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Importing from China to USA: Customs & Duties
Chapter 1: Importing from China to USA Basic
Importing products from China to the USA can be done in various ways and as seamless as possible. Small packages and low-value products are not a problem at all. But when it comes to oversized packages and those of high value, you have to shoulder the import duty from China to the USA.
We will address a lot of questions regarding import tax from China to the USA in this article. You will learn what impacts your import products and how custom duties on imports from China are calculated. It is crucial when you have a business that sells products purchased from China.
What are the Customs & Duties of importing goods from China to USA?
Let us first understand what comprises the custom fees. When importing goods from China to the USA, below is a list of customs and duties you have to pay. We will explain each further in the succeeding chapters.
Import or custom duties based on HS code
Additional 25% tariff if your product falls on a specific HS code
Other taxes and user fees such as :
1. Federal Excise Tax – ad valorem or specific excise taxes for products such as alcohol, tobacco, and fuel
2. Harbor Maintenance Fee (HMF) – for shipments imported via ocean which is calculated depending on the indicated value of the shipment on the commercial invoice. HMF is equal to 0.125 percent of the cargo’s value, with no minimum or maximum fee.
3. Merchandising Processing Fee (MPF) –for shipments based on modes of transportation which are calculated at 0.3464% of the reported value on the commercial invoice, with a minimum fee of $27.23 and a maximum fee of $528.33 per entry.
Custom fines on some cases (please see Chapter 8)
Why are the Customs & Duties on Imports from China to the U.S Important?
Customs duty taxes are imposed to protect a country’s economy and regulate cargo entering and leaving the country. It protects the country from invalid imports and exports. It strengthens and regulates security, trade operation, and taxation. Thus, these duties are essential.
There are different rules and regulations per country. Certain trade agreements with specific countries can result in duty-free tariffs being imposed. In general, customs and duties protect the economy, environment, jobs, and residents in a country. Here, we will tackle more on US import duties from China.
Import Tax Exemption
In March 2016, the Trade Enforcement Act of 2015 implemented the increase of import tax exemption from $200 to $800.The tax exemption amount means that products that meet the conditions have an indicated value not exceeding US $800.
Such products are exempt from customs declaration and payment of customs duties and taxes. As a result, most shipments with a value of or less than $800 are exempt from import charges with the following conditions:
1. The same individual imports the products on the same day
2. Consolidated products delivered to the same end consignee will be classified as one-ticket imported goods
3. Alcoholic beverages, alcohol-containing perfumes, and cigarettes are not tax-exempt
Note that Customs will thoroughly check to ensure the importer complies with the rules and does not abuse this exemption to avoid paying tax. They do proper evaluation or re-evaluation if they become suspicious of your declared value when importing.
Chapter 2: Tariffs and Customs Clearance in the US
Customs duty is a levy imposed on goods that are imported or exported. On the other hand, tariffs are specific taxes levied on items that fall within a specified category of imports. Below are important terms to know:
What is HS Coding?
H.S. Coding or Harmonized Commodity Description and Coding System is used by U.S. Customs to classify products using codes. It is also used by all members of the World Customs Organization (WCO). The H.S. Code system is the 6-digit code used to classify a product that crosses international borders.
HTS (Harmonized Tariff Schedule) code is a universal 10-digit code. Since the first six digits of an HTS code is a universal H.S. code, you need to determine the final four digits of the HTS code for U.S. import using the Harmonized Tariff Schedule.
Because product duties are calculated based on this categorization, all U.S. importers must know the exact HTS US Codes for specific products. With an HTS code, you can estimate the U.S. import tax from China you will need to pay.
Another thing is, determining the correct HTS Code is one of the most important steps an importer must know before shipping. This is to avoid complex problems when the products arrive and eliminate extra charges and custom fines.
What is a declared value, and why is it important to properly declare the value of the goods?
The Declared Value refers to the amount or worth of goods indicated on the Commercial Invoice to be shipped. For U.S. customs, this amount is used to determine how much customs duty or import tax should be applied to the shipment.
Beware of the bad practice that some shippers do where they declare a lower value of the package they are shipping to avoid taxes. When declaring this value, especially for international delivery, you must be precise and honest.
Your parcel will be held if customs suspects that the shipment value was not declared correctly. To get your shipment moving again, the regional customs officer will require you to submit other documents like proof of purchase.
When a product enters the customs system, it is declared based on the current market price. However, if the price of your goods is far less than the price set by customs, they will immediately send it for further inspection. In this case, customs will charge hundreds to thousands of dollars in inspection costs.
What are the tariff rates for US imports?
As mentioned, products whose value is below $800 are duty-free. But if your declared value is more than that, there’s a corresponding tariff or duty for it. So there’s a certain percentage you have to pay from your goods’ declared value.
The tariff rates for US imports vary from product to product. This is because the declared value of the goods does not solely determine tariffs (or duties); instead, they vary per category or list. For example, the tariff rate for cotton apparel is 16%.
Know that your product may or may not be affected by the 25% tariff rate. To name a few categories, they are jewelry/precious metals, textiles, and apparel, recreational equipment, grooming or personal hygiene items, etc. Some of the goods or products under proposed additional tariffs can be found in this complete list.
How Do You Check the US Tariff?
The steps below can help you check the corresponding import duty from China to the USA:
Step 1: Get the HS CODE
The HS code identifies the product’s type. After you find the right HS code, you will see the rate of duty on each. When your goods fall under the 25% Tariff List, you will pay an additional 25% tariff.
The first thing you need to do is go to the HS-CODE tool, where you will select your product’s category. Once selected, you will get the HS Code. Below is an example:
Let’s say you are importing mittens. You can type the work mitten on the search bar and look for the right description of your product.
In this example, if the product description you have chosen is Cross-country ski gloves, mittens, and mitts, the HS code is 4203.21.55.
Note that getting the HS code is complex. Your supplier may give you the HS Code, so you don’t need to search for it. However, there are cases when the supplier does not know the precise HS code and may give you the wrong one.
The easiest way to figure out is to hire a Licensed Customs Broker who will sort this out for you. Later, we will explain the advantages of hiring a broker. But if you want to do it yourself, you can use this GUIDE on how to know the HS code of your product.
Step 2: Check the Import Duty Rate
After finding the right HS code for your product, it’s time to check on the duty rate. If you look under RATES of DUTY, you will see three columns, and here’s what each one means:
“General” refers to the tariff that applies to the vast majority of imported goods from throughout the world (this part is where you look for import duty from China).
“Special” refers to duties imposed by the United States on imports from nations that have signed relevant Free Trade Agreements (FTA).
Tariff 2 pertains to tariffs on imports from nations with which the United States does not have a trade agreement. Currently, the countries with existing US trade agreements are only with 20 countries.
So, looking at this example above, the tariff or duty rate for 4203.21.55 is 3.5% of its true value. We emphasize true value because Customs will decide whether your declared value is correct or not. It is better, to be honest than to pay more charges in the end.
Another way to look for the China custom duty is by using an import tax from China to USA 2021 calculator. Click here to get an estimated rate. However, the final rates are always provided by Customs.
Step 3: Get an estimate of the total import tax
Once you have done Steps 1 and 2, you can now have an estimate of the total import tax. To make it simple, check this formula:
Tariff Rate: Declared value + General Rate + Others [ Merchandising Processing Fee (MPF of 0.3464%)/ Harbor Maintenance Fee (HMF of 0.125 %)]
Chapter 3: What documents are needed to clear customs with your imports from China to US?
The process doesn’t end with paying China’s customs tariff. To get clearance from Customs in the US, there are important documents you have to secure. Let’s discuss each one of them below
1. A receipt or a bill of lading (listing the items to be imported)
A Bill of Lading is a legal document that a shipper receives from a carrier that specifies the kind, quantity, and destination of the goods being transported. The bill of lading also functions as a shipment receipt when the carrier delivers the items to a pre-arranged destination.
