Import & Export
Import Duty and Landed Cost
How import duty fits into landed cost — customs value, HS codes, preferential rates, and compliance.
Duty is usually applied to customs value (often CIF). It is a major lever in landed cost alongside freight and VAT.
Duty as Part of Landed Cost
Import duty is often the second-largest line after product and freight. Underestimating duty breaks margin models and cash forecasts.
Landed cost spreadsheets should show duty explicitly — not buried in a generic "tax" line.
Customs Value and CIF
Many countries use CIF value at entry as the duty base. Adjustments for assists, royalties, or related-party pricing may apply under WTO rules.
Invoice must support declared value — under-invoicing risks penalties.
Duty Rates and Origin
MFN rate from HS tariff; FTA/preferential rate with valid certificate of origin. Wrong origin documentation → full duty plus delays.
Anti-dumping duties override normal rates for specific countries/products.
Duty Then VAT
VAT/GST often calculated on (customs value + duty). Total tax stack matters more than duty alone for retail pricing.
Some importers recover VAT if registered — model net vs gross landed cost.
Controls and Audit Trail
Keep HS classification rationale, COO, invoice, and duty payment receipts. Reconciliation after customs audit prevents surprises.
Align with broker before first shipment of a new SKU.
Examples
FTA example
Without COO: 12% duty. With Form E: 3% — landed cost gap funds marketing or price cuts.
Audit
Customs reclassifies HS code from 8471 to 8473 — duty doubles; retroactive assessment hits landed budget.
FAQ
- Is duty included in FOB?
- No — import duty is buyer responsibility under FOB.
- Who pays under DDP?
- Seller pays duty in contract, but buyer still tracks it inside DDP all-in price.
- Temporary import?
- Special regimes may defer duty — landed cost timing differs.
- Samples duty-free?
- Not always — low value thresholds vary by country.
- Bonded warehouse?
- Duty deferred until release — cash flow benefit, not elimination.
Conclusion
Integrate duty into every landed cost build. See How Import Duty Is Calculated for formula detail.