Duty and Tariff
Definition
Duties and tariffs are taxes governments levy on imported goods, usually calculated as a percentage of the goods' declared value based on their classification code and country of origin. They are a direct component of landed cost.
In Practice
Every product has a Harmonized System (HS) classification that, combined with country of origin, determines the duty rate. Rates range from zero to well over 25 percent, and additional measures such as antidumping duties or punitive tariffs can stack on top. Free trade agreements can reduce or eliminate duty when origin rules are met and documented.
For planners and analysts, duty is not an afterthought line item; it can exceed freight cost and reshape sourcing decisions. Landed cost models must apply the right rate per SKU and origin, and classification discipline matters: an incorrect HS code means either overpaying for years or facing back duties and penalties. Duty strategies include tariff engineering, origin shifts, first-sale valuation, and duty drawback on re-exports.
For example, a product dutiable at 7.5 percent from one country and zero under a trade agreement from another may justify requalifying a supplier despite higher unit prices.
Related Calculators
Related Terms
Customs clearance is the process of getting goods approved by government authorities to enter or leave a country, including filing declarations, paying duties and taxes, and satisfying any inspections. Goods cannot be delivered until clearance is complete.
Free Trade ZoneA free trade zone is a designated area where imported goods can be stored, processed, or assembled without immediately paying customs duties, which become due only if and when the goods enter the domestic market. In the US these are called foreign-trade zones (FTZs).
DDP (Delivered Duty Paid)DDP is an Incoterm under which the seller is responsible for delivering goods to the buyer's named location with all transport, export and import clearance, duties, and taxes paid. It places the maximum obligation on the seller.
IncotermsIncoterms are standardized international trade terms published by the International Chamber of Commerce that define where responsibility, cost, and risk transfer from seller to buyer in a shipment. Common examples include EXW, FOB, CIF, and DDP.