HTS codes and duty: how DTC brands overpay on customs

Two importers can bring in the same product and pay different duty. The difference is usually how the product is classified and how its value is declared. Both are decisions someone made on your behalf, often quickly, and both are worth checking.

This guide focuses on imports into the US, though the principles apply in most markets.

How classification works

Every imported product is classified under a code in the Harmonized Tariff Schedule (HTS). The first six digits follow the international Harmonized System used by most countries. The US adds digits to reach a 10-digit code. The code decides the duty rate, and whether any additional tariffs apply.

Classification depends on what the product is, what it's made of, and what it's used for. Small differences matter. Materials, construction, and whether something counts as a set, a part or a finished article can move a product into a heading with a very different rate.

How brands overpay

1. Wrong or lazy classification. The supplier's or forwarder's suggested code gets copied from shipment to shipment without anyone checking it. Sometimes it's too broad, sometimes it's simply wrong. Either way it can mean paying a higher rate than the correct code, or underpaying and creating a compliance risk.

2. Overstating customs value. In the US, duty is usually calculated on the transaction value of the goods, which generally excludes international freight and insurance. If an invoice bundles freight into the product price, you can end up paying duty on the freight.

3. Paying duty on things you don't need to. Samples, returned goods, and products re-exported to other markets can qualify for different treatment, such as duty drawback, if handled correctly.

4. Not claiming refunds. If you find you've overpaid, US importers can correct entries before they're finalised with a post-summary correction, or file a protest within a set window after liquidation. Many brands never look back, so the overpayment stays with the government.

5. Not knowing what applies to them. Additional tariffs, exclusions and trade programmes change often. A rule that applied last year may not apply now, in either direction.

What to check

1. List your top SKUs by import value and the HTS code used for each over the last year.
2. Check each code against the product: materials, construction and use. Look at how similar products have been classified in published US Customs rulings, which are searchable online.
3. Check consistency. The same product should use the same code on every entry. Different codes on different shipments are a red flag.
4. Check the declared value against the commercial invoice, and make sure freight and insurance aren't included where they shouldn't be.
5. Check what you've paid against what the correct code and value would give.

Get certainty where it matters

For high-value or ambiguous products, you can request a binding ruling from US Customs. It confirms the classification in advance and gives you certainty for future imports. A licensed customs broker can advise on classification and handle corrections and protests.

Own your customs data

Whoever is named as importer of record carries the responsibility for classification and value. If that's your brand, you need the entry records, the codes and the documents, not just a freight invoice. If you import on DDP terms, ask who is named as importer and what's being declared.

Duty is often the second-largest cost in landed cost after the product itself. It deserves the same attention as freight.