# Duty

Published July 15, 2020

A duty is a tax imposed by a government on goods crossing its borders, most commonly on imports. Duties are calculated as a percentage of the customs value of goods (ad valorem), a fixed rate per unit or weight (specific), or a combination of both. In the U.S., import duties are collected by CBP and must be paid before goods are released into domestic commerce.

## Calculating Duties

Duty = Customs Value × Duty Rate. A $10,000 shipment with a 5% duty rate generates $500 in duty. The rate depends on HTS classification and [country of origin](/content/glossary-of-shipping-terms/country-of-origin/index.html). Free trade agreements (USMCA, CAFTA-DR) can reduce rates to zero for qualifying goods when paired with a valid [certificate of origin](/content/glossary-of-shipping-terms/certificate-of-origin/index.html).

## Duty Reduction Strategies

- **FTA eligibility:** Verify whether goods qualify for preferential rates under applicable trade agreements.
- **Tariff engineering:** Importing goods in a less-finished state for domestic completion can shift classification to a lower-duty category.
- **First sale valuation:** Declaring the manufacturer’s price (rather than a middleman’s price) as customs value reduces the dutiable amount in multi-tier supply chains.
- **Bonded storage:** [Bonded warehouses](/content/glossary-of-shipping-terms/bonded-warehouse/index.html) defer duty payment until goods enter commerce.