Noticing your international shipping budget chip away because of import duties?
You're not alone.
A recent report by the U.S. Census Bureau shows that American companies paid over $90 billion in import duties last year alone.
That’s a serious hit to the bottom line—especially for small and mid-sized importers.
The truth is, most importers are paying more for their international shipping needs.
How to make US imports cheaper?
With the right strategy, you can reduce import duties legally and effectively—without cutting corners or risking compliance issues.
Here are 7 of the best ways to do just that—and start taking control of your importing expenses.
1. Use the Correct HTS Codes
Harmonized Tariff Schedule (HTS) is the first step in managing duties. The HTS code determines the specific duty rate for a product.
One incorrect classification can lead to overpayment of duties or, conversely, underpayment, which can result in significant penalties and fines.
So its always better to consult with your freight forwarder to ensure your products are assigned the most accurate and favorable classification
2. Leverage Free Trade Agreements (FTAs)
If your imported materials originate from an FTA partner country—such as Canada, Mexico, Australia, or South Korea—they may be eligible for preferential duty rates.
To qualify, the goods must meet specific rules of origin, and you must have a valid Certificate of Origin to support your claim
The United States has Free Trade Agreements (FTAs) in effect with 20 countries, which can eliminate or reduce tariffs on qualifying goods.
3.Apply the First Sale Rule
The First Sale Rule allows the dutiable value to be based on the price paid in the first sale (e.g., from the factory to a middleman) rather than a subsequent, higher-priced sale (e.g., from the middleman to the U.S. importer).
To use this strategy, the transaction must be a bona fide sale, and a clear paper trail must be maintained to prove the price paid in the first transaction.
Note: First sale rule is the most legitimate way to reduce import duties, but it must be handled carefully and correctly.
4. Claim Duty Drawback
Duty drawback is refund of duties paid on imported goods that are later exported or destroyed
Let’s say you import components, manufacture in the U.S., and then export the finished product. Then, you might be eligible for up to 99% of your duties back.
Note - U.S. law generally allows for drawback claims to be filed up to five years after the initial import, offering a significant opportunity to recover shipping costs
5. Consider Foreign-Trade Zones (FTZs)
Using a U.S. Foreign-Trade Zone (FTZ) is one of the smartest ways to eliminate import duties—especially if you're a manufacturer or high-volume importer.
When you bring goods into an FTZ, they’re considered outside U.S. customs territory.
That means you don’t pay import duties until the goods actually enter the U.S. market.
And if you export the finished product? You may not have to pay any U.S. duties at all on the imported components.
Even better: If the duty rate on your final product is lower than the rate on its individual parts, you can choose to pay the lower rate. That alone can lead to serious savings over time.
6.Implement Tariff Engineering
Tariff engineering is all about designing or tweaking your product in a way that helps it qualify for a lower-duty HTS classification—without hurting quality or performance.
That could mean importing parts separately and assembling them in the U.S., or making small changes to the material or design so the product falls under a lower tariff category.
This is a complex strategy that requires careful planning to ensure the modified product still meets business needs and complies with customs regulations
7.Maintain Strict Compliance to Avoid Penalties
The most fundamental way to control shipping costs is to avoid customs penalties. This requires maintaining meticulous records, providing accurate and complete documentation for every shipment, and ensuring all declarations are correct.
Simple errors or omissions on customs paperwork can lead to delays, inspections, and costly fines that negate any savings achieved through other strategies.
We would like to provide ancillary Information on how to calculate Import Duty
Calculating the import duty on your goods is a straightforward process once you understand the key components.
Follow these four steps to determine the amount you will owe.
Step 1: Identify the HS Code for Your Product
Step 2: Determine the Customs Value of Your Goods
- Add up the cost of your goods, the shipping fees, and the insurance premium to get your total customs value
Step 3: Find the Applicable Duty Rate
- Use the HTS code from Step 1 to find the duty rate in the official Harmonized Tariff Schedule. For example, a product might have a duty rate of 5%
Step 4: Calculate the Total Import Duty
- Apply the following formula:
- Customs Value (Step 2) x Duty Rate % (Step 3) = Total Import Duty
Example Calculation:
Let's say you are importing men's cotton shirts with a customs value of $10,000, and the HTS code has a duty rate of 12%.
- Customs Value: $10,000
- Duty Rate: 12% (or 0.12)
- Calculation: $10,000 x 0.12 = $1,200
In this example, the total import duty you would need to pay is $1,200.
Wrapping Up
As a U.S. manufacturer or importer, you have more control than you think. Whether it’s using the correct HTS codes, leveraging free trade agreements, or applying advanced strategies like the First Sale Rule or tariff engineering, each move you make can directly impact your business.
Review your current import process, identify areas where you're leaving money on the table, and lean on professionals like freight forwarders, because they can help you in reducing the import duties.
Don’t let import duties quietly eat away at your profits. Take control, make smarter decisions, and put those savings back into growing your business.
Frequently Asked Question
1) How are import duties different from other import taxes?
Import duties are specifically calculated based on the type of product, its value, and country of origin as classified under the Harmonized Tariff Schedule (HTS). Other import taxes, such as a Value-Added Tax (VAT) or sales tax, may also be applied to imported goods, but are typically broader consumption taxes that apply to domestic goods as well.
2) Can a business legally lower the customs duties it has to pay?
Yes, there are several legal strategies to reduce customs duties. These include leveraging Free Trade Agreements, ensuring the most accurate and favorable HTS code is used, and in some cases, altering a product's design or assembly process (known as tariff engineering) to qualify it for a lower duty classification.
3) How far back can I claim a refund for duties on goods I later exported?
According to U.S. law, you can generally file for a duty drawback claim up to five years after the date of the initial import, which allows for a significant window to recover these costs.
4) Is it better to risk a lower HTS code classification or stick to a safer, higher one?
The blog stresses the importance of accuracy. While using the most favorable classification is a key strategy, an incorrect HTS code can lead to significant penalties and fines for underpayment. It is recommended to consult with a freight forwarder to ensure the classification is both accurate and advantageous.
5) Are there special advantages for low-value shipments imported into the U.S.?
The United States offers a "de minimis" exemption that allows goods valued at less than $800 to be imported by one person on a single day without being subject to import duties. This has led some e-commerce companies to fulfill orders directly from fulfillment centers in Canada or Mexico to U.S. consumers to take advantage of this rule