Duties, Tariffs and Taxes: How to Calculate the True Cost of Importing and Exporting

As global trade continues to evolve in 2026—with supply chain disruptions still echoing from past years and new trade agreements, tariffs and sanctions emerging—U.S. exporters and importers must stay ahead of rising costs and shifting regulations. One of the most overlooked yet critical aspects of international trade is understanding the full spectrum of fees that apply when moving goods across borders.

What’s the difference between duties, tariffs and taxes? Are these terms interchangeable, or do they represent distinct costs that affect your profit margin? More importantly, how can you accurately calculate the total cost, or landed cost, of your goods—including import duties, VAT or GST, freight, insurance and other government fees—before making sourcing or pricing decisons? 

Whether you’re importing or exporting a finished product, or simply sourcing components from another country, failing to account for all of the costs involved can lead to unwelcome surprises.

To help you take control of these costs and account for any changes ahead, this article will explain the terms you need to understand and how tools like the Landed Cost Calculator (free trial) make it easier to determine the true cost of your goods.

What's the Difference Between Duties, Tariffs and Taxes?

Here is a breakdown of the fees to be aware of (some of these terms are often used interchangeably): 

What Are Taxes in International Trade?

Taxes are charges imposed by governments to fund public services and infrastructure. In the context of international trade, taxes often refer to Value Added Tax (VAT) or Goods and Services Tax (GST) imposed on goods entering a country. For example, VAT is applied at various stages of production and sale in many countries, and even when a product benefits from duty-free status under a free trade agreement (FTA), VAT might still apply. Learn more about VAT in Exporters May Be Eligible for Import Tax Refunds.

What Are Duties in International Trade?

Duties are broader charges imposed on goods crossing borders, encompassing various types of taxes, including tariffs. Commonly referred to as customs duties, these fees are based on factors such as a product’s Harmonized Tariff Schedule (HTS) code and its country of origin.

Duties serve multiple purposes:

1. Revenue Generation: Providing income for the importing country.
2. Industry Protection: Discouraging imports of goods that compete with domestic industries.

Duties can be categorized as:

• Specific Duties: Fixed amounts based on measurable criteria like weight or quantity (e.g., $5 per kilogram).
• Ad Valorem Duties: A percentage of the product’s value (e.g., 10% of the invoice price).

Import duties are the most common and are levied by almost all countries. Export duties are less common and typically used by resource-rich countries to generate revenue from raw material exports. For example, some countries charge export duties on commodities like oil or minerals. 

What Are Tariffs and Why Do They Change?

Tariffs, a term often used interchangeably with duties, are specific taxes applied to imports from certain countries or product categories, typically during designated periods. Tariffs are highly political, often fluctuating based on trade negotiations and government policies. They are used to restrict imports from certain countries, protect domestic industries or retaliate in trade disputes.

For example:

• Currently the United States-Mexico-Canada (USMCA) agreement eliminates tariffs on most products traded between the U.S., Canada and Mexico. However, this may change with the incoming administration. 
• Conversely, the U.S. imposes tariffs on certain products imported from China, with rates varying depending on the type of product.

Other International Trade Fees You Should Know

Whether duties, taxes, tariffs or simply fees, clearly there are numerous charges to be aware of before importing or exporting goods. Here are some specific types of taxes and fees you often hear about in international trade:

• Anti-Dumping Duties: Imposed on goods sold below fair market value to prevent unfair competition.
• Countervailing Duties: Levied to offset subsidies provided by foreign governments to their exporters, ensuring a level playing field for domestic producers.
• Demurrage: Fees charged when containers aren’t cleared from ports within the allowed timeframe.
• Customs Clearance Fees: Charges for processing goods through customs.
• Import Processing Fee (IPF): Covers administrative costs related to customs processing (known as Merchandise Processing Fee in the U.S.).
• Excise Taxes: Applied to specific goods like alcohol, tobacco or fuel, either on import or export, depending on the country's regulations.
• Inspection Fees: Costs for mandatory inspections by government agencies (e.g., phytosanitary or safety inspections).
• Dangerous Goods Surcharge: Additional costs for transporting hazardous materials requiring special handling.

How Customs Duties Are Calculated

If you want to understand how to calculate import duties and taxes accurately, the first step is proper product classification under the Harmonized System (HS). Each item traded internationally is assigned a specific HS code, which customs authorities use worldwide to identify and assess duties and taxes on products.

The HS classification system is based on a standardized six-digit code, known as a subheading, that is consistent globally. However, many countries expand this number by adding additional digits to refine product categories further. These extended codes vary by country and may influence duty rates or other regulations.

Accurate classification is particularly critical when leveraging free trade agreements (FTAs). To learn more read:

• Free guide: Classifying Your Products for International Trade: HS, HTS, and Schedule B Codes
• HTS Codes: The Importer’s Ultimate Guide
• HS Codes, HTS Codes and Schedule B Codes: What's the Difference?
• How to Determine Free Trade Agreement (FTA) Tariff Rates

Manually identifying the correct HS code for your product can be time-consuming and prone to error. Shipping Solutions Product Classification Software offers a faster, more efficient way to determine your product’s HS code, and it includes an HS Mapping tool to find equivalent 10-digit HTS codes for other countries. The software also displays default duty rates, helping you evaluate whether using an FTA is beneficial for your shipment.

Sign up for a free trial of our Product Classification Software here.

How to Calculate Landed Cost

A proper landed cost calculation for international shipments includes all the expenses involved in getting a product from the supplier to your doorstep, including shipping, insurance, customs clearance and taxes. It’s a critical concept for exporters and importers alike because it determines the true cost of goods—and whether importing a product is financially viable.

When calculating landed cost, you must account for:

• The purchase price of the product.
• Transportation costs, including freight and shipping.
• Insurance charges for protecting goods in transit.
• Customs duties, taxes (like VAT), and fees such as import processing charges.
• Additional charges, such as anti-dumping or countervailing duties, which may apply depending on the product and source country.

Failing to accurately calculate landed cost can lead to unexpected expenses, erode profit margins and even make a seemingly affordable product too costly to import.

Simplify Your Costs with a Landed Cost Calculator

To help exporters and importers get a clear picture of their total costs, we’ve developed an import cost calculator for U.S. businesses—our Landed Cost Calculator. It takes the guesswork out of estimating expenses by calculating:

• Import duties, VAT and excise taxes.
• Additional government fees.
• Transportation and insurance costs.

But that’s not all—it also allows you to compare costs across multiple sourcing options. For example, you can evaluate whether it’s more cost-effective to source a product locally or import it from China, Mexico or another country. By factoring in all associated costs, the Landed Cost Calculator ensures you make the best decision for your business.

Give it a try here, for free! Or let us show you how it works:

Why Incoterms Matter for Your Bottom Line

The Incoterms 2020 rules, published by the International Chamber of Commerce (ICC), are used in international sales contracts to define the responsibilities of buyers and sellers for delivering goods. These rules outline who handles specific aspects of the shipping process and at what point the risk shifts from the seller to the buyer. 

For instance, the Incoterm Delivered Duty Paid (DDP) places the maximum responsibility on the seller, including covering shipping costs and import duties. This is the opposite of EXW, where the buyer bears most of the responsibility. The choice of Incoterm directly impacts how landed costs are calculated.

Understanding the various duties, taxes and fees involved in international trade is essential for setting accurate pricing. While all the considerations can seem overwhelming, using the right international trade compliance tools—like Product Classification Software and a Landed Cost Calculator—can help you stay compliant, reduce risk and save time.

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