To make this legal, only an authorized representative from the carrier or shipper must sign this document. The representative will also come to oversee the merchandise.
There are three functions:
1. A title document for the goods listed on the bill of lading.
2. It is a receipt for the goods that have been shipped.
3. The bill of lading represents the agreed-upon terms and conditions for the transportation of the goods.
2. An official invoice (lists the country of origin purchase price and tariff classification of the goods imported)
This is also known as the Commercial Invoice. The information on a commercial invoice should be sufficient for Customs and Border Protection (CBP) officers to evaluate if the imported are allowed.
The fundamental aim of the commercial invoice is to calculate tariffs. The commercial invoice should include the following precise information about your FDA regulated commodities:
- Name of the company or individual selling the goods
- The location of the company or the vendor of the goods
- Business name and address
- Clear descriptions of the items
- The total number of items
- Value (in US and foreign currency)
- Originating Country
- Place where goods are purchased
- US address where the items will be delivered
3. A packing list (details of the imported goods)
The Packing List does not include any information regarding the contents’ cost or worth. It is used when the contents of a document need to be forwarded to a third party, such as a customer or vendor.
The freight forwarder or shipper provides the packing list. The information on the packing list should match that on your invoice, and it may be examined by Customs Border Protection (CBP) to verify the goods.
It’s a document sent by the carrier to a consignee or their agent to notify them that a package has arrived. The purpose is to let them know that the products have arrived at the port and are ready to be picked up. The following information is included in an Arrival Notice:
- Shipper Details
- Consignee Details
- BL, SWB, or AWB Number
- Notify Party Details
- Cargo Information
- Vessel/Flight Information
- Container or ULD Number
- Port of Loading / Origin Airport
- Port of Discharge / Destination Airport
- Estimated Time of Arrival (ETA)
- Actual Time of Arrival (ATA)
- Place of Receipt and Delivery
- Cargo Pickup Location
- Freight Terms and Charges
5. Custom’s Bond
The CBP requires the use of a Customs Bond if your imports are worth more than US$ 2500. It’s a type of insurance that covers duties and taxes and secures payment in any situation. We will elaborate on this topic more in Chapter 5.
Chapter 4: Custom Clearance Procedures in US
1. Making arrangements with the CBP port of entry
You must make arrangements with the CBP port of entry where the items will arrive before shipping them to the United States. At the CBP port of entry, the laws and regulations governing the importation of goods/products are enforced.
2. Declaration of entry of goods
Merchandise can be delivered to a warehouse at the port of entry or transported in-bond to another port of entry under the same conditions. The importer will make the arrangements and transport the merchandise in-bond to an inland port.
3. File the release of cargo
Once the products arrive at the CBP port of entry and are declared, the importer has 15 days to file for cargo release. Until the cargo release is submitted, they will keep the goods at a terminal. The storage service is free for the first two to five days, after which they will start charging.
4. File the entry summary form
Suppose the goods must be delivered right away. In that case, the importer must file a cargo release, pay the estimated tariffs, and complete the entry summary form in addition to the goods entrance declaration form.
After the cargo release, you should file CBP form 7501 ‘Entry Summary,’ which contains the importer’s declaration about the categorization, origin, and value of the imported goods. It’s an important document that must be filed within ten days of the shipment being released from CBP custody.
5. Paying import duty from China to USA
This is the stage where you pay import duty from China. Imported items will also require payment of estimated duties. The most important thing to note is that the duty from China that you have pre-estimated can still change after the Customs assessment.
However, if you pay more than what’s due, you’ll get a refund.
6. Verify that entry documentation are complete
Ensure that the following documents are completely and legally filed:
1. The cargo has arrived at the entry port.
2. The CBP has permitted the merchandise to be delivered.
3. Import duty from China to the USA was fully paid
7. Inland custom’s process
This is the clearance stage, and release might happen in less than 24 hours if all documents are in order and comprehensive. The rest may take days or weeks. The process is longer if there are missing documents or requirements.
