What you must know about Taxes duties Estimation, Custom Clearance Process and Fee, the Trade War impact to successfully plan and import from China to the US.
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Import From China To The US: Taxes Duty Estimation, Custom Clearance Process and Fee, The Trade War Impact, Everything Explained!
Why are we publishing this information?
The increase of tariff of import duties on Import From China To The Us during the Trade war has seen many importers and exporters from China to the USA worried about the future of their businesses.
Without real or practical knowledge of just how to measure the impact of the new measures, and how deep the new measure will affect Import From China To The Us and how to conduct customs clearance in the US, it led to even more anxiety when we know that you can face serious fines and delays if your custom clearance is not handled properly by a knowledgeable person or an expert licensed customs broker to ease the process of importing from China.
ย In this article, we want to provide you with practical guidelines you can follow to determine and compute the tax duty you need to pay when importing from China into the US and how to clear the customs in the US.
Please do not hesitate to contact us by email:ย cedric@nexusgroupepc.com or by WhatsApp: +86 15221019907 for further inquiry or if you need quality, professional, reliable, and trustworthy international agents in China to assist you with your procurement from China.
The additional 25% tariff
The increase in tariff on Import From China To The Us Known as the Section 301 tariffs (Section 301 Tariffs: A Comprehensive Guide), had many objectives including promoting domestic production, reduce the trade deficit between the two nations, surge the Chinese government to respect U.S. companiesโ intellectual properties.
This increase on tariff resulted in many people and companies being left with a lot of question about the new custom duty rate. How much they will be required to pay from now on? if their products are impacted or not by the 25% increase in tariff? making some to start thinking it might be time to switch to another supplier or to buy local in the event importing from China would have no longer be an option to them.
ย Do the last measures on Chinese import really apply to your business be it small, medium-sized businesses or large exporters? How does the new measure impact the way customs clearance will be conducted from now on?
Well, letโs dive right in!
1. Do you need to pay the new import duties on all goods?
During the trade war with China, the U.S. has released 4 lists of goods that would be subject to higher tariffs. The lists include almost every item that can be imported from China. However, the U.S. has also published several lists of goods that were excluded from those tariffs after some consideration. You can check the items exempted from imports duties here:ย section 301 tariff exclusions.
If you have already imported some goods that are on the list of exclusions, you can file a claim to get refunded for the taxes you have already paid on the import.
Generally speaking, as long as the value of your good is less than $800, your goods are exempt from import duties, however, you will have to pay import duties on any goods you import into the United State for a total value of more than $800.
Items you can import from China that are exempt from tariffs include:
- Chest coolers
- Upright freezers
- Plastic drinking straws
- N95 respirators and face masks
- Anesthesia masks
Many exporters are also seeking to import ventilators,ย import personal protective equipment,ย import surgical gloves,ย andย intensive care beds,ย importing isopropyl alcohol, and more.
2. How do the rates of customs duties apply to your products?
There are some parameters to reckon with when it comes to the rate of customs duties which are the H.S code of the product and the country of origin.ย Depending on those parameters, the rate of customs duties will be specific or based on an ad value basis of the total value of the goods.
- Other fees you should be aware of are:
- Federal Excise Tax for items such as alcohol, tobacco;
- Merchandising Processing Fee (MPF);
- Harbor Maintenance Fee (HMF);
It is also good to note that while HMF is not required for air shipments, you will be required to pay MPF fees on all imports by Air or by Sea. The maximum fixed fee you will need to pay for the MPF is $26.22 and the minimum is $508.70.
3. What amount do you have to pay for customs duty?
As the result of the trade war between China and the US, all products falling under the HTS codes HTS 9903.88.01 or 9903.88.02 (machinery used to make or process textiles, food, technological parts, electronicsโฆ), and the HTS code HTS 9903.88.03 or 9903.88.04 (textiles, tools, food, consumer products, chemicals, construction materials, and agricultural products, commercial electronic equipment and automotive parts) are all subjected to an additional 25% tariff on imported Chinese goods. Please check here to have the complete list of products.
Besides the above-mentioned products, there are still some that are being evaluated to be included in the list of products subjected to the additional 25% tariff on imported Chinese goods you can have access to the list from here.ย
4. How is the import duty calculated?
4.1. The first thing to do here is to know the HS code of the products you are importing into the US. We can suggest three ways to do so.
- use the HS Code Lookup & Finder tool to check what is the HS code of your goods:
Theย H.S code lookup tool helps you to do an online check of the HS code of your products by typing in each product keyword. For instance: Glass. Then you can select the category related to your product. Once done, ย you will get the first 6 digits H.S code of the product.
