Customs Duties
Also known as: Import Duties, Customs Taxes, Duty
Definition
Customs duties are government taxes charged on products crossing international borders. When you import goods, the destination country’s customs agency calculates what you owe based on what you’re importing, where it’s from, and its value.
How Duties Are Calculated
The basic formula:
Duty = Declared Value × Duty Rate
But the actual calculation involves:
- Classification - Product assigned an HS code (Harmonized System)
- Value determination - Usually the transaction/invoice value
- Rate lookup - Duty rate for that HS code from that origin country
- Calculation - Apply rate to value
Example Calculation
Importing leather handbags from Italy to the US:
- HS Code: 4202.21 (leather handbags)
- US duty rate for this code: 8%
- Declared value: $500
- Duty owed: $500 × 8% = $40
Plus potential additional fees (merchandise processing fee, harbor maintenance fee for ocean freight).
Duty Rates by Product Type
Duty rates vary dramatically:
| Product Category | Typical US Rate |
|---|---|
| Electronics | 0-5% |
| Clothing/Textiles | 10-32% |
| Leather goods | 4-20% |
| Footwear | 8-48% |
| Furniture | 0-10% |
| Auto parts | 0-25% |
De Minimis Thresholds
Many countries exempt low-value shipments from duties:
| Country | Threshold |
|---|---|
| United States | $800 |
| Canada | $20 CAD |
| European Union | €150 |
| United Kingdom | £135 |
| Australia | $1,000 AUD |
Shipments below these values often enter duty-free (though may still owe sales tax/VAT).
Who Pays Duties?
Depends on the shipping terms (Incoterms):
- DDP (Delivered Duty Paid) - Seller pays duties
- DAP (Delivered at Place) - Buyer pays duties
- DDU (Delivered Duty Unpaid) - Buyer pays duties
If duties aren’t paid, packages are held at customs until resolved.
Tips for International Shippers
- Research rates first - Know duty costs before pricing
- Accurate declarations - Undervaluing is illegal and risky
- Include HS codes - Speeds customs clearance
- Consider DDP - Pay duties upfront for better customer experience
- Track trade agreements - Some countries have reduced duty rates