Understanding duties and taxes

The words “tariff” and “duty” are often used interchangeably, and both are forms of indirect taxation. When discussing governments or economies, the term “tariff” is generally used. Tariffs protect domestic markets while generating revenue. When talking about rates or amounts, the term “duty” is generally used, and commodity-classification codes are applied to determine the amount of duty required.

A duty is a tax levied by governments on imported and exported goods. The calculation of duties is dependent on the declared value of the commodities within the shipment. Duties are applied by U.S. Customs at the time of initial entry and vary depending on the classification code, value, country of manufacture and associated freight charges for the commodities involved.

Each country establishes its own standards as to whether a shipped item is considered a document (non-dutiable) or non-document (dutiable). In most cases, documents that do not have any commercial value are non-dutiable. However, documents with commercial value are dutiable. For example, a Saudi SME in Jeddah exporting leather handbags to United States will pay U.S. import duties based on the product’s HS code, declared value, and origin, while shipping only non-commercial documents like contracts or invoices would usually not attract duties.