- Use USITC:
Here you only need to enter the product keyword. Footwear for instance, is directly in the search bar of the USITCย website. A menu with different codes to choose from will be displayed, you then have to scroll down to the corresponding product to see both the H.S code and the relevant duty rate at the same time.ย ย
- Use a local customs broker or freight forwarder:
Whether or not the above two methods work for you, whenever possible, you should double confirm those results with your local customs broker or an international freight forwarder who has a history of transporting goods to the US. The Customs broker and freight forwarder are the ones who will help you to do the customs clearance so they might be aware of the latest changes made to the H.S codes and relevant duty rates.
HS means International Harmonized System and is administered by the World Customs Organization. All countries have the same first 6 digits HS code for one product category. Each country can choose to modify by adding another two or four digits without changing the first 6 digits.ย The U.S. import, HTS classification system, and export, Schedule B classification system, expand their scope to 10 digits.ย HTS specifies duty rate for virtually every item that exists, based on the itemโs H.S code and country of origin.ย
For instance, H.S.Code 0102.21.0010 is meant for Male Purebred Breeding Animals under heading 0102 (Live bovine animals), under chapter 01 (Live Animals).ย
HTSย stands for Harmonized Tariff Scheduleย which essentially determines the applicable tariff rate of all merchandise imported into the states.
4.2. Once you have the HS code of the product you want to import, now you need to check the import duty rate.
One of the best ways to get this information is through an online search on the website of the U.S International Trade Commission website (USITC) forย HTS Revision by chapter.
You will need to type in the keywords of your product, then scroll down to the section that your product falls under and click on the chapter that relates to your product to see the rate as displayed below.ย
Another way is to directly type in the H.S code you got from the methods described above, for instance: 4417.00.4000 on the search page ofย USITCย to see the rate as shown below.
You can also choose to contact a customs broker or CBP specialist for very specific duty information on a particular product by calling yourย local CBP port.
4.3. Calculate the import tax
To show you how you can calculi the custom duty, we will use the example of the footwear circled in red in the screenshot above. Letโs say you are importing that footwear and you will ship them by the ocean. The footwear total commercial value is $5,000, below is how you compute the total import tax you need to pay:
The total tax you need to pay includes the following three parts:
- Customs Duty: the formula is: customs value * customs duty rateย
- MPF fee: the formula is: commercial value * 0.3464% (shall not be less than $26.22)ย
- HMF fee: the formula is: commercial value * 0.125%
On the commercial invoice, you can find the declared value of goods which will be used to determine theย customs value. In this example, the declared value of goods is ย ย USD 5,000.
You need to determine the customs duty rate. For this, you need the H.S Code and you can get it from the supplier or you can check it following the steps described previously. For this example, the H.S code is 6402.99.0800. ย On the ย USITCย website, you will find the rate is 37.5% as shown below.
Then the custom duty will be:
- customs value * customs duty rateย = USD 1875 (5,000*37.5%)
The MPF fee will be:
- commercial value * 0.3464%= USD 17.32 (5000*0.3464%) which is less than USD 26.22 so we will adopt USD 26.22 (shall not be less than $26.22)ย
The HMF fee will be:
- commercial value * 0.125%= USD 6.25 (5,000*0.125%)
The total tax you need to pay will be the sum of the custom duty, MPF and HMF which is: USD 1,907.46
Another way to compute the import tax is to use an online tool: ย SimplyDuty This website will automatically calculate the rate for you as long as you know the H.S code of your product. However, this website does not take into account the MPF and HMF fees.ย
Please understand that the calculation method described above will give you a rough idea of how much you need to pay and this can be helpful when you do your budget even before you buy your goods. However, we advise you to double check with CBP to have the final rate you will need to pay.
4.4. Check if you have to pay another 25% duty rate as the result of the trade war.
- Before the trade war
Using our same example for footwear, you will notice as shown in the picture above that under the General column of USITC, the general duty rate is 37.5%. However, when you look closely, there is this โ/โ right after the rate (circled in green) and when you hover over it, there is mention showing see 9903.88.15.
- Under the Trade war
the heading 9903.88.01, products of China, explains the current rate being the duty rate provided in the applicable subheading (37.5%) plus 7.5%, which comes to 45%, the new tariff rate.ย ย ย
In the article description column, you may also notice that note 20(r) and note 20(s) are mentioned, to help you get a better understanding of the content, you can find a detailed explanation under Chapter Notes as shown below:ย
There might be some instance where the โ/โ doesnโt show in the general duty column the products are included in the tariff list. What you need to do here is to search your product underย HTS 2019 Revision by chapter and double-check with your customs broker or CBP to get the most specific duty information.
