Blog Posts

Importing to the USA? Info you need to know on Duties & Taxes.

U.S. Duties and Taxes When Importing Goods

To expand your business, seize expansion opportunities and establish new markets, you’ll likely need to import goods from other countries.

Because penalties can apply if you break the rules or don’t pay the correct import taxes, it’s important to have a thorough understanding of the relevant law and your responsibilities before you start.

Why are duties and taxes charged on imported goods?

A duty is an indirect tax calculated on the value of goods which are imported into the United States.

They may seem unfair, or excessive, but duties and taxes are imposed on goods that come in from overseas for good reason.

These charges help protect local industries and jobs and control the flow of restricted and prohibited goods. Duties and taxes provide revenue to support other domestic industries and trade.

What duties and taxes are charged on imported goods?

Regardless if you are trading as an individual, or for a business, you can expect to pay import duties and taxes. The amount you will need to pay is typically based on the value of the goods you are importing. This is calculated using a method known as the Free on Board (FOB) cost. The value of the goods does not include the shipping of the goods.

In some cases, it is calculated on both the value of the goods and the quantity being imported. You can get an idea about the current rates for duties and taxes from the Department of Homeland Security’s U.S. Customs and Border Protection website. Fees and charges are updated regularly so it pays to do thorough research before you authorise a major import of goods.

Other charges may be applied too, including:
·      Sales taxes, which are not automatically applied but may be payable to the state
·      Federal excise taxes on the import of alcohol and tobacco
·      Processing fees
·      Harbor maintenance fees

You can read more about U.S. customs duties here.

Do I need to pay a Customs bond?

Customs bonds are also required by U.S. Customs and Border Protection for businesses importing goods with a value of over $2,500.

It is a legally binding contact you buy in order to give assurances that your import taxes and fees will be paid.  Customs bonds must be arranged before the goods leave their originating port.

Often, businesses use customs brokers to arrange the bonds because of the frequency and agility they have to complete the bond request. Single entry bonds are useful if you will only need a one-time only import, while continuous entry bonds cover your shipments over the course of the year.

What goods attract duty and tax charges?

Some goods do not attract charges. Again, it is worth doing your research about any specific entry requirements that apply to the particular goods or commodity you wish to import.

In most cases, although it does depend on the nature of the product, duty is not charged if the value is less than $800.
Countries with tariffs or free trade agreements
There are different costs associated with importing from certain countries.
The United States has entered trade agreements with Canada, Mexico, Israel and many Caribbean countries, which means that lower or no import taxes are applied.
There are reduced taxes on certain goods from other countries too, including Israel, Jordan, Chile and Singapore.
To receive your entitlement for tax discounts, ensure you are supplied with a statement known as a ‘Certificate of Origin’ from the country where the goods originated.
Conversely, additional tariffs put on goods from many European countries, including France, The Federal Republic of Germany, Greece, Ireland, Italy, Spain, Sweden and the Ukraine.
What other charges are applied on imported goods?

Duties and taxes are paid on top of the cost of transporting the goods, and that is often not a cheap exercise either. Charges applied on imported goods can usually be defined as either freight costs or landed costs. Freight costs are calculated on three variable factors:
·      The weight of the goods
·      Shipping method
·      Speed of shipping

Goods sent by air typically attract a rate that is measured per kilogram, while sea freight most commonly has a cost per container applied. Many services offer discounts or reductions in costs for importing where there is no urgency on the delivery of the goods. Landed costs can include transportation or warehouse costs.

Questions to consider
To ensure you are handling the process of importing goods to the United States with the adequate consideration, ask yourself these questions:
·      Do you know exactly what you are importing?
·      Do you know what it is made of?
·      Do you know where it was made?
·      Have you properly valued the goods?
·      Have you reported any costs or payments associated with the imported merchandise which could include commissions, rebates or royalties?
·      Are the goods restricted or are there any conditions on the import of the goods?
·      Do any conditional free trade agreements apply to the importation?
·      Does a Customs bond need to be arranged?
·      Do you have all of the documents required to ensure the goods will be granted entry?

Penalties

There are penalties for carrying out misleading or fraudulent activity regarding importing goods into the United States. Because taxes are based on the value of goods being imported, it’s critical that you are truthful and accurate about the value of the goods.

Imports are often audited and there are penalties for providing an inaccurate value estimate.

As this Importing into the United States document says “Reasonable care is an explicit responsibility on the part of the importer.”

There are also penalties for importing illegal material and, for non-payment of duties and taxes.

If one thing remains in your mind from reading this article - it’s that you should fully understand your responsibilities to honestly describe and declare your imported goods and pay any charges that are owed.

Use a professional freight forwarder

For most goods that are imported into America today, there will be multiple duties and taxes.
You may see some products at a price that is too good to refuse but get a rude shock when it comes to paying the fees that are payable for importing goods.
It pays to do your homework before you order goods that may incur import duties and charges, but it’s also worth engaging the experts for help.
Our freight forwarding team at The Sourcing Co has unrivalled expertise when it comes to importing goods from the United States and can help you understand the duties and taxes you are required to pay.
Get in touch with us today to learn more.

All information in this article is general only. It may be outdated or incomplete. Nothing here is intended to be legal or tax advice. Always make sure to consult your accountants and legal professionals before relying on any information.

Sourcing and Importing