• by admin
• December 1, 2024

When you export goods to another country, you must know the import duty in the importing country, if any, imposed on the products you are exporting. The cost of goods includes the purchase price, logistics costs, and import duty. Generally, when looking at the cost, the term is “what is the landed cost?” of the product. An exported may want to know the landed cost of the product in the hands of my customers. An importer wants to know what is the landed cost of his inventory. The valuation of inventory is the most crucial step in arriving at the cost of goods sold in the income statement and reflecting asset value in the balance sheet.

In this article, we try to discuss the basics and overall knowledge of import duty in the USA.

Import duty, also known as customs duty, tariff, or import tariff, is not the best source of revenue for the federal government of the United States of America so far by December 2024. On an estimate, the US collects approx. $80 to $90 billion import duty and fees every year. Although this is not the major source of revenue for the federal government. However, import duty is one of the best tools to discourage import of the products in the country and encourage local manufacturers and businesses to produce those products internally.

Import duty is levied at the border. When the products arrive at the border, the clearing agent prepares the “bill of entry” and presents it to the customs department. U.S. generally does not charge sales tax when the products are imported in the United States. When the duty, if any, is payable as per the bill of entry, is paid, the Border Security Department allows the products to enter the United States.

PROCESS

• In practice, the customs clearing agent of the importer of the products electronically submits the customs declaration before the products arrive at the border or port.
• Usually, documents included in the customs declaration – CBP form 7533 (Entry Manifest with supporting documents like commercial invoice, packing list, certificate of origin), Form 7501 (Bill of Entry)
• Products may be inspected physically and or electronically, and then CBP will provide the invoice to the duty.
• The importer or his clearing agent is responsible for the entire process

 

IMPORT DUTY

As mentioned above the import duty is calculated on the bill of entry. The following process involves in calculating the import duty on the bill of entry.

• Name of the product
• Tariff Classification – The United States uses the “Harmonized Tariff Schedule (HST)”, a global system for classifying products traded internationally. This schedule provides a 10 digit code that classifies the product and the import duty rate.
• As per the commercial invoice the value of the products declared on the bill of entry.
• The value of the products multiplied by the duty rate arrives at the import duty amount.

KEY POINTS

• Import duty rates are defined in the Harmonized Tariff Schedule (HST)
• The import duty rates may range from 0% to 37.5%
• The value of the goods is the FOB value. This is the cost of the products without including insurance and freight.
• Origin – The country where the products were manufactured can be affected. There are preferential origins or trade agreements where the duty can be eliminated or reduced. In such cases, the importer must provide the FTA certificate of origin.
• There is no import duty if someone gets a gift from outside of the United States valued at $100 or less.
• There is no duty for products imported for personal use valued under $800. Products imported valued from $800 to $1,800 are subject to 4% duty.
• USA is the largest importer in the world as per 2022 data.

As per 2022 estimates, the major top 5 Countries who exports to the United States:

1. China
2. Mexico
3. Canada
4. Japan
5. Germany

Major Categories of products that are imported in to the Unites States are:

• Capital Goods – Major items like electric devices and computers
• Consumer Goods – major items like pharmaceutical and cell phone including furniture, apparel, artwork, etc.
• Industrial Supplies
• Automotive Vehicles
• Foods, Feeds, & Beverage 

Major items that are imported into United States from Canada:

• Crude oil, minerals
• Cars and parts
• Turbines, engines
• Construction equipments
• Lumber
• Chemicals, plastics, rubber, and leather products

In 2022, USA imported $438 billion worth of goods and services from Canada.

 

Resources used: U.S. Customs and Border Protection

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Disclaimer: Information in the post has been presented for a broad and straightforward understanding. This is not a legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situation. You need to contact your accountant or RKB Accounting for further information.