US Import Duties & Taxes – How much and when do I have to pay for import tax?

So you are wondering how much tax and import rates you have to pay on your product? You keep hearing that anything below “2500$” doesn’t get taxed? Lets look at import duty rates & taxes for the US in detail.

What we are talking about today is the:

1) Informal Entry

An informal entry is the entry of goods valued under 2500US$ and does not need to be cleared by a customs bond as it is designated for mostly personal importations. The amount used to be 1000$ before 2013 but the threshold has been increased to 2500$ since then.

2) Formal Entry

A formal entry is the entry of goods valued over 2500US$ and needs to be cleared by a customs bond. This type of entry is used for commercial importations only (e.g. re-selling goods on Amazon).

3) Lowering product costs to avoid taxation & rates

 

I’ll explain each entry in a little while. The word in the community is that anything below 2500$ doesn’t get taxed and no rates apply. Wrong.

First of all any amount is technically taxable if the product is intended to be re-sold but the US customs and border protection calls the entry with a value under 2500$ an informal entry. An informal entry are “goods for personal consumption or enjoyment”.

Now in most cases customs turns a blind eye and won’t tax or slap rates on your products imported under 2500$. That is if the actual declared product value makes sense. What does that mean? Lets look at two example:

1) Informal Entry

My actual product costs 4$ and I order 500 pieces. The total order is therefore valued at 2000US$. This is called an informal entry.

Now I technically have to pay taxes and duties because I am importing as an individiual or entity with the intent to re-sell these goods.

But customs doesn’t know that and since there is a threshold of 2500$ anyway they often don’t impose any tax or duties.

But that doesn’t mean that you aren’t liable to pay them. Because if you import 500 pieces of a private labeled product it is very likely that customs knows that you have the intention of re-selling the goods.

However, as I mentioned US customs turn a blind eye in many cases and release your goods without having to pay any taxes and duties (just don’t count on it and calculate duties and taxes anyway when calculating your profit margin)

This happens especially if you use couriers like DHL, UPS etc. because they have a special clearance lane and customs often “wave these goods trough”.

Also (see my last post on this here under point 2): https://importdojo.com/how-to-import-to-the-us-for-international-sellers-ship-to-amazon-directly/

If you were to ship by a freight forwarder (Sea or regular Air freight), the forwarder has to file for a Informal Entry and you will likely be taxed according the customs tariff number.

 

2) Formal Entry

My actual product costs 6US$ per piece to manufacture and I order 500 pieces.

I declare 3000US$ Total Order value on my Invoice which means I (my forwarder/carrier) have to file for a formal entry. I get taxed at the import rates and duties as filed under the official US Harmonized Tariff Schedule” https://hts.usitc.gov/

It’s not easy to navigate around that site and often you need to look for a long time to find the correct tariff number. If you aren’t sure you can also go to: www.dutycalculator.com and look for your tariff number there.

However there are only 3 free “look-ups” and then you’ll have to pay.

Let’s say for example my product is the famous “Garlic Press”. I do the research and find out that the garlic press has a import rate of 3%. Therefore the taxable amount and import rate is 90$ (3% of 3000$).

There will be merchandising processing fees that are usually a couple of dollar. In total I won’t be paying more than roughly 100-120$ for import rates and duties.

I am happy to pay that amount and import my product in a fair and square manner.

 

3) Lowering the product value on the Invoice:

Now a lot of sellers/buyers manipulate their product price on the invoice to avoid any taxation because they have heard of the “2500$ rule” but they aren’t aware of the actual regulation (informal/formal).

They do that because they have heard from other people in Facebook groups that they do that as well. Or their supplier told them that they will lower the invoice to help them save costs…. Please don’t!

Say for example they manipulate that 6$ product to a price of 4$ instead to stay below the 2500$ threshold. In most cases customs will not check and therefore you can import your products “if you’re lucky” at a zero percent tax rate which is an informal entry.

While I don’t encourage you to do so this procedure is very common and customs is aware of it. I guess the US supports their economy and has better things to worry about.

However If you greatly underprice your item you can get in trouble. Say for example that the supplier puts 1$ (or even less) on the Invoice to make the total amount out to 500$ (for 500 garlic presses).

