Customs Duty

Inventory & Logistics

Definition

A tax levied by a government on goods imported across its borders.

Explanation

Duties add to landed cost and vary by product classification (HS code) and trade agreements. Correct classification and use of free-trade agreements can legitimately reduce duty, making it a real cost lever in global sourcing.

Example

Reclassifying the item under the correct HS code lowers its customs duty from 10% to 5%.

Related terms

Landed Cost — The total cost of a product delivered to the buyer's door, including price, freight, insurance, duties and handling.
Incoterms — Standard international trade terms defining who is responsible for shipping, insurance, duties and risk at each point of a delivery.
Harmonized System (HS) Code — A standardised international numbering system for classifying traded products, used to determine customs duties.
Import — Bringing goods into a country from abroad, subject to customs, duties and regulatory requirements.

Frequently Asked Questions

What is Customs Duty?

A tax levied by a government on goods imported across its borders. Duties add to landed cost and vary by product classification (HS code) and trade agreements. Correct classification and use of free-trade agreements can legitimately reduce duty, making it a real cost lever in global sourcing.

Can you give an example of Customs Duty?

Reclassifying the item under the correct HS code lowers its customs duty from 10% to 5%.

Back to the procurement glossary | Procurement concepts | Contact us