It is important for a dropshipper to know if their items are subject to import duty from China into the USA if they are sourcing from Chinese manufacturers and selling to American consumers.
You, as the dropshipper, have a moral obligation to warn your consumers in advance that the end-customers are responsible for the customs taxes from China to the USA.
Do you pay import duty on products shipped from China to the United States? If so, how much will your clientele be expected to pay? This comprehensive Frequently Asked Questions (FAQ) resource on Chinese goods imported to the United States can help you sort everything out.
Let’s find out!
What Is Import Duty from China to USA?
Most goods imported from other countries that cost more than a certain threshold are subject to an import tax, which governments employ to encourage citizens to buy native goods instead.
In March 2016, then-President Barack Obama signed the Trade Facilitation and Trade Enforcement Act of 2015, raising the threshold at which import taxes are waived from $200 to $800. The de minimis threshold is the lowest acceptable threshold.
Consequently, import duties apply to all Chinese products sold in the United States that cost more than $800.
The most significant portion of import taxes is the import duty; other taxes include the Merchandise Processing Fee, the Harbor Maintenance Fee, and the Federal Excise Tax on items like alcohol and tobacco.
The majority of the cost of import taxes comes from the tariff placed on imported goods. Your product’s import duty tariff will be determined by two factors:
The price of the goods being imported;
Product Harmonized System (HS) code;
In summary, if you spend more than $800 on items in China and have them sent to the US, you will have to pay import taxes.
What Do the Terms ‘Formal Entry’ and ‘No Formal Entry’ Mean?
Here, it’s crucial to be aware of the two customs clearance classifications for taxable imports:
No registration or application fees (between $800 and $2,500);
A formal application (with a fee of at least $2500) is necessary;
Keep in mind the following product prices in relation to import duties:
If the total price of your purchase is less than $800, you will not have to pay any import duties.
For products having a value greater than $800 but less than $2500, import duty is applicable but formal entry is not required; in this case, the carrier will pay the duty and pass the cost along to the customer, or the duty will be built into the price of shipping.
Any product with a value over $2500 is subject to import duty and requires a formal entry (you will likely need a customs broker in order to file the necessary paperwork for customs clearance).
Is It True That Import Taxes Are Not Applicable on Products Below $2500?
In no way, shape, or form! Import taxes begin at $800, not $2500, as we’ve previously said; hence, any shipment beyond that amount will be liable to them.
Because it occurs that orders under $2500 are occasionally not taxed, this misunderstanding is widespread among dropshippers and sellers alike. However, there are consequences to being detected smuggling goods without declaring them.
When people hear phrases like “formal entry necessary” or “no formal entry required,” they often become confused. Even while “no formal entry necessary” is sometimes misunderstood to mean that things priced at less than $2500 are exempt from taxes, this is not the case.
Import taxes apply, although the procedure is simpler and can be handled directly by your carrier for products costing $800 to $2500. Anyway, this doesn’t absolve you from having to pay those costs.
What Is the Difference Between Import Tax and Import Duty?
Import duty is what most people mean when they say “import tax.” That’s because import duty makes up the vast majority of the total import tax.
Taxes on imports include:
Customs fees (determined by the item’s HS classification and its market worth);
Product value * 0.3464% = Merchandise Processing Fee (MPF); Product value * 0.125% = Harbor Maintenance Fee (HMF) (only applicable for items carried by sea); Product value * 0.3464% = HMF.
Let your customers know up front about the potential expense of import taxes if your products are subject to them.
Do I Have to Pay Import Duty from China to USA?
You may or may not have to pay import duty when shipping goods from China to the United States; this will depend on the product’s value and category.
To give just one example, import duties are typically waived for items with a value of $800 or less. Import duties apply to all products valued at more than $800.
Warning: any import of alcoholic beverages, scented items, tobacco products, or cigars is subject to taxation, regardless of the value.
How to Calculate Your Import Duty from China to USA?
In order to determine the import tariff, you will need the commercial value of the product and the HS (or HTS) code.
You should have a ballpark estimate of the fees even if only local customs officials can give you an exact figure.
It’s best to go straight to the source and verify the USITC website for accuracy (U.S. International Trade Commission). You can look up both the HTS codes and the tariff rates for imports on that page.
If you don’t have the HTS code, you can still do a name search on this site.
If you have the HTS code but not the import duty tariff, you can look it up using the format shown below.
If you’ve already located the HTS code-based customs duty tariff, recall the above formula.
Calculating Import Duties = Product Value * Tariff on Import Duties
Say you’re importing two thousand dollars’ worth of upscale water bottles.
