When you import a product from a Chinese factory, the duty you owe is set by one thing above all others: the ten-digit HTS classification of your goods. On top of the base duty rate for that classification sit any additional trade-remedy tariffs applicable to Chinese-origin goods, plus a merchandise processing fee, a harbor maintenance fee on ocean shipments, your customs broker's charges, and port and drayage costs. Founders almost always focus on unit price and freight, then discover at the port that the bill has grown by tens of percent. Pricing built without these components has turned plenty of profitable products into unprofitable ones.

What the Duty Is Calculated On

Duty is not assessed on your invoice total. It is assessed on customs value, which for US imports is generally the transaction value of the goods themselves — the price actually paid to the seller — and, importantly, US practice generally excludes international freight and insurance from that base. That is a meaningful difference from many other countries, which assess duty on a landed CIF basis. It also means the trade terms you agreed with the factory determine what is bundled into your quoted price and therefore into your dutiable value, so know what you signed: see FOB vs EXW vs CIF.

Several things must be declared as additions to value even when invoiced separately — assists such as tooling or molds you supplied to the factory, royalties tied to the goods, and certain packing costs. Conversely, if you buy through a middleman, first-sale valuation can sometimes lower the dutiable base legitimately. Both are worth raising with a licensed broker rather than guessing.

The Layers of the Bill

  • Base duty. Set by your HTS classification. Many industrial machines, instruments, and electronic components carry a zero or very low rate, while consumer goods, textiles, footwear, furniture, and housewares can carry rates in the mid to high single digits or higher.
  • Trade-remedy tariffs. Additional duties applied to broad lists of Chinese-origin goods under Section 301, plus separate steel and aluminum measures and, for a narrower set of products, antidumping and countervailing duties that can be very large. These stack on top of the base rate and are the single biggest reason a China-sourced landed cost differs from expectation. They change over time and by classification, so verify your specific code before you commit to volume.
  • Merchandise processing fee. An ad valorem fee on formal entries, with a floor and a ceiling per entry.
  • Harbor maintenance fee. An ad valorem charge on ocean imports arriving at US ports.
  • No federal VAT. Unlike most of the world, the US has no import VAT. State sales tax is collected on resale, not at the border — a real cash-flow advantage US importers should not mistake for the bill being small.

Classification Decides Everything

Two versions of the same product can fall under different HTS codes and pay completely different rates. A device classified as professional measuring equipment may enter duty-free while a consumer version of the same device is dutiable, and a motorized version may sit in an entirely different chapter than an unpowered one. So check the likely classification during the specification phase, and where the stakes are high, request a binding ruling from US Customs and Border Protection before you order — a written, relied-upon answer is worth the wait. Small changes in specification, power rating, material, function, or how the item is packaged and presented can move it between headings, which makes classification an engineering consideration alongside your bill of materials and unit cost.

Pay attention to how the factory writes the commercial invoice, too. An overly generic description invites examination, delay, and sometimes a less favorable classification, while a precise technical description with model and part numbers moves entries faster. Country of origin is a separate legal question from where you bought the goods — substantial transformation rules decide it, and origin claims are audited. If tariff exposure is a major cost driver, that is one of the honest reasons to evaluate alternatives, as compared in Vietnam vs China, India vs China, and China vs the USA.

What Else Is Waiting at Clearance

Even at a zero duty rate, clearance costs money: customs broker fees, a continuous customs bond, terminal handling and port fees, chassis and drayage, and daily storage if the container sits. Products regulated by other agencies need their paperwork at entry — FCC compliance information for radio devices, FDA prior notice for regulated categories, CPSC certificates and tracking labels for children's products, EPA and DOT paperwork for certain chemicals and batteries. Lithium batteries in particular have shipping documentation and packaging requirements that stop shipments cold when handled sloppily. Plan those alongside product safety testing requirements, and remember that the shipping mode you choose changes both cost and clearance rhythm — see ocean vs air freight from China.

How to Reduce Your Exposure

  • Get a detailed proforma invoice with precise technical descriptions, and have a licensed customs broker confirm the classification before you place the order, not after.
  • Build pricing on full landed cost: unit price, freight, insurance, duty, trade-remedy tariffs, processing and harbor fees, brokerage, bond, drayage, and inland freight. Then apply your margins — the math is in how to price a product.
  • Consolidate into full container loads where you can. The fixed portion of clearance cost barely moves with quantity, so many small shipments pay the same overhead repeatedly.
  • Ask your broker about duty drawback if you re-export, and about foreign trade zones or bonded warehousing if you hold significant inventory and want to defer duty.
  • Design with tariffs in mind. Where a specification change legitimately moves a product into a different heading, that is a cost-reduction lever available at the design stage and nowhere else.

Choosing the right factory in the first place makes all of this smoother — see how to find a manufacturer and browse our overseas manufacturing hub.

Know Your Real Landed Cost Before You Order

Projects House takes products through design and manufacturing preparation with landed cost modeled from the start — specification, sourcing, and the fee structure that rides on top of every unit. Planning production in Asia and want to know what your product will really cost delivered? Tell us about it through the contact form and we will go over the specification, the supply chain, and the numbers before you commit.