Importing products from China is profitable for Amazon sellers. China manufactures a vast variety of products at prices far cheaper than what domestic production would cost. At the same time, it is important to know the costs involved in sourcing products from China. Import tax is one of the costs to include in your estimation. In this post, we take you through the facts on China to USA import duty.
As you may be aware, import duty is the tax collected on imports by a country’s customs authorities. Import duty is referred to by other names - customs duty, import tax, import tariff or simply tariff.
Import duties depend on the type of product and vary by country of origin. For Amazon sellers bringing products into the US, the minimum threshold for import tax is $800. That is, you will need to pay a tax if the goods you’re importing are valued at an amount of $800 or more. If the value of goods is below this amount, you don’t have to pay custom duty.
A bit of basic information is useful to understand how the US calculates customs duty. Harmonized System, more commonly known as HS or HTS Code, are a standardised international system for classifying products traded globally. First implemented in 1988, this system is maintained by the World Customs Organization.
US Customs and Border Protection (CBP) uses an extended version of international HTS Code, known as the Harmonized Tariff Schedule of the United States Annotated (HTSUS). The HTS Code is a 10-digit code that describes a particular type of product. The US government charges different tariffs for different products imported into the country.
So, you need to identify the right HTS code for the particular product you’re getting manufactured in China and shipping to the US.
Harmonized Tariff information is available on the website of the United States International Trade Commission (USITC). Here’s an example of how to check for customs duty.
1. Visit https://hts.usitc.gov/ and go to the Harmonized Tariff Information page. On this page, click on HTS Search for applicable tariff rates.
2. Say you’re interested in importing flashlights from China. You can either search using the product name, i.e ‘flashlights’ or enter the first 4 or 6 digit of the HTS code for the product, if you know it.
3. Based on the type of flashlight, you will see different HTS codes along with the descriptions of each type of flashlight product.
Under ‘Rates of Duty’, ‘General’ under Tariff 1 refers to the tariff rate for flashlights and flashlight parts from China. ‘Special’ under Tariff 1 are the tariffs on products from countries with which the US has a Free Trade Agreement (FTA). Tariff 2 is the import duty on products arriving to the US from countries with which it has no trade relationship. Countries like Cuba, Iran and North Korea fall in this category.
As a rule of thumb, find your HTS code and corresponding import duty rates from China to the USA whenever your shipment is over $800.
Take the example from above where you’re importing a shipment of flashlights from China to the USA. Say, the value of goods is $10,000. The applicable import duty rate for the commodity code is 12.5%. So, 12.5% of $10,000 is $1,250. This is the customs duty you will pay.
The import duty rates from China to the US differ based on the category of product and the specific item under that category. For example, the tariff on LED bulbs is different from that on LED lamps.
Also bear in mind that the US imposes what is known as anti-dumping duty on certain foreign imports that it believes are being dumped in the country at less than fair value. This tax can be exorbitantly high for some products.
The trade tensions between the USA and China that escalated under former president Donald Trump haven’t exactly abated. It is best to understand whether the product you wish to source from China falls into or is under threat of facing anti-dumping duty. For example, in 2019, the US Commerce Department imposed preliminary anti-dumping duties on Chinese-made mattresses and stainless steel beer kegs. The duties were as high as 79.7% on kegs and up to 1,731% on mattresses imported from China. Recently, solar cell and module import modules from China were faced with an anti-dumping probe.
With these points in mind, here’s a look at the import tax from China to USA for some commonly imported items:
· Cotton clothing (16.5%)
· LED lamps (3.9%)
· Furniture (1%)
· Wristwatches (9.8% - 11%)
· Laptops (0%)
The lower the tariff, the bigger your potential for profit. In this regard, electronics products are a profitable category, with a number of items having an import duty as low as 0%. It is in your best interest to find out the import duty for the exact product you’re shipping into the country. If the import duty rate on a chair is 0%, it could be much higher for a bed that faces anti-dumping action.
Paying import tax from China to the USA is generally a hassle-free experience. You can go about it in different ways too, as explained below.
After your shipment arrives at the port of destination, CBP adds customs duty based on the HS code. Your shipping company invoices this amount to you. You’ll know how much you have to pay and when it is due.
The invoice can also be issued on or before the due date of payment. You may be able to get better payment terms if you have an account with the freight forwarder.
DDP is a shipping term in which the supplier takes responsibility for shipping risks and fees until the shipment reaches its destination. The fee for this service is included in the overall price you pay to your supplier.