The item’s Harmonized Tariff Schedule (HTS) number is 3923.30.00 (Carboys, bottles, flasks, and similar articles).
In the next step, we’ll look up the product’s tariff on either the USITC or Freightos websites using the code in question; there, we’ll see that it’s set at 3%.
The import duty fee can be determined at this time:
$2000 * 3% = $60
What Type of Goods Are Not Subject to Import Duty?
Products with a value of $800 or less are exempt from import duty, as we’ve previously said. You may also want to verify this on a case-by-case basis, however many products created from natural materials may not be subject to taxation.
Many shoppers attempt to split up large import orders into multiple smaller ones to save on customs fees. Although this is not always obvious, it carries a risk and may result in sanctions.
Merchandise with a total value of $800 or less that is transported by a single person in a single day is exempt from import duties and taxes. It would be unwise to try to go against this.
Samples are another category of items that are exempt from import duties and taxes. Most vendors will gladly send you $1 worth of samples at their expense.
You can also ask your supplier in advance to put a label on the sample box stating that it is not for resale. Indicating to customs officials that you are only bringing the samples home for personal use is a good way to avoid unnecessary fees.
What Is HS Coding When Importing from China to the USA?
The abbreviation for “Harmonized System” (sometimes referred to as HTS code). There was a need for a standard manner to categorize goods that could be exchanged across borders. These rules were created by the World Customs Organization as a reaction to the problem.
Value and HS code of the items you’re importing into the USA will determine the import duty levy. The HS (or HTS) code for a product can be found by looking up its category in the system.
If the HS code isn’t listed on the product itself, you can look it up here or on the USITC website using the product’s category.
What Is the Difference Between an HS Code and HTS Code?
The words HS Code and HTS Code are commonly used interchangeably in the import-export industry.
The international norm for HS codes is six digits, while the range for HTS codes is between seven and ten. Due to their uniqueness after the first six digits, HTS codes are typically assigned by the country doing the importation.
To see all of the codes for the United States Harmonized Tariff Schedule, click here.
The USITC database also allows you to search by product category to locate the appropriate HTS code.
How to Check and Find the HS Code of Your Goods?
The HS or HTS code of your goods is required in order to determine the customs duty rate.
Suppliers and retailers typically have the product’s code on hand. However, if they don’t, there are a few options for determining the right code.
To begin, you might click on this page to examine if the HTS classification system has the appropriate code.
The next step is to see if the USITC website returns the same code as the one you’ve been using in your head.
If you’re having trouble calculating your import tariff from China to the United States, you can use this handy online calculator.
Who Pays the Import Duty Costs?
If a product’s total price is over $800 USD, the buyer is responsible for paying the import duty from China to the USA. If a product is subject to taxes, the client will be notified of this by the customs authorities or the carrier.
Dropshippers, suppliers, and dropshipping agencies have no involvement in the import customs procedure.
Of course, as an online shop owner and dropshipper, you should always let your clients know whether any of the products they order from you are subject to import duty.
This can be done in a number of ways, including a dedicated page on your website, an email confirmation, or a note on the checkout screen.
Customers will abandon you if they are caught off guard by the higher prices resulting from import duties. Thus, it is advisable to educate and ready customers in advance.
To further simplify things for your consumers, you can add an import duty calculator to your website or provide a link to a third-party resource (like Freightos) where they can do the research themselves.
How and When to Pay My Import Duty from China to USA?
If the value of your package is over $800 but less than $2500, it will not require a formal entry and so a customs broker is unnecessary.
Typically, the carrier will foot the bill in such an instance. In most cases, the shipping firm will pay the fee and send you an invoice to recoup the money, or the cost of import taxes will already be factored into the amount you pay for the service (handling fees).
The value of your consignment must be over $2500 for you to need the assistance of a customs broker.
Rather than mailing paper forms, modern customs brokers typically submit everything digitally.
Do You Need to Pay Taxes in the Exporting Country (China)?
No! No tax is due to China whether you are a US dropshipper (importing a large order into the US) or a US buyer (who just purchased an item subject to import duty).
You will have to deal with U.S. customs if the goods you purchased in China are subject to import duty when brought into the United States (import country).
What Other Taxes Will I Have to Pay in the USA Besides Import Tax?
You are not required to pay any additional import-related taxes beyond the import tax (which includes import duty, HMF, and MPF).
But if the shipping is for business purposes and you plan to resale the goods in the United States, keep in mind that you will be required to file a tax return and pay income tax on your profits.
As a result
In sum, clearing customs while shipping from China to the United States may appear daunting at first.
Most dropshippers, however, will never have to worry about these things because their business falls into the “no formal entry” category (with a value between $800 and $2500) or the “less than $800” category.
