Customs & Duties 101
HS codes, tariffs, de minimis thresholds, and customs bonds — the paperwork that stands between your goods and your customers. Mistakes cost money and time.
Customs is the least visible part of the supply chain — and the most expensive when it goes wrong. A shipment held for documentation review racks up storage fees at $50–$200 per day. An incorrect HS code triggers penalties, back duties, and audit exposure. A misdeclared value can result in seizure. None of these are theoretical — they happen to founders every day.
For hardware founders, customs is not something to delegate and forget. You need to understand the basics: how HS codes work, what duties you actually owe, and how to structure your documentation so goods clear smoothly. Your freight forwarder handles the paperwork, but you are legally responsible for its accuracy.
HS (Harmonized System) codes are six-digit numbers that classify every product traded internationally. The first six digits are globally standardized. Countries add additional digits — the US uses a 10-digit HTS code, the EU uses a 10-digit TARIC code. The code determines your duty rate. Classifying your product correctly is the single most important customs decision you make. A Bluetooth speaker classified as 8518.22 (loudspeakers) may have a different duty rate than one classified as 8519.81 (sound recording devices). The difference can be 5% or more of your product value.
Duty rates vary by product category and country of origin. Most consumer goods from China to the US face either the standard MFN (Most Favored Nation) rate or Section 301 additional tariffs — an extra 7.5–25% on top of the base rate for many categories. Always check both rates. Your freight forwarder or customs broker can provide a binding ruling request for certainty on classification.
The de minimis threshold is the value below which goods enter duty-free and with simplified customs. The US threshold is $800 (Section 321), one of the most generous in the world. The EU threshold is much lower — €150 for duty exemption — and is changing as regulations tighten. For low-value e-commerce shipments, de minimis is a powerful tool. For wholesale orders, it rarely applies.
A customs bond is required for US imports valued over $2,500. It is essentially an insurance policy that guarantees duties and fees will be paid. Your customs broker typically arranges this. Continuous bonds cover all shipments for a year and are recommended if you import more than 2–3 times annually. Single-entry bonds cover one shipment.
Customs mistakes that cost real money
Guessing the HS code
Googling "HS code for [product]" and picking the first result is how you misclassify and underpay or overpay duties. Your broker should provide a classification with written justification.
Under-declaring customs value
Some factories offer to declare a lower value to reduce your duties. This is customs fraud, risks seizure of your goods, and can result in you being flagged for future audits.
Forgetting about Section 301 tariffs
The base MFN duty rate on your HS code does not include Section 301 tariffs. Ask your broker specifically: "What is the total duty rate including Section 301?"
Incomplete commercial invoice
Missing a country of origin, vague product descriptions, or inconsistent values across documents trigger manual review and delays. Every field matters.
What founders should remember
Your HS code is not a guess — get it verified
Work with a licensed customs broker who provides a written classification with regulatory references. This is your legal defense if Customs and Border Protection questions your classification.
Always ask for the total duty rate
Base MFN + Section 301 + any anti-dumping or countervailing duties = total rate. A broker who only quotes the base rate is omitting the most expensive part.
De minimis is your friend for early-stage testing
Shipments under $800 to the US enter duty-free and with minimal paperwork. For small initial batches and samples, this can save hundreds in brokerage fees.