The supplier quoted you USD 3.50 per unit FOB. The freight forwarder quoted USD 2,800 for a 40ft container. So your unit cost is… USD 4.10? Not even close. China import duty, MPF, HMF, VAT, Section 301 tariffs, broker fees and last-mile trucking all land on top of the quoted price. This guide explains how import duty is calculated, how the HS/HTS code drives everything, and how to build a true landed cost model — plus the difference between DDP and DDU that catches new importers out.
1. How Import Duty Is Actually Calculated
Duty is not charged on your retail price or even on your total shipping cost. It is calculated on the customs value, which is usually the FOB value of the goods as shown on the commercial invoice. The formula is simple:
Duty = Customs value (FOB) × duty rate from the HTS code.
Example: you import 5,000 wireless earbuds at USD 4.00 FOB each. Customs value = USD 20,000. If the HTS duty rate is 4.2% (base) plus 25% Section 301 (China-origin), total duty = USD 20,000 × 29.2% = USD 5,840. That is USD 1.17 extra per unit — before broker fees and freight.
On top of duty, US customs adds:
- Merchandise Processing Fee (MPF): ~0.3464% of customs value, minimum USD 31.67, maximum USD 612 per entry.
- Harbor Maintenance Fee (HMF): 0.125% of customs value for sea shipments (air shipments exempt).
- Excise taxes: only on specific goods (alcohol, tobacco, certain fuels).
For EU importers, on top of duty you pay import VAT (typically 19–27% depending on the member state) on the duty-inclusive value, recoverable later if you are VAT-registered. UK importers pay UK VAT (20%) similarly. GST applies in Australia (10%) and Canada (5% federal plus provincial). Confirm the rules for your destination country before pricing your product.
2. The HS/HTS Code: The Single Most Important Number
The Harmonized System (HS) is a 6-digit international product classification agreed by over 200 countries. The US extends it to a 10-digit HTS code; the EU uses a 8-digit CN code; China uses a 10-digit declaration code. The same product can carry different duty rates depending on how it is classified — and choosing the wrong code is one of the most common causes of customs audits.
- Find your code on hts.usitc.gov (US), ec.europa.eu/taxation_customs (EU), or by asking your customs broker to classify it.
- Read the General Notes and Chapter notes carefully. A “kit” is classified differently from its components; “smart watches” are classified differently from “ordinary watches.”
- Section 301 tariffs: many China-origin goods carry an extra 7.5% or 25% duty under the US Section 301 lists. Check the “Special” sub-column on the HTS lookup to confirm whether your code is on List 1–4.
- First sale rule: if you buy through a trading company, you may be able to declare the lower factory-to-trader price as the customs value — a legal savings your broker can structure.
- Never guess the code. If classification is ambiguous, file a binding ruling request with CBP for certainty before shipment.
3. Build a True Landed Cost Model
Use this worksheet for every SKU. Landed cost per unit is the number that decides whether the product makes money.
- Purchase cost: FOB unit price × quantity.
- International freight: sea FCL/LCL or air, allocated per unit.
- Export / origin charges: pickup, documentation, THC at origin.
- Import duty: FOB value × (base HTS rate + any Section 301 / anti-dumping).
- MPF + HMF + broker fees: typically USD 150–300 per entry plus 0.3–0.5% MPF.
- Customs bond amortization: annual bond (~USD 500–700) spread across all entries.
- Last-mile trucking / drayage: from port to your warehouse or FBA.
- VAT / GST (if not recoverable): for non-VAT-registered importers, this is a real cost.
A practical benchmark: for a typical China-to-US consumer goods shipment, expect total duty-and-fees to add 25–35% on top of FOB cost on products hit by Section 301, and 10–15% on products not on the lists. Build your retail price from this number, not from the supplier’s quote.
4. DDP vs DDU: What Your Supplier Actually Offers
Chinese suppliers love quoting “DDP” because it sounds like one price for everything. But the two terms mean very different things for your risk.
- DDU (Delivered Duty Unpaid): the supplier delivers to your door, but you pay duty, taxes and customs brokerage when the goods arrive. This is the transparent option — you see the actual duty bill.
- DDP (Delivered Duty Paid): the supplier handles customs clearance and pays duty on your behalf. The price looks all-in, but you have no visibility into the HTS code they used, and many “DDP” suppliers under-declare value to keep their costs low — putting you at risk of a CBP audit later.
- The catch with China DDP to the US: most cheap DDP lanes use a different importer of record (not you), which means you have no record of legal importation. Amazon and CBP are cracking down on this; goods can be seized and your seller account suspended.
- Recommendation: for any product you plan to sell on Amazon or to corporate buyers, use FOB + your own broker + your own bond. Pay duty transparently under your own EIN. It costs more on paper but protects your business.
5. Legal Ways to Reduce Duty Cost
- Verify your HTS classification with a binding ruling — sometimes a correct classification drops the rate from 25% to 3.9%.
- Use the first-sale rule when buying through intermediaries.
- Explore Foreign Trade Zones (FTZs) near major US ports — you can store and even assemble goods duty-free inside the zone, paying duty only when the goods enter domestic commerce.
- De-minimis relief (USD 800 per day per person) applies only to small individual shipments, not to commercial FCL imports — do not plan your business around it.
- Never under-declare invoice value. CBP penalties start at 2× the duty loss and scale up for repeated violations.
Get the Numbers Right Before You Order
The difference between a profitable import and a write-off is usually the landed cost model built before the order, not after. Classify your HTS code, layer in Section 301, add MPF/HMF and broker fees, and compare DDP against FOB-with-your-own-broker before committing. For a complete walk-through of how duty and taxes interact with freight and payment terms, work through our China procurement guides — they cover supplier vetting, shipping modes and the full US import workflow step by step.