A Complete Guide On Import Tax From China To US

Import tariffs, port fees, value-added taxes....Do you know all of these import tax? How to caculate them and how to pay them?

Table of Contents

When importing products from China, it is important to understand import tariffs, port fees, value-added taxes, and other taxes, especially during a period of unprecedented trade tensions between China and the United States. However, different products have different import tariff rates and tariff value calculation methods. In this article, we will explain import duties, customs valuation methods, and other taxes and fees that importers must know when importing products from China.

1. What is import tax?

When you transport goods internationally from one country to another, you need to pay import tax. Import tax from China to the United States is levied on goods imported from China to the United States. Import duty is the main part of import tax.

2. What is Customs Value?

Import duties and taxes are percentages calculated based on customs value. The customs value is based on the declared value, and the declared value should be indicated on the commercial invoice (document issued by the supplier). It is important to declare the correct value on the commercial invoice, otherwise, you may end up paying the wrong amount. It is always the importer’s responsibility to ensure that the correct declared value is indicated on the commercial invoice. This responsibility cannot be transferred to Chinese suppliers.

The customs value is based on FOB (Free On Board) prices in the United States.

3.What kind of tax importers have to pay?

Basically, any goods valued at US$800 or more entering the United States are subject to import duties. Import duties are the main part of the import tax that importers must pay to the US Customs. The tariff rate is either specific or ad valorem, that is, it is based on the value of the goods. There are other additional but relatively small import taxes and fees, such as Federal Excise Tax for certain items (such as alcohol, tobacco, etc.), Merchandising Processing Fee (MPF), and Harbor Maintenance Fee (HMF). MPF is a fee imposed by the US Customs on most goods imported into the United States. The MPF is charged at 0.3464% of the value declared on the commercial invoice, with a minimum of $27.23 and a maximum of $528.33. HMF is calculated at 0.125% of the value of the goods declared on the commercial invoice. In other words, sea cargo needs to pay this fee, while air cargo does not.

4. How to calculate import tax?

4.1 HS Code

If you want to calculate import duty from China to the United States, you must know the HS code of your goods. Each HS code has its tax rate, according to which you must pay the price according to the HS code.

The HS or HTS code represents the Harmonized System or Harmonized Tariff Schedule. These codes were developed by the World Customs Organization (WCO) to classify and define internationally traded commodities. In most cases, in order to import or export products internationally, traded goods must be assigned an HTS code corresponding to the coordinated tariff schedule of the importing country.

The difference between HS code and HTS code is the number of digits in the code. The six-digit code is a general standard (HS code), and the 7-10 digit code (HTS code) is usually unique after the sixth digit, which is determined by each importing country.

The US imports, HTS classification system, Schedule B classification system expands its scope to 10 digits.

4.2 How to check HS code and import duty rate?

4.2.1 HS Code

If you don’t know the HS code of your goods, you can get it in two ways.

One is through the official USITC HTS search website of the United States. Enter product keywords (such as backpacks) directly on the USITC search page, and you will find different codes to choose from. You need to check the product and find the product whose description is applicable to you, and then you will get the HS code and the relevant tax rate at the same time.

The other is to check with the customs broker or freight forwarder. During the above search process, you may find it difficult to determine the exact HS code of your product. It is recommended that you check with your customs broker or international freight forwarder to obtain the specific HS code because they are to help you pass the customs smoothly.

4.2.2 Import Duty Rate

On the USITC website, by entering your product name or product HS code, you can obtain the latest relevant tax rates, or contact customs brokers or CBP (U.S. Customs and Border Protection) experts to obtain a piece of very specific tariff information.

HTS classification can be very complicated. If you self-categorize an item and the classification is incorrect, the error can be costly.

4.3 How to calculate import tax?

Now we know the three types of fees that need to be paid for shipping a product from China to the United States——import duty, MPF, and HMF. Let’s take a daily backpack as an example to calculate the import tax for this shipment. For example, if the customs value of backpacks imported from China is 5,000 US dollars, then the import taxes and fees include:

(1) Import duty: customs value * duty rate

(2) MPF: customs value * 0.3464% (shall not be less than $26.22)

(3) HMF: customs value* 0.125%.

The HS code of the backpack is searched from USITC according to the method mentioned above, and the corresponding code number is 4202.19.90.00. The corresponding duty rate is 20%, so the cost of the first duty is 5000$*20%= 1000$, the second MPF is 5000$*0.3464%=17.32$, this value is less than the minimum payment value of 26.22$, so it is paid at 26.22$, and the third HMF is 5000$*0.125%=6.25$. Then the total import tax of the three items together is 1032.47$.

