Once a shipment's HS heading and customs value are settled, one calculation remains: applying the heading's own duty rate to that value. This lesson mainly teaches the money flow: turning a rate and a value into the duty owed, and where that duty sits inside a factory's own commitments to a buyer. Delta Garments calculates this figure for Order A's own shipment while also holding a yearly volume commitment with Northline Apparel, so the same factory reads duty figures both for a single confirmed order and for the wider forecast it plans capacity against.
You need: lessons 3.1 (what an HS code is), 3.2 (classifying a garment), and 3.3 (calculating customs value).
By the end of this lesson you can:
Not covered here: building a complete classification and valuation sheet (lesson 3.5).
| Term | Meaning |
|---|---|
| Duty | A tax a customs authority charges on goods crossing its border, calculated from the customs value and the applicable duty rate. |
| Duty rate | The percentage a customs authority applies to a shipment's customs value to calculate the duty owed, fixed by the destination country's own tariff schedule for that HS code. |
| Ad valorem duty | A duty calculated as a percentage of a shipment's customs value, the most common duty type for apparel. |
| Duty owed | The amount of duty a customs authority charges on a shipment, calculated as the customs value multiplied by the duty rate. |
| Landed cost | The buyer's true cost once the goods have reached its own warehouse: the ex-factory price plus delivery, freight, insurance and duty for an imported order, or local transport for a domestic one. |
| Forecast | A company's own estimate of what it expects to sell, used to decide how much to produce before any specific sale exists. |
Once a shipment's customs value and HS heading are both known, duty owed is a single multiplication: customs value times duty rate. The rate itself is not chosen by the factory or the buyer; it is fixed by the destination country's own published tariff schedule against that specific HS code, and it must be checked there, never assumed from memory or from a previous shipment's own rate.
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| Duty rate by destination country | The same HS heading can carry a different duty rate in every destination country, since each country sets its own national tariff schedule on top of the shared international heading. | A duty rate learned for one destination country cannot be reused for a shipment to a different one. |
| Trade agreements | Some destination countries reduce or remove duty on goods from specific origin countries under a trade agreement, provided the correct origin documentation is presented. | The same HS code and customs value can produce two different duty figures depending only on where the goods are made and which agreement applies. |
| Export or domestic movement | Order A's export shipment to Northline Apparel owes duty once it reaches the destination country's border. Cedar & Co.'s own domestic orders never owe any duty at all, since no customs border is ever crossed. | Calculating duty owed is only ever a step in an export shipment's paperwork. |
| How the duty is paid | On some shipments the buyer pays duty directly to its own customs authority on arrival. On others, particularly DDP shipments, the factory or its agent pays duty on the buyer's behalf and recovers it inside the landed cost charged. | Knowing who actually pays the duty matters as much as knowing the figure itself, since it changes whose cash flow is affected first. |
| Confirmed order or wider forecast | A confirmed shipment like Order A has its own fixed customs value and its own duty. A factory's wider yearly volume commitment with a buyer, such as Delta Garments' own forecast arrangement with Northline Apparel, has no customs value of its own, since it is a planning figure, not a single declared shipment. | A person new to costing can wrongly assume a larger forecast number should feed a duty calculation meant for one specific shipment. |
Delta Garments calculates Order A's duty owed using its own customs value of USD 48,000 and an illustrative duty rate of 12%, verified against the destination country's current tariff schedule for heading 6109. At the same time, Order A sits inside a wider, pre-negotiated yearly commitment of 30,000 pieces between Delta Garments and Northline Apparel, a forecast-based arrangement that reserves factory capacity ahead of specific orders. Order A's own 15,000 pieces are confirmed and shipped under this one specific order, made to order against a signed purchase order, even though the factory also plans its capacity against the wider yearly forecast.
A duty rate is a percentage of the shipment's customs value, not of a single piece's price standing alone. A common mistake is multiplying the duty rate by Order A's own FOB price of USD 3.20 and treating the result as the whole shipment's duty, when the rate must instead be applied to the full customs value of USD 48,000, then divided back down to a per-piece figure only if needed. Getting the base wrong produces a duty figure that looks plausible but is actually far smaller than what is legally owed, a mistake a customs authority, not the shipper, discovers first, usually only after the goods have already been declared and the shipment is already at the border awaiting clearance.
