Duty is not simply "cargo value times a number". Understand how dutiable value is composed, and you will know what your tax base really is.
What problem this rule solves
Duty = dutiable value × applicable duty rate.
The rate is determined by the HTS code; the tax base is determined by the dutiable value.
A common seller mistake is declaring the dutiable value incorrectly, which leads to wrong duty and a back-charge.
This article explains how dutiable value is composed and where to look up the rate.
What dutiable value is
Dutiable value is the value of the goods that Customs uses to assess duty.
The US uses "transaction value" as the basis.
It is usually the price of the goods before shipment from the exporting country, i.e. the FOB price.
International freight and insurance are generally not included in the US dutiable value.
What dutiable value usually includes
| Item | Included? | Notes |
|---|---|---|
| Goods price (actual payment) | Included | Tax basis |
| Inland freight to the port of shipment | Included | Export-country inland leg |
| Packing and container costs | Included | — |
| Assists provided by the buyer (molds, design) | Included | Reasonably apportioned |
| International freight and insurance | Generally not included | US standard |
| Post-import installation and assembly | Not included | — |
How the calculation works
Step one: determine the accurate HTS code.
Step two: look up the general duty rate column for that code.
Step three: calculate the dutiable value per the standard above.
Step four: duty = dutiable value × duty rate.
Step five: add other charges due.
What other charges apply besides duty
Merchandise Processing Fee (MPF): charged per the rules, with upper and lower limits.
Harbor Maintenance Fee (HMF): charged on ocean imports.
Section 301 additional duty: if applicable, see Part 4 of this series.
Anti-dumping and countervailing duty: if applicable, see Part 8 of this series.
For specific rates and charging rules, refer to US Customs official rules.
How to verify it yourself (official channels)
HTS tariff schedule: hts.usitc.gov, look up the code and duty rate column.
CBP website: look up valuation rules and fee explanations.
USTR announcements: check whether additional duties apply.
Federal Register: check the official text of policies.
Pitfalls sellers easily fall into
Under-declaring cargo value: if found, you pay back duty plus penalties, and it hurts your declaration record.
Including international freight in the dutiable value: paying extra duty for nothing.
Omitting mold and design fees provided by the buyer.
Calculating only duty and forgetting MPF, HMF and other charges.
Estimating with the rate for the wrong code — the numbers are wrong from the ground up.
Documents you need to prepare
Commercial invoice, stating the trade terms (FOB or CIF, etc.).
Purchase contract or order.
Freight and insurance documents.
Explanation of any assists or royalties involved.
HTS code and classification basis.
Two common misconceptions
Misconception one: duty depends only on the code. If the tax base is wrong, you overpay or underpay even with the right rate.
Misconception two: the lower the rate, the better. A cheap channel saves on freight but may cost you back in duty.
