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Knowledge about Calculating Import Duty from China to USA

2024-01-23
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China is one of the most important commercial partners of the United States, accounting for more than 20% of the total imports. Despite fragile relations between the two countries, this tendency has remained consistent over time.

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 main costs to include in your estimation. In this post, we take you through the facts on China to USA import duty.

Overview of import duty from China to USA

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 importers 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 import duty.

How is the import duty set?

A bit of basic information is useful to understand how the US calculates import duty. HS code is a standardized international system for classifying products traded globally. HS 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 HS code for the product you’re getting manufactured in China and shipping to the US. Tariff information is available on the website of the United States International Trade Commission (https://hts.usitc.gov/).

Duty rates for different categories of products

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 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 better 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. The duties were up to 1,731% on mattresses imported from China. Recently, solar cell and module imported 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%)

How to pay import duty?

Paying import tax from China to USA is generally a hassle-free experience. You can go about it in different ways too, as explained below.

Pay import duties to freight forwarder

After your shipment arrives at the port of destination, your freight forwarder calculates the import duty based on the HS code. You’ll know how much you must 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.

Use Delivery Duty Paid (DDP)

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 later.

Tips for first-time importers

Naturally, for your goods to be accepted into the country, the customs declaration documents should have correct information. Customs offices will review the documents, including 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.

Mistakes to avoid when importing from China to USA

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 custom broker.

With this in mind, let’s look at some of the common import tax mistakes committed by new importers.

1. Not equipping yourself with the basic information

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.

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 or your broker do not provide the necessary paperwork 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.

2. Being careless with tariff codes

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 HS code for your product. Such mistakes will cause you customs delays, extra costs, or even rejected shipments.

3. Using outdated tax information

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.

4. Providing incomplete information on shipping documents

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.

5. Not stating the correct value of goods

Undervaluing goods to avoid duty is an offence and can have legal consequences. Breaking down shipments into smaller parts to keep their value low and avoid import tax will also come under customs’ scanner. The officials 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.

Do I need any permit for importing from China?

Importing products from China does not require general import permission. Certain Chinese goods, on the other hand, may require a permit from a government agency. Imported products are overseen by different government authorities, and the standards can change.

As an importer, you need to guarantee that your imported goods comply with all federal regulations, which may include permits and paying import taxes.

Agencies that will oversee common imports include:

1. FDA is the U.S. Food and Drug Administration. Food, medication, some housewares, cosmetics, health equipment, and food-related items or any other items are all regulated by the FDA. All imported food goods must be given prior notification, according to the FDA.

2. EPA is the United States Environmental Protection Agency (EPA). The Environmental Protection Agency (EPA) regulates many chemicals imported into the United States.

3. Transportation Department (DOT). Cars and motor vehicles are among the imports that are regulated by the DOT, according to CBP data. Consumer Product

4. The Commission on Safety (CPSC). The CPSC regulates imports of toys and children's products.

5. The Federal Trade Commission (FTC) is a government agency (FTC). The FTC oversees several aspects of the import process, that includes product labelling and other aspects.

Conclusion

It's time to start your process of getting the goods across your border and through customs after you've found the items you want to import. This necessitates a significant amount of research and planning. It's a smart to use a licensed customs broker who will review all the pertinent facts for your shipment and guarantee that it complies with customs and other requirements.

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