Once a shipment's HS heading and customs value are both settled, duty owed is one multiplication: the customs value times the duty rate that heading carries in the destination country's own tariff schedule. For Order A, that is USD 48,000 times an illustrative 12%, equal to USD 5,760 for the whole shipment, or about USD 0.38 per piece. This one shipment sits inside Delta Garments' wider yearly volume commitment with Northline Apparel, but its own duty is calculated only on its own customs value, not on the whole year's forecast. A common mistake is applying the rate to a single piece's price instead of the whole shipment's value, which understates the true duty owed.
Karim, the production manager at Delta Garments, is reviewing Order A's duty calculation with Mona. Knowing that Delta Garments and Northline Apparel have a pre-negotiated yearly commitment of 30,000 pieces, Karim asks whether the duty calculation should use that larger yearly figure instead of Order A's own 15,000-piece shipment, reasoning that the factory's real relationship with the buyer is the whole year, not one order.
Here is the fact Karim is comparing:
Should Order A's duty be calculated on the whole yearly commitment of 30,000 pieces, or on its own 15,000-piece shipment? Decide before opening the answer.
On its own 15,000-piece shipment. Two facts decide this together.
First, what a customs authority actually charges duty on. A customs authority charges duty on the specific shipment crossing its border, declared on that shipment's own commercial invoice and customs value, not on a company's wider annual sales plan, which never itself crosses a border.
Second, what the yearly commitment actually is. The 30,000-piece yearly commitment is a forecast, a capacity-planning figure between Delta Garments and Northline Apparel; it has no customs value of its own because it is not one shipment, and no customs authority ever sees it as a single declared document.
Karim's instinct that the real business relationship is the whole year is correct for planning capacity, but duty is calculated shipment by shipment, on each one's own customs value, never on a forecast total.
Framed qualitatively, using Order A's own FOB price per piece as the duty base, instead of its full customs value, understates duty owed and risks a penalty once a customs authority recalculates it correctly. Using the whole yearly commitment instead of one shipment's own value would overstate duty enormously, a mistake that would never be accepted for payment but shows how far the wrong base can drift from the correct figure.
Checking the base, the full customs value, before multiplying by the rate costs nothing; a customs authority's own recalculation, with penalty, costs considerably more.
Open the Classification and valuation sheet workbook linked below. Its duty rate and duty owed rows multiply the customs value already calculated in lesson 3.3 by a duty rate you enter, then divide the result by quantity for a per-piece figure automatically. Fill in the yellow "Your shipment" column with your own duty rate, checked against the current published tariff schedule for your destination country, to see your own duty owed calculated the same way.
[Download the Classification and valuation sheet](../../templates/T14-C03-classification-valuation-sheet.xlsx)
1. What two numbers does Order A's own shipment need to calculate its duty owed of USD 5,760?
2. A different shipment has a customs value of USD 20,000 and an illustrative duty rate of 8%. What is the duty owed?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Duty | الرسم الجمركي | Droit de douane | Gümrük vergisi | A tax a customs authority charges on goods crossing its border, calculated from the customs value and the applicable duty rate. |
| Duty rate | معدل الرسوم الجمركية | Taux de droit de douane | Gümrük vergisi oranı | The percentage a customs authority applies to a shipment's customs value to calculate the duty owed, fixed by the destination country's own tariff schedule for that HS code. |
| Ad valorem duty | رسم جمركي حسب القيمة | Droit ad valorem | Değer esaslı gümrük vergisi | A duty calculated as a percentage of a shipment's customs value, the most common duty type for apparel. |
| Duty owed | الرسم الجمركي المستحق | Droit dû | Ödenmesi gereken gümrük vergisi | The amount of duty a customs authority charges on a shipment, calculated as the customs value multiplied by the duty rate. |
| Landed cost | التكلفة بعد الوصول | Coût rendu | Teslim maliyeti | The buyer's true cost once the goods have reached its own warehouse: the ex-factory price plus delivery, freight, insurance and duty for an imported order, or local transport for a domestic one. |
| Forecast | التوقع (توقع المبيعات) | Prévision (prévision des ventes) | Tahmin (satış tahmini) | A company's own estimate of what it expects to sell, used to decide how much to produce before any specific sale exists. |
You now know how to calculate duty owed from an HS code's rate and a shipment's customs value. The final lesson brings classification, valuation and duty together into one complete sheet, contrasting Order A's export shipment with Cedar & Co.'s domestic order, which needs none of this at all. Back to the course map