Remember, it is U.S. Customs and Border Protection(CBP) that ultimately determines the correct tax rate. The actual rate of your imported goods may not match what you think. But the above search method and calculation method can give you a rough idea of how much import tax should be.

5. How do you pay?

Import tax will be collected by CBP. In view of the complexity of the import customs clearance process, in most cases, you, as an importer, can purchase the services of a local customs broker to help you prepare all the documents required for the declaration of goods upon arrival.

Send these documents to CBP as soon as possible, because you need to transfer your goods within 15 days of arrival. If you refuse to do so, the goods will be transferred to the warehouse. You must also pay additional storage fees. You must pay the dues six months after the shipment is delivered. Otherwise, these items will be sold at auction. Customs clearance fees are a bit difficult. You need the following documents to settle your expenses:

  • Bill of Lading: It is a proof of the ownership of the goods, as well as the proof of the transportation contract between the shipper and the carrier.
  • Commercial Invoice: Commercial invoice is one of the most important documents in international trade and shipping. It is a legal document issued by the seller (exporter) to the buyer (importer) in an international transaction, and is the contract and sales certificate between the buyer and the seller. It contains the following detailed information :
    • Quantity
    • Product description
    • Destination address
    • Country of origin
    • Name and address of the company selling these products
    • Value of goods in two currencies
    • Tariff classification
  • Packing list: This list includes all the materials and packing details of the items on the invoice. Customs officials use this list to search for packages.
  • Arrival notice: This document is provided by the freight company to inform you of the arrival of your shipment.
  • Custom Bond: The customs bond is a legal contract between the principal (importer or shipper), the guarantee company and CBP, which is used to ensure that the importer complies with customs regulations and that CBP is paid for applicable import duties, taxes, fines and penalties. Commercial goods with a value of more than US$2,500 require a bond for customs clearance. Please note that this requirement even applies to duty-free shipments.

When importing from China, there are many ways to pay import duties and related taxes. In fact, you can even pay directly to your Chinese suppliers. Below we list the most common situations:

  • Option 1: Pay import duties and taxes to the freight forwarder. This option may be the easiest. When your goods arrive at the port of destination, customs authorities will add duties and taxes based on the declared value and HS code. Then, your shipping company will invoice you for this amount. In some cases, you need to pay customs and tax invoices before the goods are delivered.
  • Option 2: Apply to the local customs authority for customs credit. The customs authority provides customs credit to the importer. Basically, customs credit allows you to ship goods to your warehouse first and pay duties and taxes later. Then, the transaction is made directly through a bank account operated by the customs authority instead of paying the freight company.
  • Option 3: Purchase DDP (Delivered Duty Paid) directly from your supplier. DDP is an international trade term that includes customs duties in addition to freight and port charges. Import duties are included in the price you pay to the supplier. However, due to cross-border taxation issues, additional taxes such as value-added tax and goods and services tax are generally not included. Instead, these taxes are paid on arrival at the port of destination.

6. How to avoid import tax?

In some cases, goods imported from China to the United States can be exempted from some tariffs.

  • Personal immunity. According to CBP, there are tax-free allowances or personal allowances, which are the net amount of products you can return to the United States before you have to pay the duties. In some cases, the personal allowance is $800, but there are restrictions on the number of alcoholic beverages, cigarettes, cigars, and other tobacco items that you can use in the personal allowance.
  • Sample. The sample is also an example, because the sample is for your own use and will not be sold back for commercial reasons. You can ask his supplier to place the sample with a nominal value of $1 and indicate “non-commercial sample” on the sample invoice. value. “
  • Direct sales. Since the goods are directly delivered from a third party (manufacturer or wholesaler) to consumers through ePacket or China Post, the goods do not have import duties from China to the United States, and sellers must pay those taxes.

7. FAQ

Are import duties refunded?

Import duties cannot be offset. Therefore, import tariffs should be considered as part of the cost of the product, not as a temporary expenditure. Sometimes the tax rate is so low that there is almost no difference. However, in other cases, the tax rate accounts for a large part of the procurement cost.

Why do some suppliers declare low customs value?

There are two reasons. First, some manufacturers think they are doing their buyers a favor. Second, most suppliers do not hire international tax consultants. They do not understand the customs valuation laws of every country in the world-even major markets such as the United States and the European Union. Your job is to calculate the customs value and notify your suppliers and freight forwarders accordingly.

What happens if the customs value is not declared correctly?

Underestimating the declared value is equivalent to tax fraud and is a criminal offense.

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