Duty starts from the HS code, not the price. Classify first, then run the five-line landed-cost formula: product + freight + insurance + duty + destination tax. US orders under $800 can ride de minimis; EU adds VAT on value plus freight; UK mirrors the EU structure post-Brexit. Section 301 can multiply US rates on China-origin goods — check chapter by chapter, not by rumor.
The Landed-Cost Formula (Five Lines, No Excuses)
Landed cost is the only number that decides whether your product survives retail. Buyers who price from the factory quote alone routinely discover 18-35% missing margin after the container lands. The formula is five lines - run it on every SKU before you sign anything:
| # | Line | What goes in | Typical trap |
|---|---|---|---|
| 1 | Product cost | Unit FOB price × quantity | Forgetting the deposit split changes cash flow, not cost |
| 2 | Freight to port | Inland haulage if buying EXW | EXW quotes hide $150-400 of trucking |
| 3 | Ocean/air freight + insurance | LCL/FCL quote or air rate + 0.2-0.4% insurance | Peak-season surcharges doubling quotes |
| 4 | Duty | (Line 1 + line 2 + line 3) × duty rate | Using the supplier's guess-code instead of a confirmed one |
| 5 | Destination tax | VAT/GST on (1 + 2 + 3 + 4) | Skipping VAT recovery registration in the EU/UK |
Freight-forwarder terms appear on line 3; duty computation (line 4) always uses the CIF basis - customs value including cost, insurance and freight - unless you import into Canada, which taxes on FOB. That single basis difference swings landed cost by 2-4% on the same goods.
HS Codes in 90 Seconds
Every import duty question resolves to a six-digit code. The World Customs Organization maintains the first six digits globally; countries add two to ten more on top:
- Digits 1-2: chapter (e.g. 61 = knitted apparel, 85 = electrical machinery).
- Digits 3-4: heading within the chapter.
- Digits 5-6: subheading - where the world stops agreeing.
- The tail: US appends 4 digits (HTS), EU 8 + TARIC subcodes, UK 10 digits post-Brexit.
Example: ceramic mugs travel as 6912.00 (6-digit), then 6912.00.4840 in the US HTS at 4.5% MFN duty, while the same mug in steel becomes chapter 73 and a different rate entirely. Material wins the code, not the marketing name. A "ceramic-coated" bottle classified by construction (aluminum) rather than coating can double or halve the rate - classify by what customs inspects, not what you advertise.
| Product | HS heading | US MFN rate | EU third-country |
|---|---|---|---|
| Ceramic tableware | 6912.00 | 4.5% | 6-11% |
| LED light fixtures | 9405.40 | 3.9-5.3% | 5.8-8% |
| Phone cases (plastic) | 3926.90 | 5.3% | 6.5% |
| Pet toys (nylon) | 3926.90 / 4201.00 | 5.3% / 2.9% | 6.5% / 0% |
| Knitted apparel | 6110-6114 | 16.5-32% | 12% |
| Lithium power banks | 8507.60 | 3.4% | 2.7% |
Notice apparel: the highest MFN rates trade hides in chapter 61-62. If your model blends apparel margins with 32% Section-301 stacking, the product never lands profitably - kill it at spreadsheet stage.
US Duties: MFN Rates, Section 301 and De Minimis
Three layers stack on every China-origin import:
- MFN base rate - the HTS published rate for your confirmed code.
- Section 301 - China-specific additional duties on thousands of chapter-84, 85 and 39 codes, historically 7.5-25%. Check the USTR list before final margin math; the list gets reviewed, not repealed.
- Antidumping/countervailing (AD/CVD) - case-specific orders, not product-category taxes. Aluminum extrusions, mattresses and ceramic tiles are frequent residents.
The $800 de minimis threshold exempts low-value shipments from formal entry - but 2025-2026 rule tightening removed several categories (notably many e-commerce textile and electronics flows) and repeat same-day consignments to one importer get scrutiny. Structure sample-parcel use accordingly and move recurring commercial volume to formal entry. One practical rule we hand buyers: if a SKU recurs monthly, model it with full duty anyway - de minimis is a margin cushion, never a business plan.