8. Release of goods
When Customs cleared your clearance, it is now bound for delivery to the destination address.
Chapter 5: When and Why Do You Need a Custom’s Bond?
When importing from China, a customs bond is required. When your imports are valued at more than $2,500 or are subject to the oversight of another federal agency, CBP requires you to use a customs bond. Those requirements apply to nearly all types of imports
When importing products, a customs bond is essentially an insurance policy that covers duties and taxes to the US government. Even in the most unusual circumstances, a customs bond will ensure that duties and taxes are paid.
When importing from China, you can utilize your broker’s bond to secure your transaction if you partner with a Licensed Customs Broker. This can save you time and money, and you can rely on the broker’s import reputation to expedite the clearance of your items through customs.
A customs bond is required for all imports or shipments arriving via air and ocean. Without the proper customs bond when importing from China, you may face delays and charges. This is one important thing to take note of aside from the US import tax from China.
Let’s now define the two types of Customs Bonds to know what suits your need.
2. Types of Custom Bond
1. Continuous Bonds
Getting a continuous bond is usually more cost-effective if you plan to import many shipments in a calendar year. Continuous bonds are more manageable than single entry bonds.
There is no need for a separate bond because a continuous bond covers any Importer Security Filings (ISF) requirements you may be subject to. Continuous bonds have a wide range of prices. You must pay at least $50,00 in coverage to obtain a continuous entry customs bond.
2. Single Entry Bonds
A customs bond for a single entry will only cover one shipment of imported goods entering the United States. Purchasing a single entry customs bond is more complex than purchasing a continuous bond.
The minimum amount of the single entry bond you acquire must be equal to the value of the items plus the taxes, tariffs, and fees you will incur. If another federal agency regulates the commodities you’re importing, the bond must be worth at least three times the value of the goods you’re bringing in.
So, for example, if you’re importing $10,000 worth of goods that are regulated by the Federal Communications Commission (FCC), you’ll need to buy a bond worth at least $30,000 to meet your obligations.
Do you need a Licensed Customs Broker in China when importing to US? What are its advantages?
Working with a Licensed Customs Broker might help you avoid having to pay customs fees on your own. Additionally, they offer services to assist and help you ship goods and take care of the requirements such as import duty from China to the USA.
A Licensed Customs Broker is knowledgeable on the whole shipping and clearing process. They are well-versed when it comes to compliance with CPB and other rules and regulations for product shipment. Here are some of the advantages when you hire their service:
1. Compliance and order
They ensure compliance with CPB, federal rules, and all regulations relating to product shipment. This will avoid unwanted fees like demurrage costs and costly fines due to violations.
2. Document processing
Prepare necessary documents and requirements for Customs fees from China to the US. They double-check packing lists and commercial invoices to make sure taxes and duties have been calculated and paid correctly.
3. Liaise with shippers and agencies
Customs brokers help their clients by facilitating communication between shippers and government authorities. They communicate on behalf of you, so it is more convenient and efficient.
4. Precise and accurate HTS code
A Customs Broker will ensure that the items are appropriately classified using the HTS Code so their clients will pay the least amount of taxes and duties feasible.
5. Constant communication
Your Customs Broker will give you real-time updates and information on the whole process from the beginning until you get your shipment. They help determine options for the entry of your goods while giving you the best client service.
6. Hassle-free service
Using the services of a customs broker can ensure that everything runs well. However, because there are sometimes inconsistencies in the claimed value of products, some customs officials are infamous for their delaying tactics, and bribery is prevalent.
You may be compelled to pay tariffs or import duties as required by law. The customs process can be rather tricky the first few times, so it’s necessary to learn and let specialists handle it.
Chapter 6: Important Things To Remember When Importing from China to US
If you are new to international trade, some things can get overlooked when importing. For example, if you wish to import from China to the US, you should not only check on China duty rates but also consider important factors as follows:
1. Imported goods should be legal.
The Customs from China to the US are very particular when it comes to shipping goods. Your Customs broker can assist and help you determine if the goods you will ship are legal and allowed.