How will you explain that your 500 pieces of private label garlic presses are for personal consumption? How will you explain that a product that sells for 15-20$ is being imported by you for 1$ a piece? You can’t and you will likely be taxed the full amount as well as a fine for deceiving customs.

Those fines can be in the excess of thousands of US$, depending on the product and the circumstances of the case.

Also bear in mind that the assesment of the total product value is the option and at the opinion of the customs officer on duty.

They aren’t stupid and if a product obviously has a higher value than you have declared they will definitely slap you with the full import rate and/or a possible fine.

In order to avoid any mix up with the correct customs tariff number I recommend you to tell your supplier to mention the correct number. If you aren’t sure which one is the correct number look on https://hts.usitc.gov/ or www.dutycalculator.com

If you still can’t find it then you can also call the phone number on the customs tariff website and they will give you this information for free.

So I’d recommend you to declare the real value and if you really must to save a few $… lower the price to a reasonable price. (E.g. 5.5$ instead of 6$).

I personally declare the real value because it’s simply not worth to falsify a customs invoice to save 90$ of taxes (in above example).

Important: Samples are a different scenario. You actually should declare your samples at a low or NO VALUE at all because they are simply for your evalutation and order decision. You will most likely also not re-sell that sample.

Therefore you can declare samples at a nominal value (1$) and mention on the sample Invoice: “Samples Of No Commercial Value”. Your supplier can put this on the sample invoice for you. See an example below:

 

How do I declare informal or formal and how do I properly file this with customs?

You don’t have to worry, your logistics company will declare that for your. This could be a freight forwarder or a courier like DHL.

In any event, the forwarder/courier knows the amount of total product value and will know how to declare for you.

1) Informal Entry

https://help.cbp.gov/app/answers/detail/a_id/215/~/filing-an-informal-entry-(for-goods-valued-at-less-than-$2500)

2) Formal Entry

https://help.cbp.gov/app/answers/detail/a_id/214/related/1/session/L2F2LzEvdGltZS8xNDUyMzk4NDUxL3NpZC9zTU50bzhHbQ%3D%3D

3) Merchandising Processing Fee

https://help.cbp.gov/app/answers/detail/a_id/334/related/1/session/L2F2LzEvdGltZS8xNDUyMzk4NDUxL3NpZC9zTU50bzhHbQ%3D%3D

 

IMPORTANT: There are exceptions to the 2500$ rule! One exception to the “valued under $2,500 rule” includes textiles. For this type of trade-sensitive merchandise, a lower value of $250 applies. A variation, or subcategory, of informal entry is known as “Section 321” which allows the duty-free entry of merchandise valued at $200 or less – as long as it is imported by one person on one day

I hope this helps and shines some light onto the subject 🙂

All the best and happy sourcing,

Manuel

Leave a comment



intersllc

2 years ago

Now, this is one of the best posts I’ve ever read Manuel!
Short,on the Point, Informative.

Thanks.

Manuel

2 years ago

appreciate the feedback Ryszard, thanks!! 🙂

Nina

2 years ago

Very informative, thank you Manuel! When you import to the UK you have to pay import duty AND 20% sales tax on the value of the import. Do you have to pay sales tax on imports to the USA as well, or just the import duty?

Manuel

2 years ago

Thanks Nina! Yes, the sales tax is on top and depends on the state but usually its somewhere between 1-3%. I somehow missed to mention that here 🙂

shawnl8

2 years ago

“Exception to the valued under $2500 rule includes textiles”

Does this include bed sheets, towels and clothings?

Manuel

2 years ago

Yes, most textiles are covered under this exception. I had a shipment in November for baby products (textile nature) at a value of 2200$ and they charged the full import tax.

Pierre Lamarre

2 years ago

Hi Manuel,
You are 100% right, even when you have to pay import duties, they are not high.
Importers should know tariffs before import their goods or hire a freight forwarder or customs broker.

Kenny Truong

2 years ago

Great guide! Thank you!

Sam

12 months ago

Excellent read! What about product under $2500 like thermal paper rolls that are considered in the anti dumping category? Do you still have to pay duty fees even though it’s an informal entry<$2500?

