Import Duty from China to USA: The Ultimate FAQ Guide
Need to know if your dropshipping product is subject to import duty from China to USA? Look no further! Import tax from China to USA explained in detail.
If you’re a dropshipper with product suppliers in China and clients in the USA, you need to know if your products are subject to import duty from China to USA.
Even though the end-customers cover the customs fees from China to USA, you as a dropshipper have the moral obligation to inform your buyers in advance.
So, are your prod ucts imported from China subject to import duty in the USA? And if yes, how much will your customers pay? This ultimate FAQ guide on import duty from China to USA will give you all the answers.
So, let’s find out!
What Is Import Duty from China to USA?
To encourage people to use domestic products, governments of countries have imposed an import tax on most products imported from foreign countries above a specific value.
Since March 2016, when the former US president Barack Obama signed the Trade Facilitation and Trade Enforcement Act of 2015, the import tax exemption increased from $200 to $800. This value is otherwise known as the de minimis value.
So, when it comes to Chinese products imported to the USA, all goods over $800 are subject to import taxes.
Import taxes consist of import duty (the largest part), MPF (Merchandising Processing Fee), HMF (Harbor Maintenance Fee), and a Federal Excise Tax for products such as alcohol and tobacco.
The import duty is the majority of the entire import tax value. The import duty tariff paid on your product will depend on two things:
– The value of the imported product/s;
– The HS (or HTS) code of the product;
In short, import duty from China to the USA is a part of the import tax applicable for goods over $800 purchased in China and shipped to the US.
What Do the Terms ‘Formal Entry’ and ‘No Formal Entry’ Mean?
Here, it’s essential to know that there are two types of customs clearance classifications for products that are subject to import taxes:
No formal entry required (starting from $800 up to $2500);
Formal entry required (at or above $2500);
So, remember the following product values vs. import tax obligations:
- Product value below $800 = you’re not subject to any import taxes;
- Product value exceeds $800 but below $2500 = subject to import duty, but there’s no formal entry required (this means that your carrier will cover this fee for you and then charge you with it/or the carrier price will include the duty cost upfront);
- Product value at or above $2500 = subject to import duty and formal entry required (you’ll probably need a customs broker since you’ll have to file proper documents to pass customs clearance);
Is It True That Import Taxes Are Not Applicable on Products Below $2500?
Absolutely not! As we’ve previously stated, the de minimis value after which you’re subject to import taxes is $800, not $2500!
This confusion is relatively common among dropshippers and sellers alike, considering that sometimes it does happen that orders under $2500 are not taxed. However, if you do not declare your products on purpose and get caught, you will pay penalties.
The bulk of this confusion occurs because of the terms ‘formal entry required’ and ‘no formal entry required’. Although many interpret ‘no formal entry required’ as a tax exemption on products below $2500, this is simply not the case.
Products that range between $800 and $2500 are subject to import taxes, only this process is more straightforward and can be handled directly by your carrier. In any case, this doesn’t mean you won’t pay these fees.
What Is the Difference Between Import Tax and Import Duty?
When you hear people talking about import tax, they usually refer to import duty. That’s mainly because import duty is the bulk of the entire import tax amount.
Import tax consists of:
- Import duty (based on the commercial value and HS code);
- Merchandising Processing Fee (MPF) – product value multiplied by 0.3464%;
- Harbor Maintenance Fee (HMF) – product value multiplied by 0.125% (only applicable for goods shipped by sea);
If your products are subject to import taxes, it’s always advisable to let your customers know in advance about these costs.
Do I Have to Pay Import Duty from China to USA?
Depending on the type of product imported and the product’s value, you may or may not have to pay import duty from China to the USA.
For example, generally speaking, goods valued at or below $800 are not subject to import duty. All other goods that are above $800 are subject to import duty.
A word of warning – importing products such as alcohol, perfumes, cigarettes, or cigars will always be taxed, even if the value is below $800.
How to Calculate Your Import Duty from China to USA?
To calculate the import duty fee, you’ll need the commercial product value and the HS (or HTS) code.
Although the actual costs that you’ll have cannot be determined by anyone other than customs authorities on the spot, you should still have a rough idea of the amount.
The safest route is to check directly on the USITC website (U.S. International Trade Commission). On that website, you’ll be able to check both the HTS codes of products as well as their import duty tariff.
On this website, you can search by name if you don’t have the HTS code, as shown below:
If you do have the HTS code, but you don’t know the import duty tariff for that product code, you can search by code as depicted below:
Now that you found the customs duty tariff based on the HTS code, remember the calculation formula from above:
Import duty = product value * import duty tariff
For example, let’s say you’re importing fancy water bottles for $2000 total.
The HTS code for this product would be 3923.30.00 (Carboys, bottles, flasks, and similar articles).
