Exporters sometimes sell groups of different items as a package. Together, each package of items is considered a single imported package deal.
To calculate tariff duty for package deals, customs officials multiply the total dutiable value for a shipment by a single percentage rate. Package deals are subject to a single duty rate instead of separate percentages that would otherwise be assessed on the value of individual items shipped separately.
The sample scenarios below show how to calculate tariff duty for package deals where items have a different duty rate or one of the goods is duty free.
Steps to Calculate Tariff Duty Opportunities for Package Deals
If the tariff duty rate is the same for all items in a package, then there is only one rate to use. For example, combo deal of imported guitars (harmonized system code 9126.96.36.199) and banjos (code 9188.8.131.52) are both subject to a non-preferential tariff rate of 6%.
If the tariff duty treatment is different for separate components of a package, the following steps apply.
- Determine the combined dutiable value for all items in a package deal set.
- Establish values for each item in a package deal as if they were sold separately.
- Add the values for each tariff item sold separately.
- Calculate percentage portions that each individual item represents to the total in step 3.
- Apply each percentage to the dutiable value for package steps in step 1.
- Identify which item has the highest dutiable value portion.
- Apply the tariff rate percentage for the item identified in step 6 to the dutiable value for the entire shipment.
The above steps are applied in 2 tariff duty opportunities below.
Example of Import Duty Savings for Package Deals
Canada Border Services Agency (CBSA) imposes a 7.5% tariff duty on golf clubs (harmonized system code 9506.31.00.10) and 8% for golf balls (HS code 9506.32.90.00) imported from China. In this example, the Chinese exporter charges $50 for one golf club packaged with a dozen golf balls. CBSA valuates a price of $75 per golf club and $25 for a 12 pack of golf balls if sold separately.
- Dutiable value for a club and golf balls set is $50.
- Separate price for golf club is $75 and $25 for 12 golf balls.
- Total value for golf package deal is $100 if sold separately.
- Golf club and golf balls represent 75% and 25% of total separate pricing.
- Based on the actual shipment from China, golf club’s dutiable value is $37.50 (75% of $50) and $12.50 (25%).
- Since dutiable value for golf club is greater, its 7.5% tariff rate applies to the entire package deal shipment.
- Total duty payable for a single package deal amounts to $3.75 based on the lower tariff rate for golf clubs.
If the golf balls had a separate price that was higher than for a golf club, the tariff amount would have been $4 per packaged set
While $0.25 in import duty savings may seem modest, a shipment of 100,000 packaged sets from China represents a $25,000 savings. This is a significant reward from understanding tariff duty opportunities.
Package Deals with Duty Free Items
The price for a packaged set of a guitar plus a harmonica (HS code 9184.108.40.206) imported from Spain costs a total of $400. The harmonica is duty free; the imported guitar is subject to the 6% tariff duty. Customs will calculate tariff duty as if the guitar and harmonica were sold separately, and determines that the imported guitar would cost $400 and the mouth organ would be priced at $100.
In this scenario, the guitar represents 80% of the package deal if sold separately, while the harmonica is 20%. The guitar has the highest dutiable value ($320 to $80 for the harmonica). Therefore, the guitar’s tariff duty rate of 6% is applied to the shipment’s overall $400 dutiable value.
The importer has to pay $24 on the $400 shipment, even though the portion for the harmonica would be duty free if imported separately. A separate shipment of harmonicas would save $4.80 per package deal (6% of $80). For a shipment of 10,000 guitar-and-harmonica combo deals, that amounts to an extra $48,000 in potential import duty savings.
Import Duty Savings for Carrying Case Packages
A guitar sold in a leather carrying case (HS code 4202.11.00.00) is treated under the guitar’s tariff classification, even though the guitar’s tariff duty rate of 6% is much lower than the 11% duty charged on leather cases. Canada’s Customs Tariff lists this exception to the usual treatment of package deals.
If a guitar in a leather carrying case costs $300 when imported from Italy, this represents a $15 savings in tariff duties per imported guitar set. A shipment for 10,000 of these imported combo deals would cost an extra $150,000 in customs duties if the cases were imported separately from the guitars.
Tariff Duty Opportunities for Imported Package Deals
Depending on the size of the shipment, tariff duty opportunities can result in hundreds of thousands of dollars in import duty savings. Importers should calculate tariff duty for package deals as shown in this article, and then consult a reliable customs broker or local government customs office for more help.