EU and UK: VAT Changes Everything
The US taxes at the border and nothing further; the EU and UK pile VAT on top of duty, and the value being taxed includes the freight. The effective spread between the two systems is often 8-12 points on identical goods:
| Element | EU | UK | US |
|---|---|---|---|
| Duty basis | CIF value | CIF value | FOB-adjacent transaction value |
| Standard VAT/GST | 17-27% (most 19-21%) | 20% | None federally |
| VAT on | Value + freight + duty | Value + freight + duty | - |
| Low-value relief | €150 formal-post changes; commercial flows pay | £135 is the formal-entry floor | $800 de minimis (for now, monthly recurring at risk) |
| Recoverable? | Yes with VAT registration | Yes - FDI/PVA scheme | - |
EU importers: register for VAT the month your first container clears, reclaim input VAT, and stop treating that 20-21% as pure cost. UK importers use postponed VAT accounting (PVA) so the tax never actually leaves the balance sheet. First-time importers who skip registration write off 15-25% of landed cost gratuitously - that's not a fee, it's a financing decision you didn't notice making.
Worked Example: A $4,200 Order Landed Three Ways
Real order from our cost teardown series (adjusted for this lesson): 1,000 units of a resin phone accessory, unit price $3.20 FOB Ningbo, 440 kg gross, 2.1 CBM shipped LCL.
| Line item | US buyer (MFN+301) | EU buyer (VAT-21%) | UK buyer (VAT-20%) |
|---|---|---|---|
| Product FOB | $3,200 | $3,200 | $3,200 |
| Freight + insurance | $430 | $430 | $430 |
| Customs value (CIF) | $3,630 | $3,630 | $3,630 |
| Duty @ applicable rate | $272 (7.5%) | $293 (8.1%)* | $290 (8%) |
| Sales tax / VAT | $0 upfront | $793 | $784 |
| Cash landed | $3,902 | $4,716 | $4,704 |
| After VAT reclaim | $3,902 | $3,923 | $3,920 |
*Rate band varies by member state tariff lines and trade remedies in force that quarter - the point is structure, not the third decimal. The pattern that matters: the EU/UK buyer pays significantly more cash at the border but reclaims almost all of it if VAT-registered. Unregistered, the same shipment costs nearly $800 more. Per-unit truth: $3.90 landed in the US vs $3.92 EU-registered vs $4.72 EU-unregistered - often the difference between a viable SKU and a dead one.
Six Duty Mistakes That Cost Real Money
- Trusting the supplier's HS code. Factories suggest codes that suit their export paperwork, not your duty bill. Verify with your own broker; wrong codes cap fines at 10x evaded duty in the US.
- Under-declaring value. Customs fines dwarf the saved duty, and a flagged importer gets tracking on every subsequent consignment. Never.
- Ignoring Section 301 on chapter 84/85 goods. A 7.5-25% surprise destroys the margin model the MFN rate endorsed.
- Skipping insurance. Lines 2-3 protect you in claims and usually cost 0.2-0.4% - pennies against a lost container.
- Not registering for EU/UK VAT before the first B/L lands, then eating 20% unrecoverable.
- Using per-carton guessing instead of a per-SKU model. Mixed containers with 4 SKUs need 4 classifications - average rates are how importers donate margin to nobody.
Frequently Asked Questions
Does the buyer or the seller pay import duty from China?
Under FOB, CIF and CFR terms the buyer pays import duty and taxes at destination. Under DDP the seller pays them - folded into the invoice price. Never assume DDP is free money: compare the DDP quote against your own duty estimate before choosing terms - our Incoterms explainer shows the full risk map.
How do I find the correct HS code for my product?
Use the official lookup tools (US HTS search, EU TARIC, UK trade tariff) with material, function and construction details. Cross-check the supplier's suggested code with a licensed customs broker - misclassification is the most common audit trigger, and material beats marketing in every dispute.
Is the US $800 de minimis exemption still usable for repeat shipments?
Rules tightened through 2025-2026 for several commercial categories, and repeated consignments to the same importer draw scrutiny. Treat de minimis as a cushion for samples and small tests; model every recurring SKU at full duty in your margin math.
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