When you bring goods into the US, of course you expect to pay for transportation. But as you plan an import, remember that it also costs money to clear the cargo through US Customs, even when the product isn’t subject to any duties.
How much does customs clearance cost? As with so much in life, it depends.
Costs that importers always pay
Some fees are standard when you import cargo. They include:
Merchandise Processing Fee (MPF)
US Customs collects this fee on most shipments that enter the country. It’s calculated at 0.3464% of the entered value (the cost of the merchandise, as entered on the commercial invoice you provide to your customs broker), with a minimum of $27.23 and a maximum of $528.33. For example, if the entered value of the shipment is $100,000, the MPF is $346.40.
Harbor Maintenance Fee (HMF)
US Customs collects the HMF on shipments that enter the country via ocean transportation. It comes to 0.125% of the entered value. On that $100,000 shipment, the HMF would be $125.
Through your broker, you pay these fees to a surety company. That company, in turn, guarantees to US Customs that you will submit the Import Security Filing (ISF), and you will pay any duties/fees owed on your cargo. If you import on a regular basis, you’ll probably buy a continuous bond, which covers all of your ISF submissions and customs entries for a year. The premium on a $50,000 continuous bond is about $500. If you’re a large importer or you bring in high-value cargo, US Customs might require a $100,000 or $200,000 bond, which of course costs more.
If you import cargo only now and then, you can buy a single-entry bond. You’ll actually need two of them, one to cover the ISF and the other for the actual customs clearance. These cost about $75 for the ISF bond and about 0.45% - 0.5% of the entered value for the customs bond.
Customs Broker’s Fee
Customs brokers in the US are licensed by Customs and Border Protection (CBP) and act on your behalf in all transactions with US Customs. Using information that you provide, brokers complete and file the necessary documents and oversee the progress of your shipment through Customs. They also work with surety companies to obtain your bonds. As with any professional engagement, the broker’s fee depends on the range and complexity of services it provides.
When you ship less-than-containerload (LCL) freight – with shipments for multiple importers consolidated in one container – that arrangement doesn’t save you money on import and clearance fees. Each shipper with cargo in a consolidation container must complete a separate customs clearance and pay the associated customs clearance costs.
Costs that importers sometimes pay
Some expenses apply only to certain shipments. They include:
Duty on a product you bring into the US depends on its classification in the Harmonized Tariff Schedule (HS code) and its country of origin. You might owe no duty at all, or you might owe 30% or more of the entered value. If a shipment contains multiple products – for instance, plywood, windows, roof shingles and nylon carpeting – US Customs calculates duty separately for each one.
A few categories of imported products, such as alcoholic beverages, are also subject to additional taxes when they enter the US.
Fees to regulatory agencies
Some imported products are regulated by government agencies such as the Environmental Protection Agency (EPA), the Food and Drug Administration (FDA) or the US Department of Agriculture (USDA). To import certain goods, you must register with, or obtain a license from, the relevant Participating Government Agency (PGA). For other regulated goods, you might simply have to pay your customs broker to complete extra paperwork.
A customs agent might decide to inspect your cargo because something about the import raises suspicions. Or an agent might simply choose your shipment for random screening. To keep bad actors from gaming the system, US Customs doesn’t explain the logic behind its inspections. You’ll just have to live with the fact that now and then, maybe through no fault of your own, Customs will inspect your shipment and charge you for the privilege.
The simplest inspection, an x-ray of your container or other conveyance, costs about $300. If the agent decides to conduct an “intensive exam,” opening a container to look at the contents, your fee could amount to $1,000 or more.
Other customs clearance fees related to inspection
If an agent chooses your shipment for an intensive exam, you’ll pay a trucker to transport the freight to an inspection facility near the port. If the inspection forces you to keep a container at the port longer than expected, and/or return it to the steamship line later than expected, you could incur storage and detention fees.
If an inspection reveals a problem with your import, that could carry a cost as well. For example, you might pay a penalty for applying the wrong HS code to a product, or for other infractions. If the cargo is denied entry, you would have to bear all costs associated with the re-exportation. In addition, if you fail to provide the ISF details to your broker on time, and the ISF is not filed at least 24 hours before your cargo is loaded at the port of origin, the fine is $5,000 if US Customs decides to enforce the penalty for that missed deadline.
How much does customs clearance cost if you’re smart and careful?
Much of the cost of customs clearance is beyond your control. Duties are defined by law and by the value of the product you import. The MPF and HMF apply in most situations. A customs agent might decide to inspect your shipment even when you and your broker do everything by the book.
But there are some things you can do to avoid unnecessary expense:
- Choose an experienced, reputable customs broker that will attend to all the details and double-check for possible mistakes.
- Work with that broker to make sure you choose the correct HS codes and meet any regulatory requirements that apply to your cargo. HS codes change regularly, and customs brokers will stay abreast of these changes so you don’t have to.
- Give the broker all the information about your shipment well in advance of your sailing, so there’s no problem completing the ISF filing before the deadline.
- Capitalize on favored country status. The US has free trade agreements in force with 20 countries and these agreements may factor into your duty calculations and even your sourcing strategies.
- If you’re shipping multiple containers, consider putting each of them on a separate bill of lading (BOL). While that strategy will increase your standard customs clearance costs, it could also save you money on potential inspections. When you ship five containers on one BOL and US Customs decides to inspect one of those boxes, that holds up entry for the whole shipment. Then you pay potential storage and detention fees for five containers. When you ship five containers on separate BOLs and Customs decides to inspect only one of them, the other four can continue on their way.
The real cost of customs clearance
When you think about customs clearance costs, be careful of considering ONLY the identified buckets noted in this article. Your biggest costs could involve fines for non-compliance and missed opportunity costs linked to ignorance of import and clearance processes. The right customs broker can help you avoid the negative fallout and cost of non-compliance and capitalize on opportunity costs.
Think about why we use tax accountants for our personal tax returns. They help complete tax forms – an administrative function. But they also do something that most of us just don’t have time for: they stay informed on the complex and constantly changing US tax code and advise us accordingly.
Just like accountants, customs brokers perform both an administrative and advisory function. The cost of customs clearance encompasses both. But the most value is derived from advisory services that help avoid delays and fines and capitalize on opportunities to minimize tax and duty payments.
For instance, through tariff engineering importers can change the HS code classification they use through small changes in the product or packaging to achieve a lower duty rate that, over time, could save you substantial amounts of money. Most importers are not well-versed enough in HS classifications to recognize these and similar opportunities.
You can’t eliminate the cost of customs clearance, but you can manage it
Customs clearance costs have an unhappy tendency to snowball, especially for importers who don’t understand every step of the clearance process. An experienced customs clearance agent will guide you through the maze of obligations, helping you avoid costly penalties and delays. You’ll get access to a trustworthy customs broker, help navigating the complex tariff system, and advice about how the cost of customs clearance affects the total cost to import your cargo.
Need help controlling the cost of customs clearance? Start with a call to I.C.E. Transport.