Customs & Trade Glossary
Essential terms for importers, customs brokers, and trade professionals
A
Ad Valorem Duty
A duty calculated as a percentage of the value of the imported goods. For example, a 5% ad valorem duty on a $1,000 shipment equals $50.
B
Bonded Warehouse
A secured warehouse where imported goods can be stored without payment of duties until they are released for domestic consumption or re-exported.
C
CBP
U.S. Customs and Border Protection. The federal agency responsible for regulating and facilitating international trade, collecting import duties, and enforcing trade laws.
Classification
The process of determining the correct Harmonized Tariff Schedule (HTS) code for imported goods. Proper classification determines the duty rate and regulatory requirements.
Compound Duty
A duty that combines both ad valorem (percentage) and specific (per-unit) components. Example: 5% plus $0.10 per kilogram.
Country of Origin
The country where goods were manufactured, produced, or substantially transformed. Determines eligibility for trade agreements and applicable duty rates.
Customs Broker
A licensed professional who helps importers comply with customs regulations, prepare documentation, and clear goods through customs.
Customs Value
The value of imported goods for duty calculation purposes, typically based on the transaction value (price paid) plus certain additions like assists and royalties.
D
De Minimis
The threshold value below which goods can be imported duty-free. In the U.S., shipments valued at $800 or less are generally exempt from duties.
Drawback
A refund of duties paid on imported goods that are subsequently exported, either in their original form or as part of a manufactured product.
E
Entry
The documentation and process required to legally import goods into a country. Includes the entry summary (CBP Form 7501) and supporting documents.
F
Foreign Trade Zone (FTZ)
A designated area within the U.S. where goods can be imported, stored, manufactured, or re-exported without being subject to customs duties until they enter U.S. commerce.
H
Harmonized System (HS)
An international standardized system of names and numbers to classify traded products. Used by over 200 countries. The first 6 digits are internationally standardized.
HTS Code
Harmonized Tariff Schedule code. A 10-digit number used in the U.S. to classify imported goods and determine applicable duty rates. The first 6 digits follow the international HS system.
I
In-Bond
A customs procedure allowing goods to move between ports or to bonded facilities without payment of duties, under customs supervision.
M
Merchandise Processing Fee (MPF)
A fee charged by CBP for processing imports, calculated at 0.3464% of the customs value, with minimum ($31.67) and maximum ($614.35) limits.
Most Favored Nation (MFN)
The standard duty rate applied to imports from WTO member countries. Also called Normal Trade Relations (NTR) rates. Forms the baseline before trade agreement preferences.
P
Preferential Duty Rate
A reduced duty rate available under free trade agreements (like USMCA) or preference programs (like GSP) for goods meeting specific rules of origin.
R
Rules of Origin
Criteria used to determine the country of origin of a product, particularly for qualifying for preferential duty rates under trade agreements.
S
Section 301 Tariffs
Additional tariffs imposed under Section 301 of the Trade Act of 1974, currently applied to many Chinese goods at rates of 7.5% to 25% on top of regular duties.
Section 321
A provision allowing duty-free entry of shipments valued at $800 or less per person per day. Often used for direct-to-consumer e-commerce shipments.
Specific Duty
A duty calculated as a fixed amount per unit of quantity (weight, volume, count) rather than as a percentage of value. Example: $0.50 per kilogram.
Substantial Transformation
A test for determining country of origin. Occurs when manufacturing or processing creates a new article with a different name, character, or use.
T
Tariff
A tax on imported goods, used interchangeably with 'duty.' Also refers to the schedule of rates (like the Harmonized Tariff Schedule).
Transaction Value
The price actually paid or payable for goods when sold for export to the U.S. The primary basis for determining customs value.
U
USMCA
United States-Mexico-Canada Agreement. The trade agreement between the three North American countries, replacing NAFTA in 2020. Provides duty-free treatment for qualifying goods.
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