5. Pay your import tax
5.1. Do you need a customs bond when importing from china?
The CBP mandates that anyone who imports goods valued at more than $2,500 using a customs bond or when the imports are subjected to another federal agencyโs oversight. Those requirements cover almost every type of import.ย
What is a customs bond?
A customs bond is basically an insurance policy covering the payment of duties and taxes to the U.S. government when you are importing goods. A customs bond will ensure that duties and taxes are paid, even in extraordinary circumstances. Imports arriving by both air and sea will need a customs bond. You might find that you will be subject to delays and fines if you do not have the correct customs bond when importing from China.
If you elect to work with a Licensed Customs Broker when importing from China, you will be able to use your brokerโs bond to secure your transaction. This can save you time and money, and you can rely on the brokerโs import reputation to get your goods through customs faster. At USA Customs Clearance, powered by AFC International, you can use the help of professional customs brokers to get things done right.
Itโs important to know there are 2 kinds of customs bonds you can choose from when importing from China: Single entry bonds and continuous bonds. The bond type you choose will likely depend on how often you plan to import goods from China into the U.S. The difference between the bond types is simple. Basically, a continuous bond will cover all the shipments you import during a one-year period. A single-entry customs bond will only cover a single shipment of imported goods into the U.S.
- Continuous bonds are considered simpler than single entry bonds. To get a continuous entry customs bond, you will pay for at least $50,00 in coverage. It is often more economical to purchase a continuous bond if you plan to import multiple shipments during a calendar year. A continuous bond also covers the Importer Security Filings (ISF) requirements you might be subject to, so no additional bond is required. Prices for continuous bonds can vary.
- Single entry customs bonds can be a bit more complicated than buying a continuous bond. The minimum amount of the single-entry bond you purchase is required to be worth at least the value of the goods, plus the taxes, duties, and fees you will owe on them. Additionally, if the goods you are importing are subject to oversight from another federal agency, the bond must be worth at least three times the value of the goods imported. For example, if you are importing $7,000 worth of electronic goods that are subject to regulations from the Federal Communications Commission (FCC), you will be required to purchase a bond worth at least $21,000 to fulfill this obligation.ย You also might find that the cost of a single-entry bond can vary by surety company you chose to work with. Additionally, you are required to have supplementary bond coverage to meet ISF mandatesย if you are shipping your imports from China by sea.
If you are purchasing a bond on your own, you should keep in mind that you are buying an insurance policy for the taxes and duties on your imported goods, so costs will vary. However, you can secure aย customs bondย for just $245 on USA Customs Clearance, and thatโs the first step towards getting your shipments covered.ย
5.2. Entry form (CBP Form7501)
Another very important document you will need during the import entry process is the entry form (CBP Form7501), which goes with the calculated import tax from China to the USA. You can find an example form below:ย
5.3. Working with a Licensed Customs Broker to import from China?
A Licensed Customs Broker can be a great asset to you when you are importing from China. They will make sure that your imported goods effectively cross borders and arrive at the port of entry in a timely manner. In addition to that, they can help you ensure that your shipment of imported goods follows all customs regulations and rules when entering the country. They will work you through the process step-by-step to make sure the import process goes smoothly and efficiently.
Your Licensed Customs Broker can provide a variety of services when importing from China. These services might include:
- Arrange customs clearance for imported goods at the port of entry.
- Prepare for the release of goods imported from China.
- Make sure that products and goods imported enter the country efficiently.
- Work with CBP to ensure that all government duties, taxes and fees are paid as needed.
- Determine which permits are required to import your goods and help you with obtaining the needed permits.
- Advise you through the import process, including determining entry options for your goods, navigating free-trade agreements, and tax or duty deferment.
Taking advantage of China Import Consulting services through USA Customs Clearance is a wise move. Our Licensed Customs Brokers will go over all of the necessary details for your shipment and ensure it’s compliant with CBP and other regulations.
6. How to avoid or reduce the import tax?ย
Import tax can still be a big burden for many peoples, hopefully, there are some instances where you do not need to pay the tax duties, including but not limited to:
- Personal exemption duty-free exemption: as long as the total commercial value of your goods is less or equal to $800, you will not have to pay tax duty on your goods. However, for some products such as alcoholic beverages, cigarettes, cigars, and other tobacco products, the number of you can import is subjected to a limit.
- Samples: Samples are usually used to check the quality of the product is not for commercial purposes. If you import samples with a nominal value of $1 and mention on the Sample invoice โSample of No Commercial Valueโ, you are exempted from the tax duty.ย
- Dropshipping: In the dropshipping business, you only need to place the order and the supplier will handle the shipping from China directly to the designated address, hence, no import duty is charged.
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