Duties & tariffs

Duties and tariffs are the taxes charged when goods cross a border. For a UK brand importing stock, they're a real, recurring line in the cost of every shipment — and one that lands directly in your unit cost.

"Duty" and "tariff" are used more or less interchangeably in day-to-day trade. Strictly, a tariff is the published rate (a schedule of percentages by product), and the duty is the actual amount you pay on a given consignment. The distinction rarely matters operationally; what matters is getting the number right.

Three things determine that number: classification, origin, and valuation. Get one wrong and you either overpay, underpay (and face a correction later), or get the shipment held at the border.

Classification drives the rate

Every product is assigned a code under the international HS code (Harmonised System) framework. That code maps to a duty rate in the importing country's tariff schedule.

The rate can swing enormously by classification. A cotton T-shirt, a synthetic blouse, and a leather jacket sit under different headings and attract different rates — often anywhere from 0% to 12%+ for apparel into the UK. Misclassify a product and you apply the wrong rate to every unit until someone notices.

This is why classification is worth getting right once, properly, rather than copying whatever code appeared on a previous invoice.

Origin drives trade-agreement treatment

Where a product is from — its country of origin — decides whether a trade agreement reduces or removes the duty.

• Goods made in a country with a UK free-trade agreement may qualify for preferential (often zero) duty, provided you can prove origin with the right documentation.
• Goods from elsewhere pay the standard "most-favoured-nation" rate.
• Origin is about where the goods were substantially made or transformed — not simply where they shipped from. A product assembled in one country from components made elsewhere has rules that decide its origin.

The practical upshot: two identical-looking products can carry very different duty depending solely on origin and whether you hold valid proof of it.

Valuation drives the bill

Duty is charged as a percentage of the customs value of the goods — usually the price paid plus certain costs depending on the valuation method and Incoterms used.

Duty = Customs value × Duty rate

So the bill is the product of all three factors: the right rate (classification) × possibly reduced by origin × applied to the correct value. Each is a separate place to get it wrong.

How duty lands in unit cost

Whatever the duty bill on a consignment, it's allocated across the units in that consignment and becomes part of landed cost:

• A £16,000 consignment at a 12% duty rate carries £1,920 of duty.
• Across 2,000 units, that's £0.96 of duty per unit.
• That £0.96 is real cost — it should sit in your margin maths and your stock valuation, not just on the customs paperwork.

A tariff change, a shift in origin, or a reclassification moves this number without the supplier's invoice price changing at all. Brands that only watch invoice price miss it entirely.

Common pitfalls

• Reusing an old HS code without checking it. Classifications get copied forward for years; a wrong code applies the wrong rate to every shipment until a customs query surfaces it.
• Claiming preferential origin without the proof. Preferential rates require valid origin documentation. Claim the rate and fail an audit, and you owe the difference plus penalties.
• Treating duty as a back-office cost rather than a unit cost. Duty is part of landed cost; leaving it out of margin maths overstates profitability on imported stock.
• Forgetting duty moves independently of price. A tariff revision or a new sourcing country can change your duty per unit even when the goods cost the same.