Now, we can calculate the import duty fee:
$2000 * 3% = $60
What Type of Goods Are Not Subject to Import Duty?
As we’ve mentioned before, goods that value at or below $800 are not subject to import taxes, including import duty. Furthermore, many products made out of natural materials could be tax-exempt, but you have to check this on an individual case.
To avoid import duty, many people try to divide their order into several smaller orders. Even though this can often go unnoticed, it’s risky and can invoke penalties.
By the law, merchandise at or below $800 shipped by one person on one day is free of taxes and duties. Trying to override this is not advisable.
Another type of goods where import duty and taxes are not applicable is samples. Usually, most suppliers will agree to send you samples with a nominal value of $1.
On top of that, you can communicate with your supplier upfront to place a label on the sample package that says ‘Sample of No Commercial Value’. Having this on your samples will let customs authorities know that you don’t plan to resell the products.
What Is HS Coding When Importing from China to the USA?
HS stands for Harmonized System Code (sometimes referred to as HTS code). The world needed a way to classify products traded internationally. As a response, the World Customs Organization developed these codes.
When importing from China to the USA, the import duty tariff will depend on your goods’ value and the HS code. Each product category has its corresponding HS (or HTS) code.
If your supplier/seller doesn’t clearly state the HS code on the product, you can check HTS codes in this list or search by type of product on the official USITC website.
What Is the Difference Between an HS Code and HTS Code?
In the world of import-export, you’ll often hear the terms HS Code and HTS Code used interchangeably.
HS codes have six digits as the universal standard, while HTS codes have 7 to 10 digits. HTS codes are unique after the initial six digits, meaning that the importing country usually determines them.
For example, if you need to check the HTS for the USA, this link contains the entire list of codes.
Or, find your product’s HTS code by searching by product type directly on the USITC website.
How to Check and Find the HS Code of Your Goods?
To figure out your customs duty rate, you’ll have to know your product’s HS or HTS code.
Usually, the supplier or seller will already have the code on the product. But, if they don’t, there are several ways to find the correct code.
First, you can check this link and see if you find the right code in the HTS classification system.
Next, try if the code you think is right matches the code you get on the USITC website.
If you struggle with that, you can use this website where a simple calculator can help you figure out your import duty from China to the USA.
Who Pays the Import Duty Costs?
The end-customer covers the import duty from China to USA for productsover $800. Either the customs authorities or the carrier will inform the customer if their product is subject to taxes.
Dropshippers, as well as suppliers or dropshipping agents, have nothing to do with the import customs process.
However, if you’re a dropshipper and owner of an eCommerce store, it’s always best to inform your customers if the products bought for you are subject to import duty.
To do that, you can create a separate policy page on your website, send them an email confirmation with the info, or even place a message on your checkout page.
The extra import duty costs shouldn’t come as a surprise, as this will make you lose customer loyalty. So, it’s always better to inform and prepare your customers upfront.
If you wish to make it even more convenient for your customers, you can embed an import duty calculator on your website or at least point them to a website where they can check, such as Freightos.
How and When to Pay My Import Duty from China to USA?
If your shipment value is over $800, but below $2500, it will not fall into the ‘formal entry required’ category, which means you won’t need a customs broker.
In such cases, the carrier usually takes care of the charges. Usually, your carrier company will cover the cost and then inform you for reimbursement; or they will include import taxes in their base service price (handling fees).
If your shipment value is at or above $2500, it’s best to find a customs broker that will help you gather and submit all the documents.
A typical customs broker nowadays will usually submit all documents electronically instead of sending out paper documentation.
Do You Need to Pay Taxes in the Exporting Country (China)?
No! Regardless if you’re a US dropshipper (importing a bulk order into the US) or a US buyer (who simply bought something subject to import duty), you don’t have to pay any taxes to China.
If an import duty from China to the USA applies to the product/s you bought, you have to settle this with U.S. customs authorities (import country).
What Other Taxes Will I Have to Pay in the USA Besides Import Tax?
Besides the import tax (which consists of import duty, HMF, and MPF), there are no other taxes related to import that you should pay.
However, if the shipment is commercial and you resell these items in the US, don’t forget that you have to declare each income and pay a personal income tax on your earnings.
All in all, paying customs fees from China to USA can seem complicated at first.
However, most dropshippers will never have to deal with these issues since they’re either B2C businesses with a value lower than $800 or belong in the ‘no formal entry’ category (from $800 to $2500), which means their carrier will take care of everything.
If paying import duty from China to USA seems too complicated for you to handle, try getting in touch with a customs broker, ask your carrier or simply get in touch with us, and we’ll try to guide you through the entire process as smoothly as possible!
About the Author
Over 10 years experience of foreign trade
Help 2k+ customers improve their dropshipping business