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Understanding US Import Duties and Taxes on Goods from China in 2022
What are US Customs and Import Duties?
Customs duties are indirect taxes collected on goods imported into or exported from a country. For imports into the United States, the duty is based on the appraised value of the goods, which includes the cost, insurance, and freight (CIF) charges. Each imported item is subject to different duty rates depending on factors such as:
- Commercial or non-commercial use
- Weight
- Intended use
- Country of manufacture
For example, clothing from China with FOB prices over $5,000 per piece may be subject to a 27% duty rate for commercial use, while personal use imports might incur only a 2.9% duty.
How are Customs Duties Calculated?
The process of determining customs duties begins with the entry summary process. This involves submitting a customs form (CBP Form 7501 - Entry Summary) and concludes with either an instant payment of duties (if your carrier handles electronic payments) or payment upon receipt of an invoice.
The customs value presented on CBP Form 7501 consists of two parts:
- The transaction value, which includes the CIF price plus inland freight charges
- The "transaction value of identical goods," calculated based on identical goods that are the same in physical characteristics, quality, and reputation, produced in the same country by the same producer
How are Customs Duties Determined?
The International Trade Administration (ITA) of the US Department of Commerce offers an interactive platform called DutyCalculator. This tool allows users to input specific product details, such as the HS Code (Harmonized System code), to obtain accurate information about the import duties and taxes that will apply to their shipment.
China Import Tariffs
As a general rule, products with HS codes beginning with 9003-9006 are considered electronic goods and may be subject to a 6% tax for commercial use. For clothing made in China with FOB prices exceeding $5,000 per piece, importers may face a 27% tax plus additional state taxes.
If your shipment's gross weight or volumetric weight is less than 10 kilograms per cubic meter, you may be charged 5% customs duty on the CIF value plus transportation and insurance costs. However, this is a general rule and can vary depending on the product type, country of origin, and other specifications required by US Customs and Border Protection (CBP).
How to Pay Import Duties and Taxes
Customs duty is an indirect tax that must be paid to the US Customs and Border Protection (CBP) before they can release your goods for delivery. In some cases, they may release the goods "duty paid" through cash on delivery (COD).
Import VAT is not required unless your shipment's value exceeds $800. This limit applies per package, even if there are multiple items in one box. Additional state taxes may apply depending on where your products originate from or are destined for, with rates varying from 0% to 2% across different states.
In certain situations, you may be able to request that your carrier release your goods without paying duties and taxes upfront. This could involve obtaining a letter of credit from them covering the import duties/taxes of your shipment before delivery, or providing sufficient collateral security in advance.
Is it Possible to Get a Refund on Import Duties and Taxes?
Yes, you may be eligible for a partial refund of duties/taxes if your products are sold or destroyed under CBP supervision. However, this process is not automatic and requires filing a claim with supporting documentation. It's advisable to wait until the final payment of duties/taxes is due, as submitting a claim earlier may result in additional penalties.
How FreightAmigo Can Help
Navigating the complexities of import duties and taxes can be challenging for businesses. At FreightAmigo, our Digital Logistics Platform is designed to simplify this process and provide support in several ways:
- Real-time duty and tax calculations: Our platform integrates with up-to-date customs data to provide accurate estimates of duties and taxes for your shipments.
- Documentation assistance: We help automate the generation and submission of necessary customs documents, reducing the risk of errors and delays.
- Expert guidance: Our team of logistics experts is available 24/7 to answer questions and provide support on customs-related issues.
- Customs clearance services: We can arrange customs clearance as part of our comprehensive logistics solutions, ensuring a smooth import process.
- Trade finance options: For eligible clients, we offer trade finance solutions to help manage cash flow around duty and tax payments.
By leveraging FreightAmigo's Digital Logistics Platform, importers can streamline their operations, reduce the risk of customs-related issues, and focus on growing their business. Our combination of cutting-edge technology and human expertise allows us to provide a hassle-free logistics experience, even when dealing with complex matters like import duties and taxes.
Conclusion
Understanding and managing import duties and taxes is crucial for successful international trade, especially when importing from China to the United States. By staying informed about current regulations, calculation methods, and payment processes, businesses can better prepare for the associated costs and avoid unexpected surprises.
At FreightAmigo, we're committed to helping our clients navigate these challenges with ease. Our Digital Logistics Platform and comprehensive suite of services are designed to simplify the import process, from initial quotation to final delivery. As the global trade landscape continues to evolve, we'll be here to support businesses with the latest tools and expertise needed to thrive in international commerce.