What is the difference between customs duty and import VAT?

Customs duty is a tariff charged on the goods themselves, set by the commodity code. Import VAT is a consumption tax charged when goods enter the customs territory. Both can apply to one shipment, and import VAT is usually calculated on the value including the duty.

How is customs duty calculated?

Usually as a percentage of the customs value — often the goods price plus freight and insurance to the border in the EU. The rate comes from the product's commodity code. Some goods carry specific (per-unit) duties instead.

Can I avoid paying customs duty?

You can reduce it legitimately through preferential trade-agreement origin with valid proof, correct classification, and customs special procedures such as warehousing or inward processing. You cannot lawfully avoid duty that is genuinely due.

Who pays customs duty?

The importer of record pays the duty, usually through a customs broker or carrier, before the goods are released. Under DDP Incoterms the seller takes on this role; under other terms the buyer typically does.

Glossary

Customs Duty

Import duty · Tariff · Customs tariff

Customs duty (also called import duty or a tariff) is a tax charged by a government on goods when they are imported into its customs territory. The amount is set by the product's commodity code and is usually a percentage of the customs value of the goods, which determines part of the total landed cost of imported stock.

Last updated: June 2026

Key facts

Customs duty is charged on import and is determined by the product's commodity code (built on its HS code).
Duty is normally calculated as a percentage of the customs value, often the price paid plus freight and insurance to the border.
Customs duty is separate from import VAT — duty is a tariff, VAT is a consumption tax, and both can apply to the same shipment.
Trade agreements and preferential origin can reduce or eliminate duty if the goods qualify and you hold valid proof of origin.

How customs duty is calculated

Customs duty starts with classification: the commodity code (the national extension of the HS code) tells customs which duty rate applies. That rate is then applied to the customs value of the goods. In the EU, the customs value is generally based on the CIF value — the price of the goods plus freight and insurance up to the EU border — though valuation rules have nuances.

Most duty rates are ad valorem (a percentage of value), but some products carry specific duties (a fixed amount per unit, weight or volume) or a combination of both. Once the duty is calculated, it is paid at import, usually by the importer of record or their customs representative, before the goods are released.

Reducing customs duty legitimately

There are several legitimate ways to lower duty. The most common is preferential origin: if the goods originate in a country that has a trade agreement with the importing territory, and you can prove that origin with the right documentation, the duty rate may be reduced or zero. Correct classification also matters — using the precise commodity code avoids overpaying under a higher-duty heading.

Other tools include customs special procedures, such as customs warehousing (store goods without paying duty until they are released for sale) and inward processing (suspend duty on goods imported to be processed and re-exported). These are powerful for sellers who import in bulk or re-export, but they require authorisation and careful record-keeping.

Example

An EU seller imports a batch of leather bags from outside the EU with a goods value of EUR 10,000 and EUR 800 of freight and insurance to the border. If the commodity code carries a 3% duty rate, customs duty is roughly 3% of the EUR 10,800 customs value, about EUR 324. Import VAT is then calculated separately, on the customs value plus the duty.

Why it matters for marketplace sellers

Customs duty is a real cost of importing stock from outside the EU or UK, so factor it into your landed cost and pricing before listing.
Your commodity code sets the duty rate, so accurate classification directly protects your margin.
If you source from a trade-agreement partner, valid proof of origin can cut your duty to zero — keep the supplier documentation.
For bulk importers, customs warehousing or inward processing can defer or remove duty, improving cash flow on slow-moving stock.