Understanding Customs Duty and Tariffs
Customs duty is an indirect tax levied by governments on the importation (and sometimes exportation) of goods. Duties serve multiple purposes: protecting domestic industries from foreign competition, raising revenue, and controlling the flow of specific goods. The rate you pay depends heavily on the product's classification under the Harmonized System (HS) code.
Key International Trade Concepts
HS Codes
The Harmonized System is an international nomenclature for classifying traded products. Every imported good must have an HS code, which directly dictates the tariff rate applied.
CIF vs FOB Valuation
Most countries (incl. the EU) calculate duty on the CIF value (Cost, Insurance, and Freight). The US generally calculates duty on the FOB value (Free On Board - excluding shipping).
De Minimis Values
This is the threshold below which goods are exempt from duties and taxes. In the US, the de minimis value is generously set at $800.