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Duty Types

What is Ad Valorem Duty?

A tariff calculated as a percentage of the imported goods' declared customs value. In the context of U.S. customs and tariff recovery, understanding ad valorem duty is essential for navigating the CAPE refund process and ensuring accurate duty assessment.

Definition

An ad valorem duty is a tariff expressed as a percentage of the customs value of imported goods. The Latin phrase 'ad valorem' means 'according to value.' For example, an ad valorem duty rate of 25% means the importer pays 25 cents in duty for every dollar of declared customs value. Ad valorem duties are the most common tariff structure globally and make up the majority of duty assessments in the U.S. Harmonized Tariff Schedule. The duty amount scales proportionally with the value of goods — a $10,000 shipment at 25% owes $2,500, while a $100,000 shipment at the same rate owes $25,000.

How Ad Valorem Duty Relates to Tariff Refunds

Most IEEPA and Section 301 tariffs are assessed as ad valorem duties on top of the base MFN rate. When these additional tariffs are reduced or eliminated, the ad valorem overpayment is the amount eligible for refund through the CAPE program. Tariffi calculates the exact overpayment by comparing the rate paid at entry with the current applicable rate.

Example

An importer brings in $500,000 of electronics from China. The base MFN rate is 0%, but a 25% Section 301 tariff applies, adding $125,000 in duties. If that tariff is later reduced to 10%, the $75,000 difference is the ad valorem overpayment eligible for refund.

Frequently Asked Questions

How is ad valorem different from specific duty?
Ad valorem duty is a percentage of value. Specific duty is a fixed dollar amount per unit (e.g., $0.05 per kilogram). Some products face compound duties combining both.
What value is used to calculate ad valorem duty?
CBP uses the 'transaction value' — the price actually paid or payable for the goods — as the primary basis, per 19 U.S.C. section 1401a.

Related Terms

DutyA tax imposed by the government on imported goods, based on the HTS classification and country of origin.Specific DutyA fixed-amount tariff per unit of imported goods (e.g., cents per kilogram), regardless of the goods' value.Compound DutyA tariff combining both an ad valorem percentage and a specific per-unit amount on the same import.Customs ValueThe declared value of imported goods used as the basis for calculating ad valorem duties, per 19 U.S.C. section 1401a.TariffA tax imposed on imported goods, used to protect domestic industries, raise revenue, or enforce trade policy.ValuationThe process of determining the customs value of imported goods for duty assessment, governed by 19 U.S.C. section 1401a.

Legal References

  • 19 U.S.C. § 1401a — Customs Valuation
  • 19 U.S.C. § 1202 — Harmonized Tariff Schedule

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