Any additional taxes apart from import duty is generally excluded to avoid tax complexities of import. So, the additional tariffs are paid upon arriving at the port of destination.
Check the possibility of getting customs credit from customs authorities. This is a convenient option to preserve cash flow as it lets your cargo reach the warehouse first and allows you to pay duty at a later date.
Apart from the import duty, imports from China to the US are subject to a Merchandise Processing Fee (MPF) and Harbor Maintenance Fee (HMF). Both are minor expenses that have no impact on your bottom line.
Merchandise Processing Fee is based on the order value of your shipment. On an order value of less than $2,500, the MPF can be $2, $6 or $9 per shipment. For an order value exceeding $2,500, the MPF is 0.3464% of the value of goods. The Minimum MPF is $25 while the maximum is $485.
Harbor Maintenance Fee (HMF) applies to imports arriving by ocean freight. It was implemented in the 80s as a way to share the maintenance cost of container terminals in the United States with importers. The current HMF rate is 0.125% of the cargo value, making it a negligible expense.
Naturally, for your goods to be accepted into the country and reach your customers or a warehouse, the customs declaration documents should have correct information. Customs offices will review the documents - you can send the original or a copy of the documents. They include Bill of Lading, Commercial Invoice, Packing List and Arrival Notice.
It is natural to be overwhelmed by importing procedures when you’re a new importer. A customs broker can be of valuable assistance to help manage the process. The CBP endorses and licenses customs brokers, so you can refer to their official website for a list.
You’re not legally obligated to hire a customs broker. You’re also ultimately responsible for the accuracy of the entries presented to CBP and applicable taxes, duties and fees.
Amazon sellers that manage production and shipping via sourcing agents are often at an advantage over those who handle the process on their own. This is because a trustworthy sourcing agent will take care of shipping orders directly to an Amazon warehouse (FBA). Maple Sourcing offers this service, ensuring that your shipment reaches the specified warehouse in the United States on time.
·Find the HS code for the product you’re importing
·Look up the corresponding duty rate
·The actual tariff rate may differ a bit from your estimate
·Use a customs broker for assistance with duties and taxes
China to USA import duty is a vast topic. Knowing the key aspects is important for the following reasons:
·Helps you price your product competitively in your market
·Allows you to avoid fines and penalty for not paying import tax
·Helps you identify a way to pay import duty that works for you
·Gives you time to find and hire a customs broker
With this in mind, let’s look at some of the common import tax mistakes committed by new importers.
Getting through customs is not the most important thing on importers’ minds. Yet, knowing your rights and obligations will help you make smart decisions, save you money and prevent hassles with CBP.
·You should be aware that duty and other applicable taxes are collected at the time of customs clearance at the port. While these charges do increase the cost of your product, they’re a part and parcel of importing from many countries.
·You’re required to declare within 15 days of your shipment arriving in the US. If you fail to pay import tax on time, then it will only add to your costs.
·If you or your broker do not provide the necessary paperwork to CBP within 15 days of your products’ arrival, then the products will be shifted to a warehouse, and you will need to pay storage charges.
·If you don’t collect your products within six months of their entry into the US, then the products can be sold by public auction.
This issue usually arises when you’re importing from a number of different countries, but it can also occur if you don’t choose the correct HTS code for your product. An accurate determination will spare you customs delays, extra costs and returned shipments.
Import duties keep changing. Geopolitics affect duties and tariffs, sending them up or down. Keep in mind that these fluctuations are a reality and that you should use the latest information on China to USA import duty as and when you require it.
Use descriptive and accurate terms to describe your goods. If you’re importing tablet PCs, mention the brand name, model and serial numbers of parts. As there is a possibility of incomplete descriptions causing delays, it is best to pay attention to the information being filled in shipping forms.
Needless to say, undervaluing goods to avoid duty is an offence and can have legal consequences. You are exempt from import duty only if the value of goods imported is $800 or less.
Breaking down shipments into smaller parts to keep their value low and avoid import tax will also come under CBP’s scanner. CBP will hold the goods and ask you to make a formal entry of all details of your import. In addition, you will be charged a processing fee of 0.326 percent of the total value, with a $25 minimum.
Maple Sourcing is here to make shipping and customs clearance smooth for you. Make the right decisions on shipping and import duty from China to the USA, and ensure a consistently positive experience for your customers.