Blog美国关税how to check product HTS code.jpghow to check product HTS code

The easiest way to obtain the product HTS code is to enter the U.S. International Trade Commission official website and enter the first six digits of China’s HS CODE in the search box, such as desk lamp 9405.20****.

C:运营Blog美国关税product HTS code.jpgproduct HTS code

There is a detailed HTS code on the left frame of the search result page. You can choose HTS code according to your product.

You can get the HS code of the product from your Chinese supplier.

Query import duties

Enter the HTS code of the product, and the search result is shown in the figure below.

There are three columns of content under Rates of Duty on the page.

  • “General” refers to import tariff rate on most imported products from the world (including China).
  • “Special” is the import tariff rate imposed by the United States on specific countries.
  • “2” refers to the import tariff rate of special countries (such as North Korea) that have no trade relations with the United States and are restricted in trade.
C:运营Blog美国关税US import taxes.jpgUS import taxes

Generally speaking, the proportion in the “General”column is the proportion of tariffs that you should pay when importing from China.

But please note that you also need to check whether your products are included in the 25% tariff list.

Check whether your product is on the 25% tariff list

Through the above steps, you already know how to check the rate on USITC. Now we will show you how to determine if your product is being charged another 25% tariff rate under the trade war.

C:运营Blog美国关税Product import duties.jpgProduct import duties
Product import traffics.jpgProduct import traffics

Before the trade war, its import tariff rate was 3.7% in the “General” section. But there is a “/” behind it. When the mouse points to the “/”, it shows that let us check the category “9903.88.03”.

US 25% traffic list on China

Continue to inquire “9903.88.03” on the web page, and it is clearly mentioned here that this part of Chinese products will be added 25% on the basis of the applicable tariff rate. Therefore, this lamp is included in the 25% tariff list and the current import tariff rate is 28.7%.

We tried it, and some products did not show tax increase in the query results, but it is also in the list of tariff increase, so I suggest you still check the document China Tariffs. To ensure that your products are not in the 25% tariff list.

The above is the detailed steps for querying the import tariff rate of products imported from China. Below we show you how to calculate import taxes. .

Case study

For example: There is a batch of table lamps imported to the United States with a value of USD 10000. Through the above steps, we have obtained the current import tariff rate of this table lamp 28.7%.

Import duty: 28.7% * 10000 =USD 2870

MPF: 0.3464%* USD10000 = USD 34.64

HMP: 0.1250%* USD10000 = USD 12.5

We can get the approximate taxes for imported desk lamps: 2870+34.64+12.5= USD 2917.14 USD.

How to pay the import tax? When is a customs bond required? 

The import tax will be collected by the U.S Customs and Border Protection (CBP). Given the complexity of import clearance process, most of the time, you as the importer can buy the service of a local customs broker to help you prepare all the documents needed to declare the goods upon their arrival.

CBP also requires that the importer must post a customs bond if you are importing merchandise into the United States, for commercial purposes that are valued over $2,500, or a commodity subject to other federal agencies’ requirements (i.e. firearms or food).

A customs bond, sometimes also called US surety bond, assures CBP that the importer will fulfill any financial responsibilities for customs duties, penalties, and other obligations.

The easiest way to obtain a customs bond is through a customs broker or an international freight forwarder.

However, if you import goods subject to FDA’s requirements and regulations, you need to register your importer information on the FDA website, in such a situation, you must purchase a customs bond to prove that you have the qualification needed to import those goods. If you use a freight forwarder, the U.S customs will not accept the forwarder’s identity for the imports. 

If you want to clear the goods under the name of your own company, you must purchase a customs bond through a surety agency licensed by the U.S Treasury Department. If you use the customs broker to clear your goods through CBP, then the broker’s bond can be used. For a list of licensed customs brokers, check at the port of entry

Under DDP terms, your supplier will be responsible for import clearance and pay for all the import duties and tax. 

Ways to exempt and reduce tariffs

Regardless of whether it is large-scale purchases or small-volume purchases, for some people, import taxes are still a big burden, and they will try their best to avoid or reduce taxes in business transactions. Here are some of the most common ways we have seen.

Common situations of non-payment of import duties

There are several situations where import duties are not required. they are:  

  • Sample. Your samples are only for your own evaluation and will not be resold for commercial purposes. You can ask your supplier to place samples with a nominal value of $1 and indicate “samples only, without commercial value” on the sample invoice.
  • Direct sales. In the dropshipping business, since the goods are directly delivered to customers by a third party (manufacturer or wholesaler) through ePacket or China Post, no import duties are levied; however, the seller must pay income tax and sales tax.

Although some people tend to use the following methods to reduce import taxes, considering the risks involved, we do not recommend that you like them.

  • Reduce the value of the product on the commercial invoice.

Given a certain tax rate, according to the tariff calculation formula, one possible way to reduce import tariffs is to reduce the product declared value.

According to the agreement with the importer, some suppliers will help reduce the value of the product to help the buyer reduce tariffs.

However, if the US Customs finds that the declared value is lower than the actual value and intentionally lowers it, the Customs will impose punitive duties. Worse still, the goods may be destroyed or returned to the port of shipment.

  • Deliver international mail in batches.

Because imported goods worth more than 2,500 US dollars will require a formal entry. For some importers, they will require the supplier to send it through the international postal system and divide the delivery into several batches, each for less than US$800.

However, be cautious and think twice before actually doing this.

Personal exemptions only apply to items carried by passengers. If the U.S. Customs finds that your behavior is an intentional tax reduction, it will not be exempted.

On the other hand, the total freight of express delivery may also be high.

  • Through intermediate trade or re-export trade.

Under the pressure of imposing a 25% tariff on Chinese imports, some people are considering transferring the goods to a third country, and then exporting the goods to the United States with the third country as the country of origin instead of China, in order to avoid increasing import duties.

The United States has increased tariffs on Chinese products, but has not increased tariffs on certain countries.

However, there are still many risks in this process, and high transition costs will also be incurred.

Understanding the calculation of tax will help you better control your purchase budget. To learn more about purchasing, please visit SourcingArts.com.

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