Manuel

12 months ago

Good question that I can’t answer directly 🙂 Please check with customs for details: https://www.cbp.gov/
But yes I imagine you still have to pay the duties.

Eleonora

8 months ago

I am importing products from China with a courier.
Total order value is 2100$. Should I prepare commercial invoice or pro forma ? I just think if it is commercial invoice, it will be a formal entry. Am I right?
Or informal entry, because order value is less than 2500$?

Manuel

7 months ago

Hi Eleonora,
You need to provide a Commercial Invoice, no matter what. The entry will be informal anyway (unless its textile) but the courier will take care of that 🙂
Best,
Manuel

Scott LeFoll

5 months ago

Thank you – excellent post!

Manuel

5 months ago

glad you found value in it 🙂

Clyde Gomez

5 months ago

Great information. Thanks Manuel!

Gaspar

5 months ago

Great post!

Art

4 months ago

Simple and perfectly explained. Thanks a lot.

Nathaniel Richards

3 months ago

do I have to pay import fees on private labeled phones under $200 with standard mail shipping?

Manuel

3 months ago

That depends on the country you live in 🙂 But generally low amounts are not taxed.

Eduard

2 months ago

Very useful article, many thanks!

I have a question though. My company is UK based, and I will be shipping from my supplier in China to Amazon US, do I have to pay any taxes as well. I mean, am I not going to pay taxes twice then (in my UK business as well)?

How can I find how much import duty my apply? The websites you supplied, one is down and the other I believe needs registering and payment.

Thanks in advance

Manuel

2 months ago

Hello Eduard,

If you registers with a foreign company you have to pay tax in your home country (UK in this case).
You can go to the official site of the US customs department: https://hts.usitc.gov/
Hope this helps 🙂

David Starke

2 months ago

Excellent, informative and very valuable information with key points and links for the beginner through the intermediates alike!

Thank you for this wonderfully comprised piece! Very helpful and insightful.

Manuel

2 months ago

You are welcome David 🙂

Willy N

2 months ago

Hi Manuel,
Thank you for the awesome info. I have a question regarding the tariff for textiles. I am planning to import T-shirts to sell in USA, but I can’t find the information for the tariff from the link you provide. Do you mind to share your cost when you import textiles? (Like how much is the tax and fees that you need pay)
Thank you

Renata

2 months ago

THANK YOU this was so very helpful, to clarify: if I’m importing textiles from Mexico, no matter what the value is (let’s say I import 100 items at $10usd each) that’s $1000, I would be paying .3464% in taxes which equals to $364??

Did I get that right??

Thanks again!!

Manuel

2 months ago

Hi Renata,
That would be 34.64US$ 🙂
Best,
Manuel

Caylin

2 months ago

Such an informative post! Is the $2500 threshold per parcel/box or the entire shipment? I’m planning to ship a few boxes of clothing to the US, but as they have not been sold yet, is it still advisable to declare its full value?

Manuel

2 months ago

The entire shipment 🙂 Yes, because you are planning on selling the entire lot.

Sam

2 months ago

What would be the import duty for buying a sports equipment ( a ping pong robot) that is bought in china and shipped to USA. the robot is less than 500$, is it free (as in no duty) for personal use?

If there is a duty then how much would it be approx, i read around 30% on one of gov sites

Manuel

2 months ago

Hi Sam,
I am not an duty or tax rates export. I suggest that you look this up on the Government site or contact customs to help you get a detailed rate.
Best,
Manuel

Inken

1 month ago

Very helpful post!:)

Does synthetic lingerie/swimwear fall into Textile category?

Manuel

1 month ago

Yes 🙂

Inken

1 month ago

Too bad:)
So if a textile merchandise valued more than $250 it’s going to be a formal entry anyway, do I understand right?????

Manuel

1 month ago

In most cases yes. But you’d have to check in detail with your forwarder or customs broker case by case 🙂

ImportDojo

Contact Info

18/F., Blk. B, Tung Luen Ind. Bldg. 1 Yip Shing St., Kwai Chung, Hong Kong

mail@importdojo.com

Copyright 2017 © All Rights Reserved