How Do I Calculate Import Duty? A Step-by-Step Guide
"How much duty will I actually pay?" is the question every importer asks before placing an order. The answer depends on three numbers: your customs value, your tariff rate, and — in most countries — VAT on top of both.
Step 1: Determine the customs value
Customs value is not simply what you paid for the goods. Under the WTO Valuation Agreement, most countries use the transaction value method: the price actually paid for the goods, plus (depending on your Incoterm) freight and insurance up to the border.
Under CIF terms, for example, the customs value already includes freight and insurance. Under FOB terms, you typically add freight and insurance separately to reach the customs value.
Step 2: Find your HS code and tariff rate
Your duty rate is tied directly to your product's HS code. Once you know the code, you can look up the applicable tariff percentage for your destination country — and check whether a free trade agreement reduces or eliminates it if you have a valid certificate of origin.
Step 3: Calculate duty
The formula is simple once you have the two inputs:
Customs Duty = Customs Value × Tariff Rate
Step 4: Add VAT (in most countries)
Many countries then apply VAT on top of the customs value plus the duty already calculated — not on the goods price alone.
VAT = (Customs Value + Duty) × VAT Rate
A worked example
Say you're importing goods with:
- Goods price (FOB): $10,000
- Freight + insurance: $800
- Customs value: $10,800
- Tariff rate: 8%
- VAT rate: 20%
Duty = $10,800 × 8% = $864 VAT = ($10,800 + $864) × 20% = $2,332.80 Total landed cost impact (duty + VAT) = $3,196.80 on top of the goods price and freight
This is exactly the calculation our Customs Duty Calculator and Landed Cost Calculator automate for you.
Frequently asked questions
Does the Incoterm I use change my duty amount?
Yes, indirectly. Since customs value is based on freight/insurance-inclusive cost in many Incoterms (like CIF), while others (like FOB or EXW) require adding those costs separately, the terms you trade under change what number duty gets calculated on.
Can I reduce the duty rate?
Often yes, if your product qualifies for preferential treatment under a free trade agreement and you can prove origin with the correct documentation.
Is duty the only cost at customs?
No — depending on the product and country, you may also face VAT, anti-dumping duties, or other regulatory fees.
Related tools and reading
Conclusion
Import duty is a straightforward multiplication once you have the right customs value and the right tariff rate — the work is in getting those two inputs correct. Get your HS code right first, then let the calculator handle the math.
Try it with your own numbers: Open the Customs Duty Calculator →
Last updated: July 25, 2026