2. Who is responsible for the shipping fee
The shipper or seller is responsible for delivery expenses and associated risks. It depends on what’s stated in Incoterms. To get the most out of your transaction, collaborate with the seller to define the Incoterms.
Depending on the goods imported and the amount of your order, shipping choices may include ocean freight, air freight, foreign postal service, or courier service.
3. Provide accurate information to CBP
Again, be honest and accurate. Make sure you have all of the information you need about your imported items. It is prohibited to provide CBP with incorrect information about the products and their worth. Therefore, ascertain that the information you have regarding your imported items is correct and accurate.
4. Follow Customs procedures
If you are not familiar with the process, it is easier to get things done when you consult with a Licensed Customs Broker. Importing goods from China to the USA requires careful attention and knowledge to avoid heavy fines when the procedures are not followed.
5. Get product liability insurance.
When importing goods from China to the USA, getting product liability insurance is crucial. Product liability insurance protects you and your company from lawsuits alleging injury or property damage due to the products it sells. Its primary goal is to pay for legal fees and damages.
6. Get the right custom’s bond
If you plan to import several times in a year, choosing a continuous bond will make things easier. You can ask your Customs Broker about how to save and what’s best to get for your shipment.
Chapter 7: What Will Happen if the Import Shipment Fails to Get Customs Clearance?
Some crucial factors when shipping to the US are China custom duty and the US Customs clearance. It is not easy to go through this when you are doing it for the first time. Most shippers will hire the services of a Customs broker to ensure that their shipment is hassle-free and cheaper.
Your customs broker will assist you with tariff and pricing concessions, valuation, documentation, rules, taxes, and duties, among other things. Customs brokers function effectively and are well-versed in all processes, ensuring that your goods run smoothly through each stage.
Now, what happens if your shipment fails to get Customs clearance?
1. Incurs additional charges and fines.
To keep your shipment going, you will need to abide by the rules and conditions required by Customs. Each process can take some time. The longer your goods are stored and held in Customs, you will be billed with additional fines and charges that can range from up to thousands of dollars.
2. Customs will destroy your goods.
If your shipment fails to produce the necessary documents at the provided time, Customs may destroy your parcel. When your shipment was declared part of prohibited goods, but Customs declared it non-prohibited, they will destroy the parcel.
The goods must be detained or released after 35 days, according to Customs Regulations. Contact a skilled customs attorney or customs broker if your products are detained by US Customs to demonstrate that there is no infringement actively.
If US customs seize your products, be sure your customs attorney is familiar with the policies, procedures, and practices of the United States. Customs will seek the merchandise’s release.
Chapter 8: What are Custom’s fines?
To avoid heavy fines, you must abide by all the rules and regulations when importing goods from China to the USA. Finally, if you are wondering what Custom fines are, below is a definition of each:
Demurrage fee or Railway Demurrage fee
The charge the merchant pays for the use of the container within the terminal after the free period has expired is referred to as the demurrage fee.
No matter where the shipment’s origin is, you will often be charged $60 a day for the first five days of docking, followed by $120 per day. However, some terminals charge a $100 per day per container overdue demurrage cost.
Warehouse storage fee or Container costs
Before storage charges begin at each terminal type, the carrier will usually offer a defined amount of “free time” once the shipment arrives at the terminal. The quantity of this “free time,” the reason for charging, and the rate at which charges accrue can all differ from one operator to the next.
For example, charges per container for “dry van” containers range from $150 to $500 per day, while rates for temperature-controlled containers or other specialist equipment range from $500 to $1000 per day.
Other Miscellaneous Fees
There are other storage charges that you may incur when your shipment is not cleared in Customs. They are the cabinet fee and returning cabinet fee and the warehouse decommissioning fee and loading fee.
When your shipment is being inspected and needs to be put into storage, it incurs charges. These are fees incurred when your goods are on hold due to delayed Customs clearance. To avoid these charges, make sure to hire only a trustworthy Customs broker.