The short version: the importer of record pays
Import duty is a tax your own government charges to let foreign goods cross its border. It's collected by customs in the destination country, from whoever is named as the importer of record. When you buy from China, that's you. The Chinese factory sells the goods and gets them to a port; what happens at your border is your bill, not theirs. A supplier quoting you a great unit price has said nothing about the duty you'll owe when the container lands, and most quotes don't include it. So the real question isn't whether you pay the duty. It's whether you've budgeted for it before you wire the deposit.
What "importer of record" actually means
The importer of record is the legal entity responsible for getting the goods cleared into the country: filing the correct customs entry, declaring the right value and classification, and paying the duty and import taxes due. It's normally the buyer, your company. That responsibility carries weight beyond the payment itself. If the goods are misclassified or undervalued, the importer of record is the one customs comes back to for the unpaid duty plus penalties, even if a supplier or forwarder filled in the paperwork. You can appoint an agent or broker to file on your behalf, but the legal liability stays with you. This is why it pays to know your own role before the shipment moves.
Does the Incoterm change who pays?
The Incoterm (the trade term such as EXW, FOB, CIF or DDP, defined by the ICC's Incoterms 2020) decides who arranges and fronts each cost along the route. It does not change the fact that the duty cost lands on the buyer in the end.
- EXW, FOB, CIF. You are the importer of record. The duty is collected from you (usually through your broker) when the goods reach your country. The supplier never touches your destination duty.
- DDP (Delivered Duty Paid). The supplier takes on the maximum obligation: they arrange clearance and prepay the duty at the border so the goods arrive at your door cleared. You don't hand money to customs, but the duty was priced into the DDP quote, so you paid it inside the price.
There is no standard term where the factory simply absorbs your duty out of goodwill. If a DDP price looks suspiciously low, it's often because the seller plans to under-declare the value at customs to shrink the duty, and that exposure points straight back at you as the buyer. We dig into that trap in FOB vs DDP when buying from China.
How customs works out the duty you owe
The duty is a simple formula with two inputs:
- The HS code. Every product is classified under a Harmonized System code, and that code sets the duty rate. You find the rate in your own country's tariff schedule: the US Harmonized Tariff Schedule, the EU TARIC, or the UK Trade Tariff. The same product can carry very different rates in different countries.
- The customs value. The base the rate is applied to. Depending on the country and the valuation method, this is the goods value, sometimes plus freight and insurance (the CIF value used across much of the EU). The US generally assesses duty on the FOB goods value instead.
Duty owed is the customs value times the duty rate. Because the HS code drives the rate, getting it right is the single most important step, and getting it wrong is the most common way importers either overpay or end up with a back-bill. We cover that in the documents that move with your cargo, and the broader picture in how much it really costs to import from China.
Import VAT and GST sit on top of duty
Duty is rarely the only charge at the border. Most countries also levy import VAT or GST, and it's usually calculated on the goods value plus freight plus the duty itself, so it stacks on top. A few specifics worth knowing:
- In the EU and UK, VAT-registered businesses can normally reclaim the import VAT they pay, so it's a cash-flow cost more than a final cost. The duty itself is not reclaimable.
- The United States has no federal VAT, so for US importers the duty is the main federal charge (plus fees like the Merchandise Processing Fee).
- Australia, Canada, and most of Asia charge GST or a sales tax at import, often reclaimable for registered businesses.
Budget the duty and the import VAT or GST as two separate lines. Treating them as one number is how landed-cost estimates come up short.
Does a customs broker pay the duty for you?
A customs broker files your entry and often pays the duty to customs on your behalf at clearance, then invoices you. That's a convenience, not a transfer of cost or liability. The money is still yours, and the legal responsibility for an accurate declaration is still the importer of record's. A broker is genuinely worth it for anything beyond the simplest shipment, because a misclassification or a paperwork error gets expensive fast. Whether you strictly need one depends on your country and shipment, which is its own question we'll answer separately in the Answers hub.
Where importers get the duty bill wrong
- Assuming the supplier's quote includes destination duty. On EXW, FOB or CIF it never does. Read the Incoterm before you compare prices.
- Trusting a DDP price blind. A cheap DDP can hide an under-declared customs value, and the liability for that follows you, the importer of record.
- Forgetting import VAT or GST. The duty rate looks small until the import tax stacks on top of goods, freight and duty.
- Using the wrong HS code. The factory's suggested code may be optimised for export, not for your country's tariff. Confirm it against your own tariff schedule.
- No one watching the entry. Errors made at clearance still land on you. Knowing your role before goods move is the cheapest insurance there is.
Where Mila Sourcing fits
The duty is yours to pay, but you shouldn't have to guess at the number or police the paperwork alone. Our sourcing agents confirm the product, the correct HS classification angle, and the right Incoterm before you commit, and coordinate shipping so the customs entry matches reality. That's the practical side of Sourcing Activation and Full Production Management.
Related, if you're costing out an order right now: